Imaflex Inc. increases sales by 18.6% for the year ended December 31, 2013

TICKER SYMBOL: IFX

MONTREAL, April 16, 2014 /CNW Telbec/ - Imaflex Inc. (TSXV: IFX) announces results for the year ended December 31, 2013.

(unaudited)   (CDN $ thousands, except per share amounts)	Q4 2013	Q4 2012	Year 2013	Year 2012
Sales	13,866	12,092	56,052	47,269
Cost of sales (excluding amortization)	12,450	10,537	49,159	41,426
Gross profit ($) (before amortization)	1,416	1,555	6,893	5,843
Gross profit (%)(before amortization)	10.2%	12.9%	12.3%	12.4%
Amortization of production equipment	305	257	1,130	1,039
Gross Profit	1,111	1,298	5,763	4,804
Gross profit (%)	8.0%	10.7%	10.3%	10.2%
Expenses	1,462	1,343	5,616	4,843
FX loss (gain)	(302)	(94)	(529)	231
Profit (loss) before income taxes	(49)	49	676	(270)
Provision for income taxes	135	195	469	298
Profit (loss)	(184)	(146)	207	(568)
Basic and diluted earnings (loss) per share	(0.004)	(0.003)	0.005	(0.013)
EBITDA	397	477	2,332	1,462

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).

Sales

During the fourth quarter of 2013, sales increased by $ 1,774,000, or 14.7%, compared to 2012. This increase is mainly explained by additional sales from our operations in the United States, by increased sales of metallized mulch and packaging film and by a stronger US dollar.

Sales in fiscal 2013 increased by $ 8,783,000, or 18.6%, over fiscal 2012. This increase is mainly the result of management's efforts to grow the top line in order to gain new business and fill production capacity. Management's success is largely attributable to effectively implementing its recent focus on business development and the materializing of opportunities that were developed in the past in the markets that were deemed to be prioritized. The strengthening of the US dollar against the Canadian dollar also contributed to the increase in reported sales, although to a lesser extent.

Gross profit margin

The gross profit before amortisation of production equipment decreased by $ 139,000 due to a generally higher cost structure in the fourth quarter of 2013 compared to 2012. This was necessary in order to accommodate increased production that materialized as well as the increased production that is expected for 2014. Management believes that efficiency, and consequently profitability, will improve as sales are obtained. The Company was also negatively impacted by a stronger US dollar that put pressure on the gross margin. In order to improve its top line, management accepted to temporarily sacrifice profitability. As a percentage of sales, the gross margin also decreased from 12.9% to 10.2%. Due to new equipment, the amortization of production equipment increased from $ 257,000 in the fourth quarter of 2012 to $ 305,000 in the fourth quarter of 2013. The gross profit decreased from $ 1,298,000 in 2012 to $ 1,111,000 in 2013.

In fiscal 2013, the gross margin before the amortisation of production equipment increased by $ 1,050,000, while as a percentage of sales it remained fairly constant, going from 12.4% in 2012 to 12.3% in 2013. The increased profitability was attributed to the increase in sales. Profitability would have been much greater had management chose to delay the costs to enable the Company to position itself as an aggressive player in the agricultural film market. The medium term benefit of this strategy will benefit the Company via increased revenues on its existing product line. The potential long term greater benefits of its proprietary products will be realized in the long run. The purchase of additional machinery over the year increased the depreciation expense and the gross margin after the amortisation of production equipment increased by $ 959,000, while remaining fairly stable as a percentage of sales, from 10.2% in 2012 to 10.3% in 2013.

Selling and administrative

Selling and administrative expenses increased by $226,000 in the fourth quarter of 2013 compared to 2012. As a percentage of sales, these expenses also increased from 9.0% in 2012 to 9.5% in 2013. This increase is mainly attributable to an additional management position as well as additional expenses relating to the development of Imaflex's new proprietary product. Additional professional services and the increase in sales, generating higher commission expenses, also explain a portion of the increase.

Over the year, selling and administrative expenses increased by approximately $ 769,000, but remained stable as a percentage of sales at 9.0%. This is mainly attributable to the additional expenses and professional fees the Company incurred in order to pursue the development of new products that are to be introduced to the market, as well as new management, administrative and sales salaries. Higher sales leading to increased commission expenses also had an impact of approximately $100,000 on selling expenses. To a lesser extent, foreign exchange and additional professional service fees also contributed to this increase. These expenses permitted management to continue implementing its strategy in order to build strong foundations for growth.

Net income

The increase in operating costs as well as selling and administrative expenses in order to plan for future growth did put pressure on earnings, however these measures were necessary in order to implement a strategy aimed at growing the business and developing new markets. The foreign exchange gain partially offset these increases such that the overall net loss for the quarter was $ 184,000 compared to a net loss of $ 146,000 during the fourth quarter of 2012.

For the year ended December 31, 2013, the Company's net profit was $ 207,000 as opposed to a loss of $ 568,000 in fiscal 2012. The increase in the gross margin, coupled with a decrease in the interest expense and the foreign exchange gains all had very positive impacts on overall profitability, despite increases in production costs. These improvements were partially offset by the increase in selling and administrative expenses. The Company's top line is headed in the right direction and is following management's strategy. As new products are introduced and additional sales generated in all of the Company's locations, the additional expenses will be offset by improved profitability. However, these results will not take place immediately.

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 1.85%. The line of credit is secured by trade receivables and inventories. As at December 31, 2013, the Company had drawn $ 7,438,682 on its line of credit ($ 6,103,876 as at December 31, 2012). The Company's working capital decreased since December 31, 2012, going from $ 2,303,260 to $ 143,234, mostly due to the inclusion of all long term debt and the balance of sale on the business acquisition in current liabilities. Management 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 and, given it obtained a tolerance for having breached its covenants, it does not believe that it will suffer liquidity problems due to the presentation of its long term debt in current liabilities. One long term loan came to maturity during the year and only one long term bank loan along with the balance of sale of the business acquisition were outstanding as at December 31, 2013. During the year, the Company managed liquidity in order to match its short term obligations, thus avoiding potential liquidity issues. In the second quarter of 2013, the Company issued $ 800,000 of shares and in January of 2014, the Company increased its long term borrowings. These measures were taken in order to decrease financial risk and avoid any potential liquidity issues.

Management Outlook

During the year, management continued to implement its plan of growing revenues in its legacy business in order to generate increased profitability to cope with required future investments in product developments: growing sales and purchasing more efficient equipment to generate more profitability. To date, our results reflect the partial accomplishment of the plan. The part of the plan that depends on more productive equipment will be completed as they are received in the first half of 2014.

Management's decision to effectuate this plan of growing its legacy business is necessitated by the ever increasing needs of providing the future funds necessary to achieve its objectives of registering the patent and launching its proprietary product.

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 calculated as "Earnings before finance expenses, taxes, the change in fair value of the derivative financial instrument, 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.

Imaflex Inc.: Joseph Abbandonato, President and C.E.O, Giancarlo Santella, Corporate Controller, Tel: [phone], Fax: [phone], e-mail: [email protected]; Website: www.imaflex.com