Revenues Increase 18% to $71.1M
Records Seventh Straight Quarter of Positive Adjusted EBITDA
Delivered $6.9 Million in Cash Flows From Operations
Announces Restatement of First Quarter and Second Quarter 2010 Results
WASHINGTON, N.C., Nov. 11, 2010 (GLOBE NEWSWIRE) -- Flanders Corporation (OTCQX:FLDR) reported financial results for the third quarter ended September 30, 2010.
Harry Smith, Flanders Corporation's Chairman and CEO, said: "As we anticipated, revenues continue to grow as our core business lines outpace the previous year. Retail sales were strong as consumers chose Flanders' filters over the higher priced competition and our high purity product lines continue with the momentum from the first six months of 2010 as we leverage our unique capabilities across different product lines. Our other commercial and industrial markets continue to recover although we believe growth in these product lines is hampered as businesses continue to wait for greater economic recovery before increasing their spending on existing facilities. We have now shuttered the remaining facilities related to the Ardmore, Oklahoma consolidation and consolidated additional minor operations setting up the company for continued solid performance going forward. In spite of the challenges we face from pressures outside our company, we continue to increase revenues and improve our operations."
Third Quarter 2010 Financial Summary
Revenue for the third quarter of 2010 was $71.1 million, compared to $60.4 million in the third quarter 2009. Gross margin was 18% in 2010, as it was in 2009. Operating expenses in the third quarter 2010 were $8.9 million compared to a third quarter 2009 total of $8.0 million. Net Income for the third quarter of 2010 was $1.6 million or $.06 per diluted share, as compared to net income in the third quarter of 2009 of $1.8 million, or $.07 per diluted share. Adjusted EBITDA for the third quarter of 2010 was $5.8 million, compared to adjusted EBITDA of $4.8 million in the third quarter of 2009.
Management uses some measures not in accordance with generally accepted accounting principles (GAAP) to evaluate the results of the company's operations and believes earnings before interest, taxes, certain noncash and non-operating expenses, plant consolidation and exit costs, extraordinary items, depreciation and amortization (Adjusted EBITDA) provides a useful measure of operations.
Flanders' Chief Financial Officer, John Oakley said: "We are again pleased with the results, particularly cash flows from operations. Gross margins were impacted in the third quarter by product mix as a higher percentage of our sales were from retail products."
"Operating expenses in the third quarter of 2010 continue to be impacted by higher commission expense from the increase in sales and an increase in freight expenses due to changes in shipping arrangements with customers earlier in 2010. We incurred plant consolidation and exits costs of $0.8 million in the third quarter. We anticipate these costs to taper as we have now shuttered these facilities."
"Increases in accounts receivable reflect the 18% increase in revenue while our inventory management improvements showed their impact with inventory showing improved operational performance over the prior year. The MOX project, however, has continued to struggle and, at this time, we do not anticipate being able to prevent some revenues from that project slipping into 2011 from 2010. Additionally, the C&I ASHRAE product lines have not recovered as quickly as we anticipated and we are further refining our revenue expectations as between $235 million and $240 million. This updated range would present a 6% to 8% increase over 2009."
Restatements of first quarter and second quarter 2010 results
The Company is restating its first and second quarter 2010 results in order to record certain liabilities. While these adjustments do impact the previously released results, none of the changes impact the Company's prior year's results or future cash flows.
These adjustments are primarily a result of activities connected with the previously announced consolidation of operations into the new Ardmore, Oklahoma facility. Subsequent to the consolidation efforts in the first and second quarters of this year, the company has determined the potential to sublease the four exited facilities is not likely and therefore a liability for the remaining lease term must be recorded in the amount of approximately $8 million, effectively eliminating the lease expense for these facilities from the company's statements of operations for the remainder of the lease term. After considerable review, the company has also determined there has not been sufficient change in the external factors surrounding these leases and those liabilities should have been recorded in the first and second quarters of 2010 at the time the Company moved substantially all the operations from those facilities into the Ardmore facility.
Flanders' Chief Financial Officer, John Oakley stated: "We are excited to complete the previously announced consolidation of facilities resulting in opportunities for higher efficiencies, not to mention to have removed our operations from the violence in northeast Mexico. While obviously not pleased with having to adjust the previous quarter's results but given the status of the commercial real estate markets in the United States and the violence in the northeastern regions of Mexico, we are unsure as to the timing of our ability to secure sublease tenants and have reflected this uncertainty in the liability calculation. We continue to explore all alternatives to find sub lessee tenants for these exited facilities while taking advantage of the efficiencies gained by consolidating to one facility."
The impact of all items is a decrease in net income of $2.2 million in the first quarter of 2010, or $(0.08) per fully diluted share, and a decrease of $4.6 million in the second quarter, or $(0.17) per fully diluted share.
Financial Summary – Nine Months Ended September 30, 2010
Revenue for the nine months ended September 30, 2010 was $183.0 million, compared to $167.2 million for the same period a year ago. Gross margin was 18%, compared to 20% for the same period a year ago. Operating expenses in 2010 were $30.3 million compared to a 2009 total of $24.1 million. Plant consolidation and exit costs were $11.0 million for the nine months ended September 30, 2010. Year-to-date net income was a loss of $5.1 million, or $(0.19) per diluted share, compared to net income of $6.0 million or $0.23 per diluted share for the same period in 2009. Adjusted EBITDA for the nine months ended September 30, 2010 was $13.7 million, compared to $14.9 million for the same period a year ago.
Chairman of the Board and CEO, Harry Smith and President and CFO John Oakley are scheduled to conduct a conference call at 11:00 a.m. ET on November 11, 2010 to review these results in more detail. To access the call from within the U.S., please dial 866-425-6192, and international callers can access the call by dialing 973-409-9253 approximately 10 minutes prior to the start of the conference call. The conference ID will be 22983583. A telephone replay will be available until midnight Eastern Time on December 11 by dialing 800-642-1687 or 706-645-9291 and entering pass code 22983583.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements made in this press release other than statements of historical fact, are forward-looking statements. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, among other things: statements and assumptions relating to future growth, as well as management's short-term and long-term performance goals; statements regarding anticipated order patterns from our customers or the anticipated economic conditions of the industries and markets that we serve; statements related to the performance of the U.S. and other economies generally; statements relating to the anticipated effects on results of operations or financial condition from recent and expected developments or events; statements relating to the Flanders' business and growth strategies; and any other statements or assumptions that are not historical facts. Flanders believes that its expectations are based on reasonable assumptions. However, these forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause Flanders' actual results, performance or achievements, or industry results, to differ materially from the Flanders' expectations of future results, performance or achievements expressed or implied by these forward-looking statements. In addition, the Flanders' past results of operations do not necessarily indicate its future results. These and other uncertainties are discussed in the "Risk Factors'' section of the Company's 2009 Form 10-K. The future results of Flanders may fluctuate as a result of these and other risk factors detailed from time to time in the company's filings with the Securities and Exchange Commission. You should not place undue reliance on any forward-looking statements. These statements speak only as of the date of this press release. Except as otherwise required by applicable laws, Flanders undertakes no obligation to publicly update or revise any forward-looking statements or the risk factors described in this press release, including projected sales and profit levels for any business segment in any given quarter, whether as a result of new information, future events, changed circumstances or any other reason after the date of this press release.
Flanders is a leading air filtration products manufacturer. Flanders' products are utilized by many industries, including those associated with commercial and residential heating, ventilation and air conditioning systems, semiconductor manufacturing, ultra-pure materials, biotechnology, pharmaceuticals, synthetics, nuclear power and nuclear materials processing.
For further information on Flanders and its products, visit its web site at or contact John Oakley at 252-946-8081.
The Flanders Corporation logo is available at
CONTACT: Flanders Corporation John Oakley, President and Chief Financial Officer 252-946-8081