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    • Husky Injection Molding Systems Ltd. issues fiscal 2006 first quarter results

      For release 2005-12-07


      Toronto, Ontario — Husky Injection Molding Systems Ltd. (TSX: HKY) today announced its results for the first quarter ended October 31, 2005. All figures in this press release are in US dollars unless otherwise stated.

      Management's Discussion and Analysis

      The following is a discussion of the first quarter fiscal 2006 consolidated financial condition and results of operations of Husky Injection Molding Systems Ltd. (the "Company"). This analysis is current as of December 5, 2005, and should be read in conjunction with the Company's unaudited interim consolidated financial statements for the three month period ended October 31, 2005, and the Company's Annual Report 2005 - Financial Supplement for the year ended July 31, 2005. Additional information regarding the Company, including its Annual Information Form, can be found on SEDAR at www.sedar.com.

      The Company assesses its performance by reviewing the geographic mix of sales from its territories, and gross profit and profitability on a consolidated basis.

       

      Summarized Financial Results
      (in millions of US dollars, except per share data, unaudited)

                                                               Three Months Ended
                                                           October 31,  October 31,
                                                                 2005         2004
                                                         --------------------------
          Orders                                                271.8        224.7
          -------------------------------------------------------------------------
          Sales                                                 175.9        162.2
          -------------------------------------------------------------------------
          Net Loss                                               (9.3)       (13.3)
          -------------------------------------------------------------------------
          Loss Per Share                                        (0.08)       (0.11)
          -------------------------------------------------------------------------
      

      Results of Operations
      Three month period ended October 31, 2005 compared to the same period in the previous year

      Sales
      Sales for the first quarter increased 8% to $175.9 million from $162.2 million, as a result of stronger order intake, which offset lower opening backlog levels.

      In North America, sales decreased 5% as higher shipments in packaging applications were offset by decreases in other markets. Sales in Europe grew 16%, principally due to increased PET shipments, which resulted from a higher opening backlog. The impact of foreign exchange rates on Euro-denominated shipments was not material. Sales in Asia Pacific increased 38%, due to higher PET shipments. Latin American sales increased 7% as higher shipments in packaging and automotive offset decreases in other applications.

      Net Loss
      The net loss for the first quarter was $9.3 million ($0.08 loss per share), compared to a net loss of $13.3 million ($0.11 loss per share) last year.

      President's Message
      John Galt, the Company's President and Chief Executive Officer commented, "Becoming President and CEO in September has been an exciting experience with many challenges and opportunities. Over the past three months we have focused on the following priorities:

      • Articulate our strategy - Based on the Company's strong foundation and capabilities, we have refined our strategy. The core element is to differentiate ourselves through exceptional products and services, based on a leading technology platform. Throughout this process I have worked closely with the executive team. I am excited to be working with a group of very capable people who believe in Husky's values as much as I do.
      • Share our vision with our people and ensure the organization is aligned - It is important that everyone understands where we are going and embrace their role in achieving our goals. I have received a lot of feedback from the team and am encouraged by their enthusiasm.
      • Focus on execution and profits - As we have communicated previously, we must concentrate on executing our plans and improving profits. This has, and continues to be, a key aspect of our activities.
      • Stay close to customers - At the same time, I have visited customers in our key market segments. We cannot be successful unless our actions are creating value for them.

      Our first quarter results are encouraging. For the quarter, orders increased over 20 percent to $272 million and were up in all territories. This represents a record level of orders for the Company. Our net loss decreased 30 percent over the same period last year. This positive momentum confirms that the actions we are taking have put us on the right track.

      However, we have much work to do in achieving sustained levels of profitability. While we have the basic infrastructure and platform in place to support our strategy, we need to focus on driving efficiencies across the organization and better managing costs. We must maintain a discipline of meeting our commitments and executing our plans to drive profitable growth in our key market segments. I look forward to discussing our vision in more detail with you tomorrow at Husky's Annual General Meeting.

      At this time I would also like to thank Mr. Richard Roswech who is retiring as a member of Husky's Board of Directors. Mr. Roswech has made a valued contribution to the Board since 1997, including his service as Chair of the Audit Committee between 1998 and 2004. Mr Roswech will continue to be available to the Company as a consultant."

      2006 Outlook
      The Company expects that challenging market conditions will persist through calendar 2006. While current order momentum in all territories and growth prospects in key markets are encouraging, the Company believes it is prudent not to provide specific guidance for the fiscal year. For the second quarter, the Company expects sales will exceed levels reached last year. Net income for the six month period ending January 31, 2006 is expected to reach breakeven levels compared to a net loss of $16.1 million reported for the same period last year.

      Gross Profit
      Gross profit increased to $27.1 million from $23.0 million last year. As a result, margins increased to 15.4% from 14.2%. Gross profit increased by approximately $8.0 million as a result of higher sales, the impact of price increases, and cost reduction initiatives. These were partly offset by unfavorable foreign exchange rates on the translation of Canadian dollar-denominated expenses, totaling approximately $3.3 million, and costs associated with the closure of the Vermont Controls operation and its transfer to the Bolton campus.

      Other Income and Expenses
      Selling and administration expenses were $34.7 million, down from $40.4 million last year. The decrease was primarily due to lower trade show expenses and reduced discretionary spending. These were partly offset by unfavorable foreign exchange rates on Canadian dollar-denominated expenses, and higher salary and people-related expenses. Last year's results included costs associated with the closure of the Cincinnati Technical Center and the Company's participation at a large triennial trade show in Germany.

      Interest expense, net of interest income, increased marginally to $2.6 million from $2.5 million last year. The increase was due to higher average borrowing rates, partly offset by lower average borrowing levels.

      Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)(1)
      EBITDA was positive $5.2 million, compared to negative $4.8 million last year. The increase was a result of reduced selling and administration expenses and higher gross profit.

      Income Taxes
      In the quarter, the net loss includes a recovery of income taxes of $1.1 million (10.3% of the loss before income taxes), compared to a recovery of income taxes of $6.6 million (33.0% of the loss before income taxes) last year. The current year tax rate decreased due to losses incurred in a jurisdiction where the tax benefit was not recognized. The Company records its future income tax assets (net of its valuation allowance) only to the extent it is more likely than not it will realize the assets in the foreseeable future.

      Orders and Backlog
      Orders for the first quarter increased 21% to $271.8 million from $224.7 million last year, representing a record level of orders for the Company. Orders grew in all territories and were higher in all markets except automotive, which decreased as a result of softness in Europe. In PET the trend toward manufacture of preforms by brand owners continued, particularly in North America and Latin America.

      In North America, both PET and non-PET orders increased marginally. PET orders were up following last year's strong performance, particularly in water and carbonated soft drink applications. Non-PET orders increased as lower demand in technical and general markets was offset by growth in packaging and automotive market applications. European orders increased, primarily due to higher PET demand in Eastern Europe, following a year of overcapacity and challenging market conditions. Non-PET declined marginally due to a drop in automotive activity relative to last year which had benefited from demand related to new vehicle launches. The impact of foreign exchange rates on Euro-denominated orders was immaterial. In Asia Pacific, orders increased in all markets with strength in packaging for closure applications, principally in North Asia. Latin American orders increased significantly, primarily due to stronger PET demand from brand owners in Mexico.

      Backlog at October 31, 2005 increased 2% to $335.0 million from $329.9 million last year.

      Segmented Information

      Sales and Orders
      Please refer to the discussion of sales and orders above.

      Gross Profit
      The Company evaluates gross profit on a consolidated basis. The change in gross profit margin of the Company's manufacturing operations during the quarter is attributable to the factors discussed previously under "Gross Profit". In general, gross profit earned by the Company's Service and Sales territories fluctuates primarily as a result of changes to internal pricing between business units, foreign exchange fluctuations, and competitive pricing pressures. Margins in the first quarter in Latin America and Asia Pacific improved as last year's results included competitive pricing pressure. The reader is reminded that internal changes in pricing between business units and foreign exchange fluctuations may affect comparative Service and Sales and manufacturing profit margins, and that such changes may give rise to segmented results which are not necessarily indicative of external business or market conditions.

      Liquidity and Capital Resources

      Cash Position
      Cash provided by operating activities for the quarter totaled $24.2 million, compared to cash used in operating activities of $4.8 million last year. This improvement was principally due to decreased non-cash working capital, change in future income taxes, and a reduced net loss. From the beginning of the current fiscal year, non-cash working capital declined due to lower accounts receivable and higher customer deposits. This was partly offset by increased inventory levels, consistent with the growth in the backlog. The reduction in accounts receivable was principally due to lower sales in the current quarter, as compared to the fourth quarter fiscal 2005.

      Capital Additions
      Capital additions for the quarter totaled $8.2 million compared to $8.0 million last year. Additions related principally to equipment purchases for the Company's manufacturing operations.

      Capital Resources
      Debt at October 31, 2005 totaled $159.1 million, compared to $164.3 million at July 31, 2005. The decrease was primarily attributable to the repayment of term debt, partly offset by the translation of Canadian dollar-denominated debt. Net debt(2) decreased to $127.2 million from $145.1 million at July 31, 2005, primarily as a result of increased cash and cash equivalents balances. Debt as a percentage of capital was 30% at October 31, 2005 and July 31, 2005. Net debt as a percentage of capital(3) decreased to 26% from 28% at July 31, 2005

      At October 31, 2005 the Company had committed but unutilized credit facilities totaling $97.3 million.

      The Company expects to meet its operating cash requirements through fiscal 2006, including required working capital investments, capital expenditures, and currently scheduled repayments of debt, from cash on hand, cash flow from operations, and its committed borrowing capacity.

      Forward Looking Statements
      This press release contains certain forward-looking statements which reflect the Company's current view of future events, business outlook and anticipated financial performance. Such statements are subject to assumptions which may be incorrect, and to risks and uncertainties which are difficult to predict. Future events, outcomes and financial performance may differ materially from those predicted in these statements as a result of factors which may include, but are not limited to, those described on pages 10, 11 and 12 under the "Risks and Uncertainties" section in the Company's Annual Report 2005 - Financial Supplement for the year ended July 31, 2005.

      About Husky
      Husky Injection Molding Systems Ltd. (www.husky.ca) is a leading supplier of injection molding equipment and services to the plastics industry. The Company designs and manufactures the industry's most comprehensive range of injection molding equipment, including machines, molds, hot runners and robots. In addition, Husky's value-added services include factory planning, customer training and systems integration. In fiscal 2005, sales were $860 million, with approximately 3,050 people employed worldwide.

      Customers use Husky's equipment and services to produce a wide range of plastic parts, including bottles and caps for water and soft drinks; containers, from yogurt cups to recycling bins; medical applications, such as syringes and vials; automotive components, from headlight housings to bumpers; and parts for electronic equipment, including personal digital assistants and mobile audio devices.

      Husky has more than 40 Service and Sales offices - including 19 Technical Centers - supporting customers in over 100 countries. Manufacturing facilities are located on campuses in Canada, the United States, Luxembourg, and China. Our core values - a passion for excellence, bold goals, proactive environmental responsibility, making a contribution and uncompromising honesty - are the foundation of our business practices worldwide. They are integral to everything we do and define who we are as a company.

      The Company's common shares are listed on the Toronto Stock Exchange (HKY).

          -------------------------------
          (1) EBITDA: Earnings before interest, taxes, depreciation and
              amortization is a non-GAAP measure. EBITDA does not have a
              standardized meaning prescribed by GAAP, and may not be directly
              comparable to similar measures presented by other companies due to
              the nature of its calculation. The Company believes this measure may
              be relevant to stakeholders.
      
          (2) Net debt is defined as total debt less cash and cash equivalents. Net
              debt is a non-GAAP measure, which does not have a standardized
              meaning prescribed by GAAP, and which may not be directly comparable
              to similar measures presented by other companies due to the nature of
              its calculation.
      
          (3) Debt as a percentage of capital is defined as total debt divided by
              the sum of total debt and shareholders' equity. Net debt as a
              percentage of capital is defined as net debt divided by the sum of
              net debt and shareholders' equity. Debt and net debt as a percentage
              of capital are non-GAAP measures, which do not have a standardized
              meaning prescribed by GAAP, and which may not be directly comparable
              to similar measures presented by other companies due to the nature of
              their calculation.
      
      
      
                          HUSKY INJECTION MOLDING SYSTEMS LTD.
                               CONSOLIDATED BALANCE SHEETS
      
          (IN THOUSANDS OF US DOLLARS, UNAUDITED)
      
                                                           October 31,     July 31,
                                                                 2005         2005
          -------------------------------------------------------------------------
      
          ASSETS
          Current
          Cash and cash equivalents                            31,820       19,149
          Accounts receivable                                 110,029      133,183
          Income taxes receivable                               2,393        2,419
          Inventories                                         209,877      191,761
          Prepaid expenses and other assets                    12,260        9,523
          Future income tax assets                             18,229       16,749
          -------------------------------------------------------------------------
          Total current assets                                384,608      372,784
          Cross currency swap receivable, net                   5,262        2,040
          Future income tax assets                             11,796       10,973
          Capital assets, net                                 364,199      376,596
          -------------------------------------------------------------------------
          Total assets                                        765,865      762,393
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
      
          LIABILITIES AND SHAREHOLDERS' EQUITY
          Current
          Accounts payable and accrued charges                148,414      149,274
          Customers' deposits                                  72,578       54,410
          Current portion of long-term debt                     3,385        3,904
          -------------------------------------------------------------------------
          Total current liabilities                           224,377      207,588
          Long-term debt                                      155,669      160,390
          Employee future benefits                             14,563       13,906
          Future income tax liabilities                         1,401        1,401
          Other long-term liabilities                             509          578
          -------------------------------------------------------------------------
          Total liabilities                                   396,519      383,863
          -------------------------------------------------------------------------
      
          Shareholders' equity
          Share capital                                       134,073      133,985
          Retained earnings                                   235,273      244,545
          -------------------------------------------------------------------------
          Total shareholders' equity                          369,346      378,530
          -------------------------------------------------------------------------
          Total liabilities and shareholders' equity          765,865      762,393
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
      
      
      
                          HUSKY INJECTION MOLDING SYSTEMS LTD.
               CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
      
          (IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA, UNAUDITED)
      
                                                               Three Months Ended
                                                           October 31,  October 31,
                                                                 2005         2004
          -------------------------------------------------------------------------
      
          Sales                                               175,887      162,249
          Cost of sales                                       148,836      139,259
          -------------------------------------------------------------------------
          Gross profit                                         27,051       22,990
          -------------------------------------------------------------------------
      
          Other expenses
          Sales and administration                             34,740       40,365
          Interest - current, net                                (148)        (113)
                   - long-term                                  2,792        2,609
          -------------------------------------------------------------------------
          Total expenses                                       37,384       42,861
          -------------------------------------------------------------------------
      
          Loss before income taxes                            (10,333)     (19,871)
          Provision for (recovery of) income taxes
            Current                                               964          651
            Future                                             (2,025)      (7,207)
          -------------------------------------------------------------------------
                                                               (1,061)      (6,556)
          -------------------------------------------------------------------------
          Net loss for the period                              (9,272)     (13,315)
      
          Retained earnings, beginning of period              244,545      242,470
          -------------------------------------------------------------------------
          Retained earnings, end of period                    235,273      229,155
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
      
          Basic and diluted loss per share                      (0.08)       (0.11)
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
      
          Weighted average number of common shares
           outstanding                                    117,078,145  116,935,006
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
      
      
      
                          HUSKY INJECTION MOLDING SYSTEMS LTD.
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
      
          (IN THOUSANDS OF US DOLLARS, UNAUDITED)
      
                                                               Three Months Ended
                                                           October 31,  October 31,
                                                                 2005         2004
          -------------------------------------------------------------------------
      
          OPERATING ACTIVITIES
          Net loss for the period                              (9,272)     (13,315)
          Add (deduct) items not affecting cash
            Depreciation                                       12,768       12,383
            Amortization                                           82          161
            Loss on disposal of capital assets                    380          395
            Employee future benefits                              657        1,180
            Future income taxes                                (2,303)      (8,501)
            Other                                                (228)         315
          -------------------------------------------------------------------------
                                                                2,084       (7,382)
          Net decrease in non-cash working capital
           balances related to operations                      22,160        2,577
          -------------------------------------------------------------------------
          Cash provided by (used in) operating activities      24,244       (4,805)
          -------------------------------------------------------------------------
      
          INVESTING ACTIVITIES
          Additions to capital assets                          (8,208)      (8,049)
          Net decrease in accounts payable and
           accrued charges related to capital asset
           additions                                           (2,676)      (2,473)
          -------------------------------------------------------------------------
          Cash used for capital asset additions               (10,884)     (10,522)
          Proceeds from sale of capital assets                  7,454           85
          -------------------------------------------------------------------------
          Cash used in investing activities                    (3,430)     (10,437)
          -------------------------------------------------------------------------
      
          FINANCING ACTIVITIES
          Repayment of long-term debt                          (8,251)        (870)
          Issuance of common shares                                88           63
          -------------------------------------------------------------------------
          Cash used in financing activities                    (8,163)        (807)
          -------------------------------------------------------------------------
      
          -------------------------------------------------------------------------
          Effect of exchange rate changes on cash and cash
           equivalents                                             20          659
          -------------------------------------------------------------------------
      
          Net increase (decrease) in cash and cash
           equivalents during the period                       12,671      (15,390)
          Cash and cash equivalents, beginning of period       19,149       39,901
          -------------------------------------------------------------------------
          Cash and cash equivalents, end of period             31,820       24,511
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
      
          Supplementary cash flow information
          Cash income taxes paid, net                             594          364
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
          Cash interest paid, net                                 162        4,781
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
      
      
      
                          HUSKY INJECTION MOLDING SYSTEMS LTD.
                                  SEGMENTED INFORMATION
      
          (IN THOUSANDS OF US DOLLARS, UNAUDITED)
      
                               Three Months Ended October 31, 2005
                   ----------------------------------------------------------------
                    Service and Sales territories
                   -------------------------------
                                                      Manufact-  Elimina-
                       North   Latin            Asia  uring      tions
                     America America  Europe  Pacific operations & other(i)  Total
          -------------------------------------------------------------------------
          External
           sales      68,532  21,831   56,200  29,324        -         -   175,887
          Intersegment
           sales           -       -        -       -  147,147  (147,147)        -
          -------------------------------------------------------------------------
          Total
           sales      68,532  21,831   56,200  29,324  147,147  (147,147)  175,887
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
          Gross
           profit     13,231   3,619    6,631   5,210   (1,874)      234    27,051
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
          Depreciation
           and amorti-
           zation        840     203      520     311    9,762     1,214    12,850
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
          Capital asset
           additions      42       -      134     398    7,551        83     8,208
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
          Total
           assets    104,646  30,768   88,389  77,709  369,227    95,126   765,865
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
      
      
                               Three Months Ended October 31, 2004
                   ---------------------------------------------------------------
                    Service and Sales territories
                   -------------------------------
                                                      Manufact-  Elimina-
                       North   Latin            Asia  uring      tions
                     America America  Europe  Pacific operations & other(i)  Total
          -------------------------------------------------------------------------
          External
           sales      72,129  20,355   48,584  21,181        -         -   162,249
          Intersegment
           sales           -       -        -       -  142,841  (142,841)        -
          -------------------------------------------------------------------------
          Total
           sales      72,129  20,355   48,584  21,181  142,841  (142,841)  162,249
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
          Gross
           profit     13,407   3,110    6,025   3,187   (4,766)    2,027    22,990
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
          Depreciation
           and amorti-
           zation        858     203      624     401    9,141     1,317    12,544
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
          Capital asset
           additions     265      25      404     215    6,384       756     8,049
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
          Total
           assets    103,107  34,342  102,586  66,961  367,492   102,750   777,238
          -------------------------------------------------------------------------
          -------------------------------------------------------------------------
          (i) Eliminations and other includes Corporate activities and assets not
              attributable to the operating segments.
      
          External sales to customers in Canada and the United States for the three
          months ended October 31, 2005 were $4,277 (2004 - $9,584) and $64,255
          (2004 - $62,545), respectively.
      
          Capital assets in Canada, the United States and Luxembourg as at
          October 31, 2005 were $123,128 (2004 - $133,457), $92,912 (2004 -
          $102,416) and $100,931 (2004 - $103,650), respectively.
      
          Certain fiscal 2005 comparative figures have been reclassified to conform
          with the current financial statement presentation.
      
      

      For further information: Daniel Gagnon, Vice President, Finance & CFO, (905) 951-5000

      About Husky — Husky Injection Molding Systems (www.husky.ca) is a leading global supplier of injection molding equipment and services to the plastics industry. The company has more than 40 service and sales offices, supporting customers in over 100 countries. Husky's manufacturing facilities are located in Canada, the United States, Luxembourg and China. 

      For more information, please contact:
      Media Relations
      Husky Injection Molding Systems
      E-mail: media@husky.ca

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