TURBOTEC PRODUCTS, PLC TRADING STATEMENT

AND THIRD QUARTER RESULTS FOR THE NINE MONTHS ENDED 31 DECEMBER 2006

 

Feb. 14, 2007

FINANCIAL OVERVIEW

 

The Company generated record net sales of $5,767,000 and $17,312,000 for the three and nine month periods ended December 31, 2006 representing a 27% increase over both prior year periods, $4,561,000 and $13,597,000, respectively.  Net income increased by 3% and 4% for the respective current three and nine month periods compared to the prior year. The majority of the revenue increase resulted from the pass through of material cost increases to customers while unit shipments also increased slightly from the prior year, coupled with a shift in product mix towards larger, higher priced coils. 

 

This continuing increase in sales revenue resulted largely from sales of condenser/evaporator coils to the housing market augmented by increased sales of enhanced tubing used in specialty commercial boiler applications. Overall demand for coils has remained high during the current year despite the weakening in residential construction. Concerns over rising running costs and the future availability of energy sources have helped to create market opportunities for "green" heating and cooling products, such as geothermal technology, and other high efficiency systems that use the Company's heat exchangers.  Enhanced surface titanium tubing is unique to the swimming pool heater market and although this market has shown some weakness in recent months, it continues to exhibit overall growth and has enabled the Company to capture a large part of this market niche.

 

Higher metal prices have resulted in higher carrying values of inventory as higher priced tubing was purchased to satisfy customer demand.  The Company recently instituted price increases and changes in material cost pricing formulas to customers, which is expected to improve gross margins during the balance of this fiscal year.  Recent reduction in copper prices should further improve the company's profitability.

 

Operating expenses during the period increased due to the establishment of Human Resources department to address the company's growing needs for personnel in a tight job market. Higher than anticipated administration costs were incurred as the company develops its strategies for long-term growth. Senior management has undertaken programs to reduce inventory and streamline operations, applying lean manufacturing practice whilst, still maintaining a high level of service to its customers.  

 

The recent launch of the new ENVIRO-PAK heat recovery product range at the AHR Expo in Dallas, Texas was well received, with initial response extremely favorable. Sales & Marketing efforts in the coming months will focus on the distribution of these new products as well as expanding its presence in current and new markets.

  

Sunil Raina, Managing Director, Turbotec Products Plc, Commented:

 "We are delighted to report record sales for the period, following high demand for products. We have enjoyed a productive period culminating with the launch of ENVIRO-PAK and we look forward to the benefits afforded to us through the recent trend in reducing copper prices. We continue to deliver first class, high quality products to our customers and we look forward to the future with confidence."

-ENDS-

 

Turbotec Products Plc	+1 860 683 2005
Sunil Raina, Managing Director
Robert Lieberman, Financial Director
Dawnay, Day Corporate Finance Ltd	+44 (0)20 7509 2314
David Rae, Director
Buchanan Communications Ltd	+44 (0)1943 883990
Kelly-Ann Knight, Regional Director

 

For further information, please refer to www.turbotecproducts.com or www.buchanan.uk.com

 

FINANCIAL INFORMATION

UNAUDITED FINANCIAL INFORMATION FOR TURBOTEC PRODUCTS, PLC

 

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2006 AND 2005

 

	UNAUDITED   2006	UNAUDITED PRO FORMA 2005
	($000's)	($000's)
ASSETS   CURRENT ASSETS
Cash	$2	$2
Accounts receivable, net of allowance for doubtful accounts of $128 and $85 in 2006 and 2005, respectively	2,394	1,975
Inventories	3,862	2,566
Prepaid expenses and other current assets	131	70
Total current assets	6,389	4,613
PROPERTY, PLANT AND EQUIPMENT, net	3,941	3,527
OTHER ASSETS	343	103
	$10,673	$8,243

LIABILITIES AND STOCKHOLDERS' EQUITY

 

CURRENT LIABILITIES
Line of credit	$538	$2,690
Accounts payable   Accrued expenses and taxes	1,817 257	1,377 43
Current portion of long-term debt	121	323
Current portion of obligation under capital leases	-	17
Total current liabilities	2,733	4,450
LONG-TERM LIABILITIES   Long-term debt, less current maturities above	242	334
Obligations under capital lease, less current maturities above   Deferred income taxes	- 985	- 873
	1,227	1,207
COMMITMENTS AND CONTINGENCIES   STOCKHOLDERS' EQUITY	-	-
Common stock, par value $100/share,	236	-
Merger reserve	(108)	10
Additional paid-in capital	3,373	-
Retained earnings	3,212	2,576
	6,713	2,586
	$10,673	$8,243

 

 

 

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005

 

		UNAUDITED   2006		UNAUDITED PRO FORMA 2005
		($000's)		($000's)
NET SALES		$17,312		$13,597
COST OF SALES		13,960		10,432
Gross Profit		3,352		3,165
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		1,775		1,355
Income From Operations		1,577		1,810
OTHER INCOME (EXPENSE)
Interest Expense                 Other		(75) (61)		(182) -
TOTAL OTHER INCOME (EXPENSE)		(136)		(182)
Income Before Management Fees		1,441		1,628
MANAGEMENT FEE EXPENSE		403		544
Income Before Provision for Income Taxes		1,038		1,084
PROVISION FOR INCOME TAXES		294		368
Net Income		744		716
RETAINED EARNINGS, Beginning		2,566		2,391
LESS: Distributions to Parent		(98)		(531)
RETAINED EARNINGS, Ending		$3,212		$2,576

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005

 

	UNAUDITED              2006 ($000'S)	UNAUDITED PRO FORMA 2005 ($000'S)
OPERATING ACTIVITIES:
Net income	$744	$716
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization Deferred taxes	189 49	175 123
Changes in operating assets and liabilities:
Increase (decrease) in accounts receivable Increase (decrease) in inventories	(344) (861)	(24) (209)
Decrease (increase) in prepaid expenses and other assets	(65)	(42)
Decrease (increase) in deferred assets	(102)	-
Decrease (increase) in accounts payable	(261)	(135)
Increase (decrease) in accrued taxes and expenses	20	(154)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	(631)	450
INVESTING ACTIVITIES;
Purchases of property, plant and equipment, net	(474)