Sigma Industries Inc.

Transcription

1 Condensed Interim Consolidated Interim Financial Statements (Unaudited) NOTICE OF DISCLOSURE: The accompanying Condensed Consolidated Interim Financial statements have not been reviewed by our independent auditor.

2 Condensed Interim Consolidated Interim Statement of Financial Position (Unaudited) Assets April 28, Current assets Cash 574, ,002 Accounts receivable 9,847,373 11,722,295 Current tax assets 19,535 - Inventories 6,684,327 7,000,266 Prepaid expenses 671, ,262 17,796,709 19,594,825 Property, plant and equipment 9,985,889 10,136,541 Intangible assets 2,465,915 2,600,821 Liabilities 30,248,513 32,332,187 Current liabilities Bank loans (note 4) 7,457,281 8,068,600 Trade and other payables 6,159,651 7,574,379 Deferred revenues 296, ,544 Current tax liabilities - 75,518 Current portion of long-term debt (note 5) 10,332,770 10,903,095 Deferred gain 110, ,091 24,355,854 26,900,227 Long-term debt (note 5) 882, ,266 Deferred gain 707, ,288 Equity 25,946,166 28,079,781 Share capital (note 6) 13,521,142 13,521,142 Debenture conversion options 210, ,000 Contributed surplus 2,891,983 2,891,983 Accumulated other comprehensive income 642, ,841 Deficit (12,963,650) (12,938,560) 4,302,347 4,252,406 Subsequent events (note 11) 30,248,513 32,332,187 The accompanying notes are an integral part of these condensed consolidated interim financial statements. Approved by the Board of Directors (s) Rogers Demers, FCA, Director (S)Denis Bertrand, Director (2)

3 Condensed Interim Consolidated Interim Statement of Income (Loss) (Unaudited) (expressed in Canadian dollars, except per share data) Revenues (note 6) 18,080,055 15,164,710 Cost of sales and operating expenses (excluding depreciation and amortization) before the following items 17,350,573 14,563, , ,086 Financial expenses 554, ,512 Depreciation and amortization 361, ,583 Foreign exchange gain (133,417) (103,226) Gain on disposal of property, plant and equipment (1,028) (28,918) 781, ,951 Net loss before income tax (7,083,606) (313,865) Income tax recovery 26,736 - Net loss for the period (7,056,870) (313,865) Basic and diluted earnings per share (note 8) (0.002) (0.027) Weighted average number of shares outstanding (note 8) Basic and diluted 11,724,775 11,724,775 Condensed Interim Consolidated Interim Statement of Comprehensive Income (Unaudited) Net loss for the period (25,090) (313,865) Other comprehensive loss Exchange difference of foreign operations' financial statements (34,969) (86,450) Comprehensive loss for the period (60,059) (400,315) The accompanying notes are an integral part of these condensed consolidated interim financial statements. (3)

4 Condensed Interim Consolidated Interim Statement of Changes in Equity (Unaudited) For the quarters ended ended and Share capital Debenture Conversion options Contributed surplus Accumulated other comprehensive income Deficit Total equity Balance April 30, 13,521, ,000 2,891,983 1,093,225 (16,079,656) 1,526,694 Net loss (313,865) (313,865) Other comprehensive loss (86,450) - (86,450) Comprehensive loss (86,450) (313,865) (400,315) Balance 13,521, ,000 2,891,983 1,006,775 (16,393,521) 1,126,379 Net income ,454,961 3,454,961 Other comprehensive loss (328,934) - (328,934) Comprehensive income (328,934) 3,454,961 3,126,027 Balance April 28, 13,521, ,000 2,891, ,841 (12,938,560) 4,252,406 Net loss (25,090) (25,090) Other comprehensive loss (34,969) - (34,969) Comprehensive loss (34,969) (25,090) (60,059) Debenture conversion options - 110, ,000 Balance 13,521, ,000 2,891, ,872 (12,963,650) 4,302,347 The accompanying notes are an integral part of these condensed consolidated interim financial statements. (4)

5 Condensed Interim Consolidated Interim Statement of Cash Flows (Unaudited) For the quarters ended ended and Cash flows provided by (used in): Operating activities Net loss (25,090) (313,865) Adjustments for: Depreciation and amortization 361, ,583 Amortization of the deferred gain (44,916) - Gain on disposal of property, plant and equipment (1,028) (28,918) Interest capitalized on long-term debt 10,674 13,058 Deferred tax Financial expenses 554, ,512 Interest on bank loans and bank charges (228,629) (272,733) 626, ,637 Changes in items of working capital (note 8) 568, ,172 1,195, ,809 Investing activities Additions to property, plant and equipment, net of investment tax credits (72,790) (56,778) Additions to intangible assets (2,846) (8,595) Proceeds from disposal of property, plant and equipment 1,028 29,945 (74,608) (35,428) Financing activities Increase on long-term debt 555,000 95,926 Increase (decrease) in bank loans (611,319) 164,515 Payments on long-term debt (580,761) (344,289) Interest on long-term debt (321,629) (300,703) (958,709) (384,551) Effect of exchange rate changes on cash 15,173 (50,438) Net change in cash 177, ,392 Cash at the beginning 397, ,519 Cash at the end 574, ,911 Additional information Interest paid 360, ,020 Income tax recovery 68,317 3,186 The accompanying notes are an integral part of these condensed consolidated interim financial statements. (5)

6 (Unaudited) 1 General information Nature of activities The company is a composite and metal products manufacturer. It is active in the growing heavy duty truck, coach, transit and bus, machinery, agriculture and wind energy market segments. The company sells its products mainly in Canada and the United States. The company, whose common shares trade under ticker symbol SSG on the TSX Venture Exchange, was incorporated under the Alberta Business Corporations Act on September 5, 2001 and continued under the Canada Business Corporations Act on February 6, The address of its registered office is 55 Route 271 Sud, Saint-Éphrem-de-Beauce, Quebec, G0M 1R0. 2 Basis of presentation and current principles These condensed interim consolidated financial statements have been prepared on a going concern assumption, meaning that Sigma Industries Inc. (the company) will be able to realize assets and discharge liabilities in the normal course of operations in accordance with IFRS. They include the accounts of the company and of all its wholly-owned subsidiaries. Intercompany transactions and related balances have been eliminated. As at July 28,, the company's main subsidiaries were as follows: Rene Composite Materials Ltd. and its subsidiary RMC USA Inc. Faroex Ltd. PNS-Tech Inc. These condensed interim consolidated financial statements have been prepared in compliance with IFRS applicable to the preparation of interim financial statements, including IAS 34 Interim Financial Reporting. These financial statements have been prepared based on the accounting policies and method of computation described in the consolidated financial statements for the year ended April 28,. The condensed interim consolidated financial statements should be read in conjunction with the Corporation's annual consolidated financial statements for the year ended April 28, prepared in accordance with IFRS. These condensed interim consolidated financial statements were approved by the Board of Directors on October 26,. (6)

7 (Unaudited) 3 Accounting standards issued but not yet applied The following standards were issued by the International Accounting Standards Board (IASB) in May, except for IFRS 9 which was issued in November Each of these standards is effective for annual periods beginning on or after January 1, 2013, except for IFRS 9 which is effective for annual periods beginning on or after January 1, Early adoption is permitted. The company has not yet assessed the impact of these standards or determined whether it will adopt them early. IFRS 9, Financial Instruments, addresses classification and measurement of financial assets and replaces the multiple category and measurement models in IAS 39 for debt instruments with a new mixed measurement model having only two categories: amortized cost and fair value through profit or loss. IFRS 9 also replaces the models for measuring investments in equity instruments, and such instruments are either recognized at fair value through profit or loss or at fair value through other comprehensive income (loss). Where such equity instruments are measured at fair value through other comprehensive income (loss), dividends, to the extent not clearly representing a return of investment, are recognized in profit or loss. However, other gains and losses (including impairments) associated with such instruments remain in accumulated other comprehensive income indefinitely. Fair value changes due to credit risk for liabilities designated at fair value through profit and loss are generally recorded in other comprehensive income (loss). Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements in IAS 39, Financial Instruments Recognition and Measurement, except that fair value changes due to credit risk for liabilities designated at fair value through profit and loss would generally be recorded in other comprehensive income (loss). IFRS 10, Consolidated Financial Statements, requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. IFRS 10 replaces SIC-12, Consolidation Special Purpose Entities, and parts of IAS 27, Consolidated and Separate Financial Statements. IFRS 11, Joint Arrangements, requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation, the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11 supersedes IAS 31, Interests in Joint Ventures and SIC-13, Jointly Controlled Entities Non-monetary Contributions by Venturers. IFRS 12, Disclosure of Interests in Other Entities, establishes disclosure requirements for interests in other entities, such as joint arrangements, associates, special purpose vehicles and off-balance sheet vehicles. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity's interests in other entities. IFRS 13, Fair Value Measurement, is a comprehensive standard for fair value measurements and disclosure requirements for use across all IFRS standards. The new standard clarifies that fair value is the price that would (7)

8 (Unaudited) be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and in many cases does not reflect a clear measurement basis or consistent disclosures. In June, the IASB amended IAS 1, Presentation of Financial Statements. The main change resulting from the amendments to IAS 1 is a requirement to group together items within other comprehensive income (OCI) that may be reclassified to the profit or loss section. The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements. The amendment to IAS 1 is effective for annual periods beginning on or after January 1, 2013 with earlier application permitted. The company does not anticipate that the amendment will have any impact on the presentation of its consolidated financial statements. In addition, there have been amendments to existing standards, including IAS 27, Separate Financial Statements and IAS 28, Investments in Associates and Joint Ventures. IAS 27 addresses accounting for subsidiaries, jointly controlled entities and associates in annual non-consolidated financial statements. IAS 28 now also includes joint ventures in its scope and addresses the changes in IFRS These amendments are effective for annual periods beginning on or after January 1, 2013 with earlier application permitted. The company is currently evaluating any impacts that could result from these amendments. 4 Credit facilities The company has an authorized bank line of credit of 8,500,000, bearing interest at prime rate plus 4%. A bank credit of 1,000,000 (US946,400) as well as a 250,000 temporary line of credit for risks related to the settlement of electronic funds transfers are included in this 8,500,000 credit. The company also has an available credit facility for the purchase of foreign exchange contracts with maturities not exceeding one year and with a net risk not exceeding 2,000,000. A moveable hypothec on accounts receivable, inventories and all present and future, tangible and intangible assets has been given as security. These credit facilities are renewable annually and mature in October. Under these agreements, the company has agreed to respect certain conditions and financial ratios. This credit facility was renewed until December 31, 2013 on October 25, (note 11). (8)

9 (Unaudited) 5 Long-term debt Quarter Ended Year Ended April 28, Bank loans Opening balance 8,068,600 7,593,478 Increase in bank loans (611,319) 475,122 Closing balance 7,457,281 8,068,600 Long-term debt Opening balance 11,330,361 17,284,438 Issuance of long-term debt 445, ,093 Amortization of deferred financing expenses 4,350 33,855 Interest capitalized on long-term debt 10,674 27,266 Long-term debt repayment (580,761) (1,837,436) Balance of purchase price payable and long-term debt written off - (157,884) Loans disposed of upon the disposal of a subsidiary - (4,511,391) Loan written off - (155,350) Deferred financing expenses disposed of upon the disposal of a subsidiary - 166,198 Impact of foreign exchange rate 6, ,572 Closing balance 11,215,710 11,330,361 Current portion 10,332,770 10,903,095 Long-term debt 882, ,266 11,215,710 11,330,361 On June 24,, the company completed a private placement of secured convertible debentures for a principal amount of 555,000, the debentures being convertible at any time up to maturity on November 10, 2015, in whole or in part, into units of the company, each unit consisting of one common share at 0.10 and one warrant for purchase of one common share of the company at 0.12 per share, the warrants to be valid for exercise no later than the maturity date of the debentures. An amount of 110,000 has been credited to equity for the conversion value. Of this principal amount, 400,000 were purchased by certain directors and shareholders of the company. An amount of 275,000 were used to repay the note payable to a company controlled by certain directors and shareholders. As at and April 30,, the company was in default regarding one loan. Also, a financing with one financial institution maturing in October, was not reviewed as at for these reason, these loans are presented as current liabilities (Note 11 Subsequent events). (9)

10 (Unaudited) 6 Equity Share capital Authorized Unlimited number of common shares, without par value, voting and participating Unlimited number of preferred shares with rights and restrictions fixed by the Board of Directors upon issuance Common shares issued Year Ended April 28, Number Amount Number Amount Common shares issued 11,724,775 13,521,142 11,724,775 13,521,142 7 Revenues The company's revenues are detailed as follows: Sales by family of products Heavy duty trucks Class 8 12,069,454 9,576,531 Bus 2,483,707 2,400,115 Agriculture 1,115,861 1,208,334 Wind energy 1,039, ,266 Industrial 613, ,182 Snow removal 428, ,332 Other 329, ,950 18,080,055 15,164,710 Sales from five major customers accounted for 86.0% of the company's total sales in 2013, and for 77.9% in. Three of these customers (two in ) accounted for more than 10% of the company's total sales in fiscal In 2013, the company's largest customer accounted for sales more than 2.6 times (2.6 in ) higher than those of the company's second largest customer. (10)

11 (Unaudited) 8 Additional disclosures on the condensed interim consolidated statement of income (loss) and the consolidated statement of cash flows (i) Items included in income (loss) before income taxes Cost of sales including depreciation of property, plant and equipment 17,137,214 13,621,236 Depreciation and amortization of property, plant and equipment 223, ,359 Depreciation and amortization of intangible assets 137, ,224 Depreciation and amortization of deferred finance charges 4,350 16,076 Interest on bank loans and bank charges 228, ,733 Finance charges related to long-term debt 321, ,703 (ii) Changes in items of working capital Accounts receivable 1,219, ,109 Current tax assets (95,053) (3,186) Inventories 1,551,003 (345,954) Prepaid expenses (195,874) (192,365) Trade and other payables (2,288,967) (66,502) Deferred revenues 377, , , ,172 (11)

12 (Unaudited) 9 Earnings per share The table below summarizes the basic and potentially dilutive weighted average number of common shares outstanding used in the basic and diluted net earnings per share calculations: Basic and diluted weighted average number of shares outstanding 11,724,775 11,724,775 Furthermore, the following table presents the items excluded from the calculation of diluted earnings per share because the exercise price was greater than the average market price of common shares or due to their antidilutive effect: Number of shares relating to convertible debentures at an exercise price of ,550,000 5,000,000 Number of warrants relating to convertible debentures at a price of ,000,000 5,000,000 Number of warrants relating to convertible debentures at a price of ,550, Segment information The following revenues have been allocated to geographic regions based on the customers' place of residence: Quarter ended Sales by geographic region United States 13,704,231 10,798,888 Canada 3,735,549 3,657,131 Others 640, ,691 All company long-live assets are located in Canada. 18,080,055 15,164,710 (12)

13 (Unaudited) 11 Subsequent events Amendments to the financing agreement On October 24,, certain amendments were made to the financing agreement relating to the term loan amounting to 1,916,666. Accrued interest payable up to this date, totalling 169,711, are included in the principal balance. Moreover, the loan will bear interest at Investissement Québec's prime rate and will be payable monthly. No principal repayment is required before November 2013 and principal instalments will be renegotiated at this time. Renewal of the credit agreement On October 25,, the company renewed with its main lender its credit facilities including the line of credit (note 8) and certain debts amounting to 8,752,305 as at April 28, and maturing on October 31, (note 9). Amendments to the credit agreement are effective on October 25, and the maturity date of the agreement is December 31, Terms of use are similar to those of the prior agreement, except for the interest rate which is reduced by 1%. (13)

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