Company News
National Challenge Reports 35% Increase in Gross Margins for Q3 2007
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National Challenge Systems Inc.
3700 Steeles Avenue West, Suite 601
Woodbridge, Ontario L4L 8K8
TEL: (905) 264-7700 FAX: (905) 264-7273
E-mail: info@nationalchallenge.com
Website: www.nationalchallenge.com
May 10, 2007 TSX Symbol: NLC
NEWS RELEASE
National Challenge Reports 35% Increase in Gross Margins for Q3 2007
Woodbridge, Ontario - May 10, 2007. National Challenge Systems Inc., a leader in the provision of vacuum truck services for the collection, treatment and disposal of non-hazardous liquid waste, today announced financial results for its third quarter of fiscal 2007, ended March 31, 2007.
The net loss of $264,000 for the third quarter of fiscal 2007 was reduced by 34% or $134,000 as compared to the net loss of $398,000 for the same period last year. The gross margin grew 35% or $314,000 to $1,206,000 for the third quarter of fiscal 2007 from $892,000 for the same period last year.
The net loss of $408,000 for the nine months ended March 31, 2007 was 56% or $521,000 less than the net loss of $929,000 for the first nine months of fiscal 2006. The gross margin was $3,770,000, up 33% or $935,000 from $2,835,000 in the same period last year.
The Company's single largest operating expense, residuals management, was reduced significantly beginning in May 2006 as the Company was able to take more residuals to third-party recycling sites in Ontario instead of transporting them out of province. In the second and third quarter of fiscal 2007 the Ontario sites reduced the volume of residuals they received as a result of colder weather. The Company expects the volume to increase to third-party recycling sites in Ontario during the fourth quarter of fiscal 2007. However, the Company has no long-term contracts with these third-party recycling sites and therefore cannot predict with certainty the volume of material they will receive. The Company's profitability can be materially impacted by the volume of residuals these Ontario sites receive.
The Company continues to have large non-cash operating expenses including amortization of intangible assets related to the acquisition of its two operating subsidiaries. The amortization of the intangible assets was $242,000 in each of the first three quarters of 2006 and 2007. The Company has been amortizing intangible assets since 2003 and effective May 31, 2007, $4,550,000 of these intangibles assets related to customers and software will be fully amortized leaving only $1,000,000 remaining related to patent license agreements. As a result, beginning in June 2007 the quarterly amortization charge will be reduced from $242,000 to $25,000 through to 2017.
Cash flows from operating activities were $297,000 for the three months ended March 31, 2007. For the year, cash flows from operating activities were $866,000 in fiscal 2007, an increase of $318,000 or 58% compared to the same period last year. The Company's revolving loan decreased during the third quarter by $424,000 or 37% from $1,157,000 at December 31, 2006 to $733,000 at March 31, 2007. For the year, the revolving loan decreased by $485,000 or 40%.
The comparative financial statements for the three months, six months and nine months ending March 31, 2007, along with other information, may be obtained through the Company's website at www.nationalchallenge.com, or on SEDAR at www.sedar.com.
This press release is available on the Company's official on-line investor relations site for investor commentary, feedback and questions. Investors are asked to visit the investor relations section of the Company's website at http://www.nationalchallenge.com/NCS_Investor.asp. Alternatively, investors are asked to e-mail all questions and correspondence to Info@NationalChallenge.com where they can also request addition to the National Challenge investor e-mail list to receive all future press releases and updates directly.
About National Challenge Systems Inc.
National Challenge is Canada's largest provider of vacuum truck services for the collection, treatment and disposal of organic and other non-hazardous liquid waste. NCS services in excess of 8,000 commercial, industrial, institutional and residential customers in Ontario, Quebec, and British Columbia. Further information about NCS may be obtained at the Company's web site at www.nationalchallenge.com .
Note: Certain information contained in this press release may be forward-looking and therefore subject to unknown risks or uncertainties. The actual results, performance or achievements of National Challenge Systems Inc. may differ materially from the results, performance or achievements of the Company expressed or implied by such forward-looking statements.
CONTACT INFORMATION
Corporate Inquiries
Charles H. Buehler,
Chief Executive Officer
info@nationalchallenge.com
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