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National Challenge Announces Annual Results for Year Ended June 30, 2006
download pdfNational 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
September 27, 2006 TSX Symbol: NLC
NEWS RELEASE
National Challenge Announces Annual Results for Year Ended June 30, 2006
Woodbridge, Ontario - September 27, 2006. 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 year ended June 30, 2006.
Revenue for the year was up 11% or $1,538,000 from $14,494,000 for fiscal 2005 to $16,032,000 for 2006. A significant portion of the increase in revenue was a result of the Company increasing rates to Ontario customers in order to offset the erosion to the gross margin that had occurred from the higher residuals management costs.
During 2006, the Company was forced to continue using more expensive residuals management alternatives including transporting material out of province. Consequently, residuals management costs increased significantly for the second year in a row and were up 22% in 2006 over 2005. Over the past two years, residuals management costs have increased over 100%. Despite this, gross margin improved by $435,000 or 12%, from $3,615,000 in 2005 to $4,050,000 in 2006.
Selling, general and administrative expenses were up $464,000 or 19%, from $2,469,000 in 2005 to $2,933,000 in 2006. The increase was the result of a number of higher costs including banking and audit fees related to the Company's asset based lending facility, and expenses related to the investigation of Anaerobic Digestion as a solution for the Company's residuals management issues.
There continue to be large non-cash expenses, which were up $23,000 or 1% from $2,090,000 in 2005 to $2,113,000 in 2006. This includes the amortization of intangible assets related to the acquisition of ORMI and A&A of $969,000 in both 2005 and 2006. Effective May 2007, the majority of the intangible assets will have been written off and the annual $969,000 amortization charge will be reduced to $100,000 through to 2017.
Future income tax credits were down by $138,000 from $142,000 in 2005 to $4,000 in 2006. As a result the net loss for the year was up $66,000 from $1,130,000 in 2005 to $1,196,000 in 2006. Cash flows from operating activities increased $38,000 or 5% from $701,000 in 2005 to $739,000 in 2006.
Revenue for the fourth quarter of 2006 was $3,955,000 almost unchanged from the same quarter in 2005. The net loss for the fourth quarter of 2005 was down by $87,000 or 25% from $355,000 in 2005 to $268,000 in 2006.
During the 4th quarter of 2006, the Company's largest industrial account significantly reduced their service after having made a major capital investment to their waste handling process. The majority of ORMI's residuals are collected from small volume generators that cannot make an economic argument to invest in capital to reduce the limited volumes of residuals they produce. The lost revenue was offset by the higher customer rates and new business.
Beginning in May 2006, the Company was able to take more residuals to third-party recycling sites in Ontario instead of transporting out of province. This contributed to an improvement to the gross margin percentage in the fourth quarter of 6.5% from 24.1% for 2005 to 30.6% in 2006. The Company has no long-term contracts with these third party facilities in Ontario and therefore cannot predict with certainty how long or to what extent this situation will continue. However, for as long as it does continue, it will have a material positive impact on the Company's profitability.
The Company's annual general meeting of the shareholders will held at The Ontario Club, 30 Wellington Street West, Commerce Court, 5th Floor South, Toronto, Ontario on October 24, 2006 at 4:00 o'clock in the afternoon.
The comparative financial statements for the year ended June 30, 2006 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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