iFabric Corp. Reports Results for Its Third Quarter Ended June 30, 2018

August 14, 2018 8:30 AM EDT | Source: iFabric Corp.

Markham, Ontario--(Newsfile Corp. - August 14, 2018) - iFabric Corp. (TSX: IFA) ("iFabric" or the "Company"), today announced its financial results for its third quarter and nine months ended June 30, 2018.

"Whilst the current quarter represents a transitional quarter for iFabric with results at break even, our nine months cumulative results still reflect profitability comfortably ahead of the corresponding period in 2017," said Hylton Karon, President and CEO of iFabric. "I would like to take this opportunity of informing where iFabric is headed as a company:

"In the first instance, during the course of the third quarter, we merged the operations of both operating divisions into one operating entity. Going forward, priority in allocating resources in the form of money, employee and management involvement, will be given to projects of either division that are projected to produce the highest revenues for iFabric. At the same time we have realigned our staffing so as to provide the technical and marketing skills to handle the numerous projects currently in process.

"With regard to our Intimate Apparel business, we have commenced the phase-out of our sleepwear offerings which will result in a short term drop in apparel revenue. We will be replacing the sleepwear business with newly designed products in our core specialty bra and accessories business. In particular, we have designed a new body solution product, in respect of which a patent is pending and we will be applying for additional patents for other innovative body solutions. In my opinion, this is one of our most exciting new products and will take us from servicing a limited niche market to having mass market appeal and opportunities.

"As previously advised, our Intelligent Fabrics business has shifted focus from being a pure chemical supplier, to providing customers with finished product performance apparel and other textile products that integrate combinations of our textile technologies. The main benefit to selling finished product is the increase in the unit sale by being able to sell the finished product at a significant premium over making purely a chemical sale. The first programs for a major Canadian retailer saw its preliminary shipments commence at the end of the current quarter, and will continue for the next year as these are 12 month replenishment programs. Based on the excellent retail sell-through to date, we expect further programs to be added in the future. We are also negotiating with a number of major US retailers to provide similar programs for the US market. Whilst we will continue to sell chemicals to a group of our major customers, I believe the bulk of the revenue growth in Intelligent Fabrics will come from the supply of finished products.

"With iFabric's balance sheet currently in the strongest position in company history, we are well placed to invest into and execute on our future initiatives," concluded Hylton Karon.

Q3 2018 HIGHLIGHTS:

  • Revenues in Q3 2018 decreased by 33% or $1,596,741 to $3,291,659 from $4,888,400 in Q3 2017. With regard to Company's operating divisions, revenue decreased by 25% or $879,077 in its Intimate Apparel Division and revenue decreased by 53% or $728,915 in its Intelligent Fabrics Division. The decrease in Intimate Apparel revenue in Q3 2018 versus 2017 was mainly as a result of the phase out sleepwear sales ahead of the Company's strategic initiative to focus future product development into its core specialty bra and accessories business. The lower revenues in the Intelligent Fabrics segment during the third quarter of 2018 compared to 2017, was caused by a major customer moving a substantial amount of its production from one of its major mill's in Asia to an alternate set of mills in Asia. This resulted in a delay in shipping chemicals due to the time required to train and certify the new mills in the integration of the Company's products into their production. Accordingly, chemical deliveries that were scheduled for this customer in Q2 and Q3 2018 are now anticipated to take place in Q4 2018. A written commitment to purchase these chemicals has been received from the customer.

  • Net earnings before tax of $11,235 compared to net earnings of $512,041 in 2017, representing a decrease of $500,806. The decrease in earnings was mainly as a result of lower sales and lower gross profit contribution. This was partially offset by lower share based compensation costs. As a result of the increasing importance of US dollar denominated transactions in the operations of its two main operating divisions, these division changed their functional currency to US dollars with effect from October 1, 2017. The effect of this change, is that unrealized currency gains on translation to Canadian dollars (the presentation currency), that were previously considered as earnings are now recognized in other comprehensive earnings (see below). This change had the effect of reducing earnings by $126,748 in the current quarter and increasing comprehensive earnings by the same amount. There was no corresponding adjustment in Q3 2017.

  • Adjusted EBITDA of $115,623 compared to adjusted EBITDA of $955,335 in Q3 2017, a decrease of $839,712 for the reasons discussed above.

  • Gross profit as a percentage of revenue was 47% in Q3 2018, compared to 50% in Q3 2017. The decrease in margins was mostly the result of the clearance of end of season sleepwear products at lower margins in Q3 2018 compared to Q3 2017. Gross profit in dollars was $1,536,720 in Q3 2018 compared to $2,449,749 in Q3 2017 representing a decrease of $913,029 or 37%.

  • The net loss attributable to iFabric's shareholders during Q3 2018 was $175,707 ($0.007 per share, basic and $0.006 diluted) compared to net earnings of $264,213 in Q3 2017 ($0.010 per share, basic and diluted). The decrease in attributable net earnings of $439,920 in Q3 2018 versus Q3 2017 is largely attributable to lower sales, lower gross profit contribution and higher effective income taxes in Q3 2018 compared to 2017.

  • Other comprehensive earnings, being unrealized currency gains on the translation of foreign operations, amounted to $126,748 compared to zero in Q3 2017. The total comprehensive loss amounted to $44,953 in Q3 2018 compared to comprehensive earnings of $269,154 in 2017 representing a decrease of $314,107.

  • Working capital (excluding a demand-term loan classified as current under IFRS) was virtually unchanged at $9,481,426 compared to $9,481,795 at the end of the previous quarter ended March 31, 2018.

  • Cash increased by $346,580 to $4,698,813 compared to $4,352,233 at the end of the previous quarter ended March 31, 2018.

  • The Company's bank operating line was unutilized as at June 30, 2018, leaving the full amount of $3,750,000 available to finance future business of the Company.

  • Total liabilities at the end of Q3 2018 were $3,520,326 compared to $3,474,739 at the end of the previous quarter, representing an increase of $45,587.

  • Shareholder Equity attributable to common shareholders was virtually unchanged at $11,346,392 compared to $11,344,477 at the end of the previous financial quarter.

NINE MONTH HIGHLIGHTS:

  • Revenues increased by $383,968 to $12,629,679 compared to $12,245,711 for the corresponding nine months in 2017, representing an increase of 3%. With respect to its two operating divisions, Intimate Apparel revenues increased by 14% or $1,157,805 while Intelligent Fabrics division revenues decreased by 20% or $785,087.

  • Gross profit for the nine months ended June 30, 2018, increased by 10% or $541,078 to $6,220,828 (49% of revenues) from $5,679,750 (46% of revenues) for the comparable nine months of 2017. The increase in gross profit percentage for the nine months was the result of a higher proportion of sales in the Intimate Apparel segment which carries higher margins than the Intelligent Fabrics segment.

  • The net earnings attributable to iFabric shareholders for the nine months ended June 30, 2018 was $1,145,849 ($0.044 per share basic and $0.042 per share diluted) compared to earnings of $627,159 ($0.024 per share basic and $0.023 per share diluted) in the corresponding nine months of 2017, representing an increase of $516,890. This increase was mainly as a result of higher revenues, improved margins, higher exchange gains and a decrease in share-based compensation costs.

  • Other comprehensive earnings, being unrealized gains on the translation of foreign operations, amounted to $305,309 compared to zero for the nine month ended June 30, 2017. Total comprehensive earnings totaled $1,454,624 at the end of Q3 2018 compared to $629,826 in 2017 representing an increase of $824,798.

Complete Financial Statements are available on www.sedar.com.

FINANCIAL HIGHLIGHTS

  Quarter Ended June 30, Nine Months Ended June 30,
  2018 2017 2018 2017
  $ $ $ $
Revenue 3,291,659 4,888,400 12,629,679 12,245,711
Income (loss) from operations 113,976 1,000,267 2,001,669 1,515,337
Share based compensation 38,875 369,359 128,852 401,919
Adjusted EBITDA *(Note) 115,623 955,335 2,250,479 1,652,049
Net earnings (loss) before tax 11,235 512,041 1,900,713 1,007,501
Net income (loss) after tax attributable to shareholders (175,707) 264,213 1,145,849 627,159
Other comprehensive earnings (loss) 126,748 - 305,309 -
Total comprehensive earnings (loss) (44,953) 269,154 1,454,624 629,826
Net income (loss) per share - basic (0.007) 0.010 0.044 0.024
Net income (loss) per share - diluted (0.006) 0.010 0.042 0.023

 

*Note: Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization and share based compensation.

ABOUT iFABRIC CORP:

Headquartered in Markham, Ontario, iFabric Corp www.ifabriccorp.com currently has 26.0 million shares issued and outstanding.

Through its wholly-owned subsidiaries, Intelligent Fabric Technologies (North America) Inc. ("IFTNA") and Coconut Grove Pads Inc. ("Coconut Grove"), the Company offers a variety of products and services in both of its strategic divisions:

IFTNA is focused on proprietary chemical formulations that render fabrics, foams, plastics and numerous other surfaces intelligent, thereby improving the safety and well-being of the consumer.

Coconut Grove, operating as Coconut Grove Intimates, is a designer, manufacturer, distributor, licensor and licensee of ladies intimate apparel products, accessories and sleepwear.

FORWARD LOOKING STATEMENTS:

Forward-looking statements provide an opinion as to the effect of certain events and trends on the business. Certain statements contained in this news release constitute forward looking statements. The use of any words such as "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on current expectations and various estimates, factors and assumptions and involve known and unknown risks, uncertainties and other factors. Forward-looking information includes, but is not limited to, statements with respect to the development potential of the Company's products.

Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Readers are cautioned not to place undue reliance on these statements as the Company's actual results, performance, or achievements may differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements if known or unknown risks, uncertainties or other factors affect the Company's business, or if the Company's estimates or assumptions prove inaccurate. Therefore, the Company cannot provide any assurance that forward-looking statements will materialize. The Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or any other reason except as required by applicable securities laws.

Any financial outlook or future oriented financial information in this news release, as defined by applicable securities legislation, has been approved by management of iFabric. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's reasonable expectations as to the anticipated results of its proposed business activities. Readers are cautioned that reliance on such information may not be appropriate for other purposes. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

FOR FURTHER INFORMATION, please contact:

Hilton Price, CFO
Tel: 647.465.6161
Email: hilton.price@rogers.com

Gary Perkins - Investor Relations
Tel: 416.882.0020
Email: garyperkins@rogers.com

Jean-François Dubé (Québec) — Investor Relations
Tel: 514.233.9551
Email: jfdube@mac.com

Website: www.ifabriccorp.com

Neither the TSX nor its Regulations Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this press release.

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