The company has announced a pre-tax loss from the continuing operations, before interest and other expenses, of $3.6 million for its fiscal year ended October 31, 2008, compared to a profit of $2.6 million for 2007. The loss was primarily due to combined effect of lower sales and the record high raw material costs partially offset by higher market pricing.
The sales to existing customers declined from 2007, principally as a result of weaker demand across most sectors of company’s business. The decrease in base volume was partially offset by success in securing the new customers and price increases implemented in the third and the fourth quarters. The price increases were necessary to mitigate the impact of high prices of polyethylene, company’s primary raw material, which increased throughout the year to record highs.
During the fiscal year 2008 the company continued to decrease its infrastructure and recorded severance and the other restructuring costs of $1.6 million, compared to $0.4 million in previous year. Furthermore, it wrote down value of equipment and intangible assets by $1.7 million as part of a review of its capacity needs and product development programs. The company also recognized a $3.4 million provision against value of future tax assets due to uncertainty in respect of the level of future taxable income.
Gary Tessitore, the company’s chief executive officer, said: 2008 was a challenging year for the Company, given the high cost of raw materials and a significant shortage of working capital. While 2009 will continue to be challenging with the general economic conditions in North America, management believes that the completion of the recent debenture financing, combined with lower resin prices and reduced infrastructure costs, positions the Company to profitably serve its customer base in 2009.
The company has also announced completion of second tranche of the previously announced exchangeable secured debenture (ESD) financing by company and the Polyair Corporation, the company’s principal US operating subsidiary, with its principal shareholder Glencoe Skydome Holdings, L.P. (GSH). The second tranche of EDS financing is an aggregate principal amount of $3 million and bears interest at a rate of 15% per annum.
