Bluestar Reports Results for Fiscal 2000
9 January 2001
Bluestar Reports Results for Fiscal 2000
* Completes Restructuring Under the Companies' Creditors
Arrangement Act
* Achieves Significant Reduction in Secured Debt
* Announces Sale of Retail Branch Locations in Utah
* Discloses Proforma "Fresh Start" Balance Sheet
RALEIGH, N.C., Jan. 9 BlueStar Battery Systems
International Corp. ("BlueStar") announced today that revenues from continuing
operations for the twelve months ended September 30, 2000 were $81.2 million,
compared to $116.9 million for the same period last year. Revenues from
continuing operations for the fourth quarter were $12.4 million, a decrease of
50% compared to $24.6 million for the corresponding period in 1999. The
decrease in revenues for the year ended September 30, 2000 was primarily due
to exiting relationships with lower-margin suppliers and customers, and
factors affecting comparability, including the liquidation of the California
subsidiary in June 2000 and the sale of seven Canadian branches in September
2000. In addition, certain continuing bank defaults and the costs of funding
the CCAA process resulted in a lack of working capital to purchase new
inventory to satisfy customer requirements, which continues to impact the
Company's revenues.
EBITDA (earnings (loss) before interest, taxes, depreciation and
amortization, and unusual items) was an $11.0 million loss for the three-month
period and a $12.8 million loss for the year ending September 30, 2000, as
compared to income of $1.1 million for the three-month period and income of
$4.4 million for the year ending September 30, 1999. Reported EBITDA for the
fourth quarter and the full year ended September 30, 2000 included one-time
items of $3.2 million and $6.0 million, for provisions for accounts
receivable, excess or obsolete inventory, and warranty costs.
The net loss for the year was $98.1 million or $3.28 per share, compared
to a net loss of $8.3 million or $0.34 per share in the prior year. Several
unusual items impacted the net loss for the year ended September 30, 2000.
Net loss for the year was impacted by a provision to record the impairment of
goodwill in the Canadian and Utah subsidiaries of approximately $29.9 million;
losses on the disposal of the California subsidiary and seven Canadian
branches of $25.2 million; a provision to reduce the carrying value of certain
assets of $9.4 million (principally $4.4 million for the write-down of
computer system investments, $3.5 million for other deferred costs related to
a major customer contract, and $1.2 million for the planned disposition of the
Utah subsidiary); and, $0.8 million for costs associated with the management
restructuring and the relocation of its corporate headquarters. In addition,
the Company expensed certain deferred financing costs totaling $1.5 million
associated with the Company's secured debt and convertible debentures due to
significant modifications of terms resulting from the CCAA process. The sale
of the Company's specialty battery manufacturing business and research and
development subsidiaries (presented as discontinued operations) resulted in a
loss of approximately $8.0 million for the year.
"The repositioning and restructuring of BlueStar that began nearly twelve
months ago culminated during the fourth quarter. BlueStar and its primary
Canadian operating subsidiary completed a reorganization plan under the
Companies' Creditors Arrangement Act (CCAA), which is the Canadian equivalent
of a U.S. Chapter 11 bankruptcy filing," said Marty R. Kittrell, BlueStar's
Executive Vice President of Finance and Administration and member of the Board
of Directors. "Our creditors overwhelmingly approved the plan on October 26,
2000, and the plan was approved by the Ontario Superior Court of Justice on
October 31, 2000. The plan provides for unsecured creditors to receive either
the lesser of their actual claim or $1,500, or their proportionate share of
12,500,000 post-petition BlueStar shares. Pre-petition BlueStar shareholders
were granted 1,500,000 post-petition shares, at an approximate conversion
ratio of 22 old shares for one new share. We have a new stock symbol, BSG,
that will be used once the consolidation and the share issuances are complete,
which will result in approximately 14,000,000 shares outstanding. We are
working to resolve certain conditions to receive full CDNX approval in order
to have the greatest liquidity possible. While we have obtained necessary
governmental approvals, we anticipate completing the final steps of the
reorganization including the consolidation of old shares and issuance of new
shares in the near future."
On a related note, Mr. Kittrell added, "Arthur Andersen LLP in Raleigh,
N.C. was appointed auditor of the post-petition Company. The Company's former
auditors were KPMG in Vancouver, British Columbia. In addition, we have
developed the 'fresh start' accounting for the Company resulting from the CCAA
process. While the actual implementation will be effective as of October 31,
2000, we have included in this press release a proforma disclosure of what the
September 30, 2000 balance sheet would look like assuming the application of
'fresh start' accounting and a successful CCAA process."
Mr. Kittrell continued, "During 1999, the Company had entered into a
secured loan facility with Finova Capital Corporation. In connection with the
CCAA process, BlueStar and Finova entered into a forbearance agreement on
September 1, 2000. As of September 30, 2000, the Company was indebted to
Finova for CDN $6.9 million, and was in default under the loan agreement.
Finova has continued to provide funding under the credit facility as the
Company's borrowing availability permits. At December 31, 2000, the amount
owed under the credit facility had been repaid to a remaining balance of CDN
$2.5 million and the Company had received notice of conditional approval to
extend the credit facility to January 31, 2001, with a possibility of further
extensions. The Company is in ongoing discussions with other financial
institutions to replace the Finova credit facility. The Company is also
soliciting private equity capital to replenish the working capital levels that
had been dramatically reduced in order to achieve satisfactory liquidity
during the CCAA process and to achieve the lower level of secured debt.
Improving our liquidity and obtaining fresh working capital are critical
factors to the Company as it emerges from a successful CCAA process and
focuses on its ability to be financially viable in the future."
James A. Risher, Chairman and CEO noted, "With the CCAA process nearly
complete, the Company now has an opportunity to focus on its core business of
distribution in the automotive aftermarket and developing its e-commerce
business. The last 12 months have been very difficult for the Company and its
various constituencies. We replaced most of the senior management team
starting in February; we settled a long-standing dispute with a major customer
in May; and, we sold our manufacturing business and also liquidated our
California subsidiary in June. We completed a relocation of our corporate
headquarters to Raleigh, N.C. and moved three distribution facilities during
the year. We reorganized and downsized our Canadian distribution organization
in August and filed the restructuring plan under CCAA in September. Against
this backdrop, we finalized a new business and strategic plan with a clear
market focus. As part of this process, we re-evaluated the predominately
retail strategy of our Utah operations and decided to rationalize this
activity. On October 1, 2000, the Company sold the assets of our retail
branch locations in Utah to the former owners. We continue to evaluate all of
our operations and focus on higher return, value-added distribution
opportunities. Fiscal 2000 was indeed a challenging year."
"However, achieving a financially stronger distribution company with
attractive growth prospects will allow the management team to focus its
energies in three primary areas: customer service, supplier relations and e-
commerce. During Fiscal 2000, our sales and customer service levels suffered
from a significant lack of liquidity and working capital, which adversely
impacted our inventory levels, and from our focus on restructuring activities.
However, with these activities now substantially behind us, liquidity and
customer service have our highest priority," added Mr. Risher.
Mr. Risher continued, "We are extremely grateful for the support we
received from creditors for the restructuring plan. It was one of the most
efficient reorganizations ever completed under the CCAA. Now that some of the
legal uncertainties of the CCAA are behind us, we look forward to the support
of our suppliers and customers in achieving mutual profitability. While we
would have preferred another, less disruptive alternative, we are pleased that
we were able to complete the reorganization and restructuring of our balance
sheet in a timely manner. We have emerged as a leaner distribution company
with less debt and a greater ability to invest in developing Pano8(SM)."
Pano8(SM) is BlueStar's new business-to-business (B2B) e-commerce system
that provides timely, comprehensive information, including ordering, tracking
and core recovery. It features audio and video information such as electronic
catalogs and technical information to empower a new distribution channel.
With the B2B system operational, BlueStar will focus on building its customer
base in North America, a large market opportunity for the Company.
BlueStar is one of North America's largest integrated networks for power
and charging systems, providing supplier and customer participants with sales,
marketing, distribution and support capabilities. The Company, through its
electronic commerce network, markets battery products and certain related
components from many of the world's finest suppliers. BlueStar enhances its
product lines through strategic alliances with some of the world's leading
manufacturers, along with the strengthening of the BlueStar participant
network throughout North America. BlueStar's common stock currently trades on
the Canadian Venture Exchange under the symbol BHW.
This document contains certain forward-looking statements. These forward-
looking statements are based on the Company's current expectations and are
subject to a number of risks and uncertainties. Actual results could differ
materially from these forward-looking statements. The Company makes no
representation or warranty as to the accuracy or completeness of this
information.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
BLUESTAR BATTERY SYSTEMS INTERNATIONAL CORP.
DEBTOR-IN-POSSESSION PRESENTATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND 1999
(unaudited) CDN$ in thousands
Historical Proforma (1)
1999 2000 2000
ASSETS
Current assets 50,628 (2) 12,786 11,786
Assets held for sale -- 3,759 3,759
Capital assets 12,321 2,136 2,136
Non-current assets of
discontinued operations 9,879 -- --
Goodwill and customer lists 57,525 10,529 --
Reorganization value in excess
of amounts allocable to
identifiable assets -- -- 13,930
Contract deposits and
deferred costs 4,095 -- --
Other assets 1,758 1,451 --
TOTAL ASSETS 136,206 30,661 31,611
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities 41,612 (2) 10,328 10,328
Liabilities subject to
compromise -- 50,353 --
Bank indebtedness (3) 16,879 6,894 6,894
Long-term debt and capital
leases 2,704 2,889 2,889
Convertible debentures 17,903 -- --
Deferred payable 3,727 -- --
Shareholders' equity (deficit):
Share capital (old) 81,000 85,634 --
Share capital (new) -- -- 11,500
Currency translation
adjustment 2 283 --
Deficit (27,621) (125,720) --
SHAREHOLDERS' EQUITY (DEFICIT) 53,381 (39,803) 11,500
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 136,206 30,661 31,611
(1) Represents the application of Fresh Start Accounting to the September
30, 2000 balance sheet, debtor-in-possession presentation. On
September 5, 2000, the Company filed a petition under CCAA. The
Company's shareholders approved the plan on October 26, 2000 and the
Court approved the plan on October 31, 2000. The Company has
presented its unaudited balance sheet as of September 30, 2000 to
reflect the proforma effects of the application of a comprehensive
revaluation of all assets and liabilities ("fresh start" accounting)
as of September 30, 2000. Pursuant to the requirements of fresh start
accounting, the Company will comprehensively revalue its assets and
liabilities as of October 31, 2000, the date the court confirmed the
CCAA plan. The unaudited proforma presentation assumes that creditors
will receive 12.5 million post-petition shares issued for liabilities
subject to compromise totaling approximately $50.4 million, and that
existing shareholders will receive 1.5 million post-petition shares.
The estimated equity valuation of the reorganized company is $11.5
million.
(2) Includes current assets of discontinued operations of $5.8 million and
current liabilities of discontinued operations of $1.7 million.
(3) Outstanding balance as of September 30, 2000 is a current liability.
BLUESTAR BATTERY SYSTEMS INTERNATIONAL CORP.
DEBTOR-IN-POSSESSION PRESENTATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) CDN$ in 000's, except per share amounts
Three-months ended Year ended
September 30 September 30
2000 1999 2000 1999
Revenue (1) 12,406 24,639 81,203 116,947
Cost of products (2) 13,059 (2) 19,058 69,73 (2) 96,647
Gross Margin (653) 5,581 11,470 20,300
Sales, general &
administrative (3) 10,314 (3) 4,444 24,224 (3) 15,888
Earnings (loss) before
interest, taxes,
depreciation and
amortization, and
unusual items (10,967) 1,137 (12,754) 4,412
Other expenses:
Restructuring provision (250) -- 750 --
Loss on sale of
assets (4) 12,658 (4) -- 25,223 (4) --
Provision to reduce
the carrying value
of assets (5) 1,510 (5) 2,172 9,425 (5) 2,172
Provision for
impairment of
goodwill (6) 1,732 (6) -- 29,891 (6) --
Provision to eliminate
deferred debt
costs 1,477 -- 1,477 --
Interest expense 2,133 1,709 5,699 4,622
Depreciation and
amortization 332 1,315 5,867 6,253
19,592 5,196 78,332 13,047
Loss before income
taxes 30,559 4,059 91,086 8,635
Income taxes 851 229 966 229
Loss from continuing
operations 31,410 4,288 92,052 8,864
(Earnings) from
discontinued operations -- (100) (1,930) (550)
Loss on disposal of
discontinued
operations (7) -- -- 7,977 (7) --
Net loss for the
period 31,410 4,188 98,099 8,314
Earnings (loss) per share:
Loss per share -
Continuing operations($ 0.96) ($ 0.17) ($ 3.08) ($ 0.36)
Earnings per share -
Discontinued operations -- 0.01 0.07 0.02
Loss per share -
Disposal of
discontinued operations -- -- (0.27) --
Net loss per share ($ 0.96) ($ 0.16) ($ 3.28) ($ 0.34)
(1) The Company has retroactively changed its method of recording
revenue and cost of product for one of its subsidiaries. This
change did not affect net losses reported. The effect was to
reduce revenue and cost of products by $5.7 million for the
fourth quarter 1999, by $22.9 million for the full year 1999 and
by $12.3 million for the full year 2000.
(2) Cost of products includes $1.4 million for the fourth quarter and $2.3
million for the full year for recording provisions for excess or
obsolete inventory and warranty costs.
(3) S,G&A expenses includes $1.8 million for the fourth quarter, and $3.7
million for the full year, for recording provisions for accounts
receivable.
(4) Loss on sale of assets for the fourth quarter and full year includes
$11.2 million and $23.8 million for the liquidation of the California
subsidiary, and $1.4 million for the sale of the seven Canadian
branches during the fourth quarter.
(5) Provision to reduce the carrying value of assets for the fourth
quarter includes $1.2 million related to the Company's planned
disposition of its Utah subsidiary. Provision to reduce the carrying
value of assets for the full year of $9.4 million includes $4.4
million for the write-down of computer system investments and $3.5
million costs related to a major customer contract.
(6) Provision for impairment of goodwill includes $28.2 million for the
full year for the Canadian subsidiary and $1.7 million for the fourth
quarter for the Utah sale.
(7) Loss on disposal of discontinued operations includes an $8.0 million
loss for the full year resulting from the sale of the Company's
specialty manufacturing and research and development subsidiaries as
of June 30