TIR running at a loss, pins hopes on LEXEL

May 13, 2005
TIR Systems has reported a net loss of almost CDN$3 million, but has high hopes for its LEXEL technology.
TIR Systems Ltd. (TSX Symbol: TIR) has reported a net loss of $2.9 million, or ($0.13) per share, for its second quarter of fiscal 2005 (Q2 2005) ending March 31, 2005. This loss was based on revenue of $3.4 million. All figures are in Canadian dollars.

In the year-ago quarter (Q2 2004), TIR had a net income of $370,700 or $0.02 per share and revenue of $8.1 million.

In the first two quarters of fiscal 2005, TIR recorded a net loss of $5.9 million, versus net income of $2.2 million for the same period in 2004. Year-to-date revenue for 2005 was $9.0 million compared to $18.1 million for the same period in 2004. The revenue decline was due primarily to a decrease in revenues from TIR’s largest customer, BP, as its successful North American corporate re-imaging program is now complete.

Gross margins declined from 41% in Q2 2004 to 16% in Q2 2005. The decline in gross margins was due to a number of factors, including the write-off of $189,100 of obsolete inventory in Q2 2005 and under-utilization of plant resources due to low revenues.

TIR’s president & CEO Leonard Hordyk said: “We do not believe our current financial results are satisfactory, and are continuing to focus on a number of initiatives to significantly improve order flow, revenues and gross margins. These include enhancements to our products, the use of off-shore manufacturing facilities for certain modules, and multiple cost reduction initiatives. These actions are designed to improve the overall performance of current business lines.”

Subsequent to March 31, 2005, TIR successfully introduced the LEXEL platform at Lightfair 2005. Hordyk added, “Industry reaction to the LEXEL platform was very gratifying – the LEXEL may prove to be a technology which enables a more rapid introduction of SSL into the general illumination market.

“We believe that the LEXEL is fundamentally different from the products we have introduced to date – rather than representing a finished lighting product in itself, it is an SSL-enabling lighting platform that could be incorporated into hundreds of lighting products by many manufacturers in the future.”

Revenues from LEXEL will take several quarters to begin, and in the meantime TIR has cut its revenue forecast for fiscal 2005 to the range of $16 - $19 million. “The reason for the decrease from our previously announced range is timing on large architectural deals and the continued time-lag involved in bringing prospective new Corporate Identity customers into a full re-imaging program,” Hordyk said.

Hordyk concluded, “While our current business performance is clearly behind our expectations, we are committed to improving on its performance and to achieving long term growth objectives. LEXEL Technology will serve as the basis for our efforts to foster significant strategic partnerships that can lead to LEXEL-based commercial products in the near future. We believe these developments will help accelerate the overall growth of the SSL lighting industry as well as cement our leadership role in catalyzing this growth.”