NEWMARKET, Ontario, Aug. 09, 2023 (GLOBE NEWSWIRE) -- AirBoss of America Corp. (TSX: BOS)(OTCQX:ABSSF) (the “Company” or “AirBoss”) today announced its second-quarter results. The Company will host a conference call and webcast to discuss the results on August 10^th at 9 a.m. (ET), the details of which are outlined below. All dollar amounts are shown in thousands of United States dollars ("U.S. $" or "$"), except per share amounts, unless otherwise noted.

Recent Highlights

• Awarded a contract for AirBoss Defense Group’s (“ADG”) AirBoss Molded Glove (“AMG”), expected to be worth up to an aggregate amount of $18.5 million over a term of three years;

• ADG reselected by a partner nation to supply its Bandolier multipurpose line charge system, expected to be worth $3.8 million over a period of 12 months;

• Cash from operations increased by $7.0 million to $16.9 million for the three-month period ended June 30, 2023 ("Q2 2023”) vs. the three-month period ended June 30, 2022 (“Q2 2022”); and

• Declared a quarterly dividend of C$0.10 per common share.

“AirBoss experienced stable consolidated sales levels and volume recovery in certain segments as compared to last year, however an unfavorable product mix and elevated operating expenses had a negative impact on profitability for Q2 2023. From a market demand perspective, some of the improvements we saw toward the latter part of Q1 2023 continued through this quarter, but customer volumes remained below those experienced in 2022, especially within Rubber Solutions and AirBoss Defense Group. Within Rubber Solutions, we were able to successfully offset reduced sales volumes with improved margin contributions resulting from past investments in production automation. Our Engineered Products business segment continued to deliver strong performance, supported by our past investments in automation and elevated demand across several customer categories,” stated Chris Bitsakakis, President and Co-CEO of AirBoss. “In addition, solid free cash flow generation of $19.7 million year-to-date in 2023 has allowed us to continue to strategically invest in the business while reducing our net debt levels, which have declined by over $14.6 million since the beginning of 2023.”

“Within ADG, delays in converting sales opportunities from our expanded survivability solutions platform have led us to put a series of measures in place to reduce costs and streamline our operations,” noted Gren Schoch, Chairman and Co-CEO of AirBoss. “We remain confident that our capabilities to deliver against awarded as well as future agreements remain strong. Our recent announcement of new contracts for our AirBoss Molded Glove and Bandolier line charge system demonstrate the diversity of ADG’s lineup of survivability solutions.”

¹ See Non-IFRS and Other Financial Measures.
² Debt as at June 30, 2023 and December 31, 2022 include lease liabilities of $14,108 and $15,007, respectively.

Financial Results

Consolidated net sales for Q2 2023 increased by 3.2% to $114,058 compared to Q2 2022. The increase was primarily attributable to higher sales at Engineered Products, partially offset by lower volume at Rubber Solutions. Consolidated net sales for 2023 year-to-date decreased by 9.4% to $231,134 compared with 2022 year-to-date primarily due to lower sales at AirBoss Defense Group and Rubber Solutions partially offset by strong sales growth at Engineered Products.

Consolidated gross profit for Q2 2023 increased by $2,786 to $17,586, compared with Q2 2022, driven primarily by improvements in volumes at Engineered Products offset by reductions at ADG related to unfavorable product mix in its traditional molded defense products and softness in its industrial line of business as well as a modest reduction at Rubber Solutions. Gross profit as a percentage of net sales increased to 15.4% in Q2 2023 compared with 13.4% for Q2 2022, primarily due to improvements at Engineered Products and improvements at Rubber Solutions driven by favorable mix, offset by significant reductions at ADG driven by unfavorable product mix. Consolidated gross profit for 2023 year-to-date decreased by $6,878 to $39,523 compared with 2022 year-to-date, driven by lower volume at ADG due to the completion of the large HHS nitrile examination glove order in the comparable period of 2022, partially offset by improved margins at Engineered Products. Gross profit as a percentage of net sales decreased to 17.1% for 2023 year-to-date compared with 18.2% for 2022 year-to-date. These decreases were primarily a result of product mix and lower margin at ADG driven by volume from the large HHS nitrile examination glove order completed in the early part of the comparable period in 2022, offset by significant improvements at Engineered Products driven by volume and operational improvements, and modest improvements at Rubber Solutions.

Adjusted EBITDA for Q2 2023 decreased by 50.6% compared to Q2 2022 and decreased by 48.6% for the six-month period ended June 30, 2023 compared with the six-month period ended June 30, 2022.

Financial Position

The Company retains a $250 million credit facility and a net debt to trailing twelve-month Adjusted EBITDA ratio of 3.11x.

Dividend

The Board of Directors of the Company has approved a quarterly dividend of C$0.10 per common share, to be paid on October 16, 2023 to shareholders of record at September 30, 2023.

Segment Results

Net sales in the AirBoss Defense Group segment increased by 0.6% to $26,003 for Q2 2023 from $25,839 in Q2 2022 and decreased by 39.1% to $54,646 for 2023 year-to-date, from $89,801 for 2022 year-to-date. For the quarter, the increase was primarily the result of modest increases in volume for certain molded defense products. Year-to-date, the decrease was primarily the result of the completion of the large HHS nitrile examination glove order in the comparable period of 2022, in addition to softness experienced in the molded defense products and the industrial lines of business. Gross profit at ADG decreased by 56.6% to $4,230 for the quarter and by 65.3% to $12,978, year-to-date, from the comparable periods in 2022. The decrease in gross profit for Q2 2023 was primarily due to unfavorable mix and higher overhead costs. The decrease in gross profit year-to-date was primarily due to lower volume primarily driven by the large HHS nitrile examination glove order delivered in the same period in 2022.

In the Rubber Solutions segment, net sales for Q2 2023 decreased by 8.5% to $57,786 from $63,180 and by 5.8% to $112,940 from $119,887 year-to-date from the comparable periods in 2022. For Q2 2023, volume was down 18.8% with decreases across the vast majority of sectors due to decreased momentum at most customers’ operations although there was some traction from the softness experienced in the prior quarter. Year-to-date, volume was down 21.4% with decreases across the majority of sectors and continued signs of softness with many customer’s operations. Tolling volume was down by 56.4% for the quarter and 68.6% year-to-date, and non-tolling volume was down by 9.2% for the quarter and 9.1% year to date, from the comparable periods in 2022. Gross profit in the Rubber Solutions segment decreased by 1.7% to $9,627 for the quarter and by 3.3% to $17,211 year-to-date, from the comparable periods in 2022. For the quarter, this was primarily the result of volume reductions and product mix partially offset by managing controllable overhead costs and driving continuous improvement initiatives. Year to date, the decrease in gross profit was primarily as a result of decreased tolling and non-tolling volumes compared to the same period in 2022, partially offset by managing controllable overhead costs.

At Engineered Products, net sales in the quarter increased by 40.3% to $37,651 and by 38.6% to $78,566 year-to-date from the comparable periods in 2022. For the quarter, the increase was due to higher volumes and favorable mix in SUV and light truck platforms despite some economic headwinds which continue to impact production schedules across certain OEMs and Tier 1 suppliers. Year-to-date, the increase was due to stronger volumes in the SUV, light truck and mini-van platforms compared to the same period in the prior year and was further supported by the ongoing collaboration with key suppliers and customers resulting in improved revenue. Gross profit in the Engineered Products segment for Q2 2023 increased to $3,729 from $(4,745) in Q2 2022 and to $9,334 for 2023 year-to-date from $(8,823) for 2022 year-to-date. For the quarter, this was primarily a result of improved arrangements with key suppliers and customers, favorable volume and product mix in the automotive sector in addition to operational cost improvements and reduced overhead costs. Year-to-date, the increase in gross profit was primarily a result of improved arrangements with key suppliers and customers with a continued focus on controllable operational cost containment and managing overhead costs.

Overview

During Q2 2023, AirBoss remained focused on operational execution, growth initiatives and key investments despite continued economic headwinds. AirBoss Engineered Products (“AEP”) maintained strong traction, as the segment continued to build on momentum established in the prior quarter with key suppliers and customers to strengthen its financial position for long term sustainability. AirBoss Rubber Solutions (“ARS”) saw some progressive traction in demand compared to the prior quarter, specifically in volumes, although residual softness was still present. ADG experienced some contraction in its industrial and defense businesses with continued efforts focused on strategic priorities to support conversion of sales opportunities in the coming quarters. The Company navigated ongoing economic impacts being experienced to varying degrees in each segment. Labor, logistics challenges and the availability of raw materials continue to create challenges that each segment is working through to support stability moving forward. Recovery in volumes in 2023 for each segment remains subject to the ongoing management of stable and sustained operations of businesses globally, which remains complex and volatile, with ongoing challenges such as continued inflation pressure and global conflicts, as well as successful conversion of sales opportunities.

The Rubber Solutions segment saw modest improvements in demand during the quarter and while it was a marked improvement over the prior quarter, it was still below the same quarter in the prior year. Despite the economic pressures previously noted, the segment continues to execute on its strategy of delivering strong results with specialty products and fulfilling new business through identified synergies and margin expansion. As a segment, Rubber Solutions continued to invest in research and development to support enhanced collaboration with customers and remained focused on expanding on Ace Elastomer’s (“Ace”) specialized products into its wide range of solutions.

ADG experienced residual softness in its industrial and defense businesses, making for a challenging quarter. As a result of this and the delay in converting opportunities, ADG has taken a series of cost cutting measures across the organization including a reduction in its workforce. The changes are intended to streamline this segment given reduced activity. ADG remains focused on its survivability solutions platform while targeting traditional defense contracts, which management is focused on converting over the next several years. In addition, ADG continues to work with its key customers to leverage the opportunities in its pipeline, as was evidenced with the recent award of the AMG gloves and Bandolier opportunities. Conversion of pipeline opportunities remained subject to timing as delays are expected to continue through the next few quarters. In particular, execution of the previously announced awards for Husky 2G vehicles has been delayed further due to ongoing global challenges, and management now anticipates execution of those orders to commence in early 2024.

Within the Engineered Products segment, the momentum generated in the prior quarter continued through this quarter, despite ongoing challenges of raw material availability, supply chain challenges and production volatility by the original equipment manufacturers (OEMs). The segment continued to execute on its financial sustainability plan and work with key suppliers and customers to deliver improved financial results in the quarter versus the same quarter in the prior year. Management also continued to focus on operational improvements including managing variable costs and sustaining a stable hourly workforce, while dealing with volume volatility in the automotive sector and specifically on AEP’s products for SUV, light truck and mini-van platforms. The segment also continued its focus and commitment to drive efficiencies and best-in-class automation, as well as diversification of its product lines into sectors adjacent to the automotive space.

Despite the continued headwinds associated with economic and geopolitical issues, the Company’s longer-term priorities remain intact and include:

1. Growing the core Rubber Solutions segment by positioning it as a specialty supplier of choice in the consolidating North American market, with a growing focus on building defensible leadership positions in selected compounds;
2. Capitalizing on ADG’s scale and capabilities to pursue an array of growth and value-creation opportunities in the broader survivability solutions segment serving both defense and first responder markets;
3. Driving improved performance from Engineered Products through a combination of disciplined cost containment, client relationship expansion, new product development and sector diversification; and
4. Targeting additional acquisition opportunities across the business with a focus on adding new compounds and products, technical capabilities, and geographic reach into selected North American and international markets.

As before, management remains dedicated to the creation of long-term value for all stakeholders through a combination of strategic initiatives that both drive organic growth and support possible transactions.

Conference Call Details and Investor Presentation

A conference call to discuss the quarterly results is scheduled for 9:00 a.m. ET on Thursday, August 10, 2023. Please go to https://www.gowebcasting.com/12647 or dial in to the following numbers: 1-800-898-3989 or 416-406-0743, pass code: 6965982#. Please connect approximately 10 minutes prior to the call to ensure participation. A replay of the conference call as well as the Company’s updated investor presentation will also be made available at: https://airboss.com/investor-media-center.

Investor Contact: investor.relations@airboss.com

Media Contact: media@airboss.com

AirBoss of America Corp.

AirBoss of America is a leading and diversified developer, manufacturer and provider of innovative survivability solutions, advanced custom rubber compounds and finished rubber products that are designed to outperform in the most challenging environments. Founded in 1989, the company operates through three divisions. AirBoss Defense Group is a global leader in personal and respiratory protective equipment and technology for the defense, healthcare, medical and first responder communities. AirBoss Rubber Solutions is a top-tier North American custom rubber compounder with 500 million turn pounds of annual capacity. AirBoss Engineered Products is a supplier of innovative anti-vibration solutions to the North American automotive market and other sectors. The Company’s shares trade on the TSX under the symbol BOS and on the OTCQX under the symbol ABSSF. Visit www.airboss.com for more information.

Non-IFRS and Other Financial Measures

This earnings release is based on financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) and Non-IFRS Financial Measures. Management believes that these measures provide useful information to investors in measuring the financial performance of the Company. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS. These terms are not measures of performance under IFRS and should not be considered in isolation or as a substitute for net income under IFRS.

EBITDA and Adjusted EBITDA are non-IFRS measures used to measure the Company's ability to generate cash from operations for debt service, to finance working capital and capital expenditures, potential acquisitions and to pay dividends. EBITDA is defined as earnings before income taxes, finance costs, depreciation, amortization, and impairment costs. Adjusted EBITDA is defined as EBITDA excluding acquisition costs, and non-recurring costs. A reconciliation of Profit to EBITDA and Adjusted EBITDA is below.

Adjusted profit is a non-IFRS measure defined as profit before acquisition costs and non-recurring costs. This measure and Adjusted earnings per share are used to evaluate operating results of the Company. A reconciliation of Profit to Adjusted profit and Adjusted earnings per share is below.

Net Debt measures the financial indebtedness of the Company assuming that all cash on hand is used to repay a portion of the outstanding debt. A reconciliation of loans and borrowings to Net Debt is below.

The Company has a Net Debt to trailing twelve-month Adjusted EBITDA ratio of 3.11x (December 31, 2022: 2.43x).

Free cash flow is a non-IFRS measure used to evaluate cash flow after investing in the maintenance or expansion of the Company's business. It is defined as cash provided by operating activities, less cash expenditures on long-term assets. A reconciliation of cash from operating activities to free cash flow is below.

AIRBOSS FORWARD LOOKING INFORMATION DISCLAIMER

Statements containing forward-looking information are necessarily based upon a number of opinions, estimates and assumptions that, while considered reasonable by management at the time the statements are made, are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies. AirBoss cautions that such forward-looking information involves known and unknown contingencies, uncertainties and other risks that may cause AirBoss’ actual financial results, performance or achievements to be materially different from its estimated future results, performance or achievements expressed or implied by the forward-looking information. Numerous factors could cause actual results to differ materially from those in the forward-looking information, including without limitation: impact of general economic conditions, notably including their impact on demand for rubber solutions and products; dependence on key customers; global defense budgets, notably in the Company’s target markets, and success of the Company in obtaining new or extended defense contracts; cyclical trends in the tire and automotive, construction, mining and retail industries; sufficient availability of raw materials at economical costs; weather conditions affecting raw materials, production and sales; AirBoss’ ability to maintain existing customers or develop new customers in light of increased competition; AirBoss’ ability to successfully integrate acquisitions of other businesses and/or companies or to realize on the anticipated benefits thereof; changes in accounting policies and methods, including uncertainties associated with critical accounting assumptions and estimates; changes in the value of the Canadian dollar relative to the US dollar; changes in tax laws; current and future litigation; ability to obtain financing on acceptable terms; environmental damage and non-compliance with environmental laws and regulations; impact of global health situations; potential product liability and warranty claims and equipment malfunction. This list is not exhaustive of the factors that may affect any of AirBoss’ forward-looking information.

All of the forward-looking information in this press release is expressly qualified by these cautionary statements. Investors are cautioned not to put undue reliance on forward-looking information. All subsequent written and oral forward-looking information attributable to AirBoss or persons acting on its behalf are expressly qualified in their entirety by this notice. Forward-looking information contained herein is made as of the date of this Interim Report and, whether as a result of new information, future events or otherwise, AirBoss disclaims any intent or obligation to update publicly the forward-looking information except as required by applicable laws. Risks and uncertainties about AirBoss’ business are more fully discussed under the heading “Risk Factors” in our most recent Annual Information Form and are otherwise disclosed in our filings with securities regulatory authorities which are available on SEDAR+ at www.sedarplus.com.

Investor Contact: investor.relations@airboss.com

Media Contact: media@airboss.com