IAX Intl Absorbents

FERNDALE, Wash., Sept. 12 /PRNewswire-FirstCall/ -- International Absorbents Inc. (AMEX:IAX), a leading developer and producer of environmentally-friendly pet care and industrial products, today reported financial results for the second quarter and six months ended July 31, 2005. Sales for the second quarter of fiscal year 2006 increased by 11% to $6,074,000, compared to $5,495,000 for the previous year. Sales for the six months were $11,966,000 versus $10,996,000 for the same period last year, representing an increase of 9%. Net income for the second quarter of fiscal year 2006 decreased by 89% to $48,000, compared to $447,000 for the first quarter of the fiscal year 2005. For the six months, net income was $214,000 versus $1,049,000 for the same six months last year, representing a decrease of 80%. Gross profit for the second quarter of fiscal year 2006 was $1,727,000, a decrease of 20% compared to $2,147,000 for the second quarter a year ago. Gross profit for the six months was $3,686,000 versus $4,492,000 for the same period the prior year, representing a decrease of 18%. Gordon L. Ellis, Chairman of International Absorbents Inc. commented on the second quarter, "Costs have continued to rise this past quarter. Savings in transportation costs resulting from our new east coast plant location are now even more relevant due to skyrocketing fuel and shipping costs. Increased transportation costs are a significant contribution to increased expenses this period. Increased fuel prices also affects our cost of production as our use of energy for heat/drying is a major factor. Optimal efficiencies have not yet been achieved at our new east coast production facility. This is partially due to the fact that the new facility has been tasked with development and production of new products, notably CareFRESH(R) Colors. Additional cost factors are associated with our continued aggressive activities in sales and marketing costs as we simultaneously launch various new products and support and protect market share for our core products. The net result has been the lowest profit margins in many years. Each of these areas is being scrutinized and action is being taken to recover margins. "On a more positive side, development, production and introduction of CareFRESH(R) Colors has gone very well. The product is exceptionally popular with distributors and is being hailed as one of the greatest new products to hit the pet industry in many years. Initial sales are promising and the combination of CareFRESH(R) Colors and a new push on CareFRESH(R) Ultra is opening doors to new markets for the Company. At the same time, the Company's new line of Healthy Pet cat litters is gaining momentum in the market place. Our sales and marketing efforts are producing positive results and bode well for future growth. "As we grow, we evolve. Success with existing and new product lines provides optimism for continued growth. At the same time we must adapt to current economic conditions and compensate for such changes as higher fuel costs as these changes are here to stay. Management is currently focused on identifying and adapting to, or compensating for, changing external and internal conditions such that margins can be recovered and improved. "Over the next few quarters we will be completing the integration of a new cost control and overall financial/management software system (ERP) and then potentially moving and upgrading our manufacturing facility in Washington State. Completion of these two events will round out the more significant segments in our ongoing infrastructure growth plan resulting in the well balanced corporate structure we want to support growth and profitability." International Absorbents Inc. develops, manufactures and markets patented and proprietary, cost effective consumer and commercial products derived from recycled, renewable materials. These environmentally safe products outperform conventional products used in a broad range of consumer and industrial applications, including retail/commercial pet bedding and litter, oil and hazardous liquid spill cleanup and control, oil/water filtration, and packaging. Further information is available at http://www.absorbent.com/. FINANCIAL HIGHLIGHTS 3 Months Ended Jul. 31 6 Months Ended Jul. 31 2005 2004 2005 2004 Sales, net $6,074,000 $5,495,000 $11,966,000 $10,996,000 Net income before taxes 89,000 586,000 286,000 1,533,000 Net income 48,000 447,000 214,000 1,049,000 Basic earnings per share 0.01 0.08 0.03 0.18 Weighted average shares (basic) 6,261,000 5,931,000 6,257,000 5,867,000 As at As at Jul. 31 Jan. 31 2005 2005 Total assets $23,429,000 $23,477,000 Stockholders' equity 13,583,000 13,346,000 Contact: Charles (Chuck) Tait International Absorbents Inc. Toll Free: 866-514-6559 or 604-681-6181 A number of the matters and subject areas discussed in this press release that are not historical or current facts deal with potential future circumstances and developments, including without limitation, statements referring to the Company's future growth strategies, prospects for the future, potential financial results, market and product line growth, abilities to enter new markets, ability to introduce new products, benefits from infrastructure improvements and the Company's competitiveness and profitability as a result of new sales and marketing programs, are forward- looking statements. The words "believe," "expect," "intend," "estimate," "assume" and "anticipate," variations of such words and similar expressions identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. The discussion of such matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally, and it is important to note that the Company's actual results could differ materially from those projected, due to various risk factors. Those risks include, but are not limited to delays related to commissioning a new manufacturing plant, contractor performance, newly installed equipment performance, consumer acceptance of the Company's products at a new location, competitor reactions and their ability to market and price their products, general economic conditions outside of the control of the Company, and the economic availability of sources of raw materials to meet demand rates necessary to sustain growth. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's reports filed with the SEC, including, but not limited to, the Company's annual report on Form 10-KSB for the fiscal year ended January 31, 2005 and its quarterly filings on Form 10-Q and 10-QSB. This press release speaks only as of its date, and the Company disclaims any duty to update the information herein. DATASOURCE: International Absorbents Inc. CONTACT: Charles (Chuck) Tait of International Absorbents Inc., +1-866-514-6559, +1-604-681-6181, or Web site: http://www.absorbent.com/

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