VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 05/14/12 -- Tree Island Wire Income Fund (TSX: TIL.UN)(TSX: TIL.DB) -
Q1 2012 Financial Highlights
-- Revenues increased by 13 percent to $44.0 million -- Gross Profit at $4.0 million or 9 percent of revenues -- EBITDA(3) (before foreign exchange) at $1.7 million
Tree Island Wire Income Fund ("Tree Island" or the "Fund" (1)) announced today its financial results for the three month period ended March 31, 2012.
For the three months ended March 31, 2012(2), higher sales volumes and selling prices resulted in a 13 percent increase in revenues totaling $44.0 million, compared to $38.9 million during the corresponding period in 2011. Gross profit decreased $0.4 million to $4.0 million, while gross profit per ton also decreased by $16 per ton to $130 per ton, compared to $146 per ton in the same period in 2011. The decrease in gross profit and gross profit per ton primarily reflects the increases in cost of raw materials and were primarily offset by the increase in sales prices and volumes. Gross profit and gross profit per ton were also negatively impacted by the relatively stronger US dollar on costs for our Canadian operations when compared to the same period in 2011. Consequently, EBITDA decreased to $1.7 million versus $2.0 million.
"I am encouraged that we are realizing the benefits of our initiatives to maintain market positioning and increase selling prices in an environment that remains demanding and competitively challenging," said Dale R. MacLean, President and CEO of Tree Island Industries. "While we experienced early signs of an improved selling environment, the continued global economic uncertainty coupled with aggressive pricing in certain key product categories provides the backdrop for our outlook to remain cautious. Going forward, we will continue to concentrate our energies on gross profit improvement, cost management and our ability to further optimize capacity utilization."
Amar Doman, Chairman of the Fund noted, "The Fund's top line performance in the first quarter is promising from a market demand perspective. The macro-economic environment at large remains volatile, however there also seem to be some early indications and pockets of strength in certain of our key end markets. While we continue to run the business cautiously given the re-emergence of headwinds and uncertainty in global markets, we remain well positioned to drive economies of scale and demonstrate growth and optimal profitability when healthier market conditions present themselves."
RESULTS OF OPERATIONS TABLE
Summary of Results ($000's except for tonnage Three Months Ended March 31
and per unit amounts) 2012 2011
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Sales Volumes - Tons(a) 30,618 29,948
Sales $ 43,997 $ 38,944
Cost of sales 39,237 33,887
Depreciation 768 677
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Gross profit 3,992 4,380
Selling, general and administrative expenses 3,032 3,085
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Operating income 960 1,295
Foreign exchange gain 309 418
Gain on sale of property, plant and
equipment 426 -
Changes in financial liabilities recognized
at fair value - (892)
Loss on renegotiated debt - (3,234)
Financing Expenses (2,261) (2,066)
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Loss before income taxes (566) (4,479)
Income tax recovery 148 440
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Net loss (418) (4,039)
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Operating income 960 1,295
Add back depreciation 768 677
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EBITDA (b) 1,728 1,972
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Foreign exchange gain 309 418
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EBITDA including foreign exchange gain 2,037 2,390
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Net loss (418) (4,039)
Add back significant non-cash items
Non-cash financing expenses 1,404 1,326
Non-cash loss on renegotiated debt - 3,234
Changes in fair value of convertible
instruments - 892
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Adjusted net income (b) 986 1,413
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Per unit
Net loss per unit - basic and fully diluted (0.02) (0.18)
Adjusted Distributable Cash per Unit - basic
and fully diluted (b) 0.03 0.03
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Per ton
Gross profit per ton 130 146
EBITDA per ton 56 66
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As at March As at December
31, 31,
Financial position 2012 2011
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Total assets 97,519 91,005
Total non-current financial liabilities 41,028 42,789
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(a) Sales volumes exclude tons which were processed as part
of tolling arrangements
(b) See definition of EBITDA, Adjusted Net Income and Adjusted
Distributable Cash in footnote 3 to the press release
About Tree Island Wire Income Fund
The Fund was launched on November 12, 2002 with the completion on an initial public offering. The Fund has a 100% ownership interest in Tree Island Industries Ltd and its performance depends on the performance of Tree Island Industries Ltd. Headquartered in Richmond, British Columbia, Tree Island Industries Ltd. produces wire products for a diverse range of construction, industrial, residential, manufacturing, and industrial applications. Its products include bright wire, stainless steel wire and galvanized wire; a broad array of fasteners, including packaged, collated and bulk nails; stucco reinforcing products, engineered structural mesh, fencing and other fabricated wire products. The company markets these products under the Tree Island, Halsteel, K-Lath, Industrial Alloys, Tough Strand, and TI Select brand names.
Forward-Looking Statements
This press release includes forward-looking information with respect to the Fund and the company, including their business, operations and strategies, as well as financial performance and conditions. The use of forward-looking words such as "may", "will", "expect" or similar variations generally identify such statements. Any statements that are contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Although management believes that expectations reflected in forward-looking statements are reasonable, such statements involve risks and uncertainties including risks and uncertainties discussed under the heading "Risk Factors" in the Fund's most recent annual information form and management discussion and analysis.
The forward looking statements contained herein reflect management's current beliefs and are based upon certain assumptions that management believes to be reasonable based on the information currently available to management. By their very nature, forward looking statements involve inherent risks and uncertainties, both general and specific, and a number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, prospective investors should specifically consider various factors including the risks outlined in the Fund's most recent annual information form and management discussion and analysis which may cause actual results to differ materially from any forward looking statement. Such risks and uncertainties include, but are not limited to: general economic, market and business conditions, the cyclical nature of our business and demand for our products, financial condition of our customers, competition, volume and price pressure from import competition, deterioration in the Company's liquidity, disruption in the supply of raw materials, volatility in the costs of raw materials, significant exposure to the Western United States due to lack of geographic diversity, dependence on the construction industry, transportation costs, foreign exchange fluctuations, leverage and restrictive covenants, labour relations, trade actions, dependence on key personnel and skilled workers, reliance on key customers, intellectual property risks, energy costs, un-insured loss, credit risk, operating risk, management of growth, changes in tax, environmental and other legislation, and other risks and uncertainties set forth in our publicly filed materials.
This press release has been reviewed by the Fund's Board of Trustees and its Audit Committee, and contains information that is current as of the date of this press release, unless otherwise noted. Events occurring after that date could render the information contained herein inaccurate or misleading in a material respect. Readers are cautioned not to place undue reliance on this forward-looking information and management of the Fund undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise except as required by applicable securities laws.
1. References to the Fund or Tree Island include references to Tree Island
Industries Ltd. as the context may require.
2. Please refer to our 2011 MD&A for further information.
3. References made above to "EBITDA" are to operating profit plus
depreciation, references to "Adjusted Net Income (Loss)" are to net
income (loss) per IFRS adjusted for certain non-cash items including
non-cash financing expenses, changes in fair value of convertible
instruments and loss on renegotiated debt, and references to "Adjusted
Distributable Cash" are to net cash from operating activities less all
capital expenditures, less restrictions on distributions arising from
compliance issues with financial covenants, less any minority interests
and less the impact of changes in non-cash working capital. EBITDA is a
measure used by many investors to compare issuers on the basis of
ability to generate cash flows from operations. Adjusted Net Income
(Loss) is a measure for investors to understand the impact of
significant non-cash items that affect our results from operations.
Adjusted Distributable Cash is a measure for investors to understand the
ability to sustain or support quarterly distributions. Neither EBITDA,
Adjusted Net Income (Loss), nor Adjusted Distributable Cash are earnings
measures recognized by IFRS and do not have a standardized meaning
prescribed by IFRS. We believe that EBITDA, Adjusted Net Income (Loss),
and Adjusted Distributable Cash are important supplemental measure in
evaluating the Fund's performance. You are cautioned that EBITDA,
Adjusted Net Income (Loss), and Adjusted Distributable Cash should not
be construed as alternatives to net income or loss, determined in
accordance with IFRS, as indicators of performance, to cash flows from
operating, investing and financing activities as measures of liquidity
and cash flows, or cash available for distributions. Our method of
calculating EBITDA, Adjusted Net Income (Loss), and Adjusted
Distributable Cash may differ from methods used by other issuers and,
accordingly, our EBITDA, Adjusted Net Income (Loss), or Adjusted
Distributable Cash may not be comparable to similar measures presented
by other issuers.
Tree Island Wire Income Fund
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In thousands of Canadian dollars - unaudited)
March 31 December 31
2012 2011
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Assets
Current
Cash 3,268 3,852
Accounts receivable 21,650 13,835
Inventories 37,519 36,123
Prepaid expenses 1,258 2,533
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63,695 56,343
Property, plant and equipment 33,515 34,303
Other non-current assets 309 359
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97,519 91,005
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Liabilities
Current
Senior Credit Facility 17,611 11,247
Accounts payable and accrued liabilities 14,600 13,745
Income taxes payable 2,102 2,093
Other current liabilities 212 158
Fair value of convertible instruments 322 322
Current portion of long-term debt 6,884 4,882
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41,731 32,447
Convertible Debentures 14,637 14,298
Long-term debt 26,391 28,491
Other non-current liabilities 347 364
Deferred income taxes 609 766
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83,715 76,366
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Unitholders' Equity 13,804 14,639
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97,519 91,005
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Tree Island Wire Income Fund
INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of Canadian dollars, except units and per-
unit amounts - unaudited)
Three Months Ended March 31
2012 2011
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Sales $ 43,997 $ 38,944
Cost of goods sold 39,237 33,887
Depreciation 768 677
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Gross profit 3,992 4,380
Selling, general and administrative expenses 3,032 3,085
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Operating income 960 1,295
Foreign exchange gain 309 418
Gain on sale of property, plant and equipment 426 -
Changes in financial liabilities recognized
at fair value - (892)
Loss on renegotiated debt - (3,234)
Financing expenses (2,261) (2,066)
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Loss before income taxes (566) (4,479)
Income tax recovery 148 440
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Net loss for the period $ (418) $ (4,039)
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Net loss per unit
Basic $ (0.02) $ (0.18)
Diluted $ (0.02) $ (0.18)
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Weighted-average number of units
Basic 22,337,889 22,863,913
Diluted 22,337,889 22,863,913
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Tree Island Wire Income Fund
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of Canadian dollars - unaudited)
Three Months Ended March 31
2012 2011
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Cash flows from operating activities
Net loss for the period $ (418) $ (4,039)
Items not involving cash
Depreciation 768 677
Fair value changes on convertible instruments - 892
Gain on disposal of property, plant and
equipment (426) -
Amortization of deferred financing 70 70
Loss on renegotiated debt - 3,234
Non cash accretion of debt discount 1,404 1,326
Deferred income tax recovery (157) (583)
Unit-based compensation 22 8
Exchange revaluation on foreign denominated
debt (565) (590)
Working capital adjustments (7,160) (4,771)
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(6,462) (3,776)
Addback interest paid for financing activities 754 659
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Net cash used in operating activities (5,708) (3,117)
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Cash flows from investing activities
Proceeds on disposal of property, plant and
equipment 470 -
Purchase of property, plant and equipment (129) (109)
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Net cash provided by (used in) investing
activities 341 (109)
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Cash flows from financing activities
Repayment of long-term debt (598) (729)
Interest paid (754) (659)
Normal course issuer bid (205) -
Advance on Senior Credit Facility 6,354 2,148
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Net cash provided by financing activities 4,797 760
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Effect of exchange rate changes on cash (14) (56)
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Decrease in cash (584) (2,522)
Cash, beginning of period 3,852 5,634
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Cash, end of period $ 3,268 $ 3,112
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Contacts:
Tree Island Wire Income Fund
Nancy Davies
Chief Financial Officer
(604) 523-4587
ndavies@treeisland.com
www.treeisland.com
