From the Wires
Tree Island Announces Third Quarter 2012 Results
Nov. 8, 2012 04:45 PM
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 11/08/12 -- Tree Island Steel Ltd. (TSX:TSL)(TSX:TSL.DB) -
Q3 2012 Financial Highlights:
-- Sales amount to $34.0 million
-- Gross Profit of $3.5 million or 10% of revenues
-- EBITDA(3) (before foreign exchange) at $1.0 million
Tree Island Steel Ltd. (formerly Tree Island Wire Income Fund or the "Fund") ("Tree Island"(1) or the "Company")) (TSX:TSL)(TSX:TSL.DB) announced today its financial results for the three and nine-month periods ended September 30, 2012.
For the three-month period ended September 30, 2012(2), sales totaled $34.0 million versus $38.0 million during the corresponding period in 2011, while gross profit increased to $3.5 million from $1.4 million mainly due to Tree Island's ongoing focus on profitable growth. Gross profit per ton also improved to $144 per ton, compared to $51 per ton in the same period in 2011. Gross profit and gross profit per ton continued to demonstrate improvement on a consecutive quarter basis as the Company maintained price discipline and further improved operational efficiencies. As a result of Tree Island's ongoing focus on pricing and cost management, EBITDA increased to $1.0 million during the third quarter of 2012, which compares to an EBITDA loss of $1.3 million during the corresponding period in 2011.
For the nine-month period ended September 30, 2012(2), despite a 5% decrease in sales volume, Tree Island's revenues increased by 2% to $117.6 million from $114.9 million during the same period in 2011. Gross profit and EBITDA also increased to $11.7 million and $4.7 million, respectively. The year-over-year improvement in financial results is largely the result of focused management initiatives.
During the nine-month period ended September 30, 2012, Tree Island purchased 1,018,500 units at an average price of $0.30 per unit, under its previously announced normal course issuer bid. These units were cancelled by the Company at the end of the month of purchase. On September 6, 2012, the normal course issuer bid was extended to September 6, 2013. Under the renewed normal course issuer bid the Company may purchase up to 1,700,000 units.
"I am encouraged with our overall business strategy demonstrating strength and resilience in a business environment where price volatility and overall visibility continue to be a challenge," said Dale R. MacLean, President and CEO of Tree Island Steel Ltd. "Our financial performance during the third quarter is a clear testament to our focus on profitable growth, and the strength of our underlying business fundamentals evidenced by the meaningful improvement to profit margins on a year-over-year basis despite lower sales volumes."
Amar S. Doman, Chairman of Tree Island Steel Ltd. noted, "The Company continues to demonstrate financial and operational progress with a solid commitment to providing best-in-class product quality and service to customers and partners. The sustained improvement in financial results reflects the hard work and dedication of the Tree Island team during some challenging times, which have led to a stronger Tree Island today."
Three Months Ended Nine Months Ended
September 30 September 30
Summary of Results ($000's 2012 2011 2012 2011
except for tonnage and per
unit amounts)
----------------------------------------------------------------------------
Sales Volumes - Tons(a) 24,242 27,408 80,825 85,032
Sales $ 33,962 $ 38,005 $ 117,581 $ 114,949
Cost of sales (29,697) (35,774) (103,564) (103,135)
Depreciation (778) (820) (2,299) (2,459)
----------------------------------------------------------------------------
Gross profit 3,487 1,411 11,718 9,355
Selling, general and
administrative expenses (3,267) (3,507) (9,306) (9,393)
----------------------------------------------------------------------------
Operating income (loss) 220 (2,096) 2,412 (38)
Foreign exchange gain (loss) 163 (1,817) 75 (1,239)
Gain on sale of property,
plant and equipment 3 11 430 11
Changes in financial
liabilities recognized at
fair value (727) 1,414 (727) 2,301
Gain (loss) on renegotiated
debt - - 17,805 (3,234)
Financing Expenses (1,422) (2,153) (5,975) (6,259)
----------------------------------------------------------------------------
(Loss) income before income
taxes (1,763) (4,641) 14,020 (8,458)
Income tax (expense)
recovery (228) 47 (1,304) (146)
----------------------------------------------------------------------------
Net (loss) income $ (1,991) $ (4,594) $ 12,716 $ (8,604)
----------------------------------------------------------------------------
Operating income (loss) $ 220 $ (2,096) $ 2,412 $ (38)
Add back depreciation 778 820 2,299 2,459
----------------------------------------------------------------------------
EBITDA(b) $ 998 $ (1,276) $ 4,711 $ 2,421
----------------------------------------------------------------------------
Foreign exchange gain (loss) 163 (1,817) 75 (1,239)
----------------------------------------------------------------------------
EBITDA including foreign
exchange $ 1,161 $ (3,093) $ 4,786 $ 1,182
----------------------------------------------------------------------------
Net (loss) income $ (1,991) $ (4,594) $ 12,716 $ (8,604)
Add back significant non-cash
items
Non-cash financing expenses 634 1,339 3,313 3,962
Non-cash (gain) loss on
renegotiated debt - - (17,805) 3,234
Changes in financial
liabilities recognized at
fair value 727 (1,414) 727 (2,301)
----------------------------------------------------------------------------
Adjusted net loss(b) $ (630) $ (4,669) $ (1,049) $ (3,709)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per unit
Net (loss) income per unit -
basic (0.09) (0.20) 0.57 (0.38)
Net (loss) income per unit -
diluted (0.09) (0.20) 0.27 (0.38)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per ton
Gross profit per ton 144 51 145 110
EBITDA per ton 41 (47) 58 28
----------------------------------------------------------------------------
As at As at
September 30, December 31,
Financial position 2012 2011
----------------------------------------------------------------------------
Total assets $ 94,036 $ 91,005
Total non-current financial
liabilities $ 29,629 $ 42,789
----------------------------------------------------------------------------
a. Sales volumes exclude tons which were processed as part of tolling
arrangements
b. See definition of EBITDA and Adjusted Net Loss in footnote 3 to the
press release
About Tree Island Steel Ltd.
Tree Island Steel Ltd. 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, since 1964, Tree Island Industries Ltd., through its four operating facilities in Canada and the United States, produces wire products for a diverse range of industrial, residential construction, commercial construction, agricultural, and specialty applications. Its products include bright wire; a broad array of fasteners, including packaged, collated and bulk nails; stucco reinforcing products; concrete reinforcing mesh; fencing and other fabricated wire products. The Company markets these products under the Tree Island, Halsteel, K-Lath, Industrial Alloys, TI Wire, and Tough Strand and Select Brand names. Tree Island also owns and operates a Hong Kong-based company that assists the international sourcing of products to Tree Island Industries Ltd. and its customers.
Forward-Looking Statements
This press release includes forward-looking information with respect to the Tree Island 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 Company's Board of Directors 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 Company 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 Tree Island include references to Tree Island Industries
Ltd. as the context may require.
2. Please refer to our Q3 2012 MD&A for further information.
3. References made above to "EBITDA" are to operating profit plus
depreciation and 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 gain (loss) on renegotiated debt. 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. Neither EBITDA nor
Adjusted Net Income (Loss) are earnings measures recognized by IFRS and
do not have a standardized meaning prescribed by IFRS. We believe that
EBITDA and Adjusted Net Income (Loss) are important supplemental measure
in evaluating the Fund's performance. You are cautioned that EBITDA and
Adjusted Net Income (Loss) should not be construed as alternatives to
net income or loss, determined in accordance with IFRS, or as indicators
of performance. Our method of calculating EBITDA and Adjusted Net Income
(Loss) may differ from methods used by other issuers and, accordingly,
our EBITDA or Adjusted Net Income (Loss) 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)
September 30 December 31
2012 2011
----------------------------------------------------------------------------
Assets
Current
Cash 2,850 3,852
Accounts receivable 14,410 13,835
Inventories 43,021 36,123
Prepaid expenses 1,435 2,533
----------------------------------------------------------------------------
61,716 56,343
Property, plant and equipment 32,195 34,303
Other non-current assets 125 359
----------------------------------------------------------------------------
94,036 91,005
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current
Senior Credit Facility 16,631 11,247
Accounts payable and accrued liabilities 13,909 13,745
Income taxes payable 1,991 2,093
Other current liabilities 129 158
Fair value of convertible instruments 1,049 322
Current portion of long-term debt 1,734 4,882
----------------------------------------------------------------------------
35,443 32,447
Convertible Debentures 15,391 14,298
Term Loan 4,417 -
Long-term debt 9,582 28,491
Finance Lease 101 -
Other non-current liabilities 457 364
Deferred income taxes 2,172 766
----------------------------------------------------------------------------
67,563 76,366
----------------------------------------------------------------------------
Unitholders' Equity 26,473 14,639
----------------------------------------------------------------------------
94,036 91,005
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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 Nine Months Ended
September 30 September 30
2012 2011 2012 2011
----------------------------------------------------------------------------
Sales $ 33,962 $ 38,005 $ 117,581 $ 114,949
Cost of goods sold 29,697 35,774 103,564 103,135
Depreciation 778 820 2,299 2,459
-------------------------------------------------- -------------------------
Gross profit 3,487 1,411 11,718 9,355
Selling, general and
administrative expenses 3,267 3,507 9,306 9,393
-------------------------------------------------- -------------------------
Operating income (loss) 220 (2,096) 2,412 (38)
Foreign exchange (loss)
gain 163 (1,817) 75 (1,239)
Gain on sale of
property, plant and
equipment 3 11 430 11
Changes in financial
liabilities recognized
at fair value (727) 1,414 (727) 2,301
Gain (loss) on
renegotiated debt - - 17,805 (3,234)
Financing expenses (1,422) (2,153) (5,975) (6,259)
-------------------------------------------------- -------------------------
(Loss) income before
income taxes (1,763) (4,641) 14,020 (8,458)
Income tax (expense)
recovery (228) 47 (1,304) (146)
-------------------------------------------------- -------------------------
Net (loss) income for
the period $ (1,991) $ (4,594) $ 12,716 $ (8,604)
-------------------------------------------------- -------------------------
-------------------------------------------------- -------------------------
Net (loss) income per
unit
Basic $ (0.09) $ (0.20) $ 0.57 $ (0.38)
Diluted $ (0.09) $ (0.20) $ 0.27 $ (0.38)
-------------------------------------------------- -------------------------
-------------------------------------------------- -------------------------
Weighted-average number
of units
Basic 21,846,714 22,900,703 22,293,598 22,867,849
Diluted 21,846,714 22,900,703 61,365,072 22,867,849
-------------------------------------------------- -------------------------
Tree Island Wire Income Fund
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of Canadian dollars - unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2012 2011 2012 2011
------------------------------------------------------- --------------------
Cash flows from operating
activities
Net (loss) income for the period $ (1,991) $ (4,594) $ 12,716 $ (8,604)
Adjustments for
Depreciation 778 820 2,299 2,459
Changes in financial
liabilities recognized at fair
value 727 (1,414) 727 (2,301)
Gain on sale of property, plant
and equipment (3) (11) (430) (11)
(Gain) loss on renegotiated
debt - - (17,805) 3,234
Net finance costs 1,422 2,153 5,975 6,259
Deferred income tax recovery 224 41 1,407 86
Fair value change on Phantom
Units 47 53 64 49
Exchange revaluation on foreign
denominated debt (388) 3,152 (512) 1,958
Working capital (810) (2,031) (6,795) (11,995)
------------------------------------------------------- --------------------
Net cash provided by (used in)
operating activities 6 (1,831) (2,354) (8,866)
------------------------------------------------------- --------------------
Cash flows from investing
activities
Proceeds on disposal of property,
plant and equipment 15 49 487 49
Purchase of property, plant and
equipment (23) (161) (232) (319)
------------------------------------------------------- --------------------
Net cash (used in) provided by
investing activities (8) (112) 255 (270)
------------------------------------------------------- --------------------
Cash flows from financing
activities
Term Loan (125) - 4,875 -
Repayment of long-term debt (297) (1,200) (6,514) (2,598)
Interest paid (813) (728) (2,321) (2,088)
Normal course issuer bid (39) (5) (301) (5)
(Repayment of) advance on Senior
Credit Facility (47) 3,890 5,384 11,341
------------------------------------------------------- --------------------
Net cash (used in) provided by
financing activities (1,321) 1,957 1,123 6,650
------------------------------------------------------- --------------------
Effect of exchange rate changes on
cash (28) 53 (26) (8)
------------------------------------------------------- --------------------
(Decrease) increase in cash (1,350) 67 (1,001) (2,494)
Cash, beginning of period 4,201 3,073 3,852 5,634
------------------------------------------------------- --------------------
Cash, end of period $ 2,851 $ 3,140 $ 2,851 $ 3,140
------------------------------------------------------- --------------------
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