ALBUQUERQUE, NM -- (MARKET WIRE) -- 02/09/10 -- EMCORE Corporation (NASDAQ: EMKR), a leading provider of compound semiconductor-based components, subsystems, and systems for the fiber optics and solar power markets, today announced unaudited financial results for its first quarter ended December 31, 2009.
Revenue:
Revenue for the first quarter of fiscal 2010 ended December 31, 2009 was $42.4 million, an increase of $1.9 million, or 5%, from $40.5 million reported in the immediately preceding quarter ended September 30, 2009.
On a segment basis, revenue for the Photovoltaics segment was $16.8 million, an increase of $0.4 million, or 3%, from $16.4 million reported in the immediately preceding quarter with the increase due to a 14% increase in revenue from satellite solar power products offset by a decrease in revenue from terrestrial concentrated photovoltaic (CPV) products. The Photovoltaics segment accounted for 40% of the Company's consolidated quarterly revenue for both the three months ended December 31, 2009 and September 30, 2009.
Revenue for the Fiber Optics segment was $25.6 million, an increase of $1.5 million, or 6%, from $24.1 million reported in the immediately preceding quarter with the increase concentrated primarily in the Company's cable television (CATV) product lines. The Fiber Optics segment accounted for 60% of the Company's consolidated quarterly revenue for both the three months ended December 31, 2009 and September 30, 2009.
Gross Profit:
On a GAAP basis, the consolidated gross profit was $8.0 million, an improvement of $3.9 million, or 97%, from a $4.1 million gross profit reported in the immediately preceding quarter and an improvement of $6.4 million when compared to the prior year period. This represents the Company's best gross profit performance since the quarter ended June 30, 2008.
On a segment basis, the first quarter Photovoltaics GAAP gross margin was 22.1%, a decrease from the 28.5% GAAP gross margin reported in the preceding quarter, but an increase from the 13.6% GAAP gross margin reported in the prior year period. After excluding certain adjustments, as set forth in the attached non-GAAP tables, the Photovoltaics first quarter non-GAAP gross margin of 22.1% improved when compared to the 10.6% non-GAAP gross margin in the preceding quarter. As indicated in the attached non-GAAP tables, the Company reversed $2.9 million of inventory reserves in the preceding quarter relating to legacy CPV products that were sold during that period.
The Fiber Optics GAAP gross margin was 16.7%, a significant improvement from a negative 2.5% GAAP gross margin reported in the preceding quarter and a negative 1.1% GAAP gross margin reported in the prior year period. The improvement in the Fiber Optics gross margin was due to improved gross margins across the majority of the Company's product lines as well as lower inventory excess and obsolescence charges when compared to the preceding and prior year quarters.
Operating Loss:
On a GAAP basis, the consolidated operating loss was $11.9 million, an improvement of $2.0 million from an operating loss of $13.9 million reported in the preceding quarter. This represents the Company's best operating performance since the quarter ended June 30, 2008. During the quarter, the Company incurred approximately $4.2 million in legal expenses related to patent litigation and other corporate legal charges arising principally from two trials held in the first quarter and $1.3 million in non-cash stock-based compensation expense from the surrender of stock options. After excluding these expenses and certain other non-cash and other adjustments as set forth in the attached non-GAAP tables, the first quarter consolidated non-GAAP operating loss was $7.0 million, an improvement of $2.0 million, or 23%, from the non-GAAP operating loss of $9.0 million reported in the preceding quarter.
Net Loss:
On a GAAP basis, the consolidated net loss was $13.6 million, slightly above the net loss of $13.5 million reported in the preceding quarter. On October 1, 2009, the Company entered into a $25 million equity line of credit arrangement that met all the criteria of a financial derivative instrument. Non-cash costs incurred to enter into this derivative instrument of $1.4 million were expensed as incurred. After excluding this expense and certain other non-cash and other adjustments as set forth in the attached non-GAAP tables, the first quarter consolidated non-GAAP net loss was $7.1 million, a $2.0 million improvement from the $9.1 million non-GAAP net loss reported in the preceding quarter.
On a GAAP basis, the first quarter net loss per share was $0.17, representing no change from the $0.17 net loss per share reported in the preceding quarter. On a non-GAAP basis, the net loss per share was $0.09, an improvement of $0.02 per share from the $0.11 non-GAAP loss per share reported in the preceding quarter.
Order Backlog:
As of December 31, 2009, the Company had a consolidated order backlog of approximately $61.2 million, a $1.4 million, or 2%, decrease from the $62.6 million order backlog reported as of the end of the preceding quarter. On a segment basis, the quarter-end Photovoltaics order backlog totaled $42.3 million, a $5.4 million, or 11%, decrease from $47.7 million reported as of the end of the preceding quarter with the decrease due entirely to the rescheduling of a portion of a major customer's shipments beyond the Company's twelve month backlog reporting horizon. The quarter-end Fiber Optics order backlog totaled $18.9 million, a $4.0 million, or 26%, increase from $14.9 million reported as of the end of the preceding quarter with the increase being broad-based across customers and products. The order backlog is defined as purchase orders or supply agreements accepted by the Company with expected product delivery and / or services to be performed within the next twelve months.
Liquidity Update:
As of December 31, 2009, cash, cash equivalents, current restricted cash, and available-for-sale securities totaled approximately $16.5 million which represents a $0.4 million, or 2%, decrease from $16.9 million as of the end of the preceding quarter. As of December 31, 2009, net working capital totaled $32.0 million.
During the three months ended December 31, 2009, the Company consumed $1.2 million in cash from operations and, over the last three quarters, consumed only $189,000 in cash from operations due primarily to improved working capital management. The first quarter represents the fourth consecutive quarter that the Company has generated cash from the reduction of inventory. During the last twelve months, the Company monetized approximately $25.5 million of inventory, generated $16.9 million in cash from lowering its accounts receivable balances and achieved positive cash flow from operations during the quarters ended June 30, 2009 and September 30, 2009.
The Company maintains a $14 million credit facility with Bank of America and, on October 1, 2009, closed a two-year $25 million committed equity line of credit facility with the Commerce Court Small Cap Value Fund, Ltd. In addition, the Company continues to evaluate its capital requirements and alternative sources of capital. With respect to the separation of its Fiber Optics and Photovoltaics businesses, the Company announced on February 3, 2010 that it has entered into an agreement to sell 60% of its Fiber Optics business to and enter into a joint venture with the Tangshan Caofeidian Investment Corporation.
Business Outlook:
For the second quarter of fiscal 2010 ending March 31, 2010, the Company expects consolidated revenue to be in the range of $45 to $47 million with increases in both the Photovoltaics and Fiber Optics segments.
Conference Call:
EMCORE will discuss its unaudited results for its first quarter ended December 31, 2009 on a conference call to be held on Wednesday, February 10, 2010 at 4:30 pm ET. To participate in the conference call, U.S. callers should dial (toll free) 888-587-0613 and international callers should dial 719-325-2352. The access code for the call is 7863504. A replay of the call will be available beginning February 10, 2010 at 8:00 p.m. EST until February 17, 2010 at 11:59 p.m. EST. The replay call-in number for U.S. callers is 888-203-1112, for international callers it is 719-457-0820, and the access code is 7863504. The call also will be web cast via the Company's web site at http://www.emcore.com. Please go to the site beforehand to download any necessary software.
About EMCORE:
EMCORE Corporation offers a broad portfolio of compound semiconductor-based products for the broadband, fiber optics, satellite and solar power markets. EMCORE's Fiber Optics segment offers optical components, subsystems and systems for high speed data and telecommunications networks, cable television (CATV) and fiber-to-the-premises (FTTP). EMCORE's Photovoltaics segment provides products for both satellite and terrestrial applications. For satellite applications, EMCORE offers high efficiency gallium arsenide (GaAs) solar cells, covered interconnected cells (CICs) and panels. For terrestrial applications, EMCORE is adapting its high-efficiency GaAs solar cells for use in solar concentrator systems. For further information about EMCORE, visit http://www.emcore.com.
Forward-Looking Statements:
The information provided herein may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Exchange Act of 1934. These forward-looking statements are largely based on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Such forward-looking statements include, in particular, projections about our future results included in our Exchange Act reports, statements about our plans, strategies, business prospects, changes and trends in our business and the markets in which we operate. These forward-looking statements may be identified by the use of terms and phrases such as "anticipates", "believes", "can", "could", "estimates", "expects", "forecasts", "intends", "may", "plans", "projects", "targets", "will", and similar expressions or variations of these terms and similar phrases. Additionally, statements concerning future matters such as the development of new products, enhancements or technologies, sales levels, expense levels and other statements regarding matters that are not historical are forward-looking statements. Management cautions that these forward-looking statements relate to future events or our future financial performance and are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results, levels of activity, performance or achievements of our business or our industry to be materially different from those expressed or implied by any forward-looking statements.
These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, including without limitation, the following: (a) the impact on the Company, our customers and our suppliers from the current domestic and international economic and financial market conditions; (b) the success of our cost reduction efforts in achieving their expected benefits, due to, among other things, shifts in product mix, selling price pressures, costs and delays related to product transfers to lower cost manufacturing locations and associated facility closures, integration difficulties, and execution concerns; (c) delays and other difficulties in commercializing new products; (d) the failure of new products (i) to perform as expected without material defects, (ii) to be manufactured at acceptable volumes, yields, and cost, (iii) to be qualified and accepted by our customers, and, (iv) to successfully compete with products offered by our competitors; (e) we may not be successful in undertaking the steps currently planned in order to increase our liquidity; and (f) other risks and uncertainties described in our filings with the Securities and Exchange Commission such as cancellations, rescheduling or delays in product shipments; manufacturing capacity constraints; lengthy sales and qualification cycles; difficulties in the production process; changes in semiconductor industry growth; increased competition; delays in developing and commercializing new products; and other factors.
Neither management nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. All forward-looking statements in this press release are made as of the date hereof, based on information available to us as of the date hereof, and subsequent facts or circumstances may contradict, obviate, undermine, or otherwise fail to support or substantiate such statements. We caution you not to rely on these statements without also considering the risks and uncertainties associated with these statements and our business that are addressed in our Annual Report on Form 10-K. Certain information included in this press release may supersede or supplement forward-looking statements in our other Exchange Act reports filed with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statement to conform such statements to actual results or to changes in our expectations, except as required by applicable law or regulation.
EMCORE CORPORATION
Condensed Consolidated Statements of Operations
For the three months ended December 31, 2009 and 2008
(in thousands, except loss per share)
(unaudited)
For the Three Months
Ended December 31,
-------------------------
2009 2008
----------- -----------
Revenue $ 42,401 $ 54,056
Cost of revenue 34,397 52,467
----------- -----------
Gross profit 8,004 1,589
Operating expenses:
Selling, general, and administrative 12,423 12,159
Research and development 7,513 8,110
Impairments - 33,781
----------- -----------
Total operating expenses 19,936 54,050
----------- -----------
Operating loss (11,932) (52,461)
Other (income) expense:
Interest income (2) (50)
Interest expense 116 195
Foreign exchange loss 232 472
Loss from financing derivative instrument 1,360 -
Impairment of investment - 367
----------- -----------
Total other expense 1,706 984
----------- -----------
Net loss $ (13,638) $ (53,445)
=========== ===========
Per share data:
Net loss per basic and diluted share $ (0.17) $ (0.69)
=========== ===========
Weighted-average number of basic and diluted
shares outstanding 81,113 77,816
=========== ===========
EMCORE CORPORATION
Condensed Consolidated Balance Sheets
As of December 31, 2009 and September 30, 2009
(in thousands)
(unaudited)
As of As of
December 31, September 30,
2009 2009
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 15,138 $ 14,028
Restricted cash 4 1,521
Available-for-sale securities 1,350 1,350
Accounts receivable, net of allowance of $6,640
and $7,125, respectively 40,726 39,417
Inventory, net 31,454 34,221
Prepaid expenses and other current assets 4,550 4,712
----------- -----------
Total current assets 93,222 95,249
Property, plant and equipment, net 52,719 55,028
Goodwill 20,384 20,384
Other intangible assets, net 12,424 12,982
Long-term restricted cash 163 163
Other non-current assets, net 720 753
----------- -----------
Total assets $ 179,632 $ 184,559
=========== ===========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings from credit facility $ 10,678 $ 10,332
Short-term debt 843 842
Accounts payable 28,632 24,931
Accrued expenses and other current liabilities 21,042 21,687
----------- -----------
Total current liabilities 61,195 57,792
Warrant liability 1,132 -
Other long-term liabilities 103 104
----------- -----------
Total liabilities 62,430 57,896
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.0001 par, 5,882 shares
authorized; no shares outstanding - -
Common stock, no par value, 200,000 shares
authorized; 81,900 shares issued and 81,741
shares outstanding as of December 31,
2009; 80,982 shares issued and 80,823 shares
outstanding as of September 30, 2009 692,942 688,844
Accumulated deficit (574,471) (560,833)
Accumulated other comprehensive income 814 735
Treasury stock, at cost; 159 shares as of
December 31, 2009 and September 30, 2009 (2,083) (2,083)
----------- -----------
Total shareholders' equity 117,202 126,663
----------- -----------
Total liabilities and shareholders' equity $ 179,632 $ 184,559
=========== ===========
Use of Non-GAAP Measures
The Company provides non-GAAP gross profit and gross margin, non-GAAP operating loss, and non-GAAP net loss and net loss per share as supplemental measures to GAAP regarding our operational performance. These financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. This press release also contains a reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure.
The Company believes that the additional non-GAAP measures are useful to investors in assessing the Company's financial condition and performance. In particular, management believes it is appropriate in evaluating the Company's operations to exclude gains or losses from specific accounts receivable and inventory write-downs, loss from firm purchase commitments, patent litigation and other corporate legal-related charges; impairment charges; foreign exchange gains and losses, losses from financial derivative instruments, and warranty, severance and restructuring-related expenses because these items would make results less comparable between periods. Management also uses these measures internally to evaluate the Company's operating performance, and the measures are used for planning and forecasting of future periods. In addition, financial analysts that follow our Company may focus on and publish both historical results and future projections based on non-GAAP financial measures. We also believe that it is in the best interest of our investors to provide non-GAAP information.
While management believes that these non-GAAP financial measures provide useful supplemental information to investors, there are limitations associated with the use of these non-GAAP financial measures. Our non-GAAP financial measures may not be reported by all of the Company's competitors and they may not be directly comparable to similarly titled measures of other companies due to potential differences in calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by providing reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.
Non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.
The Company has provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as indicated in the tables below:
Non-GAAP Table
Gross profit and margin
Unaudited For the Three Months For the Three Months
(in thousands, Ended December 31, 2009 Ended September 30, 2009
except percentages) ------------------------- -------------------------
Fiber Photo- Fiber Photo-
Optics voltaics Total Optics voltaics Total
------- ------- ------- ------- ------- -------
Gross profit (loss) -
GAAP $ 4,288 $ 3,716 $ 8,004 $ (598) $ 4,668 $ 4,070
Specific adjustments:
Inventory valuation - - - 1,985 (2,937) (952)
Product warranty - - - (245) - (245)
Loss on commitments - - - 1,991 - 1,991
------- ------- ------- ------- ------- -------
Gross profit -
Non-GAAP $ 4,288 $ 3,716 $ 8,004 $ 3,133 $ 1,731 $ 4,864
======= ======= ======= ======= ======= =======
Gross margin - GAAP 16.7% 22.1% 18.9% (2.5%) 28.5% 10.0%
======= ======= ======= ======= ======= =======
Gross margin -
Non-GAAP 16.7% 22.1% 18.9% 13.0% 10.6% 12.0%
======= ======= ======= ======= ======= =======
Non-GAAP Table For the Three For the Three
Operating Loss Months Ended Months Ended
Unaudited December 31, September 30,
(in thousands) 2009 2009
------------ ------------
Operating loss - GAAP $ (11,932) $ (13,915)
Specific adjustments:
Surrender of stock options 1,252 -
Provision for doubtful accounts (450) 225
Corporate legal expense 4,163 2,779
Severance and restructuring-related expense 8 1,082
Inventory valuation - (952)
Product warranty - (245)
Loss on commitments - 1,991
----------- -----------
Operating loss - Non-GAAP $ (6,959) $ (9,035)
=========== ===========
Non-GAAP Table For the Three For the Three
Net Loss Months Ended Months Ended
Unaudited December 31, September 30,
(in thousands) 2009 2009
------------ ------------
Net loss - GAAP $ (13,638) $ (13,532)
Specific adjustments:
Surrender of stock options 1,252 -
Provision for doubtful accounts (450) 225
Corporate legal expense 4,163 2,779
Severance and restructuring-related expense 8 1,082
Inventory valuation - (952)
Product warranty - (245)
Loss on commitments - 1,991
Foreign exchange loss (gain) 232 (481)
Loss from financing derivative instrument 1,360 -
----------- -----------
Net loss - Non-GAAP $ (7,073) (9,133)
=========== ===========
Net loss per basic and diluted share - GAAP $ (0.17) $ (0.17)
=========== ===========
Net loss per basic and diluted share -
Non-GAAP $ (0.09) $ (0.11)
=========== ===========
Contacts: EMCORE Corporation Silvia M. Gentile Executive Offices (505) 332-5000 Email Contact TTC Group Victor Allgeier (646) 290-6400 Email Contact
SAN FRANCISCO, Feb. 9 /PRNewswire/ -- Sky Holding Company, LLC is pleased to announce the delivery of one Airbus A320-214 to Aerovias del Continente Americano S.A. ("Avianca"), Colombia's leading airline. This transaction represents a continuation of Sky's long relationship with Avianca and the first sale/leaseback transaction of Sky's new fleet, which is being built in partnership with Oaktree Capital.
"We are thrilled to be able to execute another transaction with Avianca, which is one of Latin America's strongest carriers and has been a great partner with our firm for a long time," said Richard Wiley, Sky's founder and CEO. "We emphasize new, fuel-efficient aircraft on lease to leading airlines around the world. We have ambitious growth plans over the next couple of years, and with $500 million in support from Oaktree Capital this is the first of many such transactions for us."
"Avianca is pleased to have received its thirteenth Airbus A320, as a result of a sale and lease back transaction with Sky. With this new aircraft the airline will continue to provide its high quality service based on comfort and efficiency in its routes in Colombia, the Americas and Europe" said Gerardo Grajales, CFO for Avianca.
About Sky Holding Company, LLC: Sky is a full-service aircraft leasing company based in San Francisco with offices in Seattle, Miami, and Buenos Aires, with a European office opening in 2010. The management team, which had previously worked together at Pegasus Aviation, has over 90 years of combined industry experience. The team has collectively acquired over $10 billion of aircraft, has purchased and/or remarketed over 400 aircraft, and has developed relationships with over 30 commercial lenders and investment banks across Europe, Asia and North America. Sky is equity funded by its management team and Oaktree Capital Management, L.P., a premier global alternative and non-traditional investment manager with over US$70 billion in assets under management.
About Avianca: Avianca was the first airline founded in the Americas. Along with Ocean Air, in Brazil; and Vip S.A., in Ecuador, it is part of the Synergy Aerospace Group. With more than six thousand direct collaborators, and a fleet of 60 short, medium and long range aircraft, Avianca currently operates directly to 21 destinations in Colombia and 22 points in America and Europe. From its hub in Bogota, the company offers an average of 350 flights per day connecting its domestic and international destinations. Passengers have more than 6,000 options for connections between destinations operated both directly and through code share agreements with other internationally renowned companies. In addition to its passenger air transport services, Avianca provides tourism, mail, cargo, and courier transport services, as well as aeronautical assistance services, through its Business Units: Avianca Tours, Deprisa and Avianca Services. For additional information, please visit www.avianca.com.
www.skyholding.aero
SOURCE Sky Holding Company, LLC
VANCOUVER, BRITISH COLUMBIA -- (MARKET WIRE) -- 02/09/10 -- Acadian Timber Corp. (TSX: ADN) -
Investors, analysts and other interested parties can access Acadian Timber Income Fund's 2009 Fourth Quarter and Year-end Results conference call via webcast on Wednesday, February 10, 2010 at 10:00 a.m. ET at www.acadiantimber.com or via teleconference at 1-800-319-4610, toll free in North America. For overseas calls please dial +1-604-638-5340, at approximately 9:50 a.m. ET. The teleconference recorded rebroadcast can be accessed at 1-800-319-6413 or +1-604-638-9010 and enter passcode 2826.
Acadian Timber Corp. (the "Corporation") (TSX: ADN), formerly Acadian Timber Income Fund ("Acadian" or the "Fund"), today reported financial and operating results(1) for the three and twelve month periods ended December 31, 2009.
For the three months ended December 31, 2009 (the "fourth quarter"), Acadian generated net sales of $16.7 million on consolidated volumes of 343 thousand m3, compared with net sales of $19.7 million on consolidated volumes of 307 thousand m3 during the same period last year.
EBITDA for the fourth quarter was $2.0 million or 12% of sales as compared to EBITDA of $6.9 million or 35% of sales during the comparable period in 2008. Results in the quarter reflect a lower contribution from the management of the Crown licensed timberlands by New Brunswick Timberlands and soft pricing at Maine Timberlands. As a result of these market conditions, Acadian has continued to reduce near-term harvest levels of our high margin spruce-fir sawlogs allowing us to maximize opportunities when markets recover, thus preserving the long-term value of Acadian's resource. Additionally, the Fund incurred $0.9 million of non-recurring costs associated with the previously announced conversion to a corporation.
For the year ended December 31, 2009, Acadian generated net sales of $63.4 million as compared to net sales of $67.9 million in 2008. EBITDA was $12.1 million or 19% of sales as compared to EBITDA of $17.4 million or 26% of sales in the prior year.
"While 2009 was another very challenging year, we are pleased with what we have achieved this year at both corporate and operating levels. These accomplishments include successfully completing the conversion to a corporation and extending the maturity of our bank term credit facility," commented Reid Carter, Chief Executive Officer of Acadian. "While 2010 is expected to be another difficult year, we will focus on identifying and accessing market opportunities while keeping costs low," added Mr. Carter.
(1) This news release makes reference to earnings before interest, taxes, depletion, depreciation and amortization ("EBITDA") and distributable cash from operations. Management believes that EBITDA and distributable cash from operations are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of Acadian's operating performance. As EBITDA and distributable cash from operations do not have a standardized meaning prescribed by Canadian GAAP, they may not be comparable to similar measures presented by other companies. As a result, we have provided in this news release reconciliations of net income and cash flow from operations, as determined in accordance with Canadian GAAP, to EBITDA and distributable cash from operations.
New Chief Financial Officer Appointed
Brookfield Timberlands Management LP, as Manager of Acadian, announced that, after almost three years as Acadian's Chief Financial Officer, Mr. Joseph Cornacchia will be leaving Acadian to take on new responsibilities within Brookfield Asset Management. "The entire management team would like to thank Mr. Cornacchia for his hard work, dedication and very significant contributions to Acadian and wish him the best in his new endeavours" commented Mr. Carter. Effective February 10, 2010, Mr. Brian Banfill will replace Mr. Cornacchia as Acadian's Senior Vice-President and Chief Financial Officer. Mr. Banfill has been intimately involved with Acadian since its inception and is a Certified General Accountant with over 25 years of experience in the forest industry.
Review of Operations
2009 Financial and Operating Highlights
Three Months Ended Year Ended
December 31 December 31
------------------------------------------------
($millions except per unit
information) 2009 2008 2009 2008
----------------------------------------------------------------------------
Net sales $ 16.7 $ 19.7 $ 63.4 $ 67.9
EBITDA 2.0 6.9 12.1 17.4
Distributable cash from
operations 1.3 5.7 8.1 13.3
Distributions declared 1.4 3.4 11.7 13.7
Net income(1) - 15.8 9.3 18.9
Per unit - fully diluted
Net Income (loss)(1) - (0.14) 0.30 0.02
Distributable cash from
operations 0.08 0.34 0.49 0.80
Distributions declared -
Class A unitholders 0.08 0.21 0.70 0.83
Sales volume (000s m3) 343.0 306.6 1,258.3 1,251.0
----------------------------------------------------------------------------
(1) Net income includes the impact of the revaluation of the Class B
Interest Liability of a subsidiary, the future income tax
expense/recovery, and the depreciation and depletion expense, which are
non-cash items recorded in each respective period.
Included in the net income for the three and twelve month periods ended December 31, 2009 is a non-cash future income tax recovery of $0.3 million and $3.0 million, respectively (2008 - $6.1 million expense and $6.2 million expense, respectively). The future income tax liability of the Fund is based on differences between the financial reporting and tax basis of assets and liabilities of its subsidiaries, which have been measured using the substantially enacted tax rates and laws that are expected to be in effect at the time the differences are anticipated to reverse. The reduction in the future income tax liability, and related recovery, recorded during the year is largely a result of a decline in the substantially enacted tax rate expected to be in effect.
Also, included in net income for the year ended December 31, 2009 is a non-cash gain related to the Class B Interest Liability of a subsidiary. The settlement obligation of this interest was based on the trading value of Acadian's units at the time of settlement, which required recording the liability at its fair value at each balance sheet date with the corresponding gain arising from a decrease in Acadian's unit price or loss arising from an increase in Acadian's unit price included in the statement of operations. In addition, as this Canadian dollar liability was issued by a self-sustaining U.S. dollar subsidiary of the Fund, the obligation was required to be converted to U.S. dollars at each reporting period, with the corresponding gain or loss included in the statement of operations. These items resulted in a $4.7 million gain for the year ended December 31, 2009 (2008 - $22.2 million gain) comprised of a $4.1 million mark-to-market gain (2008 - $15.0 million gain) and a $0.6 million foreign exchange gain (2008 - $7.2 million gain).
On February 3, 2009, an affiliate of Brookfield Asset Management Inc. ("Brookfield") converted all units representing the Class B Liability of a subsidiary into Class A Units of the Fund on a one-for-one basis. Accordingly, the Class B Liability of a subsidiary was not outstanding during the fourth quarter and was not revalued at the end of the period.
New Brunswick Timberlands
The table below summarizes operating and financial results for New Brunswick Timberlands.
Three Months Ended Three Months Ended
December 31, 2009 December 31, 2008
--------------------------------------------------------------
Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) (millions) (000s m3) (000s m3) (millions)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Softwood 57.4 68.0 $ 3.8 72.5 73.2 $ 4.4
Hardwood 148.7 143.9 7.6 81.7 78.2 4.6
Biomass 58.8 58.8 1.1 57.4 57.4 1.1
----------------------------------------------------------------------------
264.9 270.7 12.5 211.6 208.8 10.1
Other sales 0.8 3.2
----------------------------------------------------------------------------
Net sales $ 13.3 $ 13.3
----------------------------------------------------------------------------
EBITDA $ 2.5 $ 4.5
EBITDA margin 19% 34%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
--------------------------------------------------------------
Year Ended December 31, 2009 Year Ended December 31, 2008
--------------------------------------------------------------
Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) (millions) (000s m3) (000s m3) (millions)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Softwood 336.5 328.9 $ 18.9 273.8 280.8 $ 17.0
Hardwood 444.0 432.7 22.1 389.6 413.5 23.8
Biomass 235.4 235.4 4.5 241.6 241.6 4.4
----------------------------------------------------------------------------
1,015.9 997.0 45.5 905.0 935.9 45.2
Other sales 3.3 4.8
----------------------------------------------------------------------------
Net sales $ 48.8 $ 50.0
----------------------------------------------------------------------------
EBITDA $ 10.8 $ 11.5
EBITDA margin 22% 23%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Softwood, hardwood and biomass shipments were 68 thousand m3, 144 thousand m3 and 59 thousand m3, respectively, during the fourth quarter, representing a 30% increase in sales volumes as compared to same period in 2008. This increase reflects improved demand for hardwood pulpwood as compared to the fourth quarter of 2008. Approximately 30% of sales volumes were sold as sawlogs, 48% as pulpwood and 22% as biomass in the fourth quarter. This compares to 34% of sales volumes sold as sawlogs, 39% as pulpwood and 27% as biomass in the fourth quarter of 2008.
Net sales for the fourth quarter totaled $13.3 million, consistent with the same period in 2008. The increase in sales volumes was offset by a lower value species mix and a $2.4 million decrease in other sales. The decrease in other sales was primarily attributed to a reduced contribution from our management of Crown licensed timberlands as a result of lower harvesting activity. The weighted average selling price was $46.05 in the fourth quarter of 2009, compared to $48.79 in the same period of 2008.
Costs for the fourth quarter were $10.8 million, representing an increase of 23% compared to the same period of 2008. This was primarily a result of increased harvest volumes, longer hauling distances and cable logging.
EBITDA for the fourth quarter was $2.5 million, compared to $4.5 million in the same period in 2008, while EBITDA margin decreased from 34% to 19%.
NB Timberlands experienced no incidents among employees and three minor reportable incidents among contractors during the fourth quarter, from which the individuals have since fully recovered. We are pleased to report that there were no reportable environmental incidents during the fourth quarter.
Maine Timberlands
The table below summarizes operating and financial results for Maine Timberlands.
Three Months Ended Three Months Ended
December 31, 2009 December 31, 2008
--------------------------------------------------------------
Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) (millions) (000s m3) (000s m3) (millions)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Softwood 43.7 43.6 $ 2.1 72.4 72.4 $ 4.8
Hardwood 21.2 21.2 1.1 18.1 18.7 1.4
Biomass 7.5 7.5 0.1 6.7 6.7 0.1
----------------------------------------------------------------------------
72.4 72.3 3.3 97.2 97.8 6.3
Other sales 0.1 0.1
----------------------------------------------------------------------------
Net sales $ 3.4 $ 6.4
----------------------------------------------------------------------------
EBITDA $ 0.7 2.5
EBITDA margin 21% 39%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
--------------------------------------------------------------
Year Ended December 31, 2009 Year Ended December 31, 2008
--------------------------------------------------------------
Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) (millions) (000s m3) (000s m3) (millions)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Softwood 196.0 195.6 $ 11.7 234.4 234.2 $ 13.7
Hardwood 45.3 44.6 2.2 62.1 62.5 3.6
Biomass 21.1 21.1 0.3 18.4 18.4 0.2
----------------------------------------------------------------------------
262.4 261.3 14.2 314.9 315.1 17.5
Other sales 0.4 0.4
----------------------------------------------------------------------------
Net sales $ 14.6 $ 17.9
----------------------------------------------------------------------------
EBITDA $ 4.2 $ 6.5
EBITDA margin 29% 36%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Maine Timberlands experienced strong operating conditions during the fourth quarter, primarily as a result of favourable weather conditions. However, difficult market conditions resulted in a significant decline in the operation's financial performance. Softwood, hardwood and biomass shipments were 44 thousand m3, 21 thousand m3, and 7 thousand m3, respectively, with total sales volumes decreasing by 26% as compared to the fourth quarter of 2008. The decrease in sales volumes reflects particularly strong volumes in the fourth quarter of 2008 as the operation's largest contractor caught up on its contract volume after weather-related difficulties during the spring and early summer operating season. Approximately 43% of sales volumes were sold as sawlogs, 47% as pulpwood and 10% as biomass during the fourth quarter. This compares to 55% of sales volumes sold as sawlogs, 38% as pulpwood and 7% as biomass in the fourth quarter of 2008.
Net sales for the fourth quarter totaled $3.4 million, compared to $6.4 million for the same period last year. The year-over-year decline in net sales is a result of lower shipment volumes, a lower value species mix, and softer prices across all products. The weighted average price across all products was $45.27 in the fourth quarter, compared to $64.19 in the same period of 2008, reflecting a 29% decrease in Canadian dollar terms. Weighted average selling prices decreased 22% in U.S. dollar terms year over year.
Costs for the fourth quarter were $2.7 million, compared to $3.9 million for the same period in 2008. This decrease reflects lower sales volumes and lower variable costs per m3, partially due to lower diesel prices.
EBITDA for the fourth quarter was $0.7 million, compared to $2.5 million for the same period in 2008, while EBITDA margin decreased from 39% to 21%.
Maine Timberlands had no recordable safety incidents among employees and one minor reportable incident among contractors during the fourth quarter. The individual has since fully recovered. We are pleased to report that there were no reportable environmental incidents during the fourth quarter.
Market and Company Outlook
The following Market Outlook contains forward-looking statements about Acadian Timber Corp.'s market outlook for fiscal 2010. Reference should be made to the "Forward-looking Statements" section of this news release. For a description of material factors that could cause actual results to differ materially from the forward-looking statements in the following, please see the Risk Factors section of our Management's Discussion and Analysis (MD&A) in our most recent Annual Report and Annual Information Form available on our website at www.acadiantimber.com or filed with SEDAR at www.sedar.com.
Consensus forecasts for U.S. housing predict an increase in housing starts to only 675,000 units in 2010 and 910,000 in 2011 - a very slow recovery from 2009's post World War II low of 550,000 starts. While smaller, non-industrial timberland owners continue to withhold timber from the market, an ample supply of Crown and private timber has placed considerable pressure on timber prices resulting in price declines of approximately 20% from 2006 - 2007 averages. The fact that Fraser Papers Inc. is currently expected to operate its Edmundston Pulp mill and Plaster Rock sawmill provides some encouragement that demand for Acadian's spruce-fir sawlogs will be stronger in 2010 than in 2009, although prices are expected to remain low throughout the year. Despite current difficult softwood sawlog markets, Acadian continues to find markets for its key products while choosing to preserve value for those products that don't offer adequate market opportunities by reducing the near-term harvest levels of our high margin spruce-fir sawlogs. Weak softwood sawlog markets and relatively large inventories of softwood pulpwood and chips is also expected to result in uncertainties in regard to the level of activity on Fraser Papers Inc.'s Crown licensed timberlands which is managed by Acadian, reducing the contribution from these management services to Acadian's net income.
Markets for hardwood sawlogs and specialty products remain relatively stable, particularly for aspen. These markets are expected to remain stable into 2010. Markets for hardwood have improved since the first half of 2009 and Acadian's major hardwood pulpwood customers continue to operate and take deliveries with pricing improving modestly from the second and early third quarter. Acadian has been able to sell all of its biomass, although this market has also been under pressure due to low demand for electric power and reduced gas and oil prices. The Biomass Crop Assistance Program (BCAP) implemented in the U.S. during the fourth quarter of 2009 may provide limited additional opportunities for biomass sales by our Maine Timberlands although the impact of this two-year program on biomass sales by our New Brunswick Timberlands remains uncertain.
"During these challenging market conditions, we remained focused on preserving long-term value for shareholders and merchandising all of our products for their highest value, while seeking every opportunity to reduce costs. We continue to be confident in Acadian's long-term outlook and the quality of our asset base. We believe that our new tax effective corporate structure and steadily improving market conditions will lead to improved financial performance going forward" concluded Mr. Carter.
Acadian Timber Corp. is a leading supplier of primary forest products in Eastern Canada and the Northeastern U.S. With a total of 2.4 million acres of land under management, the Corporation is the second largest timberland operator in New Brunswick and Maine.
The Corporation owns and manages approximately 1.1 million acres of freehold timberlands in New Brunswick and Maine, and provides management services relating to approximately 1.3 million acres of Crown licensed timberlands. The Corporation also owns and operates a forest nursery in Second Falls, New Brunswick. Acadian's products include softwood and hardwood sawlogs, pulpwood and biomass by-products, sold to over 110 regional customers.
Acadian Timber Corp.'s shares are listed for trading on the Toronto Stock Exchange under the symbol ADN.
For further information, please visit our website at www.acadiantimber.com.
Forward-Looking Statements
This News Release contains forward-looking information and other forward-looking statements within the meaning of applicable Canadian securities laws that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Corporation and its subsidiaries (collectively, "Acadian"), or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this News Release, such statements may contain such words as "may," "will," "intend," "should," "expect," "believe," "outlook," "predict," "remain," "anticipate," "estimate," "potential," "continue," "plan," "could," "might," "project," "targeting" or the negative of these terms or other similar terminology. Forward-looking information in this News Release includes, without limitation, statements regarding management's beliefs, intentions, results, performance, goals, achievements, future events, plans and objectives, business strategy, access to capital, liquidity and trading volumes, dividends, taxes, capital expenditures, projected costs, and anticipated benefits of the conversion from an income trust to a corporation, and similar statements concerning anticipated future events, results, achievements, circumstances, performance or expectations that are not historical facts. These statements reflect management's current expectations regarding future events and operating performance are based on information currently available to management and speak only as of the date of this News Release. All forward-looking statements in this News Release are qualified by these cautionary statements. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, should not be unduly relied upon, and will not necessarily be accurate indications of whether or not such results will be achieved. Factors that could cause actual results to differ materially from the results discussed in the forward-looking statements include, but are not limited to: general economic and market conditions; product demand; concentration of customers; commodity pricing; interest rate and foreign currency fluctuations; seasonality; weather and natural conditions; regulatory, trade or environmental policy changes; changes in Canadian income tax law; economic situation of key customers; failure to realize the anticipated benefits of the conversion from an income trust to a corporation; the risks associated with the availability and the amount of the tax basis in connection with the conversion from an income fund to a corporation;
and other risks and factors, to the extent they remain applicable to the Corporation, discussed under the heading "Risk Factors" in each of the Annual Information Form dated March 27, 2009 and the Management Information Circular dated November 23, 2009 of Acadian Timber Income Fund (the "Fund"), the predecessor reporting issuer to the Corporation, and other filings of the Fund and the Corporation with securities regulatory authorities, which are available on SEDAR at www.sedar.com. Forward-looking information is based on various material factors or assumptions, which are based on information currently available to Acadian. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: anticipated financial performance; business prospects; strategies; regulatory developments; exchange rates; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services and the ability to obtain financing on acceptable terms, which are subject to change based on commodity prices, market conditions for timber and wood products, the economic situation of key customers, and the utilization of the tax basis resulting from the conversion from an income trust to a corporation. Readers are cautioned that the preceding list of material factors or assumptions is not exhaustive. Although the forward-looking statements contained in this News Release are based upon what management believes are reasonable assumptions, the Corporation cannot assure readers that actual results will be consistent with these forward-looking statements. Certain statements in this New Release may also be considered "financial outlook" for the purposes of applicable Canadian securities laws, and such financial outlook may not be appropriate for purposes other than this News Release. The forward-looking statements in this News Release are made as of the date of this News Release, and should not be relied upon as representing Acadian's views as of any date subsequent to the date of this News Release. The Corporation assumes no obligation to update or revise these forward-looking statements to reflect new information, events, circumstances or otherwise, except as required by applicable law.
Acadian Timber Income Fund
Consolidated Balance Sheets
----------------------------------------------------------------------------
As at December 31
(CAD millions) 2009 2008
----------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 2.1 $ 9.0
Accounts receivable and other assets 6.2 4.7
Note receivable 4.0 -
Inventory 1.8 1.4
----------------------------------------------------------------------------
14.1 15.1
Intangible assets 6.1 6.1
Timberlands, logging roads and fixed assets 190.0 207.8
----------------------------------------------------------------------------
$ 210.2 $ 229.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 4.3 $ 6.2
Distributions payable to unitholders - 0.8
----------------------------------------------------------------------------
4.3 7.0
Future income tax liability 13.9 17.7
Long-term debt 80.7 80.8
Class B Interest Liability of a subsidiary - 31.6
Unitholders' equity 111.3 91.9
----------------------------------------------------------------------------
$ 210.2 $ 229.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Acadian Timber Income Fund
Consolidated Statements of Operations and Deficit
----------------------------------------------------------------------------
For the Three Months For the Year Ended
Ended December 31 December 31
----------------------------------------------------------------------------
CAD millions 2009 2008 2009 2008
----------------------------------------------------------------------------
Net sales $ 16.7 $ 19.7 $ 63.4 $ 67.9
Operating costs and expenses
Cost of sales 12.1 11.1 43.3 44.8
Selling, administration and
other 2.6 1.7 8.6 6.4
Depreciation and depletion 1.6 2.2 7.1 7.4
----------------------------------------------------------------------------
16.3 15.0 59.0 58.6
----------------------------------------------------------------------------
Operating earnings 0.4 4.7 4.4 9.3
Gain on sale of timberlands - - (0.6) (0.7)
Gain on Class B Interest
Liability of a subsidiary - (19.1) (4.7) (22.2)
Interest:
Interest income - - - (0.2)
Interest expense 0.7 1.0 3.1 3.6
Class B Interest Liability
of a subsidiary - 0.9 0.3 3.7
----------------------------------------------------------------------------
Earnings (loss) before
income tax expense (0.3) 21.9 6.3 25.1
Future income tax recovery
(expense) 0.3 (6.1) 3.0 (6.2)
----------------------------------------------------------------------------
Net income for the period - 15.8 9.3 18.9
Deficit, beginning of period (21.6) (34.2) (20.9) (29.8)
Unitholders' distributions (1.4) (2.5) (11.4) (10.0)
----------------------------------------------------------------------------
Deficit, end of period $ (23.0) $ (20.9) $ (23.0) $ (20.9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income per unit - basic $ - $ 1.31 $ 0.58 $ 1.57
Net income (loss) per unit
diluted $ - $ (0.14) $ 0.30 $ 0.02
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Acadian Timber Income Fund
Consolidated Statement of Comprehensive Income (Loss)
----------------------------------------------------------------------------
For the Three Months For the Year Ended
Ended December 31 December 31
----------------------------------------------------------------------------
CAD millions 2009 2008 2009 2008
----------------------------------------------------------------------------
Net income $ - $ 15.8 $ 9.3 $ 18.9
----------------------------------------------------------------------------
Other comprehensive income
(loss)
Unrealized foreign currency
translation gain (loss) (1.2) 1.7 (6.0) 1.5
----------------------------------------------------------------------------
Comprehensive income (loss) $ (1.2) $ 17.5 $ 3.3 $ 20.4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Acadian Timber Income Fund
Consolidated Statements of Cash Flows
----------------------------------------------------------------------------
For the Three Months For the Year Ended
Ended December 31 December 31
----------------------------------------------------------------------------
CAD millions 2009 2008 2009 2008
----------------------------------------------------------------------------
Cash provided by (used for):
----------------------------------------------------------------------------
Operating activities
Net income $ - $ 15.8 $ 9.3 $ 18.9
Items not affecting cash:
Future income tax expense
(recovery) (0.3) 6.1 (3.0) 6.2
Depreciation and depletion 1.6 2.2 7.1 7.4
Gain on sale of timberlands - - (0.6) (0.7)
Gain on Class B Interest
Liability of a subsidiary - (19.1) (4.7) (22.2)
----------------------------------------------------------------------------
1.3 5.0 8.1 9.6
Net change in non-cash
working capital balances
and other (0.8) 1.6 (4.0) 4.5
----------------------------------------------------------------------------
0.5 6.6 4.1 14.1
----------------------------------------------------------------------------
Investing activities
Sale of timberlands, logging
roads and fixed assets - - 0.6 0.8
Additions to timberlands,
logging roads and fixed
assets - (0.2) (0.8) (0.5)
Silviculture expenditures - - (0.1) (0.3)
Issuance of note receivable (4.0) - (4.0) -
----------------------------------------------------------------------------
(4.0) (0.2) (4.3) -
----------------------------------------------------------------------------
Financing activities
Distributions paid to
unitholders (2.2) (2.5) (12.2) (10.0)
Borrowing from revolving
credit facility 5.5 - 5.5 -
----------------------------------------------------------------------------
3.3 (2.5) (6.7) (10.0)
----------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents during
the period (0.2) 3.9 (6.9) 4.1
Cash and cash equivalents,
beginning of period 2.3 5.1 9.0 4.9
----------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 2.1 $ 9.0 $ 2.1 $ 9.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reconciliation to EBITDA and Distributable Cash from Operations
----------------------------------------------------------------------------
For the Three Months For the Year Ended
Ended December 31 December 31
----------------------------------------------------------------------------
CAD millions 2009 2008 2009 2008
----------------------------------------------------------------------------
Net income(1) $ - $ 15.8 $ 9.3 $ 18.9
Add (deduct)
Interest income - - - (0.2)
Interest expense 0.7 1.0 3.1 3.6
Distribution on Class B
Interest Liability of a
subsidiary - 0.9 0.3 3.7
Future income tax expense
(recovery) (0.3) 6.1 (3.0) 6.2
Depreciation and depletion 1.6 2.2 7.1 7.4
Non-cash gain on Class B
Interest Liability of a
subsidiary - (19.1) (4.7) (22.2)
----------------------------------------------------------------------------
EBITDA 2.0 6.9 12.1 17.4
Add (deduct)
Interest income - - - 0.2
Interest expense (0.7) (1.0) (3.1) (3.6)
Silviculture and capital
expenditures - (0.2) (0.5) (0.8)
Non-cash gain on sale of
timberlands - - (0.6) (0.7)
Proceeds from sale of
timberlands, logging roads
and fixed assets - - 0.6 0.8
Acquisition of timberlands - - (0.4) -
----------------------------------------------------------------------------
Distributable cash from
operations $ 1.3 $ 5.7 $ 8.1 $ 13.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Distributions declared $ 1.4 $ 3.4 $ 11.7 $ 13.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Net income includes the impact of the revaluation of the Class B
Interest Liability of a subsidiary, the future income tax
expense/recovery, and the depreciation and depletion expense, which are
non-cash items recorded in each respective period.
Reconciliation to Distributable Cash from Operations
----------------------------------------------------------------------------
For the Three Months For the Year Ended
Ended December 31 December 31
----------------------------------------------------------------------------
CAD millions 2009 2008 2009 2008
----------------------------------------------------------------------------
Cash flow from operating
activities $ 0.5 $ 6.6 $ 4.1 $ 14.1
Add (deduct):
Capital adjustments
Proceeds from sale of
timberlands, logging roads
and fixed assets - - 0.6 0.8
Acquisition of timberlands - - (0.4) -
Other adjustments
Change in non-cash working
capital balances and other 0.8 (1.6) 4.0 (4.5)
Distribution on Class B
Interest liability of a
subsidiary - 0.9 0.3 3.7
Silviculture and capital
expenditures - (0.2) (0.5) (0.8)
----------------------------------------------------------------------------
Distributable cash from
operations $ 1.3 $ 5.7 $ 8.1 $ 13.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Distributions declared $ 1.4 $ 3.4 $ 11.7 $ 13.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Contacts: Acadian Timber Corp. Robert Lee Investor Relations and Communications 604-661-9607 rlee@acadiantimber.com www.acadiantimber.com
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 9, 2010) - Acadian Timber Corp. (TSX: ADN) -
Investors, analysts and other interested parties can access Acadian Timber Income Fund's 2009 Fourth Quarter and Year-end Results conference call via webcast on Wednesday, February 10, 2010 at 10:00 a.m. ET at www.acadiantimber.com or via teleconference at 1-800-319-4610, toll free in North America. For overseas calls please dial +1-604-638-5340, at approximately 9:50 a.m. ET. The teleconference recorded rebroadcast can be accessed at 1-800-319-6413 or +1-604-638-9010 and enter passcode 2826.
Acadian Timber Corp. (the "Corporation") (TSX: ADN), formerly Acadian Timber Income Fund ("Acadian" or the "Fund"), today reported financial and operating results(1) for the three and twelve month periods ended December 31, 2009.
For the three months ended December 31, 2009 (the "fourth quarter"), Acadian generated net sales of $16.7 million on consolidated volumes of 343 thousand m3, compared with net sales of $19.7 million on consolidated volumes of 307 thousand m3 during the same period last year.
EBITDA for the fourth quarter was $2.0 million or 12% of sales as compared to EBITDA of $6.9 million or 35% of sales during the comparable period in 2008. Results in the quarter reflect a lower contribution from the management of the Crown licensed timberlands by New Brunswick Timberlands and soft pricing at Maine Timberlands. As a result of these market conditions, Acadian has continued to reduce near-term harvest levels of our high margin spruce-fir sawlogs allowing us to maximize opportunities when markets recover, thus preserving the long-term value of Acadian's resource. Additionally, the Fund incurred $0.9 million of non-recurring costs associated with the previously announced conversion to a corporation.
For the year ended December 31, 2009, Acadian generated net sales of $63.4 million as compared to net sales of $67.9 million in 2008. EBITDA was $12.1 million or 19% of sales as compared to EBITDA of $17.4 million or 26% of sales in the prior year.
"While 2009 was another very challenging year, we are pleased with what we have achieved this year at both corporate and operating levels. These accomplishments include successfully completing the conversion to a corporation and extending the maturity of our bank term credit facility," commented Reid Carter, Chief Executive Officer of Acadian. "While 2010 is expected to be another difficult year, we will focus on identifying and accessing market opportunities while keeping costs low," added Mr. Carter.
(1) This news release makes reference to earnings before interest, taxes, depletion, depreciation and amortization ("EBITDA") and distributable cash from operations. Management believes that EBITDA and distributable cash from operations are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of Acadian's operating performance. As EBITDA and distributable cash from operations do not have a standardized meaning prescribed by Canadian GAAP, they may not be comparable to similar measures presented by other companies. As a result, we have provided in this news release reconciliations of net income and cash flow from operations, as determined in accordance with Canadian GAAP, to EBITDA and distributable cash from operations.
New Chief Financial Officer Appointed
Brookfield Timberlands Management LP, as Manager of Acadian, announced that, after almost three years as Acadian's Chief Financial Officer, Mr. Joseph Cornacchia will be leaving Acadian to take on new responsibilities within Brookfield Asset Management. "The entire management team would like to thank Mr. Cornacchia for his hard work, dedication and very significant contributions to Acadian and wish him the best in his new endeavours" commented Mr. Carter. Effective February 10, 2010, Mr. Brian Banfill will replace Mr. Cornacchia as Acadian's Senior Vice-President and Chief Financial Officer. Mr. Banfill has been intimately involved with Acadian since its inception and is a Certified General Accountant with over 25 years of experience in the forest industry.
Review of Operations
2009 Financial and Operating Highlights
Three Months Ended Year Ended
December 31 December 31
------------------------------------------------
($millions except per unit
information) 2009 2008 2009 2008
----------------------------------------------------------------------------
Net sales $ 16.7 $ 19.7 $ 63.4 $ 67.9
EBITDA 2.0 6.9 12.1 17.4
Distributable cash from
operations 1.3 5.7 8.1 13.3
Distributions declared 1.4 3.4 11.7 13.7
Net income(1) - 15.8 9.3 18.9
Per unit - fully diluted
Net Income (loss)(1) - (0.14) 0.30 0.02
Distributable cash from
operations 0.08 0.34 0.49 0.80
Distributions declared -
Class A unitholders 0.08 0.21 0.70 0.83
Sales volume (000s m3) 343.0 306.6 1,258.3 1,251.0
----------------------------------------------------------------------------
(1) Net income includes the impact of the revaluation of the Class B
Interest Liability of a subsidiary, the future income tax
expense/recovery, and the depreciation and depletion expense, which are
non-cash items recorded in each respective period.
Included in the net income for the three and twelve month periods ended December 31, 2009 is a non-cash future income tax recovery of $0.3 million and $3.0 million, respectively (2008 - $6.1 million expense and $6.2 million expense, respectively). The future income tax liability of the Fund is based on differences between the financial reporting and tax basis of assets and liabilities of its subsidiaries, which have been measured using the substantially enacted tax rates and laws that are expected to be in effect at the time the differences are anticipated to reverse. The reduction in the future income tax liability, and related recovery, recorded during the year is largely a result of a decline in the substantially enacted tax rate expected to be in effect.
Also, included in net income for the year ended December 31, 2009 is a non-cash gain related to the Class B Interest Liability of a subsidiary. The settlement obligation of this interest was based on the trading value of Acadian's units at the time of settlement, which required recording the liability at its fair value at each balance sheet date with the corresponding gain arising from a decrease in Acadian's unit price or loss arising from an increase in Acadian's unit price included in the statement of operations. In addition, as this Canadian dollar liability was issued by a self-sustaining U.S. dollar subsidiary of the Fund, the obligation was required to be converted to U.S. dollars at each reporting period, with the corresponding gain or loss included in the statement of operations. These items resulted in a $4.7 million gain for the year ended December 31, 2009 (2008 - $22.2 million gain) comprised of a $4.1 million mark-to-market gain (2008 - $15.0 million gain) and a $0.6 million foreign exchange gain (2008 - $7.2 million gain).
On February 3, 2009, an affiliate of Brookfield Asset Management Inc. ("Brookfield") converted all units representing the Class B Liability of a subsidiary into Class A Units of the Fund on a one-for-one basis. Accordingly, the Class B Liability of a subsidiary was not outstanding during the fourth quarter and was not revalued at the end of the period.
New Brunswick Timberlands
The table below summarizes operating and financial results for New Brunswick Timberlands.
Three Months Ended Three Months Ended
December 31, 2009 December 31, 2008
--------------------------------------------------------------
Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) (millions) (000s m3) (000s m3) (millions)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Softwood 57.4 68.0 $ 3.8 72.5 73.2 $ 4.4
Hardwood 148.7 143.9 7.6 81.7 78.2 4.6
Biomass 58.8 58.8 1.1 57.4 57.4 1.1
----------------------------------------------------------------------------
264.9 270.7 12.5 211.6 208.8 10.1
Other sales 0.8 3.2
----------------------------------------------------------------------------
Net sales $ 13.3 $ 13.3
----------------------------------------------------------------------------
EBITDA $ 2.5 $ 4.5
EBITDA margin 19% 34%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
--------------------------------------------------------------
Year Ended December 31, 2009 Year Ended December 31, 2008
--------------------------------------------------------------
Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) (millions) (000s m3) (000s m3) (millions)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Softwood 336.5 328.9 $ 18.9 273.8 280.8 $ 17.0
Hardwood 444.0 432.7 22.1 389.6 413.5 23.8
Biomass 235.4 235.4 4.5 241.6 241.6 4.4
----------------------------------------------------------------------------
1,015.9 997.0 45.5 905.0 935.9 45.2
Other sales 3.3 4.8
----------------------------------------------------------------------------
Net sales $ 48.8 $ 50.0
----------------------------------------------------------------------------
EBITDA $ 10.8 $ 11.5
EBITDA margin 22% 23%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Softwood, hardwood and biomass shipments were 68 thousand m3, 144 thousand m3 and 59 thousand m3, respectively, during the fourth quarter, representing a 30% increase in sales volumes as compared to same period in 2008. This increase reflects improved demand for hardwood pulpwood as compared to the fourth quarter of 2008. Approximately 30% of sales volumes were sold as sawlogs, 48% as pulpwood and 22% as biomass in the fourth quarter. This compares to 34% of sales volumes sold as sawlogs, 39% as pulpwood and 27% as biomass in the fourth quarter of 2008.
Net sales for the fourth quarter totaled $13.3 million, consistent with the same period in 2008. The increase in sales volumes was offset by a lower value species mix and a $2.4 million decrease in other sales. The decrease in other sales was primarily attributed to a reduced contribution from our management of Crown licensed timberlands as a result of lower harvesting activity. The weighted average selling price was $46.05 in the fourth quarter of 2009, compared to $48.79 in the same period of 2008.
Costs for the fourth quarter were $10.8 million, representing an increase of 23% compared to the same period of 2008. This was primarily a result of increased harvest volumes, longer hauling distances and cable logging.
EBITDA for the fourth quarter was $2.5 million, compared to $4.5 million in the same period in 2008, while EBITDA margin decreased from 34% to 19%.
NB Timberlands experienced no incidents among employees and three minor reportable incidents among contractors during the fourth quarter, from which the individuals have since fully recovered. We are pleased to report that there were no reportable environmental incidents during the fourth quarter.
Maine Timberlands
The table below summarizes operating and financial results for Maine Timberlands.
Three Months Ended Three Months Ended
December 31, 2009 December 31, 2008
--------------------------------------------------------------
Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) (millions) (000s m3) (000s m3) (millions)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Softwood 43.7 43.6 $ 2.1 72.4 72.4 $ 4.8
Hardwood 21.2 21.2 1.1 18.1 18.7 1.4
Biomass 7.5 7.5 0.1 6.7 6.7 0.1
----------------------------------------------------------------------------
72.4 72.3 3.3 97.2 97.8 6.3
Other sales 0.1 0.1
----------------------------------------------------------------------------
Net sales $ 3.4 $ 6.4
----------------------------------------------------------------------------
EBITDA $ 0.7 2.5
EBITDA margin 21% 39%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
--------------------------------------------------------------
Year Ended December 31, 2009 Year Ended December 31, 2008
--------------------------------------------------------------
Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) (millions) (000s m3) (000s m3) (millions)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Softwood 196.0 195.6 $ 11.7 234.4 234.2 $ 13.7
Hardwood 45.3 44.6 2.2 62.1 62.5 3.6
Biomass 21.1 21.1 0.3 18.4 18.4 0.2
----------------------------------------------------------------------------
262.4 261.3 14.2 314.9 315.1 17.5
Other sales 0.4 0.4
----------------------------------------------------------------------------
Net sales $ 14.6 $ 17.9
----------------------------------------------------------------------------
EBITDA $ 4.2 $ 6.5
EBITDA margin 29% 36%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Maine Timberlands experienced strong operating conditions during the fourth quarter, primarily as a result of favourable weather conditions. However, difficult market conditions resulted in a significant decline in the operation's financial performance. Softwood, hardwood and biomass shipments were 44 thousand m3, 21 thousand m3, and 7 thousand m3, respectively, with total sales volumes decreasing by 26% as compared to the fourth quarter of 2008. The decrease in sales volumes reflects particularly strong volumes in the fourth quarter of 2008 as the operation's largest contractor caught up on its contract volume after weather-related difficulties during the spring and early summer operating season. Approximately 43% of sales volumes were sold as sawlogs, 47% as pulpwood and 10% as biomass during the fourth quarter. This compares to 55% of sales volumes sold as sawlogs, 38% as pulpwood and 7% as biomass in the fourth quarter of 2008.
Net sales for the fourth quarter totaled $3.4 million, compared to $6.4 million for the same period last year. The year-over-year decline in net sales is a result of lower shipment volumes, a lower value species mix, and softer prices across all products. The weighted average price across all products was $45.27 in the fourth quarter, compared to $64.19 in the same period of 2008, reflecting a 29% decrease in Canadian dollar terms. Weighted average selling prices decreased 22% in U.S. dollar terms year over year.
Costs for the fourth quarter were $2.7 million, compared to $3.9 million for the same period in 2008. This decrease reflects lower sales volumes and lower variable costs per m3, partially due to lower diesel prices.
EBITDA for the fourth quarter was $0.7 million, compared to $2.5 million for the same period in 2008, while EBITDA margin decreased from 39% to 21%.
Maine Timberlands had no recordable safety incidents among employees and one minor reportable incident among contractors during the fourth quarter. The individual has since fully recovered. We are pleased to report that there were no reportable environmental incidents during the fourth quarter.
Market and Company Outlook
The following Market Outlook contains forward-looking statements about Acadian Timber Corp.'s market outlook for fiscal 2010. Reference should be made to the "Forward-looking Statements" section of this news release. For a description of material factors that could cause actual results to differ materially from the forward-looking statements in the following, please see the Risk Factors section of our Management's Discussion and Analysis (MD&A) in our most recent Annual Report and Annual Information Form available on our website at www.acadiantimber.com or filed with SEDAR at www.sedar.com.
Consensus forecasts for U.S. housing predict an increase in housing starts to only 675,000 units in 2010 and 910,000 in 2011 - a very slow recovery from 2009's post World War II low of 550,000 starts. While smaller, non-industrial timberland owners continue to withhold timber from the market, an ample supply of Crown and private timber has placed considerable pressure on timber prices resulting in price declines of approximately 20% from 2006 - 2007 averages. The fact that Fraser Papers Inc. is currently expected to operate its Edmundston Pulp mill and Plaster Rock sawmill provides some encouragement that demand for Acadian's spruce-fir sawlogs will be stronger in 2010 than in 2009, although prices are expected to remain low throughout the year. Despite current difficult softwood sawlog markets, Acadian continues to find markets for its key products while choosing to preserve value for those products that don't offer adequate market opportunities by reducing the near-term harvest levels of our high margin spruce-fir sawlogs. Weak softwood sawlog markets and relatively large inventories of softwood pulpwood and chips is also expected to result in uncertainties in regard to the level of activity on Fraser Papers Inc.'s Crown licensed timberlands which is managed by Acadian, reducing the contribution from these management services to Acadian's net income.
Markets for hardwood sawlogs and specialty products remain relatively stable, particularly for aspen. These markets are expected to remain stable into 2010. Markets for hardwood have improved since the first half of 2009 and Acadian's major hardwood pulpwood customers continue to operate and take deliveries with pricing improving modestly from the second and early third quarter. Acadian has been able to sell all of its biomass, although this market has also been under pressure due to low demand for electric power and reduced gas and oil prices. The Biomass Crop Assistance Program (BCAP) implemented in the U.S. during the fourth quarter of 2009 may provide limited additional opportunities for biomass sales by our Maine Timberlands although the impact of this two-year program on biomass sales by our New Brunswick Timberlands remains uncertain.
"During these challenging market conditions, we remained focused on preserving long-term value for shareholders and merchandising all of our products for their highest value, while seeking every opportunity to reduce costs. We continue to be confident in Acadian's long-term outlook and the quality of our asset base. We believe that our new tax effective corporate structure and steadily improving market conditions will lead to improved financial performance going forward" concluded Mr. Carter.
Acadian Timber Corp. is a leading supplier of primary forest products in Eastern Canada and the Northeastern U.S. With a total of 2.4 million acres of land under management, the Corporation is the second largest timberland operator in New Brunswick and Maine.
The Corporation owns and manages approximately 1.1 million acres of freehold timberlands in New Brunswick and Maine, and provides management services relating to approximately 1.3 million acres of Crown licensed timberlands. The Corporation also owns and operates a forest nursery in Second Falls, New Brunswick. Acadian's products include softwood and hardwood sawlogs, pulpwood and biomass by-products, sold to over 110 regional customers.
Acadian Timber Corp.'s shares are listed for trading on the Toronto Stock Exchange under the symbol ADN.
For further information, please visit our website at www.acadiantimber.com.
Forward-Looking Statements
This News Release contains forward-looking information and other forward-looking statements within the meaning of applicable Canadian securities laws that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Corporation and its subsidiaries (collectively, "Acadian"), or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this News Release, such statements may contain such words as "may," "will," "intend," "should," "expect," "believe," "outlook," "predict," "remain," "anticipate," "estimate," "potential," "continue," "plan," "could," "might," "project," "targeting" or the negative of these terms or other similar terminology. Forward-looking information in this News Release includes, without limitation, statements regarding management's beliefs, intentions, results, performance, goals, achievements, future events, plans and objectives, business strategy, access to capital, liquidity and trading volumes, dividends, taxes, capital expenditures, projected costs, and anticipated benefits of the conversion from an income trust to a corporation, and similar statements concerning anticipated future events, results, achievements, circumstances, performance or expectations that are not historical facts. These statements reflect management's current expectations regarding future events and operating performance are based on information currently available to management and speak only as of the date of this News Release. All forward-looking statements in this News Release are qualified by these cautionary statements. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, should not be unduly relied upon, and will not necessarily be accurate indications of whether or not such results will be achieved. Factors that could cause actual results to differ materially from the results discussed in the forward-looking statements include, but are not limited to: general economic and market conditions; product demand; concentration of customers; commodity pricing; interest rate and foreign currency fluctuations; seasonality; weather and natural conditions; regulatory, trade or environmental policy changes; changes in Canadian income tax law; economic situation of key customers; failure to realize the anticipated benefits of the conversion from an income trust to a corporation; the risks associated with the availability and the amount of the tax basis in connection with the conversion from an income fund to a corporation; and other risks and factors, to the extent they remain applicable to the Corporation, discussed under the heading "Risk Factors" in each of the Annual Information Form dated March 27, 2009 and the Management Information Circular dated November 23, 2009 of Acadian Timber Income Fund (the "Fund"), the predecessor reporting issuer to the Corporation, and other filings of the Fund and the Corporation with securities regulatory authorities, which are available on SEDAR at www.sedar.com. Forward-looking information is based on various material factors or assumptions, which are based on information currently available to Acadian. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: anticipated financial performance; business prospects; strategies; regulatory developments; exchange rates; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services and the ability to obtain financing on acceptable terms, which are subject to change based on commodity prices, market conditions for timber and wood products, the economic situation of key customers, and the utilization of the tax basis resulting from the conversion from an income trust to a corporation. Readers are cautioned that the preceding list of material factors or assumptions is not exhaustive. Although the forward-looking statements contained in this News Release are based upon what management believes are reasonable assumptions, the Corporation cannot assure readers that actual results will be consistent with these forward-looking statements. Certain statements in this New Release may also be considered "financial outlook" for the purposes of applicable Canadian securities laws, and such financial outlook may not be appropriate for purposes other than this News Release. The forward-looking statements in this News Release are made as of the date of this News Release, and should not be relied upon as representing Acadian's views as of any date subsequent to the date of this News Release. The Corporation assumes no obligation to update or revise these forward-looking statements to reflect new information, events, circumstances or otherwise, except as required by applicable law.
Acadian Timber Income Fund
Consolidated Balance Sheets
----------------------------------------------------------------------------
As at December 31
(CAD millions) 2009 2008
----------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 2.1 $ 9.0
Accounts receivable and other assets 6.2 4.7
Note receivable 4.0 -
Inventory 1.8 1.4
----------------------------------------------------------------------------
14.1 15.1
Intangible assets 6.1 6.1
Timberlands, logging roads and fixed assets 190.0 207.8
----------------------------------------------------------------------------
$ 210.2 $ 229.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 4.3 $ 6.2
Distributions payable to unitholders - 0.8
----------------------------------------------------------------------------
4.3 7.0
Future income tax liability 13.9 17.7
Long-term debt 80.7 80.8
Class B Interest Liability of a subsidiary - 31.6
Unitholders' equity 111.3 91.9
----------------------------------------------------------------------------
$ 210.2 $ 229.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Acadian Timber Income Fund
Consolidated Statements of Operations and Deficit
----------------------------------------------------------------------------
For the Three Months For the Year Ended
Ended December 31 December 31
----------------------------------------------------------------------------
CAD millions 2009 2008 2009 2008
----------------------------------------------------------------------------
Net sales $ 16.7 $ 19.7 $ 63.4 $ 67.9
Operating costs and expenses
Cost of sales 12.1 11.1 43.3 44.8
Selling, administration and
other 2.6 1.7 8.6 6.4
Depreciation and depletion 1.6 2.2 7.1 7.4
----------------------------------------------------------------------------
16.3 15.0 59.0 58.6
----------------------------------------------------------------------------
Operating earnings 0.4 4.7 4.4 9.3
Gain on sale of timberlands - - (0.6) (0.7)
Gain on Class B Interest
Liability of a subsidiary - (19.1) (4.7) (22.2)
Interest:
Interest income - - - (0.2)
Interest expense 0.7 1.0 3.1 3.6
Class B Interest Liability
of a subsidiary - 0.9 0.3 3.7
----------------------------------------------------------------------------
Earnings (loss) before
income tax expense (0.3) 21.9 6.3 25.1
Future income tax recovery
(expense) 0.3 (6.1) 3.0 (6.2)
----------------------------------------------------------------------------
Net income for the period - 15.8 9.3 18.9
Deficit, beginning of period (21.6) (34.2) (20.9) (29.8)
Unitholders' distributions (1.4) (2.5) (11.4) (10.0)
----------------------------------------------------------------------------
Deficit, end of period $ (23.0) $ (20.9) $ (23.0) $ (20.9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income per unit - basic $ - $ 1.31 $ 0.58 $ 1.57
Net income (loss) per unit
diluted $ - $ (0.14) $ 0.30 $ 0.02
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Acadian Timber Income Fund
Consolidated Statement of Comprehensive Income (Loss)
----------------------------------------------------------------------------
For the Three Months For the Year Ended
Ended December 31 December 31
----------------------------------------------------------------------------
CAD millions 2009 2008 2009 2008
----------------------------------------------------------------------------
Net income $ - $ 15.8 $ 9.3 $ 18.9
----------------------------------------------------------------------------
Other comprehensive income
(loss)
Unrealized foreign currency
translation gain (loss) (1.2) 1.7 (6.0) 1.5
----------------------------------------------------------------------------
Comprehensive income (loss) $ (1.2) $ 17.5 $ 3.3 $ 20.4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Acadian Timber Income Fund
Consolidated Statements of Cash Flows
----------------------------------------------------------------------------
For the Three Months For the Year Ended
Ended December 31 December 31
----------------------------------------------------------------------------
CAD millions 2009 2008 2009 2008
----------------------------------------------------------------------------
Cash provided by (used for):
----------------------------------------------------------------------------
Operating activities
Net income $ - $ 15.8 $ 9.3 $ 18.9
Items not affecting cash:
Future income tax expense
(recovery) (0.3) 6.1 (3.0) 6.2
Depreciation and depletion 1.6 2.2 7.1 7.4
Gain on sale of timberlands - - (0.6) (0.7)
Gain on Class B Interest
Liability of a subsidiary - (19.1) (4.7) (22.2)
----------------------------------------------------------------------------
1.3 5.0 8.1 9.6
Net change in non-cash
working capital balances
and other (0.8) 1.6 (4.0) 4.5
----------------------------------------------------------------------------
0.5 6.6 4.1 14.1
----------------------------------------------------------------------------
Investing activities
Sale of timberlands, logging
roads and fixed assets - - 0.6 0.8
Additions to timberlands,
logging roads and fixed
assets - (0.2) (0.8) (0.5)
Silviculture expenditures - - (0.1) (0.3)
Issuance of note receivable (4.0) - (4.0) -
----------------------------------------------------------------------------
(4.0) (0.2) (4.3) -
----------------------------------------------------------------------------
Financing activities
Distributions paid to
unitholders (2.2) (2.5) (12.2) (10.0)
Borrowing from revolving
credit facility 5.5 - 5.5 -
----------------------------------------------------------------------------
3.3 (2.5) (6.7) (10.0)
----------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents during
the period (0.2) 3.9 (6.9) 4.1
Cash and cash equivalents,
beginning of period 2.3 5.1 9.0 4.9
----------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 2.1 $ 9.0 $ 2.1 $ 9.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reconciliation to EBITDA and Distributable Cash from Operations
----------------------------------------------------------------------------
For the Three Months For the Year Ended
Ended December 31 December 31
----------------------------------------------------------------------------
CAD millions 2009 2008 2009 2008
----------------------------------------------------------------------------
Net income(1) $ - $ 15.8 $ 9.3 $ 18.9
Add (deduct)
Interest income - - - (0.2)
Interest expense 0.7 1.0 3.1 3.6
Distribution on Class B
Interest Liability of a
subsidiary - 0.9 0.3 3.7
Future income tax expense
(recovery) (0.3) 6.1 (3.0) 6.2
Depreciation and depletion 1.6 2.2 7.1 7.4
Non-cash gain on Class B
Interest Liability of a
subsidiary - (19.1) (4.7) (22.2)
----------------------------------------------------------------------------
EBITDA 2.0 6.9 12.1 17.4
Add (deduct)
Interest income - - - 0.2
Interest expense (0.7) (1.0) (3.1) (3.6)
Silviculture and capital
expenditures - (0.2) (0.5) (0.8)
Non-cash gain on sale of
timberlands - - (0.6) (0.7)
Proceeds from sale of
timberlands, logging roads
and fixed assets - - 0.6 0.8
Acquisition of timberlands - - (0.4) -
----------------------------------------------------------------------------
Distributable cash from
operations $ 1.3 $ 5.7 $ 8.1 $ 13.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Distributions declared $ 1.4 $ 3.4 $ 11.7 $ 13.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Net income includes the impact of the revaluation of the Class B
Interest Liability of a subsidiary, the future income tax
expense/recovery, and the depreciation and depletion expense, which are
non-cash items recorded in each respective period.
Reconciliation to Distributable Cash from Operations
----------------------------------------------------------------------------
For the Three Months For the Year Ended
Ended December 31 December 31
----------------------------------------------------------------------------
CAD millions 2009 2008 2009 2008
----------------------------------------------------------------------------
Cash flow from operating
activities $ 0.5 $ 6.6 $ 4.1 $ 14.1
Add (deduct):
Capital adjustments
Proceeds from sale of
timberlands, logging roads
and fixed assets - - 0.6 0.8
Acquisition of timberlands - - (0.4) -
Other adjustments
Change in non-cash working
capital balances and other 0.8 (1.6) 4.0 (4.5)
Distribution on Class B
Interest liability of a
subsidiary - 0.9 0.3 3.7
Silviculture and capital
expenditures - (0.2) (0.5) (0.8)
----------------------------------------------------------------------------
Distributable cash from
operations $ 1.3 $ 5.7 $ 8.1 $ 13.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Distributions declared $ 1.4 $ 3.4 $ 11.7 $ 13.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
FOR FURTHER INFORMATION PLEASE CONTACT:
Acadian Timber Corp.
Robert Lee
Investor Relations and Communications
604-661-9607
rlee@acadiantimber.com
www.acadiantimber.com
Source: Acadian Timber Corp.
MANKATO, MINNESOTA and WINNIPEG, MANITOBA--(Marketwire - Feb. 9, 2010) - Ridley Inc. (TSX: RCL) today reported its financial results for the second quarter of fiscal 2010, the three months ended December 31, 2009. All currency amounts are stated in U.S. dollars unless otherwise noted.
For the three months ended December 31, 2009, Ridley earned $5.0 million after income taxes (37 cents per share) compared to $0.7 million (5 cents per share) last year. Earnings before interest, taxes and amortization (EBITA (i)) for the second quarter of fiscal 2010 were $10.2 million compared to $7.3 million last year.
Several factors contributed to Ridley's earnings growth in the second quarter of fiscal 2010. Unit margins improved over last year with an improved product mix and the stabilization of raw material prices this year. Operating cost structures improved as a result of efficiency initiatives undertaken last year. Colder weather with good snow cover throughout much of the trade area was favourable to beef feed volumes.
Ridley Feed Operations (RFO) was the most improved operating segment in the second quarter with an increase in operating income of $5.9 million over last year. U.S. feed operations accounted for most of this increase while Canadian operations recorded a modest profit this year compared to a loss last year. Ridley Nutrition Solutions (RNS) performed as expected, increasing operating income by $0.9 million, aided by favourable weather conditions. Operating income at Ridley Feed Ingredients (RFI) fell $1.1 million from last year due to the absence of raw material pricing gains realized last year.
"Considering the difficult economic environment for livestock and poultry producers, we are satisfied with the results of the second quarter and appreciative of the hard work of our employees in achieving those results, but we remain cautious in our outlook for the remainder of the year", said Steve VanRoekel, President & CEO of Ridley Inc. "There are indications that producer profitability is improving but animal numbers will remain low in many sectors. While that happens, a strong balance sheet puts us on a solid footing to move forward with new business development initiatives that will position Ridley for future growth", added VanRoekel.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Management Discussion and Analysis as of February 9, 2010 is based on the accompanying financial statements prepared using Canadian Generally Accepted Accounting Principles ("GAAP"). All amounts are in U.S. dollars unless otherwise stated.
Second Quarter Results The following summary data is presented to assist in understanding the fiscal 2010 second quarter results:
----------------------------------------------------------------------
----------------------------------------------------------------------
Three months
ended Six months ended
Summary of Results December 31 December 31
($ million except for EPS) 2009 2008 2009 2008
----------------------------------------------------------------------
----------------------------------------------------------------------
Revenue 150.0 163.6 285.7 332.9
Gross profit 23.5 22.1 40.9 45.2
Operating income 8.1 1.8 10.4 7.0
Net earnings before exceptions 5.0 3.0 6.1 5.7
Exceptions, net of income taxes (noted
below (ii)) - (2.3) - (2.1)
Net earnings 5.0 0.7 6.1 3.6
Diluted earnings per share (EPS) $0.37 $0.05 $0.45 $0.26
EBITA (i) 10.2 7.3 14.6 14.4
----------------------------------------------------------------------
----------------------------------------------------------------------
(i) EBITA - Operating income before amortization and exceptions. EBITA does
not have a standardized meaning prescribed by Canadian GAAP and,
therefore, is not readily comparable to similar measures presented by
other companies. However, management believes that this measure
provides investors with useful supplemental information.
(ii) Exceptions - In the preceding summary data, net earnings were reported
before exceptions. Those exceptions, which are mainly unusual or
non-recurring items, are summarized below, net of income taxes:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months
ended Six months ended
Exceptions (Net of Income Taxes) December 31 December 31
($ million) 2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gain on sale of facilities - - - 0.2
Asset impairment loss - (0.9) - (0.9)
Restructuring charges - (1.5) - (1.5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Exceptions - (2.3) - (2.1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated Second Quarter Results
Revenue of $150.0 million in the second quarter of fiscal 2010 was lower by 8.3% from the same period last year. A comparison of revenue is not necessarily indicative of the strength of Ridley's business because revenue can be influenced by fluctuating commodity prices. The revenue decline in the second quarter of 2010 was due to lower volumes and raw material prices. Total sales volumes, as measured in tons of feed products sold, were 4.8% lower than the prior year. The decline in volume occurred in the Ridley Feed Operations (RFO) segment, particularly in Canadian feed operations where poor producer profitability has led to reduced animal numbers.
Consolidated gross profit in the second quarter of fiscal 2010 was $23.5 million compared to $22.1 million in the same period of fiscal 2009. Gross profits were higher mainly in the U.S. feed operations of RFO, which benefited from more stable raw material prices and a favourable product mix, and in Ridley Nutrition Solutions (RNS), which generated improved volumes.
Operating expenses, which include selling, general and administrative expenses as well as amortization of property, plant and equipment, were $15.5 million in the second quarter of fiscal 2010 compared to $20.4 million last year. In the second quarter last year the Company undertook an initiative to reduce overhead costs and recorded $2.1 million in restructuring expenses. Operating expenses last year also included an asset impairment loss of $1.4 million from the closure of a facility in North Carolina. The efficiency initiatives last year accounted for approximately $1 million in lower overhead costs in the second quarter this year.
EBITA is comprised of operating income before amortization and unusual items which, in the prior year, included a gain on the sale of a facility, an asset impairment loss and restructuring expenses. There were no unusual items of material significance in the second quarter of 2010. As a result of the improvement in operating income, EBITA in the second quarter of fiscal 2010 increased to $10.2 million from $7.3 million in the prior year.
Net earnings after taxes for the second quarter of fiscal 2010 were $5.0 million (earnings per share of $0.37) compared with net earnings after taxes of $0.7 million (earnings per share of $0.05) in the same period of fiscal 2009.
Comprehensive income is the change in net assets that results from transactions, events and circumstances from sources other than investments by and/or distributions to shareholders. Other comprehensive income (OCI) is comprised entirely of unrealized gains and losses on translation of financial statements of related entities with foreign functional currency to U.S. dollar reporting currency. Ridley recorded comprehensive income in the second quarter of fiscal 2010 of $4.5 million, comprised of net income of $5.0 million, as reported above, less unrealized losses of $0.5 million on the translation to U.S. currency of financial statements of Canadian entities.
Consolidated Six Months Results
For the six months ended December 31, 2009, revenues of $285.7 million were 14.2% lower than the same period in the previous year. Lower raw material prices and a 6.4% decrease in volume accounted for most of the decline in revenue. Softer demand for feed products is reflective of the continuing economic difficulties of livestock and poultry producers and declines in the size of cattle and swine herds and poultry flocks. Gross profit for the first half of the year was $40.9 million, a decline of 9.5% from the prior year. The decline in gross profits follows from decreased volume for the year to-date and lower unit margins this year compared to last year when the company held more favourable raw material inventory positions.
Operating expenses of $30.6 million in the first half of fiscal 2010 were $7.7 million lower than the previous year. Included in operating expenses last year were $2.1 million in restructuring expenses and an asset impairment loss of $1.4 million for closure of a redundant facility. Operating expenses last year also included $0.8 million in advisory services related to the strategic review process which concluded following the sale by Ridley Corporation Limited of its 69% interest in Ridley Inc. to Fairfax Financial Holdings Limited. Last year also included a $0.3 million gain on the sale of property at a closed facility.
EBITA in the first six months of fiscal 2010 was $14.6 million compared to $14.4 million for the same period last year. EBITA is comprised of operating income before amortization and unusual items, which last year included a gain on the sale of facilities ($0.3 million), restructuring charges ($2.1 million) and an asset impairment loss ($1.4 million). There were no unusual items of material significance in the first six months of fiscal 2010.
Net earnings after taxes for the six months ended December 31, 2009 were $6.1 million (earnings per share of $0.45) compared with net earnings after taxes of $3.6 million (earnings per share of $0.26) in the same period last year.
Reconciliation of Non-GAAP Financial Measures
The Company reports its financial results according to Canadian GAAP. However, included in this management discussion and analysis are certain non-GAAP financial measures and ratios which the Company's management believes provide useful information in measuring the financial performance and financial condition of the Company. These measures and ratios do not have a standardized meaning prescribed by Canadian GAAP and, therefore, may not be comparable to similar measures presented by other public companies, nor should they be construed as an alternative to other financial measures described by Canadian GAAP. Operating income is defined as net earnings before finance costs, interest income and provision for income taxes. Earnings before interest, taxes and amortization (EBITA) are defined as operating income before amortization, gain on sale of facilities, asset impairment loss and restructuring charges.
The following table is a reconciliation of EBITA to net earnings, the most closely comparable GAAP measure to EBITA:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three
months Six months
Earnings before interest, taxes and amortization ended ended
(EBITA) December 31 December 31
($ million) 2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings/(loss) 5.0 0.7 6.1 3.6
Provision for income taxes 3.0 0.4 4.0 2.2
Interest income (0.1) (0.1) (0.2) (0.3)
Finance costs 0.2 0.8 0.3 1.5
----------------------------------------------------------------------------
Operating income 8.1 1.8 10.4 7.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Amortization of property, plant and equipment 2.1 2.0 4.2 4.1
Other amortization - - 0.1 0.1
Gain on sale of facilities - - - (0.3)
Asset impairment loss - 1.4 - 1.4
Restructuring charges - 2.1 - 2.1
----------------------------------------------------------------------------
Earnings before interest, taxes and amortization
(EBITA) 10.2 7.3 14.6 14.4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SEGMENT RESULTS
---------------
The following is a summary of operating income (loss) of Ridley's
reporting segments.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three
months Six months
ended ended
Operating Income (Loss) (iii) December 31 December 31
($ million) 2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Ridley Feed Operations (RFO) $4.2 $(1.7) $3.9 $(0.8)
Ridley Feed Ingredients (RFI) 0.9 2.0 2.4 4.9
Ridley Nutrition Solutions (RNS) 3.7 2.8 5.6 6.1
Corporate (0.7) (1.3) (1.5) (3.2)
----------------------------------------------------------------------------
Consolidated Operating Income $8.1 $1.8 $10.4 $7.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(iii) Operating income is earnings before interest and taxes.
Ridley Feed Operations (RFO)
The Ridley Feed Operations (RFO) segment consists of full-line feed manufacturing facilities operating in the United States and Canada, producing and marketing products for traditional livestock and poultry markets. RFO's overall volumes were lower by 5.6% in the second quarter of fiscal 2010 compared to last year. The downturn in volumes is reflective of reduced animal numbers, particularly in Canada, and a continuation of the Company's strategic shift in product mix towards lower inclusion, higher value added products. Colder weather conditions in the second quarter were more favourable to RFO's U.S. feed operations which market a higher proportion of its volume to the beef sector. Volume in Canadian feed operations declined by 12.5% for the quarter, while volume in U.S. feed operations declined by 1.7% from last year. For the six months year to-date, volume in Canadian feed operations was lower by 9.9% compared to last year, while volume in U.S. feed operations was lower by 5.0%.
Lower commodity prices this year over last year translated into lower revenue for RFO as feed prices are generally set at a fixed margin above raw material costs. Revenue was 10.2% lower in the second quarter of 2010 compared to last year. About two-thirds of the decline in revenue was due to reduced unit prices while the remainder was due to lower volumes.
RFO gross profits in the second quarter this year were 12.2% higher than the same period last year due to a 20.3% increase in unit margins partly offset by a 5.6% decline in sales volumes. For the six months of fiscal 2010, RFO gross profits were lower by 4.1%, largely due to lower unit margins in the first quarter.
RFO operating expenses in the second quarter were lower by $4.3 million as a result of unusual expenses last year including $1.9 million related to restructuring charges and $1.4 million for closure of a facility. Lower operating expenses this year also the result of efficiency initiatives undertaken last year.
Ridley Feed Ingredients (RFI)
The Ridley Feed Ingredients (RFI) segment consists of feed-grade vitamin and trace mineral premixes, small packaged specialty products, medicated and non-medicated feed additives and micro feed ingredients produced and distributed through a specialized facility in Illinois. Revenue in the second quarter of fiscal 2010 declined by 10.2% from the same period last year, mainly the result of the softening of raw material prices that were abnormally high last year and reduced demand for feed ingredients following from lower animal numbers. The absence of gains from inventory positions this year reduced unit margins, resulting in a 29.8% decrease in gross profit in the second quarter compared to last year. Gross profits for the first six months of fiscal 2010 were 33.8% lower than the same period last year.
Ridley Nutrition Solutions (RNS)
Ridley Nutrition Solutions (RNS) includes Ridley's feed supplement block and equine nutrition businesses. RNS volumes have been impacted negatively by the lower trending cattle population of the last several years. However, colder weather conditions in the second quarter of fiscal 2010 were favourable to sales of feed supplement blocks resulting in an increase in RNS volumes of 8.7% over last year. For the six months of fiscal 2010, volumes were 1.6% lower than last year as a result of reduced volume in the first quarter of this year.
Gross profits in the second quarter this year were 9.0% higher than last year due to improved volume and slightly more favourable unit margins as the RNS product mix improved towards higher value-added products. Gross profits for the year to-date lag behind last year due to lower volume and reduced unit margins in the first quarter, which followed from less favourable inventory positions.
Corporate
Corporate expenses include certain corporate management, board of directors' and other public company expenses, as well as legal expenses related to the BSE class action lawsuits. Corporate expenses in the second quarter this year were $0.6 million lower than last year, mainly the result of unusual expenditures last year related to the strategic review process and restructuring initiatives. For similar reasons, corporate expenses for the six months to-date this year were lower by $1.7 million compared to last year.
Liquidity/Capital Resources/Cash Flow
Ridley's working capital and debt to equity positions are summarized below:
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December September June March December
31 30 30 31 31
Balances ($000) as of: 2009 2009 2009 2009 2008
----------------------------------------------------------------------------
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Working capital (i) $47,816 $47,022 $45,546 $53,163 $48,969
Net debt (ii) 11,429 11,912 8,652 16,247 18,020
Equity 153,061 151,478 149,013 155,461 152,788
Net debt to equity ratio 7.5% 7.9% 5.8% 10.5% 11.8%
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(i) Working capital is defined as current assets less current liabilities,
excluding cash and short term deposits.
(ii) Net debt is defined as bank obligations and capital leases, less cash
and short term deposits.
Net debt of $11.4 million as at December 31, 2009 was comprised of long term debt of $11.2 million and a $1.9 million balance in revolving credit, less $1.6 million of cash and short term deposits. For the six months year-to-date the Company funded all capital expenditures from operating cash flows. The $2.8 million increase in net debt from the start of the current fiscal year reflects the expenditure of $3.7 million on the repurchase of the Company's shares for cancellation.
The following is a summary of cash generated or utilized by business operations, net of capital expenditures on plant and equipment, excluding business acquisitions.
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Three months
ended Six months ended
Summary of Changes in Cash Available December 31 December 31
($ million) 2009 2008 2009 2008
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----------------------------------------------------------------------------
Cash flow from operating activities 7.7 3.3 10.4 7.6
Net decrease (increase) in non-cash working
capital balances (0.5) 6.0 (5.0) (9.4)
Decrease in loans receivable, net - - 0.1 -
Proceeds on disposal of property, plant and
equipment 0.1 0.1 0.4 0.5
Capital expenditures, excluding business
acquisitions (2.9) (2.1) (5.4) (4.6)
Business acquisitions - - - (0.1)
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Increase (decrease) in cash available 4.4 7.2 0.4 (6.1)
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For the second quarter of fiscal 2010, cash flows from operations net of capital expenditures were $4.4 million compared to $7.2 million in the same three-month period last year. Cash flows were significantly increased last year by falling raw material prices which reduced inventory and accounts receivable balances.
Capital Expenditures
Expenditures on plant and equipment in the second quarter of fiscal 2010 were $2.9 million compared to $2.1 million in the same period a year ago. Major capital projects in the quarter included $1.1 million for expansion of the Worthington, MN and Mendota, IL facilities. For the six months to-date, $2.2 million has been invested in the Worthington and Mendota capital projects. The balance of capital expenditures ($1.8 million in the second quarter and $3.2 million for the year-to-date) was made on a variety of smaller projects for the maintenance of equipment and facilities.
Seasonality and Commodity Variability
The Company experiences seasonal variations in revenue. Historically, revenue is strongest in the second and third fiscal quarters when colder weather from October to March increases demand for beef feed. Other product lines are only marginally affected by seasonal conditions.
Commodity-based agricultural raw materials constitute a significant component of the Company's complete feed production. Fluctuating commodity prices can influence revenues and associated cost of sales as selling prices and product costs move in relation to changes in commodity prices.
Selected Quarterly Financial Information
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(US $ millions except per share
data) Fiscal First Second Third Fourth
Year Quarter Quarter Quarter Quarter
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Revenue 2010 135.7 150.0
2009 169.3 163.6 140.7 129.8
2008 139.8 167.0 167.3 159.4
Net earnings (loss) (before unusual
items(i) net of income taxes) 2010 1.1 5.0
2009 2.7 3.0 3.5 (0.2)
2008 2.0 4.5 5.2 0.9
Net earnings (loss) 2010 1.1 5.0
2009 2.9 0.7 3.5 (8.4)
2008 2.6 (2.8) 5.0 1.2
Net earnings (loss) per share (EPS) 2010 0.08 0.37
2009 0.21 0.05 0.25 (0.60)
2008 0.19 (0.21) 0.37 0.08
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(i) Unusual items include: asset impairment loss, restructuring charges, and
gain on sale of facilities.
Outstanding Share Data
Ridley's share capital consists of an unlimited number of common shares, with no par value. On December 11, 2009 the Company received approval from the Toronto Stock Exchange (the "TSX") to initiate a normal course issuer bid for the Company's shares through the facilities of the TSX. The share repurchase program permits the Company to purchase for cancellation up to 663,169 of its common shares over the twelve month period ending December 14, 2010. This normal course issuer bid follows a previous share repurchase program which terminated on December 14, 2009. Under the previous share repurchase program, the Company had repurchased for cancellation 595,922 shares at an average price of C$7.48 per share, excluding commissions. As at December 31, 2009, the Company had made no share repurchases under the new normal course issuer bid. The number of shares outstanding as at December 31, 2009 and as at February 9, 2010 was 13,263,378.
Internal Control Over Financial Reporting
The Chief Executive Officer and Chief Financial Officer have signed form 52-109F2 - Certification of Interim Filings and filed it with the appropriate securities regulators in Canada in compliance with Multilateral Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings issued by the Canadian Securities Administrators. There has been no change in Ridley's internal controls over financial reporting or disclosure controls and procedures that occurred during the most recent interim period that has materially affected, or is reasonably likely to materially affect, Ridley's internal control over financial reporting.
International Financial Reporting Standards
The Canadian Accounting Standards Board (AcSB) requires all public companies to adopt International Financial Reporting Standards (IFRS) for interim and annual financial statements for fiscal years beginning on or after January 1, 2011. Companies will be required to provide IFRS comparative information for the previous fiscal period. The impact of the adoption of IFRS on the consolidated financial statements of the Company may be significant and, as such, the Company has begun developing its convergence plan to transition its financial statement reporting, presentation and disclosure for IFRS to meet its first quarter fiscal 2012 deadline. The Company continues to evaluate the potential impact of IFRS on its consolidated financial statements. The process will be ongoing as new standards and recommendations are issued by the International Accounting Standards Board and AcSB.
BSE Class Action Lawsuits
In April 2005, representative plaintiffs filed proposed class actions in Alberta, Saskatchewan, Ontario and Quebec against the Government of Canada and Ridley Inc. to include all Canadian cattle farmers who allegedly suffered damage as a result of international bans on trade in Canadian beef and cattle following the 2003 diagnosis of Bovine Spongiform Encephalopathy (BSE) in a cow in Alberta. A settlement agreement between Ridley and the representative plaintiffs was finalized in January 2009 when Ridley made payment of C$6.0 million into a plaintiffs' settlement trust fund for the benefit of the plaintiffs in continuation of their litigation against the Government of Canada. In agreeing to the settlement, Ridley made no admission of liability or wrongdoing in the matter. The settlement effectively capped Ridley's exposure to the claims made by the plaintiffs to that amount.
Following the settlement agreement with plaintiffs the Ontario Superior Court granted Ridley's motion for dismissal of the Ontario action as against Ridley on July 28, 2009. The Quebec Superior Court dismissed the Quebec action as against Ridley on November 13, 2009. Ridley will seek to obtain similar court orders in Alberta and Saskatchewan where the plaintiffs commenced identical actions. If the remaining jurisdictions grant dismissal motions, Ridley will cease to be a party to the continuing class action lawsuits.
Forward-Looking Information
This report contains "forward-looking" information. The forward-looking information includes statements concerning Ridley's outlook for the future, as well as other statements of beliefs, plans and strategies or anticipated events, and similar expressions concerning matters that are not historical facts. Forward- looking information and statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, contemplated or implied by, such statements. These risks and uncertainties include the ability to make effective acquisitions and successfully integrate newly acquired businesses into existing operations, the availability and prices of raw materials and supplies, livestock disease, product pricing, the competitive environment and related market conditions, operating efficiencies, access to capital, the cost of compliance with environmental and health standards and other regulatory requirements affecting Ridley's business, adverse results from ongoing litigation, and actions of domestic and foreign governments. Other risks are outlined in the Risk Management section of the MD&A included in Ridley's Annual Report. Unless otherwise required by applicable securities law, Ridley disclaims any intention or obligation to publicly update or revise this information, whether as a result of new information, future events or otherwise. Ridley cautions readers not to place undue reliance upon forward-looking statements.
OUTLOOK
The external drivers of Ridley's commercial feed business are strongly influenced by the economic dynamics of the North American livestock and poultry production industry. Demand for commercial animal feed in 2010 will be influenced by any improvement in the profit margins of livestock and poultry producers. Longer term commercial feed demand will depend on the eventual reversal of the reduction in animal numbers across most segments in the U.S. and Canada.
The outlook is encouraging for improved profitability amongst most sectors of livestock and poultry production within the next six to twelve months. However, in the near term, many sectors continue to operate below breakeven levels, which negatively affects producer demand for feed supplementation.
Management continues to focus on the needs of Ridley's customers, making customer satisfaction a top priority while helping producers find profitable feeding solutions in a challenging economic environment. Maintaining a balanced presence amongst each of the sectors of livestock and poultry production remains important for diversifying Ridley's earnings across multiple geographies and product categories.
Ridley Inc., headquartered in Mankato, Minnesota and Winnipeg, Manitoba, is one of North America's leading commercial animal nutrition companies. Ridley employs more than 900 people in the United States and Canada in the manufacture and distribution of a full range of animal nutrition products under highly regarded trade names.
Ridley's common shares are listed on The Toronto Stock Exchange (trading symbol: RCL).
Additional information, including the notes to the interim financial statements and Ridley's Annual Information Form (AIF), are available at www.sedar.com. Visit our website at www.ridleyinc.com.
RIDLEY Inc.
Consolidated Balance Sheets
(Unaudited)
December December
(Expressed in thousands of U.S. dollars) 31 June 30 31
2009 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current assets
Cash and short-term deposits 1,594 1,954 6,087
Accounts receivable 36,026 30,697 39,295
Inventories (Note 8) 50,708 48,153 58,475
Income taxes recoverable 58 1,867 1,516
Prepaids and other current assets 2,105 721 2,206
Current portion of loans receivable 1,069 1,013 1,168
Assets held-for-sale (Note 12) - 245 -
Future income tax asset 1,602 1,545 1,439
----------------------------------------------------------------------------
Total current assets 93,162 86,195 110,186
Non-current assets
Loans receivable 472 603 952
Assets held-for-sale (Note 12) 598 598 867
Property, plant and equipment 91,439 88,604 88,812
Future income tax asset 4,256 3,425 -
Other assets 3,980 4,431 2,604
Other intangibles 4,642 4,379 4,466
Goodwill 37,982 37,982 48,477
----------------------------------------------------------------------------
Total non-current assets 143,369 140,022 146,178
----------------------------------------------------------------------------
TOTAL ASSETS 236,531 226,217 256,364
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Outstanding cheques in excess of bank
balances 3,920 2,038 408
Short-term debt 1,871 364 1,767
Accounts payable and accrued liabilities 34,451 34,525 43,588
Advances from customers 3,366 1,716 4,397
Claim settlement provision (Note 14) - - 4,902
Income taxes payable 91 - -
Current portion of long-term debt 53 52 68
----------------------------------------------------------------------------
Total current liabilities 43,752 38,695 55,130
Long-term liabilities
Long-term debt 11,099 10,190 22,272
Future income tax liability 24,672 24,427 21,836
Other accrued liabilities 3,947 3,892 4,338
----------------------------------------------------------------------------
Total long-term liabilities 39,718 38,509 48,446
----------------------------------------------------------------------------
Total liabilities 83,470 77,204 103,576
Shareholders' equity
Share capital (Note 11) 55,127 57,315 57,601
Retained earnings 86,706 81,285 86,199
Accumulated other comprehensive income (Note
4) 11,228 10,413 8,988
----------------------------------------------------------------------------
97,934 91,698 95,187
----------------------------------------------------------------------------
Total shareholders' equity 153,061 149,013 152,788
----------------------------------------------------------------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 236,531 226,217 256,364
----------------------------------------------------------------------------
----------------------------------------------------------------------------
RIDLEY Inc.
Consolidated Statements of Earnings and Retained
Earnings
(Unaudited)
(Expressed in thousands of Three Months Ended Six Months Ended
U.S. dollars) December 31 December 31
2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue 149,969 163,562 285,676 332,866
Cost of sales (Note 8) 126,453 141,413 244,736 287,628
----------------------------------------------------------------------------
Gross profit 23,516 22,149 40,940 45,238
----------------------------------------------------------------------------
Operating (income) expenses
Selling, general and administrative 13,095 16,755 25,806 32,481
Amortization of property, plant and
equipment 2,093 2,047 4,185 4,116
Gain on sale of facility (Note 12) - - - (316)
Research and development 228 140 498 486
Other amortization 44 44 87 87
Asset impairment loss (Note 13) - 1,407 - 1,407
----------------------------------------------------------------------------
Net operating expenses 15,460 20,393 30,576 38,261
----------------------------------------------------------------------------
Operating income 8,056 1,756 10,364 6,977
Finance costs (170) (845) (348) (1,450)
Interest income 87 145 166 262
----------------------------------------------------------------------------
Earnings before income taxes 7,973 1,056 10,182 5,789
Provision for income taxes (Note 9) 2,953 385 4,037 2,184
----------------------------------------------------------------------------
Net earnings for the period 5,020 671 6,145 3,605
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Retained earnings, beginning of period 82,410 85,528 81,285 82,594
Net earnings for the period 5,020 671 6,145 3,605
Excess over stated value of shares
purchased for cancellation (Note 11) (724) - (724) -
----------------------------------------------------------------------------
Retained earnings, end of period 86,706 86,199 86,706 86,199
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----------------------------------------------------------------------------
Net earnings per share, basic and
diluted 0.37 0.05 0.45 0.26
Consolidated Statements of Comprehensive
Income
(Unaudited)
Three Months
(Expressed in thousands of U.S. dollars) Ended Six Months Ended
December 31 December 31
2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings for the period 5,020 671 6,145 3,605
Unrealized gains (losses) on translation
of financial statements of related
entities with foreign functional
currency to U.S. dollar reporting
currency (Note 4) (525) (3,298) 815 (4,317)
----------------------------------------------------------------------------
Other comprehensive income (loss) for
the period (525) (3,298) 815 (4,317)
Comprehensive income (loss) for the
period 4,495 (2,627) 6,960 (712)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
RIDLEY Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in thousands Three Months Ended Six Months Ended
of U.S. dollars) December 31 December 31
2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow from operating activities
Net earnings for the period 5,020 671 6,145 3,605
Add (deduct) items not affecting cash:
Amortization of property, plant and
equipment 2,093 2,047 4,185 4,116
Future income taxes 414 (1,037) (214) (1,468)
Asset impairment loss (Note 13) - 1,407 - 1,407
Loss on sale of property, plant and
equipment 75 47 114 49
Gain on sale of facility (Note 12) - - - (316)
Other amortization 44 44 87 87
Other items not affecting cash 46 121 94 148
----------------------------------------------------------------------------
7,692 3,300 10,411 7,628
Net change in non-cash working capital
balances related to operations:
Accounts receivable (329) 1,987 (4,160) (6,538)
Inventories (1,911) 14,520 (1,677) 8,920
Prepaids and other current assets 187 343 (1,343) (361)
Accounts payable and accrued
liabilities (1,028) (11,219) (1,361) (12,541)
Advances from customers 2,336 3,331 1,626 2,125
Income taxes payable and recoverable 287 (3,005) 1,883 (1,048)
----------------------------------------------------------------------------
Net cash from (utilized for) operating
activities 7,234 9,257 5,379 (1,815)
----------------------------------------------------------------------------
Cash flow from investing activities
Proceeds on disposal of facilities,
property, plant and equipment 102 57 368 526
Purchase of property, plant and
equipment (2,931) (2,095) (5,098) (4,632)
Purchase of intangibles - - (350) -
Decrease in loans receivable, net 43 15 94 -
Business acquisitions (Note 10) - - - (137)
----------------------------------------------------------------------------
Net cash utilized for investing
activities (2,786) (2,023) (4,986) (4,243)
Cash flow from financing activities
Repayment of short- and long-term debt (4,770) (18,699) (6,493) (26,275)
Proceeds from short- and long-term
debt 1,852 9,476 7,782 34,484
Purchases of share capital for
cancellation (Note 11) (3,745) (3) (3,745) (3)
----------------------------------------------------------------------------
Net cash from (utilized for) financing
activities (6,663) (9,226) (2,456) 8,206
Effect of exchange rate changes on cash (36) 28 (179) 21
Increase (decrease) in cash and cash
equivalents (2,251) (1,964) (2,242) 2,169
Cash and cash equivalents - beginning of
period (75) 7,643 (84) 3,510
----------------------------------------------------------------------------
Cash and cash equivalents - end of
period (2,326) 5,679 (2,326) 5,679
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents are comprised
of:
Cash and short-term deposits 1,594 6,087 1,594 6,087
Outstanding cheques in excess of bank
balances (3,920) (408) (3,920) (408)
----------------------------------------------------------------------------
(2,326) 5,679 (2,326) 5,679
----------------------------------------------------------------------------
----------------------------------------------------------------------------
FOR FURTHER INFORMATION PLEASE CONTACT:
RIDLEY Inc.
Steve VanRoekel
President and CEO
(507) 388-9412
RIDLEY Inc.
Gordon Hildebrand
Chief Financial Officer
(507) 388-9577
Source: Ridley Inc.
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