Tree Island Steel Ltd. (TSX:TSL)(TSX:TSL.DB) -
Q4 2012 Financial Highlights:
-- Revenue of $28.7 million as compared to $35.1 million in Q4 2011
-- Gross Profit of $1.3 million or 4.6% of revenues as compared to $1.1
million or 3.1% of revenues in Q4 2011
2012 Financial Highlights:
-- Revenue of $146.2 million as compared to $150.0 million in 2011
-- Gross Profit of $13.0 million or 8.9% of revenue as compared to $10.5
million or 7.0% of revenues in 2011
-- EBITDA(3) (before foreign exchange) at $3.6 million as compared to $1.3
million in 2011
Tree Island Steel Ltd. (formerly Tree Island Wire Income Fund or the "Fund")
("Tree Island"(1) or the "Company") announced today its financial results for
the three and twelve month periods ended December 31, 2012.
For the three-month period ended December 31, 2012(2), gross profit improved to
$1.3 million from $1.1 million and gross profit per ton also improved to $61 per
ton from $44 per ton in the same period in 2011. The increase in gross profit
and gross profit per ton primarily reflects Tree Island's ongoing focus on
profitable growth coupled with the decrease in raw material costs during the
quarter. Gross profit and gross profit per ton continued to demonstrate
improvement on a year over year basis as the Company maintained price discipline
and further improved operational efficiencies. Despite a $0.4 million decrease
in foreign exchange gain, EBITDA remained consistent at $1.1 million during the
fourth quarter of 2012 as compared to the corresponding period in 2011 as a
result of Tree Island's ongoing focus on pricing and cost management.
For the year ended December 31, 2012(2), Tree Island's gross profit and EBITDA
increased to $13.0 million and $3.6 million, respectively. The year-over-year
improvement in financial results is largely the result of management
initiatives.
During the year ended December 31, 2012, Tree Island purchased 1,050,900 shares
/ units at an average price of $0.30 per share / unit, under its previously
announced normal course issuer bid. These shares / units were cancelled by the
Company at the end of the month of purchase. On September 6, 2012, the normal
course issuer bid was extended to September 6, 2013. Under the renewed normal
course issuer bid the Company may purchase up to 1,700,000 shares / units.
"I am pleased with our ability to navigate through the continued industry wide
challenges faced in 2012. Our focus and sound strategies during the past year
allowed Tree Island to further strengthen its position as a manufacturer and
supplier of choice in a recovering market," said Dale R. MacLean, President and
CEO of Tree Island Steel "On the heels of improved financial performance in
2012, we are seeing early market signals of demand recovery and price
stabilization emerging which provides us with a reasonable opportunity to build
a path to a stronger year in 2013."
Amar S. Doman, Chairman of Tree Island Steel noted, "2012 came with its
challenges but the Tree Island team once again responded with strength and
commitment to the industry-wide issues, focused on operational efficiencies and
provided best in class service to customers and partners, all of which led to a
significant year-over-year improvement in the Company's overall operational and
financial performance. I am looking forward to working with the management team
and another improvement year ahead for Tree Island."
Three Months Ended Year Ended
December 31 December 31
2012 2011 2012 2011
Summary of Results ($000's except for tonnage and per unit amounts)
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Sales Volumes - Tons(1) 21,583 25,282 102,408 110,314
Sales $ 28,657 $ 35,081 $ 146,238 $ 150,030
Cost of sales (26,568) (33,196) (130,132) (136,331)
Depreciation (775) (782) (3,074) (3,241)
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Gross profit 1,314 1,103 13,032 10,458
Selling, general and
administrative expenses (3,221) (3,018) (12,527) (12,411)
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Operating (loss) income (1,907) (1,915) 505 (1,953)
Foreign exchange gain
(loss) 12 517 87 (722)
Gain on sale of property,
plant and equipment 18 - 448 11
Changes in financial
liabilities recognized at
fair value 10 30 (717) 2,331
Gain (loss) on renegotiated
debt - - 17,805 (3,234)
Financing Expenses (1,324) (2,241) (7,299) (8,500)
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(Loss) income before income
taxes (3,191) (4,467) 10,829 (12,925)
Income tax (expense)
recovery 846 210 (458) 64
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Net (loss) income (2,345) (4,257) 10,371 (12,861)
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Operating (loss) income (1,907) (1,915) 505 (1,953)
Add back depreciation 775 782 3,074 3,241
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EBITDA (2) (1,132) (1,133) 3,579 1,288
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Foreign exchange gain (loss) 12 517 87 (722)
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EBITDA including foreign
exchange (1,120) (616) 3,666 566
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Net (loss) income (2,345) (4,257) 10,371 (12,861)
Add back significant non-
cash items
Non-cash financing expenses 648 1,387 3,961 5,349
Non-cash (gain) loss on
renegotiated debt - - (17,805) 3,234
Changes in financial
liabilities recognized at
fair value (10) (30) 717 (2,331)
Deferred income tax recovery 200 99 1,207 (13)
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Adjusted net loss (2) (1,507) (2,801) (1,549) (6,622)
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Per share / unit
Net (loss) income per share
/ unit - basic (0.11) (0.19) 0.47 (0.56)
Net (loss) income per share
/ unit - diluted (0.11) (0.19) 0.25 (0.56)
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Per ton
Gross profit per ton 61 44 127 95
EBITDA per ton (52) (45) 35 12
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As at As at
December December
31 31,
Financial position 2012 2011
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Total assets $ 81,102 $ 91,005
Total non-current financial
liabilities $ 29,790 $ 42,789
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(a) Sales volumes exclude tons which were processed as part of tolling
arrangements
(b) See definition of EBITDA and Adjusted Net Loss in footnote 3 to the
press release
About Tree Island Steel
Tree Island Steel has a 100% ownership interest in Tree Island Industries Ltd.
and its performance depends on the performance of Tree Island Industries Ltd.
Headquartered in Richmond, British Columbia, since 1964, Tree Island, through
its four operating facilities in Canada and the United States, produces wire
products for a diverse range of industrial, residential construction, commercial
construction, agricultural, and specialty applications. Its products include
bright wire; a broad array of fasteners, including packaged, collated and bulk
nails; stucco reinforcing products; concrete reinforcing mesh; fencing and other
fabricated wire products. The Company markets these products under the Tree
Island, Halsteel, K-Lath, Industrial Alloys, TI Wire, and Tough Strand and
Select Brand names. Tree Island also owns and operates a China-based company
that assists the international sourcing of products to Tree Island Industries
Ltd. and its customers.
Forward-Looking Statements
This press release includes forward-looking information with respect to Tree
Island and Tree Island Industries Ltd., including their business, operations and
strategies, as well as financial performance and conditions. The use of
forward-looking words such as, "may", "will", "expect" or similar variations
generally identify such statements. Any statements that are contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. Although management believes that expectations reflected in
forward-looking statements are reasonable, such statements involve risks and
uncertainties including risks and uncertainties discussed under the heading
"Risk Factors" in Tree Island's most recent annual information form and
management discussion and analysis.
The forward-looking statements contained herein reflect management's current
beliefs and are based upon certain assumptions that management believes to be
reasonable based on the information currently available to management. By their
very nature, forward looking statements involve inherent risks and
uncertainties, both general and specific, and a number of factors could cause
actual events or results to differ materially from the results discussed in the
forward looking statements. In evaluating these statements, prospective
investors should specifically consider various factors including the risks
outlined in the Fund's most recent annual information form and management
discussion and analysis which may cause actual results to differ materially from
any forward looking statement. Such risks and uncertainties include, but are not
limited to: general economic, market and business conditions, the cyclical
nature of our business and demand for our products, financial condition of our
customers, competition, volume and price pressure from import competition,
deterioration in the Company's liquidity, disruption in the supply of raw
materials, volatility in the costs of raw materials, significant exposure to the
Western United States due to lack of geographic diversity, dependence on the
construction industry, transportation costs, foreign exchange fluctuations,
leverage and restrictive covenants, labour relations, trade actions, dependence
on key personnel and skilled workers, reliance on key customers, intellectual
property risks, energy costs, un-insured loss, credit risk, operating risk,
management of growth, changes in tax, environmental and other legislation, and
other risks and uncertainties set forth in our publicly filed materials.
This press release has been reviewed by the Company's Board of Directors and its
Audit Committee, and contains information that is current as of the date of this
press release, unless otherwise noted. Events occurring after that date could
render the information contained herein inaccurate or misleading in a material
respect. Readers are cautioned not to place undue reliance on this
forward-looking information and management of the Company undertakes no
obligation to update publicly or revise any forward-looking information, whether
as a result of new information, future events or otherwise except as required by
applicable securities laws.
1. References to Tree Island include references to Tree Island Industries
Ltd. as the context may require.
2. Please refer to our 2012 MD&A for further information.
3. References made above to "EBITDA" are to operating profit plus
depreciation and references to "Adjusted Net Income (Loss)" are to net
income (loss) per IFRS adjusted for certain non-cash items including
non-cash financing expenses, changes in fair value of convertible
instruments, gain (loss) on renegotiated debt, and deferred income tax
recovery (expense). EBITDA is a measure used by many investors to
compare issuers on the basis of ability to generate cash flows from
operations. Adjusted Net Income (Loss) is a measure for investors to
understand the impact of significant non-cash items that affect our
results from operations. Neither EBITDA nor Adjusted Net Income (Loss)
are earnings measures recognized by IFRS and do not have a standardized
meaning prescribed by IFRS. We believe that EBITDA and Adjusted Net
Income (Loss) are important supplemental measure in evaluating the
Fund's performance. You are cautioned that EBITDA and Adjusted Net
Income (Loss) should not be construed as alternatives to net income or
loss, determined in accordance with IFRS, or as indicators of
performance. Our method of calculating EBITDA and Adjusted Net Income
(Loss) may differ from methods used by other issuers and, accordingly,
our EBITDA or Adjusted Net Income (Loss) may not be comparable to
similar measures presented by other issuers.
Tree Island Steel Ltd.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In thousands of Canadian dollars)
December 31 December 31
2012 2011
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Assets
Current
Cash 2,371 3,852
Accounts receivable 11,984 13,835
Inventories 32,732 36,123
Prepaid expenses 2,200 2,533
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49,287 56,343
Property, plant and equipment 31,592 34,303
Other non-current assets 223 359
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81,102 91,005
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Liabilities
Current
Senior Revolving Facility 10,785 11,247
Accounts payable and accrued liabilities 9,649 13,745
Income taxes payable 1,346 2,093
Other current liabilities 83 158
Fair value of convertible instruments 312 322
Current portion of long-term debt 1,748 4,882
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23,923 32,447
Convertible Debentures 15,634 14,298
Senior Term Loan 4,292 -
Long-term debt 9,639 28,491
Finance Lease 87 -
Other non-current liabilities 449 364
Deferred income taxes 1,973 766
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55,997 76,366
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Shareholders' Equity 25,105 -
Unitholders' Equity - 14,639
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81,102 91,005
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Tree Island Steel Ltd.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of Canadian dollars, except share / units and per-share / unit
amounts)
Three Months Ended Year Ended
December 31 December 31
2012 2011 2012 2011
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Sales $ 28,657 $ 35,081 $ 146,238 $ 114,949
Cost of goods sold 26,568 33,196 130,132 103,135
Depreciation 775 782 3,074 2,459
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Gross profit 1,314 1,103 13,032 9,355
Selling, general and
administrative expenses 3,221 3,018 12,527 9,393
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Operating (loss) income (1,907) (1,915) 505 (38)
Foreign exchange gain (loss) 12 517 87 (1,239)
Gain on sale of property,
plant and equipment 18 - 448 11
Changes in financial
liabilities recognized at
fair value 10 30 (717) 2,301
Gain (loss) on renegotiated
debt - - 17,805 (3,234)
Financing expenses (1,324) (2,241) (7,299) (6,259)
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(Loss) income before income
taxes (3,191) (4,467) 10,829 (8,458)
Income tax recovery
(expense) 846 210 (458) (146)
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Net (loss) income for the
period $ (2,345) $ (4,257) $ 10,371 $ (8,604)
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Net (loss) income per share
/ unit
Basic $ (0.14) $ (0.19) $ 0.47 $ (0.38)
Diluted $ (0.14) $ (0.19) $ 0.25 $ (0.38)
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Weighted-average number of
shares / units
Basic 21,799,448 22,843,741 21,978,006 22,867,849
Diluted 21,799,448 22,843,741 60,590,536 22,867,849
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Tree Island Steel Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of Canadian dollars)
Three Months Ended Year Ended
December 31 December 31
2012 2011 2012 2011
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Cash flows from operating
activities
Net (loss) income for the
year $ (2,345) $ (4,257) $ 10,371 $ (12,861)
Adjustments for
Depreciation 775 782 3,074 3,241
Changes in financial
liabilities recognized at
fair value (10) (30) 717 (2,331)
Gain on sale of property,
plant and equipment (18) - (448) (11)
Property, plant and
equipment impairment - 858 - 858
(Gain) loss on renegotiated
debt - - (17,805) 3,234
Net finance costs 1,324 2,241 7,299 8,500
Deferred income tax
(recovery) expense (200) (99) 1,207 (13)
Fair value change on
Phantom Units (128) (16) (64) 33
Exchange revaluation on
foreign denominated debt 123 (1,141) (389) 817
Working capital (Note 24) 6,928 3,735 133 (8,260)
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Net cash provided by (used
in) operating activities 6,449 2,073 4,095 (6,793)
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Cash flows from investing
activities
Proceeds on disposal of
property, plant and
equipment 33 - 520 49
Purchase of property, plant
and equipment (117) (152) (349) (471)
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Net cash (used in) provided
by investing activities (85) (152) 171 (422)
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Cash flows from financing
activities
Senior Term Loan, net (83) - 4,792 -
Repayment of long-term debt (298) (294) (6,812) (2,892)
Interest paid (608) (783) (2,929) (2,871)
Normal course issuer bid
(Note 14) (16) (21) (317) (26)
(Payment of) advance on
Senior Revolving Facility (5,846) (94) (462) 11,247
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Net cash (used in) provided
by financing activities (6,852) (1,192) (5,729) 5,458
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Effect of exchange rate
changes on cash 8 (17) (18) (25)
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(Decrease) increase in cash (479) 712 (1,481) (1,782)
Cash, beginning of period 2,850 3,140 3,852 5,634
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Cash, end of period $ 2,371 $ 3,852 $ 2,371 $ 3,852
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FOR FURTHER INFORMATION PLEASE CONTACT:
Tree Island Steel Ltd.
Nancy Davies
Chief Financial Officer
(604) 523-4587
ndavies@treeisland.com
www.treeisland.com
Tree Island Steel (TSX:TSL)
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