Tree Island Steel Ltd. ("Tree Island Steel" or the "Company")
(TSX:TSL)(TSX:TSL.DB) announced today its financial results for the three month
period ended March 31, 2013(1).
For the three-month period ended March 31, 2013, Tree Island Steel's focus on
profitability resulted in gross profit increasing to $4.2 million from $4.0
million, and gross profit per ton also improving to $153 per ton from $130 per
ton in the same period in 2012, despite the lower revenues and sales volume. As
a result of the Company's ongoing efforts and focus on cost management and
operational efficiencies, EBITDA and EBITDA per ton increased to $1.8 million
and $66, respectively compared to $1.7 million and $56 during the corresponding
period in 2012. Revenues during the first quarter of 2013 decreased to $38.1
million versus $44.0 million and sales volumes decreased 9.9% resulting from our
continued focus on profitable growth in the marketplace and a 4.0% reduction in
revenue per ton from lower cost of steel.
"While revenues and sales volumes were lower in the quarter, I am pleased to see
our focus on profitable growth demonstrate steady improvement in gross profit
and EBITDA on a year-over-year basis," said Dale R. MacLean, President and CEO
of Tree Island Steel. "While we continue to see price volatility in raw
materials and selling prices, we are committed to maximize efficiencies and
mitigate these factors by leveraging our brand, service and product quality
while selling into end markets where we can achieve optimal returns now and in
the future for the Company and our shareholders."
Amar S. Doman, Chairman of Tree Island Steel noted, "The first quarter results
are a testament to the Company's ongoing focus on profitability. It is
encouraging to see the Company generate improved profitability metrics on a
consistent basis, which leads us to believe that our efforts are paying off in
strengthening Tree Island Steel's foundation and growth platform."
Summary of Results ($000's except for tonnage Three Months Ended March 31
and per unit amounts) 2013 2012
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Sales Volumes - Tons(a) 27,601 30,618
Sales $ 38,093 $ 43,997
Cost of sales (33,137) (39,237)
Depreciation (720) (768)
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Gross profit 4,236 3,992
Selling, general and administrative expenses (3,147) (3,032)
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Operating income 1,089 960
Foreign exchange gain 26 309
Gain on sale of property, plant and
equipment - 426
Changes in financial liabilities recognized
at fair value 20 -
Financing Expenses (1,439) (2,261)
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Loss before income taxes (304) (566)
Income tax recovery 167 148
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Net loss (137) (418)
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Operating income 1,089 960
Add back depreciation 720 768
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EBITDA (2) 1,809 1,728
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Foreign exchange gain 26 309
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EBITDA including foreign exchange 1,835 2,037
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Net loss (137) (418)
Add back significant non-cash items
Non-cash financing expenses 654 1,404
Non-cash (gain) loss on renegotiated debt - -
Changes in financial liabilities recognized
at fair value 20 -
Deferred income tax recovery (179) (157)
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Adjusted net income (b) 358 829
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Per share / unit
Net loss per share / unit - basic (0.01) (0.02)
Net loss per share / unit - diluted (0.01) (0.02)
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Per ton
Gross profit per ton 153 130
EBITDA per ton 66 56
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As at As at
March 31, December 31,
Financial position 2013 2012
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Total assets $ 91,348 $ 81,102
Total non-current financial liabilities $ 29,553 $ 29,790
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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 Income in footnote 2 to the
press release
About Tree Island Steel
Headquartered in Richmond, British Columbia, since 1964, Tree Island Steel,
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 Steel also owns and operates a China-based
company that assists the international sourcing of products.
Forward-Looking Statements
This press release includes forward-looking information with respect to Tree
Island Steel including its business, operations and strategies, as well as
financial performance and conditions. The use of forward-looking words such as,
"may," "will," "expect" or similar variations generally identify such
statements. Any statements that are contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Although
management believes that expectations reflected in forward-looking statements
are reasonable, such statements involve risks and uncertainties including risks
and uncertainties discussed under the heading "Risk Factors" in the Company'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. 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) Please refer to our Q1 2013 MD&A for further information.
(2) References made above to "EBITDA" are to operating profit plus
depreciation and references to "Adjusted Net Income" are to net income per
IFRS adjusted for certain non-cash items including non-cash financing
expenses, changes in fair value of convertible instruments, and deferred
income tax recovery. 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 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 are earnings measures recognized by IFRS and
do not have a standardized meaning prescribed by IFRS. We believe that
EBITDA and Adjusted Net Income are important supplemental measure in
evaluating the Fund's performance. You are cautioned that EBITDA and
Adjusted Net Income 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 may differ from
methods used by other issuers and, accordingly, our EBITDA or Adjusted Net
Income 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)
March 31 December 31
2013 2012
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Assets
Current
Cash 2,569 2,371
Accounts receivable 21,616 11,984
Inventories 34,618 32,732
Prepaid expenses 1,108 2,200
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59,911 49,287
Property, plant and equipment 31,229 31,592
Other non-current assets 208 223
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91,348 81,102
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Liabilities
Current
Senior Revolving Facility 16,981 10,785
Accounts payable and accrued liabilities 13,331 9,649
Income taxes payable 1,352 1,346
Other current liabilities 92 83
Fair value of convertible instruments 276 312
Current portion of long-term debt 1,774 1,748
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33,806 23,923
Convertible Debentures 15,471 15,634
Senior Term Loan 4,167 4,292
Long-term debt 9,705 9,639
Finance Lease 72 87
Other non-current liabilities 441 449
Deferred income taxes 1,794 1,973
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65,456 55,997
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Shareholders' Equity 25,892 25,105
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91,348 81,102
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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 March 31
2013 2012
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Sales $ 38,093 $ 43,997
Cost of goods sold 33,137 39,237
Depreciation 720 768
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Gross profit 4,236 3,992
Selling, general and administrative expenses 3,147 3,032
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Operating income 1,089 960
Foreign exchange gain 26 309
Gain on sale of property, plant and equipment - 426
Changes in financial liabilities recognized
at fair value 20 -
Financing expenses (1,439) (2,261)
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Loss before income taxes (304) (566)
Income tax recovery 167 148
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Net loss for the period $ (137) $ (418)
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Net loss per share / unit
Basic $ (0.01) $ (0.02)
Diluted $ (0.01) $ (0.02)
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Weighted-average number of shares / units
Basic 23,113,661 22,337,889
Diluted 23,113,661 22,337,889
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Tree Island Steel Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of Canadian dollars)
Three Months Ended March 31
2013 2012
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Cash flows from operating activities
Net loss for the year $ (137) $ (418)
Adjustments for:
Depreciation 720 768
Changes in financial liabilities
recognized at fair value (20) -
Gain on sale of property, plant and
equipment - (426)
Amortization and write-off of deferred
financing 16 70
Net finance costs 1,423 2,191
Deferred income tax recovery (179) (157)
Fair value change on Phantom Units - 22
Exchange revaluation on foreign
denominated debt 226 (565)
Working capital Adjustments:
Accounts Receivable (9,526) (7,908)
Inventories (1,648) (1,645)
Accounts payable and accrued liabilities 3,595 916
Prepaid expenses 1,099 1,260
Income and other taxes 12 9
Other (268) 278
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Net cash used in operating activities (4,688) (5,605)
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Cash flows from investing activities
Proceeds on disposal of property, plant and
equipment - 470
Purchase of property, plant and equipment (215) (129)
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Net cash (used in) provided by investing
activities (215) 341
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Cash flows from financing activities
Repayment of Senior Term Loan (125) -
Repayment of long-term debt (386) (598)
Conversion of Warrants 171 -
Interest paid (778) (857)
Normal course issuer bid - (205)
Advance on Senior Revolving Facility 6,196 6,354
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Net cash provided by financing activities 5,078 4,694
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Effect of exchange rate changes on cash 16 (14)
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Increase (decrease) in cash 191 (584)
Cash, beginning of period 2,371 3,852
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Cash, end of period $ 2,562 $ 3,268
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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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