Q2 2013 Financial Highlights:
-- Revenue of $40.6 million as compared to $39.6 million in Q2 2012
-- Gross Profit of $5.4 million or 13.3% of revenues as compared to $4.2
million or 10.7% of revenues in Q2 2012
-- EBITDA(2)at $2.9 million as compared to $2.0 million in Q2 2012
Tree Island Steel Ltd. ("Tree Island" or the "Company")
(TSX:TSL)(TSX:TSL.DB) announced today its financial results for the
three and six month periods ended June 30, 2013(1).
For the three-month period ended June 30, 2013, revenues
increased to $40.6 million versus $39.6 million during the second
quarter in 2012. Volumes also increased by 12% in the second
quarter to 29,160 tons, primarily due to increasing demand for
construction products in the Company's US markets. Gross profit
continued to strengthen in the quarter, amounting to $5.4 million,
representing a 27% improvement when compared to $4.2 million in the
corresponding period in 2012. As a result, gross margin increased
to 13.3% from 10.7%, and gross profit per ton also improved to $185
per ton, from $163 per ton in the same period in 2012. The
improvements in revenues and gross profit together are the result
of ongoing focus on profitable growth, cost management and
operational efficiencies. These strategies resulted in EBITDA
increasing 44% to $2.9 million, or $98 per ton compared, to $2.0
million and $76 per ton during the corresponding period in
2012.
For the six-month period ended June 30, 2013, revenues amounted
to $78.7 million on 56,761 tons compared to $83.6 million on 56,583
tons during the same period in 2012. The lower revenues in 2013
primarily reflect price adjustments that were in line with
corresponding raw material cost reductions, coupled with product
mix changes and competitive factors in certain business lines,
particularly, nail imports and galvanized wire sales in Canada.
Gross profit increased to $9.6 million at a margin of 12.2%
compared to $8.2 million or 9.8%, while gross profit per ton also
increased to $170 per ton versus $145 per ton in the corresponding
period in 2012. EBITDA during the first six months of 2013
increased by 26% to $4.7 million versus $3.7 million during the
same period last year.
"I am pleased to see our focus on profitable growth demonstrate
meaningful improvement in gross profit and EBITDA on a
year-over-year basis," said Dale R. MacLean, President and CEO of
Tree Island Steel. "The resurgence of the construction industry in
the US, albeit still lower than historical levels, is demonstrating
a positive trend along with stability in our other key end markets.
Looking ahead, we remain cautiously optimistic as we navigate
through the ongoing volatility in raw material and selling prices,
which we have grown accustomed to, while focusing on strategies to
selectively grow revenues by leveraging our brands, providing best
in class product and service quality, and optimizing operational
efficiencies in an effort to target and achieve improved returns
for the Company and our shareholders."
Amar S. Doman, Chairman of Tree Island Steel noted, "Tree
Island's second quarter results continue to demonstrate promise
with improvement at the gross profit and EBITDA lines. The Company
is in a good position to take advantage of increasing demand in the
future."
Summary of Results Three Months Ended June
30 Six Months Ended June 30
2013 2012 2013 2012
($000's except for
tonnage and per
unit amounts,
unaudtied)
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Sales Volumes - Tons 29,160 25,965 56,761 56,583
Sales $ 40,594 $ 39,622 $ 78,687 $ 83,619
Cost of sales (34,474) (34,630) (67,611) (73,867)
Depreciation (724) (753) (1,444) (1,521)
----------------------------------------------------------------------------
Gross profit 5,396 4,239 9,632 8,231
Selling, general and
administrative
expenses (3,261) (3,007) (6,408) (6,039)
----------------------------------------------------------------------------
Operating income 2,135 1,232 3,224 2,192
Foreign exchange
gain (loss) 106 (397) 132 (88)
Gain on sale of
property, plant
and equipment (0) 1 (0) 427
Changes in
financial
liabilities
recognized at
fair value - - 20 -
Gain on
renegotiated debt - 17,805 - 17,805
Financing Expenses (1,485) (2,292) (2,924) (4,553)
----------------------------------------------------------------------------
Income before income
taxes 756 16,349 452 15,783
Income tax expense (566) (1,224) (399) (1,076)
----------------------------------------------------------------------------
Net Income 190 15,125 53 14,707
----------------------------------------------------------------------------
Operating income 2,135 1,232 3,224 2,192
Add back
depreciation 724 753 1,444 1,521
----------------------------------------------------------------------------
EBITDA(a) 2,859 1,985 4,668 3,713
----------------------------------------------------------------------------
Foreign exchange
gain (loss) 106 (397) 132 (88)
----------------------------------------------------------------------------
EBITDA including
foreign exchange 2,965 1,588 4,800 3,625
----------------------------------------------------------------------------
Net Income 190 15,125 53 14,707
Add back significant
non-cash items
Non-cash financing
expenses 711 1,275 1,364 2,679
Non-cash (gain) loss
on renegotiated
debt - (17,805) - (17,805)
Changes in financial
liabilities
recognized at fair
value - - (20) -
Deferred income tax
expense 549 1,339 370 1,182
----------------------------------------------------------------------------
Adjusted net income
(loss)(a) 1,449 (66) 1,768 763
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per share / unit
Net income per
share / unit -
basic 0.01 0.69 0.00 0.66
Net income per
share / unit -
diluted 0.01 0.27 0.00 0.28
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per ton
Gross profit per
ton 185 163 170 145
EBITDA per ton 98 76 82 66
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As at June 30, As at December 31,
Financial position 2013 2012
----------------------------------------------------------------------------
Total assets $ 90,447 $ 81,102
Total non-current financial
liabilities $ 30,060 $ 29,790
----------------------------------------------------------------------------
(a) See definition of EBITDA and Adjusted Net Income in footnote 2 to the
press release
About Tree Island Steel
Tree Island Steel, headquartered in Richmond, British Columbia,
since 1964, 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
galvanized wire, 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. The Company also owns and operates a
China-based company that assists the international sourcing of
products to Tree Island and its customers.
Forward-Looking Statements
This press release includes forward-looking information with
respect to Tree Island 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 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) Please refer to our Q2 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. 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, unaudited)
June 30 December 31
2013 2012
----------------------------------------------------------------------------
Assets
Current
Cash 2,470 2,371
Accounts receivable 20,803 11,984
Inventories 35,161 32,732
Prepaid expenses 1,045 2,200
----------------------------------------------------------------------------
59,479 49,287
Property, plant and equipment 30,773 31,592
Other non-current assets 195 223
----------------------------------------------------------------------------
90,447 81,102
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current
Senior Revolving Facility 16,606 10,785
Accounts payable and accrued liabilities 11,231 9,649
Income taxes payable 1,356 1,346
Other current liabilities 92 83
Fair value of convertible instruments 276 312
Current portion of long-term debt 1,829 1,748
----------------------------------------------------------------------------
31,390 23,923
Convertible Debentures 15,894 15,634
Senior Term Loan 4,042 4,292
Long-term debt 9,924 9,639
Finance Lease 57 87
Other non-current liabilities 437 449
Deferred income taxes 2,343 1,973
----------------------------------------------------------------------------
64,087 55,997
----------------------------------------------------------------------------
Shareholders' Equity 26,360 25,105
----------------------------------------------------------------------------
90,447 81,102
----------------------------------------------------------------------------
Tree Island Steel Ltd.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of Canadian dollars, except share / units and per-share / unit
amounts, unaudited)
Three Months Ended June
30 Six Months Ended June 30
2013 2012 2013 2012
----------------------------------------------------------------------------
Sales $ 40,594 $ 39,622 $ 78,687 $ 83,619
Cost of goods sold 34,474 34,630 67,611 73,867
Depreciation 724 753 1,444 1,521
----------------------------------------------------------------------------
Gross profit 5,396 4,239 9,632 8,231
Selling, general and
administrative
expenses 3,261 3,007 6,408 6,039
----------------------------------------------------------------------------
Operating income 2,135 1,232 3,224 2,192
Foreign exchange
gain (loss) 106 (397) 132 (88)
Gain on sale of
property, plant and
equipment - 1 - 427
Changes in financial
liabilities
recognized at fair
value - - 20 -
Gain on renegotiated
debt - 17,805 - 17,805
Financing expenses (1,485) (2,292) (2,924) (4,553)
----------------------------------------------------------------------------
Income before income
taxes 756 16,349 452 15,783
Income tax expense (566) (1,224) (399) (1,076)
----------------------------------------------------------------------------
Net income for the
period $ 190 $ 15,125 $ 53 $ 14,707
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income per share
/ unit
Basic $ 0.01 $ 0.69 $ 0.00 $ 0.66
Diluted $ 0.01 $ 0.27 $ 0.00 $ 0.28
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted-average
number of shares /
units
Basic 23,852,148 21,935,051 23,495,536 22,144,756
Diluted 24,210,904 60,937,580 24,390,748 61,147,285
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Tree Island Steel Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of Canadian dollars, unaudited)
Three Months Ended June
30 Six Months Ended June 30
2013 2012 2013 2012
----------------------------------------------------------------------------
Cash flows from
operating
activities
Net income for the
period $ 190 $ 15,125 $ 53 $ 14,707
Adjustments for:
Depreciation 724 753 1,444 1,521
Changes in
financial
liabilities
recognized at
fair value - - (20) -
Gain on sale of
property, plant
and equipment - (1) - (427)
Amortization and
write-off of
deferred
financing 15 - 31 -
Gain on
renegotiated
debt - (17,805) - (17,805)
Net finance
costs 1,470 2,292 2,893 4,553
Deferred income
tax expense 549 1,339 370 1,182
Fair value
change on
Phantom Units - 5 - 11
Exchange
revaluation on
foreign
denominated
debt 379 441 605 (124)
Working capital
Adjustments:
Accounts
Receivable 1,101 4,196 (8,425) (3,712)
Inventories (17) (2,513) (1,665) (4,158)
Accounts payable
and accrued
liabilities (2,320) (148) 1,275 768
Prepaid expenses 71 - 1,170 -
Income and other
taxes 17 (115) 29 (106)
Other (630) (200) (892) 1,258
----------------------------------------------------------------------------
Net cash provided by
(used in) operating
activities 1,549 3,369 (3,132) (2,332)
----------------------------------------------------------------------------
Cash flows from
investing
activities
Proceeds on
disposal of
property, plant
and equipment - 2 - 472
Purchase of
property, plant
and equipment (59) (80) (274) (209)
----------------------------------------------------------------------------
Net cash (used in)
provided by
investing
activities (59) (78) (274) 263
----------------------------------------------------------------------------
Cash flows from
financing
activities
Repayment of
Senior Term Loan (125) 5,000 (250) 5,000
Repayment of long-
term debt (359) (5,619) (745) (6,217)
Conversion of
Warrants - - 171 -
Interest paid (759) (765) (1,537) (1,536)
Normal course
issuer bid - (57) - (262)
(Repayment)
advance on Senior
Revolving
Facility (375) (933) 5,821 5,431
----------------------------------------------------------------------------
Net cash (used in)
provided by
financing
activities (1,618) (2,374) 3,460 2,416
----------------------------------------------------------------------------
Effect of exchange
rate changes on
cash 28 16 44 2
----------------------------------------------------------------------------
(Decrease) increase
in cash (100) 933 98 349
Cash, beginning of
period 2,569 3,268 2,371 3,852
----------------------------------------------------------------------------
Cash, end of period $ 2,469 $ 4,201 $ 2,469 $ 4,201
----------------------------------------------------------------------------
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Contacts: Tree Island Steel Ltd. Nancy Davies, Chief Financial
Officer (604) 523-4587ndavies@treeisland.com www.treeisland.com
Tree Island Steel (TSX:TSL)
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