Tree Island Steel Ltd. (TSX:TSL)(TSX:TSL.DB) -
Q3 2013 versus Q2 2012 Financial Highlights:
-- Volumes up by 21.1% at 29,345 tons
-- Revenue increases by 14.8% to $39.0 million
-- Gross Profit at $3.9 million or 10.0% of revenues
-- EBITDA(2) increases by 55.3% to $1.6 million
Tree Island Steel Ltd. ("Tree Island" or the "Company") (TSX:TSL)(TSX:TSL.DB)
announced today its financial results for the three and nine month periods ended
September 30, 2013(1).
For the three-month period ended September 30, 2013, revenues increased to $39.0
million versus $34.0 million during the third quarter in 2012. Volumes also
increased by 21.1% in the third quarter to 29,345 tons, primarily due to
increasing demand for industrial and construction products in the Company's
markets. Gross profit continued to strengthen in the quarter, amounting to $3.9
million, representing an 11.7% improvement when compared to $3.5 million in the
corresponding period in 2012. Gross margin decreased slightly to 10.0% from
10.3%, along with gross profit per ton, which decreased to $133 per ton, from
$144 per ton in the same period in 2012. These decreases were more than offset
by the increase in the volume experienced in the quarter, and were a result of
market pressure on prices and a focus to grow volume in key markets. These
strategies resulted in EBITDA increasing by 55.3% to $1.6 million, or $53 per
ton, compared to $1.0 million and $41 per ton, respectively, during the
corresponding period in 2012. The improvements in revenues, volumes, and EBITDA
are the result of ongoing focus on profitable growth, cost management and
operational efficiencies.
For the nine-month period ended September 30, 2013, revenues amounted to $117.7
million on 86,107 tons, compared to $117.6 million on 80,825 tons during the
same period in 2012. The higher revenues in 2013 primarily reflect increased
volumes particularly in the Industrial and commercial construction market
segments. The growth in volume was partially reduced by price adjustments that
were in line with corresponding raw material cost reductions, coupled with
product mix changes and competitive factors in certain business lines. Gross
profit increased to $13.5 million at a margin of 11.5%, compared to $11.7
million or 10.0%, while gross profit per ton also increased to $157 per ton
versus $145 per ton in the corresponding period in 2012. During the period,
EBITDA increased by 32.0% to $6.2 million versus $4.7 million during the
corresponding period last year.
"The third quarter and year-to-date financial results are indicative of our
success in remaining focused on our ongoing priorities such as cost management
and operational efficiencies, while growing revenues by leveraging Tree Island's
brand and quality where we can ultimately realize profitable growth," said Dale
R. MacLean, President and CEO of Tree Island Steel. "We continue to see strength
and momentum in demand building up in some of our key end markets in the U.S.,
which combined with our internal priorities leads us to maintain a cautiously
optimistic view in the near to mid-term."
Amar S. Doman, Chairman of Tree Island Steel noted, "I am pleased to see key
metrics continuing to move in the right direction with revenues and profits
increasing on a year-over-year basis. Tree Island is perfectly positioned to
benefit from, and service the demand in any of its growing and recovering end
markets."
Summary of Results
Three Months Ended Nine Months Ended
September 30 September 30
($000's except for tonnage and
per unit amounts, unaudtied) 2013 2012 2013 2012
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Sales Volumes - Tons 29,345 24,242 86,107 80,825
Sales $ 39,003 $ 33,962 $ 117,690 $ 117,581
Cost of sales (34,379) (29,697) (101,990) (103,564)
Depreciation (728) (778) (2,172) (2,299)
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Gross profit 3,896 3,487 13,528 11,718
Selling, general and
administrative expenses (3,074) (3,267) (9,482) (9,306)
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Operating income 822 220 4,046 2,412
Foreign exchange gain (loss) (23) 163 109 75
Gain (loss) on sale of
property, plant and
equipment (42) 3 (42) 430
Gain on sale of subsidiary 231 - 231 -
Changes in financial
liabilities recognized at
fair value (8) (727) 12 (727)
Gain on renegotiated debt - - - 17,805
Financing Expenses (1,476) (1,422) (4,400) (5,975)
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Income (loss) before income
taxes (496) (1,763) (44) 14,020
Income tax recovery (expense) 453 (228) 54 (1,304)
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Net (Loss) Income (43) (1,991) 10 12,716
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Operating income 822 220 4,046 2,412
Add back depreciation 728 778 2,172 2,299
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EBITDA(a) 1,550 998 6,218 4,711
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Foreign exchange gain (loss) (23) 163 109 75
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EBITDA including foreign
exchange 1,527 1,161 6,327 4,786
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Net (Loss) Income (43) (1,991) 10 12,716
Add back significant non-cash
items
Non-cash financing expenses 723 634 2,087 3,313
Non-cash (gain) loss on
renegotiated debt - - - (17,805)
Changes in financial
liabilities recognized at
fair value (8) 727 (12) 727
Deferred income tax expense (438) 224 (68) 1,407
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Adjusted net income (loss)(a) 234 (406) 2,017 358
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Per share / unit
Net (loss) income per share /
unit - basic (0.00) (0.09) 0.00 0.57
Net (loss) income per share /
unit - diluted (0.00) (0.09) 0.00 0.27
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Per ton
Gross profit per ton 133 144 157 145
EBITDA per ton 53 41 72 58
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As at As at
September December
30, 31,
Financial position 2013 2012
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Total assets $ 84,639 $ 81,102
Total non-current financial
liabilities $ 29,977 $ 29,790
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(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 Q3 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)
September 30 December 31
2013 2012
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Assets
Current
Cash 2,114 2,371
Accounts receivable 18,153 11,984
Inventories 32,807 32,732
Prepaid expenses 1,422 2,200
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54,496 49,287
Property, plant and equipment 29,968 31,592
Other non-current assets 175 223
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84,639 81,102
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Liabilities
Current
Senior Revolving Facility 14,299 10,785
Accounts payable and accrued liabilities 8,863 9,649
Income taxes payable 814 1,346
Other current liabilities 104 83
Fair value of convertible instruments 275 312
Current portion of long-term debt 1,834 1,748
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26,189 23,923
Convertible Debentures 16,315 15,634
Senior Term Loan 3,917 4,292
Long-term debt 9,563 9,639
Finance Lease 42 87
Other non-current liabilities 415 449
Deferred income taxes 1,905 1,973
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58,346 55,997
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Shareholders' Equity 26,293 25,105
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84,639 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, unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2013 2012 2013 2012
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Sales $ 39,003 $ 33,962 $ 117,690 $ 117,581
Cost of goods sold 34,379 29,697 101,990 103,564
Depreciation 728 778 2,172 2,299
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Gross profit 3,896 3,487 13,528 11,718
Selling, general and
administrative expenses 3,074 3,267 9,482 9,306
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Operating income 822 220 4,046 2,412
Foreign exchange (loss)
gain (23) 163 109 75
Gain (loss) on sale of
property, plant and
equipment (42) 3 (42) 430
Gain on sale of
subsidiary 231 - 231 -
Changes in financial
liabilities recognized
at fair value (8) (727) 12 (727)
Gain on renegotiated
debt - - - 17,805
Financing expenses (1,476) (1,422) (4,400) (5,975)
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Income before income
taxes (496) (1,763) (44) 14,020
Income tax recovery
(expense) 453 (228) 54 (1,304)
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Net (loss) income for
the period $ (43) $ (1,991) $ 10 $ 12,716
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Net (loss) income per
share / unit
Basic $ (0.00) $ (0.09) $ 0.00 $ 0.57
Diluted $ (0.00) $ (0.09) $ 0.00 $ 0.27
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Weighted-average number
of shares / units
Basic 23,888,215 21,846,714 23,627,867 22,293,598
Diluted 23,888,215 21,846,714 24,406,130 61,365,072
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Tree Island Steel Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of Canadian dollars, unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2013 2012 2013 2012
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Cash flows from operating activities
Net (loss) income for the period $ (43) $ (1,991) $ 10 $ 12,716
Adjustments for:
Depreciation 728 778 2,172 2,299
Changes in financial liabilities
recognized at fair value (8) 727 (12) 727
Gain on sale of property, plant
and equipment 42 (3) 42 (430)
Amortization and write-off of
deferred financing 16 - 47 -
Gain on renegotiated debt - - - (17,805)
Net finance costs 1,460 1,422 4,353 5,975
Deferred income tax (recovery)
expense (438) 224 (68) 1,407
Fair value change on Phantom
Units - 47 - 64
Exchange revaluation on foreign
denominated debt (243) (388) 362 (512)
Gain on sale of subsidiary (231) - (231) -
Working capital Adjustments:
Accounts Receivable 2,477 2,942 (5,948) (770)
Inventories 2,038 (3,237) 373 (7,395)
Accounts payable and accrued
liabilities (2,168) (444) (893) 324
Prepaid expenses (374) - 796 -
Income and other taxes (15) 3 14 (103)
Other (361) (74) (1,269) 1,149
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Net cash provided by (used in)
operating activities 2,880 6 (252) (2,354)
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Cash flows from investing activities
Proceeds from sale of subsidiary,
net of costs 439 - 439 -
Proceeds on disposal of property,
plant and equipment - 15 - 487
Purchase of property, plant and
equipment (108) (23) (382) (232)
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Net cash (used in) provided by
investing activities 331 (8) 57 255
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Cash flows from financing activities
Repayment of Senior Term Loan (125) (125) (375) 4,875
Repayment of long-term debt (367) (297) (1,112) (6,514)
Conversion of Warrants - - 171 -
Interest paid (749) (813) (2,286) (2,321)
Normal course issuer bid - (39) - (301)
(Repayment) advance on Senior
Revolving Facility (2,307) (47) 3,514 5,384
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Net cash (used in) provided by
financing activities (3,548) (1,321) (88) 1,123
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Effect of exchange rate changes on
cash (18) (28) 26 (26)
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Decrease in cash (355) (1,351) (257) (1,002)
Cash, beginning of period 2,469 4,201 2,371 3,852
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Cash, end of period $ 2,114 $ 2,850 $ 2,114 $ 2,850
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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
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