GRANBY INDUSTRIES INCOME FUND
TSX : GBY.UN

GRANBY INDUSTRIES INCOME FUND

November 13, 2007 16:15 ET

Granby Industries Income Fund Announces/Third Quarter 2007 Results

GRANBY, QUEBEC--(Marketwire - Nov. 13, 2007) - Granby Industries Income Fund (TSX:GBY.UN)("the Fund") reported today its financial results for the third quarter ended September 30, 2007. The Fund holds an eighty per cent (80%) interest in Granby Industries Limited Partnership ("Granby" or "Granby LP").



Financial Highlights: Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
($000s, except per September September September September
unit amounts 30, 2007 30, 2006 30, 2007 30, 2006
and Units
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(unaudited) (unaudited) (unaudited) (unaudited)

Sales 12,669 15,996 30,754 38,682
EBITDA (1) 672 2,621 1,113 5,215
Goodwill and intangible
asset impairment charges - - 14,501 -
Net (loss) earnings (500) 922 (13,690) 1,294
Net (loss) earnings
per unit (0.07) 0.13 (1.86) 0.18

Standardized
distributable cash
(shortfall) from
operations (1) (1,255) 272 (7,116) (3,031)
Standardized
distributable cash
(shortfall) from
operations per Fund
unit (0.1702) 0.0369 (0.9648) (0.4109)
Cash distributed to
Fund unitholders - 2,074 - 6,222
Cash distributed per
Fund unit - 0.2812 - 0.8436

Units - Fund 7,375,644 7,375,644 7,375,644 7,375,644
outstanding - Granby
LP
Class B 1,843,911 1,843,911 1,843,911 1,843,911

(1) See discussion on Non-GAAP Measures


Outlook

The sales and profit decline during the first three quarters of 2007 have been disappointing and led to breaching certain financial performance covenants of our credit facilities at September 30, 2007. The broad market weakness we are seeing in the residential HVAC and plumbing sector brought on by softening housing activity in the US, particularly declining existing home sales, is dampening demand for our products as is falling consumer confidence. During this same time, both the US dollar decline of 15% against its Canadian counterpart and the competitive pressures in our coated copper tubing business, led to the erosion in our operating margins. Management continues to be engaged in reviewing all operating expenses and general and administrative costs to improve the efficiency of our organization and to facilitate a stronger ability to compete in a less active and/or price sensitive environment. We remain committed to improving results and competing in these difficult market conditions.

Management believes that despite the difficult residential HVAC market conditions, the prospects for the replacement storage tank market remain sound, with an installed base of approximately 11.5 million homes in North America using heating oil as the source of heating. At this time management does not foresee a significant loss of heating oil users as a result of conversions to alternative energy sources in its key markets. As previously disclosed, we expect the weakness in the North American residential HVAC market to continue this year and into fiscal 2008. Accordingly, we do not expect the Fund will resume distributions in 2007 or beyond.

As reported in the Fund's press release of November 1, 2007, Clarke Inc. ("Clarke') has advised the Fund that it has taken an assignment of a $15.75 million term loan provided to Granby LP by two Canadian chartered bank lenders. Notwithstanding the assignment to Clarke, Granby continues to be in breach of certain covenants under its credit facilities. Granby intends to renegotiate the terms of its credit facility with Clarke or seek alternative financing prior to the maturity of the existing credit facility on January 31, 2008. The Board of Trustees of the Fund established an independent committee to oversee the renegotiation process with Clarke and to consider other financing alternatives available to the Fund.

There can be no assurance that Granby will be able to do so at all or on favourable terms. A failure to comply with the obligations in the credit facilities could result in the acceleration of the relevant indebtedness under the credit facilities, in which case there can be no assurance that the assets of Granby would be sufficient to repay in full that indebtedness. In addition, the ability of Granby to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities when due is dependent on the successful completion of the actions taken or planned relating to the breach of certain covenants under its credit facilities.

Third Quarter Results

Consolidated sales for the third quarter of fiscal 2007 totalled $12.7 million compared to $16.0 million in the same quarter of 2006. Storage tank sales were $9.6 million in the quarter, down 25% from $12.8 million in the same quarter last year. The decrease resulted from lower shipments of storage tanks to both the US and Canada. The Fund sold approximately 33,700 tanks in the third quarter ended September 30, 2007 as compared to approximately 42,500 sold in the same period last year. Coated copper tubing sales for the third quarter of 2007 were $3.0 million compared with $3.2 million for the same period in 2006 with pounds shipped of 534,000 up approximately 9% from the same quarter of 2006. EBITDA for the three months ended September 30, 2007 was $0.7 million compared to $2.6 million for the three months ended September 30, 2006. The net loss in the third quarter of 2007 was $0.5 million compared to net earnings of $0.9 million in the same quarter of 2006.

"The softness in demand for the Fund's products that began in the second half of last year continued in the third quarter of 2007. Market conditions in the HVAC and plumbing industry continued to worsen as a result of the ongoing weakness in US housing activity," said Pierre Fournier, President and Chief Operating Officer.

Consolidated sales for the nine months ended September 30, 2007 were $30.8 million compared to $38.7 million for the same period in 2006. Storage tank sales for the first nine months of 2007 were $22.9 million compared to $28.7 million. Granby LP shipped approximately 78,100 tanks in the nine months of 2007 versus 95,200 shipped in the corresponding period last year. Sales at Kamco, the Fund's coated copper segment, for the nine months ended September 30, 2007 totalled $7.9 million compared with $10.0 million for the same period in 2006, representing a $2.1 million or 21% decrease. Pounds shipped in the first nine months of 2007 were approximately 1,428,000 down from 1,840,000 pounds shipped in the same period in 2006. EBITDA for the first nine months of 2007 was $1.1 million compared to $5.2 million for the same period last year. The net loss for the nine months ended September 30, 2007 was $13.7 million compared with net earnings of $1.3 million in the same period of 2006.

About Granby Industries Income Fund

Granby Industries is a leading North American manufacturer of high quality tanks for the residential and light commercial storage of heating oil and other petroleum-based products and is also a leading manufacturer of coated copper tubing. Granby has been operating in the heating oil storage tank industry for more than 50 years and its primary business is manufacturing replacement residential tanks. Granby Industries has operations in Granby, Quebec and Oakville, Ontario.

Non-GAAP Measures

Standardized distributable cash, standardized distributable cash from operations, standardized distributable cash per unit and maintenance capital expenditures are not measures recognized by GAAP, do not have standardized meanings prescribed by GAAP and therefore, may not be comparable to similar measures presented by other issuers. Standardized distributable cash from operations is determined by the Fund as cash flow from operating activities for the period less principal term debt repayments capital expenditures. The Fund believes that standardized distributable cash as a cash flow measure is a useful supplemental measure as it helps the readers to evaluate the ability of the Fund to generate cash that could be used for distributions and provides an indication of the amount of cash available for distribution to the Fund's Unitholders. Investors are cautioned, however, that standardized distributable cash is not meant to be an alternative to using cash flows from operating, investing and financing activities as a measure of the Fund's liquidity and cash flows.

References in this press release to the term "EBITDA" are to earnings before non-controlling interest, income taxes, amortization, interest expense, goodwill and intangible assets impairment charges and restructuring costs and to "EBITDA margin" are to the ratio of EBITDA for any period to sales for that period. EBITDA is not a recognized measure under GAAP in Canada and may not be comparable to similar measures used by other companies. The Fund believes that EBITDA is a useful supplementary measure of operating performance as it provides investors with an indication of cash available for distributions prior to debt service and capital expenditures. Investors are cautioned, however, that EBITDA should not replace net earnings or loss as an indicator of the Fund's performance, or cash flows from operating, investing and financing activities as a measure of the Fund's liquidity and cash flows. It is not intended to be representative of cash flow from operating activities or results from operations determined in accordance with GAAP or cash available for distribution.

Other

The Fund's publicly filed documents, including its interim financial statements and Management's Discussion and Analysis for the quarter ended September 30, 2007 are available at www.sedar.com.

Forward-Looking Statements

Certain information included in this press release may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information can be identified by the use of terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management's future outlook and anticipated events or results, and may include statements or information regarding the future growth, financial position, business strategy, goals, prospects and opportunities, results of operations, sales targets, budgets, projected costs, working capital requirements, capital expenditures, financial results, taxes and plans and objectives of or involving the Fund and Granby. Particularly, information regarding cash distributions is forward-looking information. Forward-looking statements reflect management's current beliefs and are based on information currently available to management.

Forward-looking information is based on certain factors and assumptions regarding, among other things, expected storage tank unit volumes, the price of raw materials and the average US/Canadian dollar exchange rate during the year. While Granby considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what we currently expect. These factors include, among other things, economic conditions, the seasonality of demand for Granby's products, the risk of increased heating oil costs, which could depress demand for heating oil storage tanks, commodity pricing volatility and foreign exchange risk, regulatory change, interest rate fluctuation, a decline in the housing and major consumer products markets, dependence on key suppliers, reliance on major customers and the risk of increased competition in the coated copper tubing market and the storage tank market.

You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While Granby may elect to, it is under no obligation and does not undertake to update this information at any particular time, except as required by law.

Contact Information

  • Granby Industries Income Fund
    Mr. Paul Antoniadis, CA
    Vice President, Finance & CFO
    450-378-2334 ext. 225