XS Cargo Income Fund
TSX : XSC.UN

XS Cargo Income Fund

May 12, 2006 08:30 ET

XS Cargo Income Fund Reports 2006 First Quarter Results

EDMONTON, ALBERTA--(CCNMatthews - May 12, 2006) - XS Cargo Income Fund (TSX:XSC.UN) (the "Fund") today announced its results for the 2006 first quarter. The Fund's consolidated interim financial statements and Management's Discussion and Analysis ("MD&A") can be found on XS Cargo's website at www.xscargo.com and or SEDAR at www.sedar.com.

For the 2006 first quarter, the Fund reported sales of $20.7 million; earnings before non-controlling interest of $1.4 million or $0.1185 per unit outstanding; net earnings of $0.7 million or $0.1185 per unit and EBITDA (1) of $2.2 million. Distributable cash (1) was $1.8 million or $0.15 per unit compared to distributions declared of $3.5 million or $0.29 per unit.

Michael McKenna, President and Chief Executive Officer of the Fund stated, "We are very pleased with our marked improvement in same store sales. With two new store openings completed and three more scheduled in the second quarter, we are poised for significant growth in earnings and distributable cash."

Highlights for the first quarter (2)

- First quarter sales of $20.7 million, up 18.3% from the first quarter of 2005.

- First quarter gross margin of $7.6 million, up 26.7% from the first quarter of 2005.

- Gross margin percentage of 36.8% compared to 34.2% for the first quarter of 2005.

- Earnings from operations of $2.2 million ($0.18 per unit), up 4.8% from the first quarter of 2005.

- Non-recurring expenses were incurred related to the consolidation of our Edmonton distribution facilities of $0.2 million ($0.02 per unit).

- Earnings from operations excluding non-recurring expenses of $2.4 million ($0.20 per unit), up 14.3% from the first quarter of 2005.

- One new store was opened during the last week of the quarter, in Sudbury, Ontario.

- Continued successful sales of two-year product replacement extended warranty plans ("PRPs"). During the six months since implementation, $1.3 million of PRPs were sold, however only $0.2 million has been recognized as revenue to date and approximately $0.1 million was recognized during the quarter. Revenue from PRP sales is deferred and recognized on a straight-line basis over the two-year terms of the PRPs.

- Distributable cash (1) of $0.15 per unit compared to distributions declared of $0.29 per unit. Due to the seasonal nature of our business, approximately 10 - 12% of our annual distributable cash (1) is generated in the first quarter. Since the Fund declares equal monthly distributions throughout the year, it is expected that distributable cash (1) will be below distributions declared in the first quarter.

Business of the Fund

The Fund commenced business operations on May 17, 2005, when it completed an initial public offering (the "IPO") of 6,106,000 trust units at a price of $10 per unit, for aggregate gross proceeds of $61,060,000. Concurrent with the closing of the IPO, the Fund acquired a 51% indirect interest in XS Cargo LP and XS Cargo LP acquired the net assets (the "Acquired Business") of Famous Brands (Edmonton) Inc. (the "Vendor"). XS Cargo LP operates 29 closeout retail stores in Alberta, British Columbia, Manitoba, Saskatchewan and Ontario.

(1) Non-GAAP Measures

References to "EBITDA" are to earnings before interest, income taxes, depreciation and amortization and references to "distributable cash" are to cash available for distribution to Unitholders in accordance with the distribution policies of the Fund. Management believes that, in addition to income or loss, EBITDA is a useful supplemental measure of performance and cash available for distribution before debt service, changes in working capital, capital expenditures and income taxes. Specifically, management believes that EBITDA is the appropriate measure from which to make adjustments to determine the distributable cash of the Fund. Distributable cash of the Fund is a measure generally used by open-ended trusts as an indicator of financial performance. As one of the factors that may be considered relevant by prospective investors is the cash distributed by the Fund relative to the price of the Units, management believes that distributable cash of the Fund is a useful supplemental measure that may assist prospective investors in assessing an investment in the Fund.

Earnings from operations have been calculated as described below. In the case of the Fund, earnings from operations have been derived by adding interest expense, amortization of property and equipment and intangible assets, unit-based compensation and non-controlling interest to net earnings for the period. In the case of the Vendor, earnings from operations have been derived by adding amortization expense, employee profit sharing plan contributions, interest expense, and income tax expense to net earnings (loss) for the period.

EBITDA, distributable cash and earnings from operations are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP. Investors are cautioned that EBITDA, distributable cash and earnings from operations should not replace net income or loss (as determined in accordance with GAAP) as an indicator of the Fund's performance, of its cash flows from operating, investing and financing activities or as a measure of its liquidity and cash flows. The Fund's methods of calculating EBITDA, distributable cash and earnings from operations may differ from the methods used by other issuers and may not be comparable to similar measures presented by other issuers.

(2) The Fund commenced business operations on May 17, 2005 after acquiring the business from the Vendor. For the purposes of the first quarter highlights, the results of operations of the Fund from January 1 to March 31, 2006 are compared to the unaudited results of operations of the Vendor from January 1 to March 31, 2005.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements. All statements other than statements of historical fact contained in this press release are forward-looking statements. You can identify many of these statements by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof. These forward-looking statements include statements with respect to the amount and timing of the payment of distributions of the Fund. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. Forward-looking statements are subject to risks, uncertainties and assumptions, including, but not limited to, those discussed elsewhere in the press release. There can be no assurance that such expectations will prove to be correct.

Some of the factors that could affect future results and could cause results to differ materially from those expressed in the forward-looking statements contained herein include, but are not limited to, those discussed under "Risk Factors" in the Fund's MD&A.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and, except as required by law, the Fund assumes no obligation to update or revise them to reflect new events or circumstances.

Contact Information

  • XS Cargo Income Fund
    Jeff Rootman
    Vice-President, Finance and Chief Financial Officer
    (780) 732-2112