Arctic Glacier Income Fund
TSX : AG

Arctic Glacier Income Fund

August 15, 2005 21:00 ET

Arctic Glacier Posts Record Second Quarter Results

WINNIPEG, MANITOBA--(CCNMatthews - Aug. 15, 2005) -

Acquisitions fuel 44% increase in distributable cash

The Arctic Glacier Income Fund (TSX:AG) today announced results for the three months ended June 30, 2005.

Highlights:

- Increased sales 31% to all-time high of $47.3 million

- Increased EBITDA 43% to record $15.1 million

- Increased distributable cash 44% to second-quarter record of $11.6 million

- Increased earnings 14% to second-quarter record of $6.3 million

- Paid distributions to unitholders at newly increased rate of $1.10 per unit, annualized

"This was Arctic Glacier's best second quarter ever," said Robert Nagy, President and CEO of Arctic Glacier Inc., the Fund's operating company. "The combined effect of strategic acquisitions, rationalization of acquired operations and a return to more normal spring weather conditions pushed our top line to a record high and resulted in new second-quarter benchmarks for virtually all of our key operating metrics."

"Arctic Glacier's acquisitions in late 2004 significantly enlarged our scale of operations, improved our results and enhanced unitholder value," said Keith McMahon, Executive Vice President and Chief Financial Officer of Arctic Glacier. "The second-quarter results also clearly indicate the accretive nature of the acquisitions and point to the potential for higher results in the third quarter of 2005 compared to the same quarter in 2004."

Financial Review

Sales during the second quarter increased by 31% or $11.2 million to an all-time record of $47.3 million. The gain was driven mainly by acquisitions of packaged-ice producers in the U.S. in the final quarter of 2004. These included the Losquadro Ice Group in Arctic Glacier's key New York City market and the Party Time Ice group of companies in Michigan, including the densely populated city of Detroit.

In addition, the Fund saw a return to more normal weather conditions this spring, spurring higher sales of packaged ice in virtually all markets. That was a marked improvement from unprecedented cold and rainy conditions that prevailed across most of North America during the same period in 2004. The impact of the hotter, drier weather this year is evident in financial results when acquisitions completed over the previous year are excluded. The results show an 11% year-over-year sales increase in previously served markets.

Factors spurring higher sales were partly offset by the stronger Canadian dollar, which decreased the Canadian-dollar value of sales incurred in U.S. markets by $2.2 million during the second quarter. For the first six months of 2005, sales advanced 29% over 2004 to $61.1 million.

EBITDA, heavily influenced by the same factors as sales, increased by 43% in the second quarter of 2005 compared to 2004, to $15.1 million. In addition to $3.1 million being contributed in the second quarter by the recently acquired Losquadro and Party Time operations, EBITDA from previously serviced markets was up by $2.1 million or 22%, largely due to improved weather conditions. For the first half of 2005, EBITDA increased 55% to $10.0 million.

Earnings for the second quarter moved up 14% to $6.3 million, which equated to $0.27 per unit, up from $0.24 last year. For the six-month period, earnings decreased to $0.6 million from $2.5 million. This was due to a larger loss realized in the first quarter of 2005 than in 2004, owing to the expanded scale of operations during winter months, when operations normally run at a loss, along with increased amortization related to acquisitions. During the first quarter of each year, the Fund incurs approximately 25% of its fixed costs including amortization while incurring less than 10% of its revenue. Six-month earnings per share totaled $0.03 compared to $0.11 during the same period last year.

Distributable cash, propelled by the expanded scale of operations and improved weather conditions, posted a 44% gain during the second quarter to $11.6 million. On a per-unit basis that amounted to $0.50 compared to $0.35 in 2004. For the first half of 2005, distributable cash increased 40% to $3.8 million or $0.16 per unit, up from $0.12 last year.

Outlook

Second quarter results indicate Arctic Glacier is directly accruing benefits from strategic acquisitions completed in the final quarter of 2004. In particular, the Fund's expansion in the New York City area and entry into the Michigan market, including the populous Detroit metro area, have enlarged and strengthened Arctic Glacier's operational base. An increase in per-unit results in the wake of these acquisitions also underlines their accretive nature.

Operational gains are being effected through continued rationalization and integration of operations. Significant progress has been made during the first half of 2005 and these activities will continue for the balance of the year and into 2006. As this process continues, the Fund expects to achieve reduced costs and enhanced productivity growth by improving production processes, distribution networks and administrative infrastructure.

Arctic Glacier will continue to seek new avenues for prudent, measured growth. Management will proceed with further rationalization of operating assets to enhance operating synergies, raise market profile and enlarge the foundation for future expansion. The Fund will examine accretive acquisition opportunities that are strategic and where a significant regional presence can be achieved or enhanced.

Arctic Glacier will discuss second quarter results for 2005 during a conference call with a live audio webcast for investors and analysts on Tuesday, August 16 at 11 a.m. (EDT). To access the simultaneous webcast, log on to Arctic Glacier's website at www.arcticglacierinc.com. Please note the webcast allows participants to listen only.

Arctic Glacier Income Fund, through its operating company, Arctic Glacier Inc., is a leading producer, marketer and distributor of high-quality packaged ice in North America under the brand name of Arctic Glacier® Premium Ice. Arctic Glacier operates 23 production plants and 40 distribution facilities across Canada and the central, midwest and northeastern United States servicing more than 50,000 retail accounts.

Arctic Glacier Income Fund trust units are listed on the Toronto Stock Exchange under the trading symbol AG. There are 23.4 million trust units outstanding.

This news release contains forward-looking statements, which are subject to certain risks, uncertainties and assumptions. A number of factors could cause actual results to differ materially from the results discussed in these forward-looking statements, and there is no assurance that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as at the date of this news release, and the Fund assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances.

EBITDA and distributable cash are not recognized measures under Canadian generally accepted accounting principles (GAAP). EBITDA is defined as earnings before interest, taxes, amortization, non-recurring expenses and acquisition integration charges that are one-time costs unique to each individual acquisition. EBITDA is a performance metric used by many investors to provide an indication of cash available for distribution from ongoing operations prior to debt service, capital expenditures and income taxes and is often used to compare companies and income trusts on the basis of ability to generate cash from ongoing operations. Distributable cash is a performance metric used by many investors to summarize the funds available for distribution to unitholders in an income trust. Investors should be cautioned that EBITDA and distributable cash should not be construed as alternatives to net income, cash from operations or other financial measures determined in accordance with GAAP as indicators of the Fund's performance. The Fund's method of calculating EBITDA and distributable cash may differ from other companies and income trusts and, accordingly, may not be comparable to measures used by them.



ARCTIC GLACIER INCOME FUND
Interim Consolidated Balance Sheets
As at June 30, 2005 and 2004 (unaudited) and December 31, 2004
(audited)


June 30, June 30, December 31,
(thousands) 2005 2004 2004
---------------------------------------------------------------------
ASSETS

Current assets

Cash $ - $ 475 $ 14,755
Accounts receivable 21,297 14,876 7,845
Inventories 7,494 6,002 5,961
Prepaid expenses 3,263 3,773 2,180
-----------------------------------------
32,054 25,126 30,741


Property, plant and
equipment 123,717 94,522 120,717
Other assets 3,359 2,043 3,739
Intangibles 24,973 3,927 25,695
Goodwill 107,851 105,640 106,150
-----------------------------------------
$ 291,954 $ 231,258 $ 287,042
-----------------------------------------
-----------------------------------------

LIABILITIES AND UNITHOLDERS'
EQUITY

Current liabilities
Bank indebtedness $ 9,133 $ - $ -
Accounts payable and
accrued liabilities 17,720 11,441 12,325
Distributions payable
to unitholders 2,145 2,079 2,083
Current obligations
under capital leases 13 56 38
Principal due within one
year on long-term debt 520 205 514
-----------------------------------------
29,531 13,781 14,960


Obligations under capital
leases - 13 -
Long-term debt 116,404 54,742 112,252
Future income taxes 6,156 2,420 10,426


Unitholders' equity

Capital contributions 202,212 201,285 201,721
Contributed surplus 624 236 334
Cumulative earnings 22,952 10,546 22,327
Cumulative distributions (70,206) (44,973) (57,462)
Cumulative translation
adjustment (15,719) (6,792) (17,516)
-----------------------------------------
139,863 160,302 149,404
-----------------------------------------
$ 291,954 $ 231,258 $ 287,042
-----------------------------------------
-----------------------------------------


ARCTIC GLACIER INCOME FUND
Interim Consolidated Statements of Operations
Three and six months ended June 30, 2005 and 2004 (unaudited)



Three Months Six Months
-------------------------------------------
(thousands, except per
unit amounts) 2005 2004 2005 2004
---------------------------------------------------------------------
Sales $ 47,275 $ 36,088 $ 61,084 $ 47,310
Cost of sales,
selling, general
and administration
expenses 32,189 25,535 51,087 40,880
-----------------------------------------------
Earnings before
the undernoted 15,086 10,553 9,997 6,430
Amortization 4,517 3,037 8,970 5,900
Interest 2,157 403 3,619 716
Acquisition
integration
charges 187 129 479 232
Loss (gain) on disposal
of property, plant
and equipment 24 (3) 4 (105)
Loss (gain) on foreign
exchange options 231 (521) 361 (521)
Non-recurring
expenses - 102 - 109
-----------------------------------------------
Earnings (loss)
before income taxes 7,970 7,406 (3,436) 99
Income tax expense
Current 138 721 349 939
Future (reduction) 1,500 1,111 (4,410) (3,360)
-----------------------------------------------
1,638 1,832 (4,061) (2,421)
-----------------------------------------------
Earnings for the
period $ 6,332 $ 5,574 $ 625 $ 2,520
-----------------------------------------------
-----------------------------------------------
Earnings per unit -
basic and diluted $ 0.27 $ 0.24 $ 0.03 $ 0.11
-----------------------------------------------

ARCTIC GLACIER INCOME FUND
Interim Consolidated Statements of Cumulative Earnings
Three and six months ended June 30, 2005 and 2004 (unaudited)


Three Months Six Months
-------------------------------------------
(thousands) 2005 2004 2005 2004
---------------------------------------------------------------------

Cumulative earnings,
beginning of
period $ 16,620 $ 4,972 $ 22,327 $ 8,026
Earnings for the
period 6,332 5,574 625 2,520
-----------------------------------------------
Cumulative earnings,
end of period $ 22,952 $ 10,546 $ 22,952 $ 10,546
-----------------------------------------------
-----------------------------------------------


ARCTIC GLACIER INCOME FUND
Interim Consolidated Statements of Cash Flows
Three and six months ended June 30, 2005 and 2004 (unaudited)

Three Months Six Months
-------------------------------------------
(thousands) 2005 2004 2005 2004
---------------------------------------------------------------------

Cash from (used in):

Operating activities

Earnings for the
period $ 6,332 $ 5,574 $ 625 $ 2,520
Adjustments for:
Amortization 4,517 3,037 8,970 5,900
Loss (gain) on
disposal of property,
plant and equipment 24 (3) 4 (105)
Unit-based
compensation
expense 56 235 290 235
Unrealized loss
(gain)on foreign
exchange options 196 (447) 326 (447)
Future income
taxes 1,500 1,111 (4,410) (3,360)
-----------------------------------------------
Funds from
operations 12,625 9,507 5,805 4,743
Changes in
working capital
items (7,821) (8,043) (10,997) (8,778)
-----------------------------------------------
4,804 1,464 (5,192) (4,035)
-----------------------------------------------


Investing activities

Additions to property,
plant and equipment (4,321) (3,896) (8,732) (7,147)
Proceeds from
disposal of
property, plant
and equipment 95 227 207 459
Additions to
other assets (4) (224) (212) (239)
Additions to
goodwill - (40) - (51)
Acquisition of
business operations - (199) - (9,714)
-----------------------------------------------
(4,230) (4,132) (8,737) (16,692)
-----------------------------------------------
Financing activities

Proceeds from
long-term debt - 5,424 2,318 22,666
Principal repayments
on long-term debt (131) (52) (265) (108)
Principal payments
under capital
lease obligations (12) (317) (24) (396)
Units issued 273 209 490 380
Cash distributions
paid (6,432) (6,235) (12,682) (12,465)
-----------------------------------------------
(6,302) (971) (10,163) 10,077
-----------------------------------------------


Foreign exchange gain
(loss) on cash held
in foreign currency (27) (18) 204 93
-----------------------------------------------
Increase in bank
indebtedness (5,755) (3,657) (23,888) (10,557)
Cash (bank
indebtedness),
beginning of period (3,378) 4,132 14,755 11,032
-----------------------------------------------
Cash (bank
indebtedness), end
of period $ (9,133) $ 475 $ (9,133) $ 475
-----------------------------------------------
-----------------------------------------------
Supplementary cash
flow information

Interest paid $ 1,724 $ 435 $ 2,599 $ 729
Income taxes paid 138 722 349 940


ARCTIC GLACIER INCOME FUND
Interim Schedule of Distributable Cash
Three and six months ended June 30, 2005 and 2004 (unaudited)


Three Months Six Months
-------------------------------------------
(thousands, except per
unit amounts) 2005 2004 2005 2004
---------------------------------------------------------------------
Cash from (used in)
operating
activities $ 4,804 $ 1,464 $ (5,192) $ (4,035)

Adjustments:
Changes in working
capital items 7,821 8,043 10,997 8,778
-----------------------------------------------
12,625 9,507 5,805 4,743
Less sustaining
capital
expenditures,
net of dispositions (1,001) (1,409) (2,054) (2,060)
-----------------------------------------------
Distributable cash $ 11,624 $ 8,098 $ 3,751 $ 2,683
-----------------------------------------------
-----------------------------------------------


Weighted average
number of units 23,384 23,302 23,372 23,293
Distributable cash
per unit $ 0.50 $ 0.35 $ 0.16 $ 0.12
-----------------------------------------------
-----------------------------------------------

Distributions
declared $ 6,434 $ 6,236 $ 12,744 $ 12,468
Distributions
declared per unit $ 0.28 $ 0.27 $ 0.55 $ 0.54
Distributions
declared per unit
(annualized) $ 1.10 $ 1.07 $ 1.10 $ 1.07
-----------------------------------------------



Contact Information

  • Arctic Glacier Income Fund
    Robert Nagy
    President & CEO
    Toll free investor relations phone: 1-888-573-9237
    or
    Arctic Glacier Income Fund
    Keith McMahon
    Executive VP & Chief Financial Officer
    Toll free investor relations phone: 1-888-573-9237