Arctic Glacier Income Fund
TSX : AG.UN

Arctic Glacier Income Fund

August 14, 2006 21:13 ET

Arctic Glacier Posts Record Second Quarter Results

Acquisitions in California, New York, Wisconsin Fuel Gains

WINNIPEG, MANITOBA--(CCNMatthews - Aug. 14, 2006) - The Arctic Glacier Income Fund (TSX:AG.UN) today announced record results for the three months ended June 30, 2006.



Highlights

- Increased sales by $13.2 million or 28%
- Increased EBITDA by $5.5 million or 36%
- Increased earnings by $2.6 million or 41%
- Increased distributable cash by $4.5 million or 39%
- Acquired initial four of six companies comprising California Ice,
the largest packaged ice enterprise in the state
- Acquired Happy Ice of Fairport, New York
- Completed construction of new production plant near Milwaukee
- Opened new distribution center near Philadelphia


"Arctic Glacier's growth initiatives since mid-2005 powered all of the Fund's principal metrics to record highs in the second quarter of 2006," said Robert Nagy, President and CEO of Arctic Glacier Inc., the Fund's operating company. "During the quarter we also continued to make progress rationalizing and integrating operations acquired in the Northeastern U.S., Michigan and Wisconsin."

The most significant event during the quarter was the acquisition of California Ice. The US$190 million acquisition, announced May 9, is the largest transaction in the company's history. The first closing on May 25 completed the acquisition of four of the six companies comprising California Ice, with the remaining two companies acquired in the final closing subsequent to the second quarter on August 8.

In addition, Arctic Glacier completed the acquisition of Happy Ice LLC of Fairport, New York on June 15. The company is the leading provider of packaged ice in upstate New York, and the transaction further consolidates Arctic Glacier's market leadership throughout the northeastern U.S.

"Arctic Glacier's acquisitions in California and New York, as well as in Wisconsin last September, have greatly enlarged our scale of operations, set new performance benchmarks and enhanced unitholder value," said Keith McMahon, Executive Vice President and Chief Financial Officer of Arctic Glacier. "The second-quarter results clearly indicate the accretive nature of the acquisitions and point to higher results expected in the third quarter."

During the second quarter Arctic Glacier continued to rationalize and integrate operations. Construction was completed on a new production facility near Milwaukee, Wisconsin and a new distribution center was opened north of Philadelphia, Pennsylvania.

Second Quarter Financial Review

Sales in the second quarter of 2006 totaled $60.5 million, an increase of $13.2 million or 28% from the same period in 2005. The increase was primarily attributable to recent acquisitions completed by the Fund.

Sales in previously serviced markets moved up by $2.5 million or 6% from the second quarter of last year, partly as a result of increased volumes and more favorable pricing. These sales improvements were partially offset by the stronger Canadian dollar, which reduced sales in previously serviced markets by $3.6 million. For the first six months of 2006, sales advanced 23% over 2005 to $75.1 million.

EBITDA during the quarter was $20.5 million, an increase of $5.5 million or 36% from the same period last year. Of the total increase, California Ice, Hometown Ice and Happy Ice contributed $6.5 million, while EBITDA for previously serviced operations increased by $0.2 million or 2% over last year's levels. These gains were partly offset by the stronger Canadian dollar, which reduced EBITDA by $1.2 million. The first six months of 2006 saw EBITDA jump by 62% to $16.2 million.

Earnings for the quarter totaled $8.9 million or $0.30 per unit, compared to $6.3 million or $0.16 per unit, for the same period in 2005. For the half year, the total earnings were $4.6 million, an increase of $4.0 million over 2005. Earnings per unit moved up to $0.16 from $0.03 in the first six months of last year.

Accretive acquisitions resulted in a 39% increase in distributable cash, to $16.2 million during the quarter. On a per-unit basis that was $0.54, compared to $0.50 in the second quarter of 2005. The first half of 2006 saw distributable cash increase to $9.5 million or $0.33 per unit from $3.8 million or $0.16 per unit last year.

The Fund declared distributions to unitholders totaling $8.5 million during the quarter, up 33% from 2005. That equates to $0.28 per unit for the second quarter in both years. The Fund's current monthly distribution rate of $0.0917 per unit, set in March 2005, equates to an annualized distribution rate of $1.10 per unit.

The Fund expects to continue generating sufficient cash in 2006 to exceed the current distribution rate.

Financial Position

The Fund had net long-term debt (excluding convertible debentures) at June 30, 2006 of $139.7 million, resulting in a net debt to trailing 12-month EBITDA ratio of 2.1 to 1, down from 3.3:1 last year. These ratios reflect an increase to trailing EBITDA of $19.0 million ($6.9 million for the 12 months ended June 30, 2005) to give effect to the contribution of acquisitions and foreign currency option gains. Arctic Glacier expects to maintain the net debt to trailing EBITDA ratio to levels within the Fund's internal guideline of 2.25:1.

At June 30, 2006 the Fund had $54.4 million of credit available under a revolving term facility.

Strong Outlook

Arctic Glacier's growth strategy continues to achieve positive results. Strategic acquisitions have opened up new market areas and added to coverage of existing markets. Rising distributable cash per unit confirms the accretive nature of these acquisitions and underlines the effectiveness of the Fund's strategic direction.

As new expansion possibilities are investigated, post-acquisition gains are being achieved through ongoing rationalization and integration of operations. Arctic Glacier made significant progress during the first six months of 2006, and these initiatives will continue for the balance of the year and in 2007. During the course of these activities, the Fund will actively seek to reduce costs and enhance productivity growth by improving production processes, distribution networks and administrative infrastructure.

Arctic Glacier is a strong and competitive force across all its markets. Acquisitions have added to Arctic Glacier's leading market position, enabled operating synergies and created opportunities for continued expansion. As rationalization and integration measures proceed, management will continue to strategically examine opportunities to build further value for unitholders.

Arctic Glacier will discuss second quarter 2006 results during a conference call with a live audio webcast for investors and analysts on Tuesday, August 15 at 11 a.m. (EDT). To access the simultaneous webcast, please visit 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 35 production plants and 50 distribution facilities across Canada and the northeast, central and western United States, servicing more than 68,000 retail accounts.

Arctic Glacier Income Fund trust units are listed on the Toronto Stock Exchange under the trading symbol AG.UN. There are 32.6 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 measures that are not recognized by Canadian generally accepted accounting principles (GAAP) and do not have standardized meanings prescribed by GAAP. EBITDA and distributable cash should not be construed as alternatives to earning, 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, 2006 and 2005 and December 31, 2005 (unaudited)
June 30, June 30, December 31,
(thousands) 2006 2005 2005
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ASSETS
Current assets
Cash $ 4,882 $ - $ 6,313
Accounts receivable 33,577 21,297 8,569
Inventories 12,347 7,494 6,012
Prepaid expenses 4,279 3,263 2,381
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55,085 32,054 23,275

Property, plant and equipment 155,034 123,717 119,847
Investments 515 - -
Other assets 8,776 3,359 2,714
Intangible assets 127,862 24,973 24,782
Goodwill 170,333 107,851 106,899
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$ 517,605 $ 291,954 $ 277,517
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LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ - $ 9,133 $ -
Accounts payable and accrued
liabilities 39,168 17,720 9,269
Distributions payable to
unitholders 2,989 2,145 2,557
Current portion of payable
to vendors of acquired
assets 1,618 - 1,686
Current obligations under
capital leases - 13 -
Principal due within one
year on long-term debt 1,155 520 400
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44,930 29,531 13,912

Payable to vendors of
acquired assets 8,591 - 1,686
Long-term debt 143,405 116,404 70,743
Convertible debentures 89,999 - -
Future income taxes 4,733 6,156 7,920

Unitholders' equity
Capital contributions 297,019 202,212 249,747
Contributed surplus 775 624 723
Equity portion of
convertible debentures 10,161 - -
Cumulative translation
adjustment (23,957) (15,719) (20,782)
Accumulated deficit (58,051) (47,254) (46,432)
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225,947 139,863 183,256
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$ 517,605 $ 291,954 $ 277,517
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ARCTIC GLACIER INCOME FUND
Interim Consolidated Statements of Operations
Three and six months ended June 30, 2006 and 2005 (unaudited)

Three Months Six Months
---------------------------------------------------------------------
---------------------------------------------------------------------
(thousands, except per
unit amounts) 2006 2005 2006 2005
---------------------------------------------------------------------
Sales $ 60,464 $ 47,275 $ 75,126 $ 61,084
Cost of sales, selling,
general and administration
expenses 39,926 32,189 58,957 51,087
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Earnings before the
undernoted 20,538 15,086 16,169 9,997
Amortization 5,507 4,517 10,114 8,970
Interest 2,494 2,157 3,594 3,619
Acquisition integration
expenses 173 187 287 479
Loss (gain) on disposal
of property, plant and
equipment (115) 24 (126) 4
Loss (gain) on foreign
exchange options (464) 231 (273) 361
Debt settlement costs 751 - 751 -
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Earnings (loss) before
income taxes 12,192 7,970 1,822 (3,436)

Income tax expense
Current 258 138 340 349
Future (reduction) 2,989 1,500 (3,113) (4,410)
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3,247 1,638 (2,773) (4,061)
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Earnings for the period $ 8,945 $ 6,332 $ 4,595 $ 625
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Earnings per unit --
basic and diluted $ 0.30 $ 0.27 $ 0.16 $ 0.03
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ARCTIC GLACIER INCOME FUND
Interim Consolidated Statements of Accumulated Deficit
Three and six months ended June 30, 2006 and 2005 (unaudited)

Three Months Six Months
---------------------------------------------------------------------
---------------------------------------------------------------------
(thousands) 2006 2005 2006 2005
---------------------------------------------------------------------
Accumulated deficit,
beginning of period $ (58,458) $ (47,152) $ (46,432) $ (35,135)
Earnings for the period 8,945 6,332 4,595 625
Distributions declared (8,538) (6,434) (16,214) (12,744)
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Accumulated deficit,
end of period $ (58,051) $ (47,254) $ (58,051) $ (47,254)
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ARCTIC GLACIER INCOME FUND
Interim Consolidated Statements of Cash Flows
Three and six months ended June 30, 2006 and 2005 (unaudited)

Three Months Six Months
---------------------------------------------------------------------
(thousands) 2006 2005 2006 2005
---------------------------------------------------------------------
Cash from (used in):
Operating activities
Earnings for the period $ 8,945 $ 6,332 $ 4,595 $ 625
Adjustments for:
Amortization 5,507 4,517 10,114 8,970
Accretion of convertible
debenture principal and
payable to vendors of
acquired assets 160 - 160 -
Non-cash portion of debt
settlement costs 751 - 751 -
Loss (gain) on disposal
of property, plant and
equipment (115) 24 (126) 4
Unit-based compensation 20 56 52 290
Unrealized loss (gain) on
foreign exchange options (411) 196 (220) 326
Future income taxes 2,989 1,500 (3,113) (4,410)
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Funds from operations 17,846 12,625 12,213 5,805
Changes in working
capital items 2,593 (7,821) 340 (10,997)
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20,439 4,804 12,553 (5,192)
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Investing activities
Additions to property,
plant and equipment (8,328) (4,321) (12,383) (8,732)
Proceeds from disposal of
property, plant and
equipment 456 95 527 207
Additions to other assets (7,551) (4) (7,551) (212)
Acquisition of business
operations (196,991) - (197,266) -
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(212,414) (4,230) (216,673) (8,737)
---------------------------------------------------------------------
Financing activities
Proceeds from long-term
debt 57,664 - 73,742 2,318
Principal repayments on
long-term debt (83) (131) (327) (265)
Principal payments under
capital lease obligations - (12) - (24)
Payments of amounts due
to vendors (1,621) - (1,621) -
Convertible debentures
issued 100,000 - 100,000 -
Units issued 47,094 273 47,272 490
Cash distributions paid (8,108) (6,432) (15,782) (12,682)
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194,946 (6,302) 203,284 (10,163)
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Foreign exchange gain
(loss) on cash held in
foreign currency (719) (27) (595) 204
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Increase (decrease) in
cash 2,252 (5,755) (1,431) (23,888)
Cash (bank indebtedness),
beginning of period 2,630 (3,378) 6,313 14,755
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Cash (bank indebtedness),
end of period $ 4,882 $ (9,133) $ 4,882 $ (9,133)
---------------------------------------------------------------------
---------------------------------------------------------------------

Supplementary cash flow information

Interest paid $ 1,487 $ 1,724 $ 2,702 $ 2,599
Income taxes paid 259 138 340 349
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The net present value of the portion of the purchase price or additional consideration on acquisitions of business operations satisfied by the issuance of deferred consideration in the amount of $8,485 (2005 - $nil) has been excluded from the financing and investing activities.



ARCTIC GLACIER INCOME FUND
Interim Schedule of Distributable Cash
Three and six months ended June 30, 2006 and 2005 (unaudited)

Three Months Six Months
---------------------------------------------------------------------
(thousands, except per
unit amounts) 2006 2005 2006 2005
---------------------------------------------------------------------
Cash from operating
activities $ 20,439 $ 4,804 $ 12,553 $ (5,192)
Adjustments:
Changes in working
capital items (2,593) 7,821 (340) 10,997
---------------------------------------------------------------------
17,846 12,625 12,213 5,805
Less sustaining capital
expenditures, net of
dispositions (1,687) (1,001) (2,668) (2,054)
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Distributable cash $ 16,159 $ 11,624 $ 9,545 $ 3,751
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Weighted average number
of units 29,817.7 23,384.0 28,863.1 23,371.9
Distributable cash per
unit $ 0.54 $ 0.50 $ 0.33 $ 0.16

Distributions declared $ 8,538 $ 6,434 $ 16,214 $ 12,744
Distributions declared
per unit $ 0.28 $ 0.28 $ 0.55 $ 0.55
Distributions declared
per unit (annualized) $ 1.10 $ 1.10 $ 1.10 $ 1.09
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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