Arctic Glacier Income Fund
TSX : AG.UN

Arctic Glacier Income Fund

November 01, 2005 06:00 ET

Arctic Glacier Posts Record Third Quarter Results

WINNIPEG, MANITOBA--(CCNMatthews - Nov. 1, 2005) -

Acquisitions, return of favorable weather fuel 51% increase in distributable cash

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

Highlights:

- Increased sales 45% to new high of $73.6 million

- Increased EBITDA 56% to record $31.6 million

- Increased distributable cash 51% to record $28.6 million

- Increased distributable cash per unit to $1.19 from $0.81

- Increased earnings 48% to record $17.1 million

- Increased earnings per unit (basic and diluted) to $0.72 from $0.50

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

- Completed offering of 4.45 million trust units for net proceeds of $47.2 million

- Acquired ice products division of Hometown Inc. of Milwaukee, Wisconsin establishing Arctic Glacier as the market leader in Wisconsin.

"The Fund posted its best results ever during the third quarter," said Robert Nagy, President and CEO of Arctic Glacier Inc., the Fund's operating company. "Strategic acquisitions were the principal driver behind the improvement, as well as a return to more favorable weather conditions this summer."

"The successful integration of the acquisitions completed in late 2004 expanded Arctic Glacier's scale of operations and established new highs for performance metrics," said Keith McMahon, Executive Vice President and Chief Financial Officer of Arctic Glacier. "The results also demonstrate that the Fund is generating distributable cash that significantly exceeds the current level of distributions to unitholders."

Financial Review

Sales during the third quarter of 2005 increased by 45% or $23.0 million to an all-time record of $73.6 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. Also making a small initial contribution was the ice division of Hometown Inc. of Milwaukee, Wisconsin, that was acquired by Arctic Glacier on September 16, 2005. These acquisitions contributed $17.2 million to sales in the third quarter.

The Fund also benefited from a return to more favorable weather conditions this summer. The change was a significant improvement from unprecedented cold and rainy conditions that prevailed across most of North America during the same period in 2004. The impact is evident in financial results for the quarter when acquisitions completed over the previous year are excluded; the results show a 17% increase in sales in previously served markets for the third quarter of 2005 compared to the same quarter in 2004.

The improved sales were partly offset by the stronger Canadian dollar, which decreased the Canadian-dollar value of sales incurred in U.S. markets by $2.5 million during the third quarter as compared to 2004. For the first nine months of 2005, sales advanced 37% over 2004 to $134.7 million.

EBITDA, driven by the same factors as sales, increased by 56% in the third quarter of 2005 compared to 2004, to $31.6 million. In addition to $6.3 million being contributed by the Losquadro and Party Time operations, EBITDA from previously serviced markets was up by $6.1 million or 32%, largely due to improved weather conditions. For the first nine months of 2005, EBITDA increased 56% to $41.6 million compared to 2004.

Earnings for the third quarter of 2005 gained 48% to $17.1 million, which equated to $0.72 per unit (basic and diluted), up from $0.50 for the third quarter of 2004. Year-to-date earnings increased by 26% to $17.8 million, or $0.75 per unit, versus $0.60 in 2004. The improvement was largely due to the expanded scale of Arctic Glacier's operations.

Distributable cash, propelled by the larger scale of operations and vastly improved weather conditions, posted a 51% gain during the third quarter to $28.6 million as compared to 2004; on a per-unit basis, that amounted to $1.19 compared to $0.81 in 2004. For the first nine months of 2005, distributable cash increased 49% to $32.3 million or $1.37 per unit, up from $0.93 last year.

Financial Position

The Fund had total long-term debt at September 30, 2005 of $71.6 million, compared to $56.0 million at the same time last year, with the increase due to the acquisitions made over the last twelve months. The Fund had total working capital of $22.8 million, including $10.4 million of cash, at the end of the third quarter. This compares to working capital of $22.1 million one year ago.

The Fund's net debt to trailing 12-month EBITDA ratio at September 30, 2005 was 1.4:1, reflecting an increase to trailing EBITDA of $1.3 million to give effect to the contribution of acquisitions and foreign currency option gains. This ratio has improved from 1.7:1 at the same time in 2004, and is well within the Fund's internal guideline of 2.25:1.

Outlook

Arctic Glacier's record third quarter results dramatically demonstrate the benefits of the strategic acquisitions completed in the final quarter of 2004. The Fund's expansion in the New York City area and entry into the Michigan market, including the populous Detroit metro area, powered increases in performance metrics to record levels during the third quarter. In addition, the accretive nature of the initiatives is underlined by gains in per-unit results following completion of the acquisitions. The Fund's purchase of the assets of the ice division of Hometown Inc. in Wisconsin during the third quarter further expands the Fund's market reach and is expected to add another $10 million in annual sales.

As each acquisition is integrated into Arctic Glacier's operations, rationalization measures seek to maximize synergies and eliminate overlap and duplication. Typically, acquisitions reach optimum performance 18 to 24 months following acquisition. Meanwhile, operational costs are being reduced throughout the system and productivity growth is being encouraged by improvement of production processes, distribution networks and administrative infrastructure.

Going forward, the combination of recent accretive acquisitions, rationalization activities and the return to more favorable weather conditions is expected to generate new performance benchmarks for the fiscal year. The Fund is well capitalized and has a strong balance sheet. The Fund has a solid foundation that has been strengthened over the past year and will provide investors with secure and stable monthly distributions.

Arctic Glacier will discuss third quarter results for 2005 during a conference call with a live audio webcast for investors and analysts on Tuesday, November 1 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 26 production plants and 41 distribution facilities across Canada and the central, midwest and northeastern United States servicing more than 53,000 retail accounts.

Arctic Glacier Income Fund trust units are listed on the Toronto Stock Exchange under the trading symbol AG.UN. There are 27.9 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 September 30, 2005 and 2004 (unaudited)
and December 31, 2004 (audited)
September September December
(thousands) 30, 2005 30, 2004 31, 2004
---------------------------------------------------------------------
ASSETS
Current assets
Cash $ 10,351 $ 11,900 $ 14,755
Accounts receivable 20,649 13,860 7,845
Inventories 5,116 3,726 5,961
Prepaid expenses 2,439 2,539 2,180
------------------------------
38,555 32,025 30,741

Property, plant and equipment 122,267 94,046 120,717
Other assets 3,012 1,804 3,739
Intangibles 25,361 3,724 25,695
Goodwill 103,500 101,972 106,150
------------------------------
$ 292,695 $ 233,571 $ 287,042
------------------------------
------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 12,658 $ 7,648 $ 12,325
Distributions payable to
unitholders 2,555 2,081 2,083
Current obligations under
capital leases - 51 38
Principal due within one year
on long-term debt 493 190 514
------------------------------
15,706 9,970 14,960

Long-term debt 71,127 55,721 112,252
Future income taxes 13,453 7,568 10,426

Unitholders' equity
Capital contributions 249,596 201,508 201,721
Contributed surplus 664 285 334
Cumulative earnings 40,101 22,112 22,327
Cumulative distributions (77,054) (51,214) (57,462)
Cumulative translation
adjustment (20,898) (12,379) (17,516)
------------------------------
192,409 160,312 149,404
------------------------------
$ 292,695 $ 233,571 $ 287,042
------------------------------
------------------------------



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

Three Months Nine Months
---------------------------------------
(thousands, except ---------------------------------------
per unit amounts) 2005 2004 2005 2004
---------------------------------------------------------------------
Sales $ 73,584 $ 50,640 $134,668 $ 97,950
Cost of sales, selling,
general and administration
expenses 42,017 30,443 93,104 71,323
---------------------------------------
Earnings before the
undernoted 31,567 20,197 41,564 26,627
Amortization 4,475 2,939 13,445 8,839
Interest 2,117 455 5,736 1,171
Acquisition integration
charges 186 83 665 315
Loss (gain) on disposal
of property, plant
and equipment 53 (258) 57 (363)
Loss (gain) on foreign
exchange options (269) (380) 92 (901)
Non-recurring expenses - - - 109
---------------------------------------
Earnings before income taxes 25,005 17,358 21,569 17,457
Income tax expense
Current 119 450 468 1,389
Future 7,737 5,342 3,327 1,982
---------------------------------------
7,856 5,792 3,795 3,371
---------------------------------------
Earnings for the period $ 17,149 $ 11,566 $ 17,774 $ 14,086
---------------------------------------
---------------------------------------
Earnings per unit - basic
and diluted $ 0.72 $ 0.50 $ 0.75 $ 0.60
---------------------------------------



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

Three Months Nine Months
---------------------------------------
---------------------------------------
(thousands) 2005 2004 2005 2004
---------------------------------------------------------------------
Cumulative earnings,
beginning of period $ 22,952 $ 10,546 $ 22,327 $ 8,026
Earnings for the period 17,149 11,566 17,774 14,086
---------------------------------------
Cumulative earnings,
end of period $ 40,101 $ 22,112 $ 40,101 $ 22,112
---------------------------------------
---------------------------------------



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

Three Months Nine Months
---------------------------------------
---------------------------------------
(thousands) 2005 2004 2005 2004
---------------------------------------------------------------------
Cash from (used in):
Operating activities
Earnings for the period $ 17,149 $ 11,566 $ 17,774 $ 14,086
Adjustments for:
Amortization 4,475 2,939 13,445 8,839
Loss (gain) on disposal
of property, plant and
equipment 53 (258) 57 (363)
Unit-based compensation
expense 40 48 330 283
Unrealized loss (gain) on
foreign exchange options (216) 178 110 (269)
Future income taxes 7,737 5,342 3,327 1,982
---------------------------------------
Funds from operations 29,238 19,815 35,043 24,558
Changes in working capital
items 303 658 (10,694) (8,120)
---------------------------------------
29,541 20,473 24,349 16,438
---------------------------------------

Investing activities

Additions to property,
plant and equipment (1,896) (4,041) (10,628) (11,188)
Proceeds from disposal
of property, plant and
equipment 73 338 280 797
Additions to other assets (60) (35) (272) (274)
Additions to goodwill - (93) - (144)
Acquisitions of business
operations (8,456) (2,538) (8,456) (12,252)
---------------------------------------
(10,339) (6,369) (19,076) (23,061)
---------------------------------------

Financing activities
Proceeds from long-term
debt - 3,940 2,318 26,606
Principal repayments on
long-term debt (39,682) (51) (39,947) (159)
Principal payments
under capital lease
obligations (12) (18) (36) (414)
Units issued 47,385 223 47,875 603
Cash distributions paid (6,438) (6,239) (19,120) (18,704)
---------------------------------------
1,253 (2,145) (8,910) 7,932
---------------------------------------

Foreign exchange loss
on cash held in foreign
currency (971) (534) (767) (441)
---------------------------------------
Increase (decrease) in cash 19,484 11,425 (4,404) 868
Cash (bank indebtedness),
beginning of period (9,133) 447 14,755 11,032
---------------------------------------
Cash, end of period $ 10,351 $ 11,900 $ 10,351 $ 11,900
---------------------------------------
---------------------------------------

Supplementary cash flow
information
Interest paid $ 3,055 $ 550 $ 5,654 $ 1,279
Income taxes paid 119 450 468 1,389
---------------------------------------



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

Three Months Nine Months
---------------------------------------
---------------------------------------
(thousands, except per
unit amounts) 2005 2004 2005 2004
---------------------------------------------------------------------
Cash from operating
activities $ 29,541 $ 20,473 $ 24,349 $ 16,438
Adjustments:
Changes in working
capital items (303) (658) 10,694 8,120
---------------------------------------
29,238 19,815 35,043 24,558
Less sustaining capital
expenditures, net of
dispositions (668) (857) (2,722) (2,917)
---------------------------------------
Distributable cash $ 28,570 $ 18,958 $ 32,321 $ 21,641
---------------------------------------
---------------------------------------

Weighted average number
of units 23,937 23,321 23,562 23,302
Distributable cash per unit $ 1.19 $ 0.81 $ 1.37 $ 0.93
---------------------------------------
---------------------------------------

Distributions declared $ 6,848 $ 6,241 $ 19,592 $ 18,709
Distributions declared
per unit $ 0.28 $ 0.27 $ 0.82 $ 0.80
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
    www.arcticglacierinc.com