Arriscraft International Income Fund

Arriscraft International Income Fund

March 07, 2007 22:08 ET

Arriscraft International Income Fund Announces Fourth Quarter and Year End 2006 Results

CAMBRIDGE, ONTARIO--(CCNMatthews - March 7, 2007) - Arriscraft International Income Fund ("Arriscraft" or the "Fund") (TSX:AIN.UN) today released its financial results for the three months and year ended December 31, 2006.


- Sales increase 13.5% on solid growth in both Canada and US

- Adjusted EBITDA(i) rises 27.8%

- Distributable cash increases 67.0%

- Monthly cash distributions reinstated during third quarter

- $0.265 special year-end cash distribution declared

- Expansion of Georgia facility approved

Financial Results

Excluding the non-cash items set out below, 2006 net income increased by $3.5 million compared to 2005. The Fund's net income for the fourth quarter of 2005 included a goodwill impairment charge of $6.4 million. There was no impairment charge in 2006. Furthermore, the Fund's net income for the fourth quarter of 2005 included foreign exchange and foreign currency contract losses of $0.1 million compared to foreign exchange and foreign currency contract losses of $1.8 million in the same period of 2006, as the U.S. dollar strengthened relative to the Canadian dollar. For the full year, foreign exchange and foreign currency contract losses totaled $1.7 million in 2006 compared to gains of $1.4 million in 2005, resulting in a year-over-year change of $3.1 million.

Consolidated fourth quarter and 2006 financial highlights are summarized below (in $ thousands, except per unit amounts):

Three Months Twelve Months
Ended December 31 Ended December 31
2006 2005 2006 2005
---- ---- ---- ----

Sales $19,279 $17,486 $79,226 $69,783
Gross Profit 9,355 8,584 38,641 32,289
% 48.5% 49.1% 48.8% 46.3%
Net Income (Loss) (1,633) (6,502) (259) (7,107)
Adjusted EBITDA(a) 3,415 2,173 11,273 8,823
Distributable Cash 2,541 1,244 8,006 4,794
Per Unit(b) $0.294 $0.144 $0.927 $0.555
Cash Distributions
Declared 2,593 NIL 3,084 4,204
Per Outstanding Unit $0.370 NIL $0.440 $0.600

(i) see definition below.

(a) "Adjusted EBITDA" removes the following non-cash items from earnings before interest, taxes, depreciation and amortization: (i) the non-controlling interest in the Fund's income or loss for the period, and (ii) all foreign exchange gains and losses.

(b) Per unit calculations assume the conversion of all restricted, subordinated Management Units into Units.

In spite of housing start declines in several of Arriscraft's key markets, consolidated sales in the fourth quarter of 2006 reached $19.3 million, a 10.3% increase over levels in the same period last year, led by strong gains in Canada. For the year, the combined effect of focused sales efforts on both sides of the border, investments made in new U.S. sales personnel and marketing materials, the continued strength of the commercial markets in the U.S. and the ability of the Fund to increase sales in the important southern Ontario market resulted in higher sales in both Canada and the U.S. Total consolidated sales of $79.2 million in 2006 represented an increase of 13.5% over 2005. A slight shift in sales mix towards higher value-added products, combined with the year's higher sales, contributed to a 19.7% improvement in gross profit margins which more than offset the 11.0% year-over-year increase in selling, general and administrative expenses incurred in support of the Fund's growth initiatives. Adjusted EBITDA rose by 27.8% to $11.3 million for the year, up from $8.8 million in 2005. Excluding a non-cash, non-recurring charge of $1.0 million related to an inventory valuation adjustment made in 2004 that was added back to the 2005 calculation thereof, Adjusted EBITDA increased by 43.4% in 2006 over 2005. Distributable cash in 2006 increased by 67.0% to $8.0 million ($0.927 per Unit prior to reserves), up from $4.8 million ($0.555 per Unit) in 2005.

In light of the year's improved financial performance and other relevant factors, the Trustees of the Fund reinstituted monthly cash distributions in September, 2006 at a rate of $0.035 per unit. In addition, the Trustees of the Fund declared a special year-end distribution of $0.265 per unit payable to Unitholders of record as of December 29, 2006.

Dave Boles, President & CEO, commented: "We were pleased with our operating and financial performance in 2006 as, despite softness in certain markets, our unique products and leading customer service and support translated into solid growth across each of our major product lines and markets. Looking ahead, we anticipate that our evolving strategies will continue to deliver growth in sales and cash flow over the long term."

Georgia Plant Expansion:

On November 7, 2006 the Fund announced that the Board of Trustees had approved the expansion of Arriscraft's Georgia manufacturing facility. Management believes this expansion will provide the necessary production capacity to further support Arriscraft's traditional U.S. commercial business while accelerating its expansion into the U.S. residential market.

As detailed in the Management's Discussion and Analysis for the third quarter, 2006, a number of benefits are expected to result from the expansion, including increased product line diversification, increased geographic diversification, enhanced market proximity, improved manufacturing efficiencies, reduced exposure to foreign currency fluctuations and an attractive return on investment.

Capital costs for the Georgia plant expansion project are presently estimated at $8.5 million, of which approximately $5.0 million to $6.0 million is expected to be invested in 2007. The project will be financed primarily from the Fund's internal cash flow after all working capital and current cash distribution needs have been met. As provided for in the constating documents of the Fund and those of its direct and indirect subsidiary entities, cash reserves were taken in 2006 by the Fund's U.S. and Canadian operating entities to provide a portion of the internal cash flow which will be allocated to finance the expansion. Further reserves will be taken during 2007 and 2008, as necessary, to provide the funding necessary to complete this expansion.

Mr. Boles commented: "Our Georgia facility is located in the heart of North America's strongest housing and masonry market, one in which demographic shifts favouring the construction of retirement residences in warmer climates are expected to continue driving residential construction activity. Even a modest increase in our share of this market should result in a meaningful increase in our revenues in the years ahead."

Arriscraft International Income Fund

The Fund owns the Arriscraft International manufactured stone, brick and natural stone masonry products business conducted through Arriscraft International Limited Partnership, Arriscraft International LLC and certain affiliates in Canada and the United States. Arriscraft produces manufactured stone masonry products in Canada and the United States using its proprietary The Natural Edge ® manufacturing process. Arriscraft also produces brick, cast stone and natural stone masonry products and distributes its masonry products across Canada and most of the United States.

The Fund's Consolidated Financial Statements for the year ended December 31, 2006 and Management's Discussion and Analysis are available on the Fund's web site at and on SEDAR at

This press release contains forward-looking statements. The statements that are not historical facts contained in this press release are forward-looking statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Examples of such statements include the anticipated costs of the Georgia expansion and the possible effects thereof as well as expectations of growth in sales and cash flow. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the successful completion of the Georgia plant expansion on schedule and within budget; the ability of the Fund to implement its programs for growth and production enhancements; level of activity in the residential and commercial construction markets and the economy generally; consumer interest in the Fund's products, including demand that is sufficient to absorb the Fund's increasing production volume; competition; foreign exchange rates; and anticipated and unanticipated costs. While the Fund anticipates that subsequent events and developments may cause the Fund's views to change, the Fund specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the Fund's views as of any date subsequent to the date of this press release. Although the Fund has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect the Fund. Additional factors are noted in Management's Discussion and Analysis of the Fund for the quarter and year ended December 31, 2006 under "Risks and Uncertainties".

"Adjusted EBITDA" is determined by making adjustments to earnings before interest, taxes, depreciation and amortization ("EBITDA") for certain items that Management believes do not affect Arriscraft's cash flow, principally unrealized foreign exchange gains and losses and the non-controlling interest in the Fund's consolidated gains and losses. EBITDA and Adjusted EBITDA are not recognized measures under Canadian generally accepted accounting principles ("GAAP"); however, Management believes EBITDA and Adjusted EBITDA are useful supplemental measures to net earnings as they provide investors with an indication of cash available for distribution prior to debt service, capital expenditures and income taxes. "Distributable cash" is not a measure recognized under GAAP and does not have a standardized meaning prescribed by GAAP. Management believes distributable cash is a relevant measure of the ability of the Fund to earn and distribute cash returns to Unitholders. A reconciliation of cash provided by operating activities to distributable cash is set out in Management's Discussion and Analysis of the Fund for the quarter and year ended December 31, 2006.

Contact Information

  • Arriscraft International Limited Partnership
    David Boles
    President and CEO
    (519) 653-3275