Arriscraft International Income Fund
TSX : AIN.UN

Arriscraft International Income Fund

August 15, 2005 17:18 ET

Arriscraft International Income Fund Announces Second Quarter 2005 Results

CAMBRIDGE, ONTARIO--(CCNMatthews - Aug. 15, 2005) - Arriscraft International Income Fund ("Arriscraft" or the "Fund")(TSX:AIN.UN) announced today its results for the three and six-month periods ended June 30, 2005.

Compared to the same periods in 2004, consolidated sales declined 18% in the second quarter of 2005 and 14% in the first six months of 2005.

Sales in Canada were down 30% to $8.2 million in the second quarter and 20% to $17.4 million year-to-date. These declines were due primarily to a decrease in single-detached housing starts in Ontario and Quebec markets that account for the bulk of Arriscraft's Canadian residential business. According to Canada Mortgage and Housing Corporation, single-detached housing starts in Ontario and Quebec declined by 13% and 12%, respectively, for the six-month period to the end of June 2005 compared with the same period last year. Arriscraft's lower Canadian sales to the residential market in the second quarter are also attributable to a carryover of dealer inventories purchased during the first quarter of 2005 when a number of Arriscraft's Canadian dealers increased inventories in anticipation of a strong spring building season. However, a particularly cold and harsh winter combined with lower single-detached housing starts caused these inventories to take longer than anticipated to clear the system.

Sales in the United States in the quarter, net of exchange rate changes, rose 6% compared to last year due primarily to the introduction of new products and the benefits of a growing US distribution network for Arriscraft Products. But for the depreciation of the US dollar, which reduced sales for the quarter by $567,000 compared to the 2004 exchange rate equivalent, reported United States sales would have shown an increase of 11% in the quarter. For the first six months of 2005, United States sales were $15.6 million, net of exchange rate changes, unchanged from the same period in 2004.

The decline in consolidated sales in the second quarter and first six months of 2005 resulted in a reduction in adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) to $1.9 million in the second quarter from $3.3 million last year, and to $3.8 million in the first six months of 2005 from $6.4 million in 2004. The net loss in the second quarter of 2005 was $1.4 million compared with net earnings of $0.8 million in the same quarter of 2004.

As announced on July 27, 2005, subsequent to the end of the second quarter the Fund determined that it did not comply with certain financial covenants under its bank credit facilities. As part of a new refinancing package designed to address current business conditions and enhance Arriscraft's operating flexibility going forward, Arriscraft has: (i) entered into an agreement to replace its $16 million secured term debt facility held by certain Canadian chartered banks with a new $16 million subordinated unsecured exchangeable debenture provided by the former owner of the business; and (ii) renegotiated the terms of its operating line with its existing Canadian banks to better suit the nature of Arriscraft's business. This refinancing is scheduled to close on August 31, 2005. By entering this agreement, the former owner expressed its support for the Company and its products and ability to build upon its long history as a leading supplier of residential and architectural stone.

On July 27, 2005, the Fund suspended the previously announced August 15 distribution to Unitholders as well as distributions on both the subordinated exchangeable LP units of the LP held by the vendor of the Arriscraft business sold to the Fund at its initial public offering and payments to the President and Chief Executive Officer and other eligible members of senior management under the discretionary payment plan for management. The Board of Trustees of the Fund has now confirmed that the August 15 distribution will not be made and has further determined to suspend monthly cash distributions. It is the intention of the Board of Trustees to resume cash distributions by the Fund at a prudent and sustainable rate during 2006.

CEO and President, Randy White was quoted, "While financial and operating results in the second quarter and first six months of 2005 were disappointing, we do not believe they are representative of Arriscraft's underlying value and long-term prospects. Despite the largely external market related factors that have negatively affected our performance so far in 2005, Arriscraft remains a viable, cash producing business in a cyclical industry."

Further he added "Going forward, we will continue to build on our strong market presence, extensive and supportive dealer network, broad and unique product line, and our experienced management team to further enhance our position in our current markets, expand into new geographic markets, and grow our business by capitalizing on the increase in production capacity that was added in 2004. In addition, management is reviewing all costs, including production rationalization, to determine where expenses can be reduced and efficiencies realized to match current levels of business. We will assess working capital and future cash requirements in order to maximize cash flow and improve operating performance, and we will examine all product and geographic markets to determine the greatest and most immediate opportunities to grow Arriscraft's sales."



Financial Highlights:

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Period Ended June 30, 2005 Three Months Six Months
(in $'000 except per Unit amounts)
Revenue 17,717 33,063
Adjusted EBITDA 1,937 3,792
Net Income (Loss) (1,385) (2,459)
Net Income (Loss) per Unit
(basic and diluted) $(0.198) $(0.351)
Distributable Cash 744 1,423
Distributable Cash per Unit $0.106 $0.203
Cash Distributions Declared 2,102 4,204
Cash Distributions Paid and Declared
per Unit $0.300 $0.600
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Conference Call

Management will conduct a conference call to discuss its results on August 16, 2005 at 11 am EDT. Interested parties may dial (416) 406-6419 or toll free at (888) 575-8232. The conference call will also be broadcast over Arriscraft's website at www.arriscraft.com. Please call or log in 10 minutes prior to the call. The telephone numbers to listen to the conference call after it is completed (Instant Replay) are (416) 695-5800 or (800) 408-3053. Please enter the passcode 3158946# when instructed. The Instant Replay will be available until midnight, August 23, 2005. The conference call will also be archived on Arriscraft's web site.

Arriscraft International Income Fund

The Fund owns the Arriscraft International manufactured stone, brick and natural stone masonry products business conducted through Arriscraft International LP, Arriscraft International LLC and certain affiliates in Canada and the United States. Arriscraft is the leading producer of manufactured stone masonry products in Canada and the United States. These products are produced using Arriscraft's proprietary The Natural Edge® manufacturing process and offer the aesthetic and physical benefits of natural stone combined with the strength, simplicity of construction and cost-effectiveness of traditional masonry. Arriscraft also produces brick and natural stone masonry products and distributes its masonry products across Canada and most of the United States.

Certain statements in this press release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund or Arriscraft, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties are more fully discussed in the Fund's regulatory filings available at www.sedar.com.

The Fund uses earnings before interest, taxes, depreciation and amortization ("EBITDA") to measure its financial performance. "Adjusted EBITDA" is determined by making adjustments to EBITDA for certain items that Management believes do not affect Arriscraft's cash flow. 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 EBITDA, Adjusted EBITDA and Distributable Cash is set out in Management's Discussion and Analysis of the Fund for the three and six-month periods ended June 30, 2005.

The Fund's Consolidated Financial Statements for the three and six-month periods ended June 30, 2005, including Management's Discussion and Analysis, are available on the Fund's web site and at www.sedar.com.

Contact Information

  • Arriscraft International Limited Partnership
    Randy White
    President and CEO
    519-653-3275