Brampton Brick Limited
TSX : BBL.A

Brampton Brick Limited

March 24, 2009 17:58 ET

Brampton Brick Reports Results for the Fourth Quarter and Year Ended December 31, 2008

BRAMPTON, ONTARIO--(Marketwire - March 24, 2009) -

(All amounts are stated in thousands of Canadian dollars, except per share amounts, unless otherwise indicated.)

Brampton Brick Limited (TSX:BBL.A) today reported a loss for the year ended December 31, 2008 of $6,694, or $0.61 per Class A Subordinate Voting Share ("Class A share") and Class B Multiple Voting Share ("Class B share") outstanding, compared to consolidated net income of $3,519, or $0.32 per Class A share and Class B share outstanding in 2007. The aggregate weighted average number of Class A shares and Class B shares outstanding was 10,928,000 in 2008 and 10,836,000 in 2007.

The loss for the year is comprised of a loss from continuing operations of $6,339, or $0.58 per share, and a loss from discontinued operations of $355, or $0.03 per share. The major factors which impacted operating results from continuing operations in 2008 were:

i) a non-cash charge of $6,711 to write off the remaining carrying value of goodwill which, net of the related tax benefit recorded of $720, resulted in a net charge of $5,991, or $0.55 per share;

ii) a valuation allowance of $1,903, or $0.17 per share, recorded against future tax assets related to U.S. operations, and;

iii)significantly lower production volumes in both the Masonry Products and Landscape Products business segments which resulted in unabsorbed manufacturing expenses being charged against current period operations.

For the fourth quarter ended December 31, 2008, the Company recorded a loss from continuing operations of $8,716, or $0.80 per share, on a weighted average 10,937,000 Class A shares and Class B shares outstanding, compared to a loss from continuing operations of $12,833, or $1.18 per share, on a weighted average 10,841,000 Class A shares and Class B shares outstanding, for the fourth quarter in 2007.

These losses reflect net goodwill impairment charges, net of income taxes, of $5,991, or $0.55 per share, in 2008 and $13,068, or $1.21 per share, in 2007.

The loss for 2008 also reflects the valuation allowance of $1,903 recorded against the future tax asset pertaining to the U.S. operations.

Effective October 2, 2007, a 65% owned subsidiary of the Company completed the sale of substantially all of its medical waste business operations and assets. The sale of the remaining portion of this business was completed in 2008 through the sale of the 50% joint venture interest in Sharpsmart on April 21, 2008 and the disposal of the remaining interest in certain small quantity generator accounts effective September 1, 2008. Accordingly, operating results and cash flows of these components of the business have been classified as discontinued operations, as applicable, and comparative amounts have been reclassified to conform with the current year financial statement presentation.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2008

Net sales from continuing operations were $81,476 in 2008 compared to $82,352 in 2007. Net sales declined in the Masonry Products business segment by $966, or 1.6%, due to lower clay brick volumes and a small decrease in average net selling prices. In the Landscape Products business segment net sales declined by $773, or 3.6%, primarily due to lower volumes. Net sales from the new waste composting operations of Universal Resource Recovery Inc. ("Universal"), which commenced operations in October 2008, amounted to $863.

The increase in cost of goods sold from $50,706 in 2007 to $55,787 in 2008 reflected an increase in unabsorbed manufacturing expenses charged against operations as noted above, additional costs incurred in connection with the introduction of new concrete masonry products and costs of the new waste composting operations which accounted for $1,198 of the increase. These items are discussed in greater detail under the business segment results which follow.

The increase in selling, general and administrative expenses over 2007 was primarily due to higher selling expenses incurred in relation to new products in the Masonry Products business segment. Costs were also incurred in streamlining the sales order processing procedures and reorganizing the sales administration departmental structure. Higher expenses incurred in the new waste composting operations also accounted for some of the increase.

As a result of the above factors, operating income from continuing operations, before interest and other items, decreased from $10,643 in 2007 to $3,413 in 2008.

Interest on long-term debt increased by $584 to $1,322 primarily due to the new term bank loan of $17,000 to finance a portion of the construction costs of the new clay brick plant in Indiana and the Company's proportionate share, amounting to $7,500, of loans incurred by Universal to finance a portion of the construction costs of its waste composting plant in Welland.

Interest income in 2008 was primarily due to interest on the promissory note taken back on the sale of the medical waste assets and business operations in October 2007. Interest income in 2007 was primarily the result of interest earned on cash balances held to finance a portion of the Indiana clay brick plant construction costs.

The Company incurred a foreign currency exchange loss of $128 for the year compared to a loss of $1,515 in 2007. The exchange loss reported in 2007 related primarily to the impact of the strengthening in the relative value of the Canadian dollar versus the U.S. dollar on U.S. cash balances held during that period.

In 2007, other income included a gain of $533 on the disposal of certain equipment in connection with the outsourcing of the clay brick quarry operations in Brampton.

The Company performed its annual test for impairment of goodwill as at December 31, 2008. As a result of this test, management determined there was a decline in the estimated fair value of goodwill related to the Landscape Products business segment and, accordingly, the Company wrote off the remaining carrying value of $6,711. Net of the related income tax benefit of $720, this resulted in a net charge to the Consolidated Statement of Loss for 2008 of $5,991, or $0.55 per share. In 2007, the Company wrote down the carrying value of goodwill by $13,500, which net of income taxes resulted in a net charge to the Consolidated Statement of Income of $13,068, or $1.21 per share. Excluding these non-cash charges, the loss from continuing operations would have been $348, or $0.03 per share, in 2008, compared to income of $8,393, or $0.77 per share in 2007.

The Company owns properties in Quebec which are surplus to its requirements. Certain of these properties were sold during the year resulting in a gain of $267. Properties sold in 2007 generated a gain of $898.

In 2007 the Company disposed of its investment in common shares of Futureway Communications Inc. ("FCI") for cash proceeds of $688, which resulted in a gain in the same amount.

Operating results for 2008 reflect an income tax expense of $2,246 on a loss before income taxes of $3,992. In 2008, the Company has recorded a valuation allowance in the amount of $1,903 against the future tax asset related to U.S. operations. In addition, a future tax benefit of only $720 was recorded with respect to the $6,711 write off of goodwill. Similarly in 2007, operating results reflected an income tax expense of $2,524 on a loss before income taxes of $2,092 due, primarily, to a future tax benefit of only $432 being recorded with respect to the $13,500 write-down of goodwill.

The 2007 income tax provision reflected the benefit of a reduction in future income tax liabilities in the amount of $1,039 resulting from changes in future income tax rates which were substantively enacted.

The loss from discontinued operations in 2008 amounted to $355, or $0.03 per share, compared to net income from discontinued operations of $8,194, or $0.75 per share, in 2007. The loss in 2008 included a reduction of $375 to the principal amount of the promissory note taken back on the sale in 2007 to settle a dispute with the purchaser, a provision of $625 with respect to certain other expenditures which are expected to be incurred and a pre-tax gain of $255 on the sale of the Sharpsmart operations.

In 2007, the Company recorded a pre-tax gain for accounting purposes of $15,709 on the sale of the medical waste business operations. After deducting estimated income taxes and the non-controlling interests' 35% share of the net after-tax gain, the Company's share was $7,942, or $0.73 per share.

THREE MONTHS ENDED DECEMBER 31, 2008

Net sales from continuing operations were $14,268, a decrease of $1,740 from net sales of $16,008 in the fourth quarter of 2007. Sales volumes were lower in both the Masonry Products and Landscape Products business segments. Net sales of the new waste composting operations amounted to $706 in the fourth quarter of 2008.

The operating loss from continuing operations, before interest and other items, was $2,071 for the fourth quarter of 2008 compared to operating income of $22 for the fourth quarter of 2007.

Foreign currency exchange fluctuations resulted in a gain of $246 for the quarter compared to a gain of $183 for the corresponding period in 2007.

The sale of property in Quebec resulted in a gain of $131 in the fourth quarter of 2008 compared to $645 in 2007.

The sale of the medical waste business operations and assets on October 2, 2007 was reflected in last year's fourth quarter results.

In total, the loss for the quarter was $8,716, or $0.80 per share, compared to $5,048, or $0.47 per share, in 2007, including the net goodwill impairment charges of $5,991, or $0.55 per share, in 2008 and $13,068, or $1.21 per share, in 2007.

More detailed discussion with respect to each operating business segment follows:

MASONRY PRODUCTS

For the year ended December 31, 2008, net sales were $59,977 compared to $60,943 in 2007, representing a decline of $966, or 1.6%.

Lower clay brick shipments and a small decrease in average net selling prices caused the decrease in net sales. Sales volumes have been affected by the downturn in residential construction activity in both the Canadian and U.S. markets.

Operating income was $9,353 in 2008 compared to $15,278 in 2007. The negative impact of a 24% reduction in clay brick production volumes for the year ended December 31, 2008 compared to 2007 was the primary cause of the reduction in operating income. Lower production volumes resulted in a higher proportion of total manufacturing costs being charged against current period operations. Production volumes were lowered in 2008 to reduce inventories in anticipation of lower demand due to current economic conditions. The Company also incurred higher manufacturing costs in 2008 related to the testing and initial production of new concrete masonry products.

Higher distribution costs, due to an increase in trucking expenses and higher yard costs, also contributed to the decrease in operating income.

Selling, general and administrative expenses increased over 2007 as a result of expenditures incurred in connection with the introduction of new concrete masonry products, such as stone veneer, window sills and concrete brick.

Net sales for the fourth quarter decreased by $2,093, or 17.6%, from $11,872 in 2007 to $9,779 in 2008 primarily due to lower clay brick shipments which were offset, in part, by higher sales of new concrete masonry products.

For the fourth quarter of 2008, the Masonry Products business segment incurred an operating loss of $901 compared to operating income of $2,339 in 2007. The reasons for the decline are substantially the same as outlined above for the results for the year.

LANDSCAPE PRODUCTS

Net sales of the Landscape Products business segment were $20,636 for the year ended December 31, 2008 compared to $21,409 in 2007. The decline of $773 was due to lower sales in the U.S. caused by economic factors affecting the Company's U.S. market, primarily Michigan.

Significantly lower production volumes in 2008, to reduce inventories, and higher distribution costs resulted in an increase in cost of goods sold which in turn resulted in a higher operating loss in the current period.

A decrease in selling, general and administrative expenses partially offset the increase in cost of goods sold.

For the year ended December 31, 2008, the Landscape Products business segment incurred an operating loss of $5,271 compared to $4,249 in 2007.

Net sales for the fourth quarter of 2008 were $3,783 compared to $4,136 for the corresponding period in 2007 and the operating loss for the quarter was $965 compared to $2,194 in 2007.

Sales declined in both the Canadian and U.S. markets in the fourth quarter of 2008. Operating results for the quarter improved over the comparable prior year period due, in part, to improved production scheduling and other efficiencies which reduced manufacturing expenses. Almost all of the reduction in production volumes in this business segment occurred during the first three quarters of the year. Lower distribution costs and lower selling, general and administrative expenses also contributed to the improvement for the quarter.

OTHER OPERATIONS

Other operations include, among other things, the Company's 50% joint venture interest in Universal. This investment is accounted for using the proportionate consolidation method.

For the period of operation to December 31, 2008 the Company's proportionate share of net sales were $863 and the share of the operating loss was $666.

This operation had no sales in 2007. The Company's proportionate share of the loss incurred in 2007 totaled $386.

DISCONTINUED OPERATIONS

Discontinued operations represents the Company's former medical waste business operations previously operated by a 65% owned subsidiary, substantially all of which were sold on October 2, 2007. This subsidiary's 50% joint venture interest in Sharpsmart was sold on April 21, 2008 and its remaining interest in certain small quantity generator accounts were disposed of effective September 1, 2008. Operating results of these components of the business have been classified as discontinued operations and the prior year comparative amounts have been reclassified to conform with the current period financial statement presentation.

Net sales of discontinued operations to the date of sale in 2008 were $632 compared to $9,866 for the year ended December 31, 2007. The operating loss for the period of operations in 2008 was $119 compared to operating income of $534 for the year in 2007.

The sale of the medical waste business operations and assets in 2007 resulted in a pre-tax gain of $15,709. After deducting estimated income taxes of $3,490 and the 35% non-controlling interest in the after tax gain, the contribution to consolidated net income was $7,942, or $0.73 per share.

The loss from discontinued operations in 2008 includes a reduction of $375 in the principal amount of the promissory note taken back on the sale of the medical waste business operations and assets in October 2007 to settle a dispute with the purchaser in such transaction and a provision of $625 with respect to certain other expenditures which are expected to be incurred. These adjustments resulted in a net charge of approximately $473, or $0.04 per share, after deducting income taxes and the 35% non-controlling interest therein. As part of the settlement, the interest in certain small quantity generator accounts which had been retained as part of the sale of the interest in Sharpsmart were also transferred to the purchaser.

CASH FLOW

Cash flow provided by operating activities of continuing operations totaled $15,823 for the year ended December 31, 2008, an increase of $2,185 from cash flow of $13,638 provided for the year ended December 31, 2007.

Cash from operations prior to working capital changes was down $9,216, reflecting lower operating income in 2008 compared to 2007. A reduction in working capital items, including inventories ($4,547), accounts receivable ($1,743) and income taxes ($1,173) generated additional cash from operations in 2008 totaling $7,340, compared to an overall use of cash in 2007 of $4,954 to build working capital.

Cash utilized for purchases of property, plant and equipment totaled $48,266 in 2008 compared to $21,144 in 2007. Expenditures in 2008 included $34,521 pertaining to the Company's new clay brick plant under construction in Indiana compared to $15,748 in 2007. Expenditures in 2008 also included an amount of $9,341, being the Company's 50% share of expenditures incurred by Universal to construct its waste composting facility. In 2007, this amount was $748.

Other deferred costs incurred in 2008 included approximately $1,832 in connection with pre-operating costs for the Indiana clay brick plant during construction and in the testing and commissioning phase and $691 in relation to the Company's proposed new quarry site in Brampton.

Proceeds of $2,958 from the first instalment on the promissory note taken back on the sale of medical waste business operations and assets were received in October 2008.

Proceeds from the sale of land held for sale totaled $428 compared to $1,304 in the prior year. In 2007, proceeds from the disposal of equipment totaled $652 including the disposal of equipment in connection with the outsourcing of the clay brick quarry operations in Brampton. Proceeds from the sale of the investment in FCI in 2007 were $688.

During 2008, discontinued operations repaid advances totaling $715 to the parent company compared to $1,099 in 2007.

Term bank loans increased by $24,500. Of this amount, $17,000 represented financing of a portion of the costs of construction of the Indiana clay brick plant and $7,500 represented the Company's proportionate share of the term bank loan incurred by Universal for the construction of its waste composting facility.

Debt repayments, including the promissory note and other term loans, totaled $4,451 in 2008 compared to $4,580 in 2007.

A portion of the cash proceeds received from the sale of the medical waste business operations and assets, including the promissory note instalment received in the fourth quarter of 2008, was distributed by way of a cash dividend. The non-controlling interests' share of these distributions totaled $1,750 in 2008 and $350 in 2007.

Cash dividends of $0.10 per Class A share and $0.10 per Class B share were paid to shareholders on June 30 and December 31 in both 2008 and 2007.

In 2008, the Company purchased and cancelled 37,800 Class A shares for aggregate consideration of $365 under a Normal Course Issuer Bid. In 2007, 1,300 Class A shares were purchased and cancelled for aggregate consideration of $14.

Net cash provided by discontinued operations in 2007 included $9,832 cash proceeds on closing, less a $1,835 term loan repayment, advance repayments of $1,099 and other cash outflows of $465.

FINANCIAL CONDITION

The nature of the Company's products and primary markets dictates that its Masonry Products and Landscape Products business segments are seasonal. The Landscape Products business is affected to a greater degree than the Masonry Products business. As a result of this seasonality, bank operating advances are generally expected to increase through the first half of the year and decline through the second half of the year.

Furthermore, demand for both masonry and landscape products is cyclical and fluctuates in accordance with residential, commercial, industrial and institutional construction.

Current economic conditions are expected to result in a lower overall level of construction activity and reduced consumer spending in 2009 and the Company anticipates that demand for its products will be impacted accordingly. Consequently, production plans, manpower requirements and discretionary spending have been significantly reduced in order to minimize the impact on operating results and cash flows.

Operating plans will continue to be evaluated in light of economic conditions as these business segments move into the historical seasonal upswing in the second quarter of the year and will be further adjusted as circumstances dictate. This may include temporary plant shutdowns and further reductions in manpower.

As at December 31, 2008 and throughout the year, the Company was in compliance with the financial covenants under its credit facilities. However, based on the current economic environment, the Company recognized that it would be unable to comply with the existing covenants throughout fiscal year 2009 and is currently in discussions with its lender to amend the financial covenants to levels which are appropriate under the current economic circumstances. In the event the Company is unable to come to a satisfactory arrangement with the bank, the term loan, which is classified as a long-term obligation, would be subject to demand. The Company expects that it will be able to conclude on favourable arrangements that will allow it to maintain compliance with the proposed amended financial covenants throughout the coming year.

During the course of these discussions the lender has indicated that it will seek a reduction in the maximum availability under both the term loan and operating loan facilities. The Company may incur additional costs, higher interest rates or be subject to different terms as a result of the renegotiation of its credit facilities.

Total capital expenditures to be incurred in connection with the construction of a new brick plant in Indiana are estimated at approximately U.S. $53,000. A total of U.S. $46,125 had been expended to December 31, 2008. The balance is expected to be funded from future cash flows from operations and the unutilized portion of the Company's credit facilities.

Universal anticipates that it will require approximately $3,200 in 2009 to fund capital expenditures incurred to December 31, 2008 and additional expenditures in 2009 to complete construction. This amount is expected to be funded by Universal from cash on hand, future cash flows from operations and the unutilized balance of its operating credit facility.

Since the inception of its financing agreement in 2008, Universal has maintained compliance with the financial covenants thereunder and is expected to maintain compliance throughout the coming year.

OTHER

Certain statements contained herein constitute "forward-looking statements". Such forward-looking statements involve known and unknown risks, uncertainties and other factors, including, but not limited to, those identified under "Risks and Uncertainties" in the Company's 2007 Annual Report, which may cause actual results, performance or achievements of the Company to be materially different from any future result, performance or achievements expressed or implied by such forward-looking statements.

Brampton Brick is Canada's second largest manufacturer of clay brick and manufactures concrete paving stones, retaining walls, garden walls and enviro products in Canada and the U.S. under the Oaks Concrete Products trade name. The Company also manufactures a range of concrete masonry products including stone veneer, window sills and concrete brick. Products are used for residential construction and for industrial, commercial, and institutional building projects. Da Vinci Stone Craft Ltd., a wholly owned subsidiary, manufactures fireplace surrounds and accessory products. The Company also holds a 50% joint-venture interest in Universal Resource Recovery Inc., which commenced operations at its newly constructed waste composting facility in Welland, Ontario in October 2008.



Selected Financial Information

(Thousands of dollars,
except per share amounts) (unaudited)
----------------------------------------------------------------------------
Three months ended Year ended
CONSOLIDATED STATEMENTS December 31 December 31
OF INCOME (LOSS) 2008 2007 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net sales from continuing operations $ 14,268 $ 16,008 $ 81,476 $ 82,352
Cost of goods sold 10,517 11,245 55,787 50,706
Selling, general and administrative
expenses 3,420 2,700 13,446 12,480
Amortization 2,402 2,041 8,830 8,523
--------- -------- --------- --------
16,339 15,986 78,063 71,709

Operating income (loss) from
continuing operations before the
undernoted items (2,071) 22 3,413 10,643
Interest on long-term debt (490) (153) (1,322) (738)
Interest income (net) 85 209 415 558
Foreign currency exchange (gain) loss 246 183 (128) (1,515)
Foreign currency exchange gain on
cash flow hedges 6 33 5 209
Other income 21 2 69 665
--------- -------- --------- --------
(132) 274 (961) (821)
--------- -------- --------- --------

Income (loss) from continuing
operations before the following items (2,203) 296 2,452 9,822
--------- -------- --------- --------

Goodwill impairment (6,711) (13,500) (6,711) (13,500)
--------- -------- --------- --------

Gain on sale of property held for sale 131 645 267 898
--------- -------- --------- --------

Gain on sale of investment in
Futureway Communications Inc. - - - 688
--------- -------- --------- --------

Loss from continuing operations
before income taxes and
non-controlling interests (8,783) (12,559) (3,992) (2,092)

(Provision for) recovery of
income taxes
Current 390 (39) (1,871) (905)
Future (301) (164) (375) (1,619)
--------- -------- --------- --------
89 (203) (2,246) (2,524)
--------- -------- --------- --------
Loss from continuing operations
before non-controlling interests (8,694) (12,762) (6,238) (4,616)
--------- -------- --------- --------
Non-controlling interests (22) (71) (101) (59)
--------- -------- --------- --------
Loss from continuing operations (8,716) (12,833) (6,339) (4,675)
Net income (loss) from discontinued
operations - 7,785 (355) 8,194
--------- -------- --------- --------
Net income (loss) for the period $(8,716) $(5,048) $(6,694) $ 3,519
--------- -------- --------- --------
--------- -------- --------- --------
Net income (loss) per Class A and
Class B share
From continuing operations $ (0.80) $ (1.17) $ (0.58) $ (0.43)
--------- -------- --------- --------
--------- -------- --------- --------
For the period $ (0.80) $ (0.47) $ (0.61) $ 0.32
--------- -------- --------- --------
--------- -------- --------- --------
Weighted average Class A and
Class B shares outstanding (000's) 10,937 10,841 10,928 10,836

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Selected Financial Information

(Thousands of dollars) (unaudited)
----------------------------------------------------------------------------
Three months ended Year ended
CONSOLIDATED STATEMENTS December 31 December 31
OF CASH FLOWS 2008 2007 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash provided by (used for)
activities of continuing operations
Operating activities
Loss from continuing operations for
the period $ (8,716) $ (12,833) $ (6,339) $ (4,675)
Items not affecting cash and cash
equivalents
Amortization and accretion 2,414 2,052 8,879 8,569
Future income taxes 301 164 375 1,619
Non-controlling interests 22 71 101 59
Unrealized foreign currency exchange
(gain) loss 21 53 (313) 1,364
Gain on sale of property held for
sale (131) (645) (267) (898)
Loss (gain) on disposal of property,
plant and equipment 4 71 - (492)
Goodwill impairment 6,711 13,500 6,711 13,500
Gain on sale of investment in
Futureway Communications Inc. - - - (688)
Other 50 (39) 229 234
--------- ---------- --------- ---------
676 2,394 9,376 18,592

Changes in non-cash operating items
Accounts receivable 9,363 6,512 1,743 3,190
Inventories (759) (1,043) 4,547 (4,365)
Accounts payable and accrued
liabilities (3,196) (1,813) 86 (739)
Income taxes payable (net) (1,075) 82 1,173 (3,155)
Other 816 633 (209) 115
--------- ---------- --------- ---------
5,149 4,371 7,340 (4,954)
Payments of asset retirement
obligation (76) - (893) -
--------- ---------- --------- ---------
Cash provided by operating
activities of continuing operations 5,749 6,765 15,823 13,638

Investing activities
Purchase of property, plant and
equipment (6,069) (7,437) (48,266) (21,144)
Other deferred costs (2,523) (7) (2,523) (62)
Proceeds from promissory note 2,958 - 2,958 -
Proceeds from disposal of
property, plant and equipment 1 33 13 652
Proceeds from sale of property
held for sale 212 962 428 1,304
Proceeds from mortgage receivable 150 - 150 -
Proceeds from sale of investment
in Futureway Communications Inc. - - - 688
Inter-company advances repaid by
discontinued operations - 55 715 1,099
--------- ---------- --------- ---------
Cash used for investment activities
of continuing operations (5,271) (6,394) (46,525) (17,463)

Financing activities
Increase (decrease) in bank
operating advances 902 (170) 1,931 (2,555)
Increase in term bank loans 4,325 - 24,500 -
Repayment of promissory note and
term loans (4,162) (4,163) (4,451) (4,580)
Repayment of mortgage - - - (1,781)
Payments on obligations under
capital leases (97) (37) (277) (284)
Payment of dividends by
subsidiary to non-controlling
interests (1,050) (350) (1,750) (350)
Payment of dividends to
shareholders (1,093) (1,086) (2,189) (2,170)
Proceeds from exercise of stock
options - 115 634 127
Class A shares repurchased (26) (14) (365) (14)
--------- ---------- --------- ---------
Cash provided by (used for)
financing activities of continuing
operations (1,201) (5,705) 18,033 (11,607)

Net cash provided by discontinued
operations 560 6,830 490 6,433
--------- ---------- --------- ---------

Foreign exchange on cash held in
foreign currency 30 (162) 407 (1,587)
--------- ---------- --------- ---------

Increase (decrease) in cash and
cash equivalents (133) 1,334 (11,772) (10,586)

Cash and cash equivalents at the
beginning of the period 2,221 12,526 13,860 24,446
--------- ---------- --------- ---------

Cash and cash equivalents at the
end of the period $ 2,088 $ 13,860 $ 2,088 $ 13,860
--------- ---------- --------- ---------
--------- ---------- --------- ---------

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Selected Financial Information

(Thousands of dollars) (audited)
----------------------------------------------------------------------------

December 31 December 31
CONSOLIDATED BALANCE SHEETS 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 2,088 $ 13,860
Accounts receivable 5,691 7,433
Inventories 18,062 22,609
Income taxes recoverable 10 2,919
Future income taxes 40 85
Other current assets 988 988
Promissory note receivable, current 3,358 3,382
Assets of discontinued operations held for
sale - 538
----------- -----------
30,237 51,814

Property, plant and equipment (net) 107,158 97,756
Construction in progress 49,149 14,851
----------- -----------
156,307 112,607

Other assets
Goodwill - 6,711
Future income taxes 605 1,270
Promissory note receivable, long-term 3,244 6,449
Other 3,749 1,472
Assets of discontinued operations held
for sale - 917
----------- -----------
7,598 16,819
----------- -----------
$ 194,142 $ 181,240
----------- -----------
----------- -----------

LIABILITIES
Current liabilities
Bank operating advances $ 2,581 $ 650
Accounts payable and accrued liabilities 14,478 14,000
Income taxes payable 2,517 4,253
Long-term debt, current portion 4,137 4,684
Derivative financial instruments, current 834 1,606
Asset retirement obligation 245 375
Liabilities of discontinued operations
held for sale 730 822
----------- -----------
25,522 26,390

Long-term debt, less current portion 25,521 3,744

Derivative financial instruments, non-current 2,267 809

Future income taxes 6,552 7,513

Asset retirement obligation 496 673

Liabilities of discontinued operations held
for sale - 14
----------- -----------
60,358 39,143

Non-controlling interests 2,526 4,366

SHAREHOLDERS' EQUITY 131,258 137,731
----------- -----------
$ 194,142 $ 181,240
----------- -----------
----------- -----------

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Selected Financial Information

(Thousands of dollars) (audited)
----------------------------------------------------------------------------
Year ended Year ended
December 31 December 31
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at the beginning of the year $ 111,587 $ 110,246
Net income (loss) (6,694) 3,519
Premiums paid on repurchase of capital stock (215) (8)
Dividends (2,189) (2,170)
----------- -----------
Balance at the end of the year $ 102,489 $ 111,587
----------- -----------
----------- -----------

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(Thousands of dollars) (unaudited)
----------------------------------------------------------------------------

Three months ended Year ended
CONSOLIDATED STATEMENTS December 31 December 31
OF COMPREHENSIVE LOSS 2008 2007 2008 2007
----------------------------------------------------------------------------
Net income (loss) for the period $ (8,716) $ (5,048) $ (6,694) $ 3,519
Other comprehensive loss
Loss on cash flow hedges net
of taxes (932) (1,566) (878) (4,177)
--------- --------- --------- --------
Total comprehensive loss for the
period $ (9,648) $ (6,614) $ (7,572) $ (658)

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