CanWel Building Materials Group Ltd.
TSX : CWX.UN

CanWel Building Materials Group Ltd.

November 14, 2005 16:01 ET

CanWel Building Materials Income Fund reports results for the Three Months Ended September 30, 2005

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 14, 2005) -

NOT FOR RELEASE OR DISSEMINATION INTO THE UNITED STATES

CanWel Building Materials Income Fund (the "Fund") (TSX:CWX.UN) announced today record sales in the third quarter of $265 million compared to $169 million for the comparable period in 2004. Net earnings were $3.7 million(1), compared to $4.0 million in 2004. For the quarter, EBITDA(2) was $6.2 million, compared to $7.6 million for the comparable period last year. On an earnings per unit basis, net earnings for the third quarter were $0.11 per unit (3) compared to $0.16 for same period last year.

Highlights. Sales for the three months increased by 57 percent compared to the same period in 2004. British Columbia and Alberta posted strong revenue growth for the quarter. The Atlantic region also reported steady revenue growth while Ontario, Quebec and Manitoba revenue results were negatively impacted by a slight reduction in new home construction. A continued decrease in the average value of commodity products in the quarter compared to the same period last year negatively impacted sales across Canada. Despite continued lower average commodity product prices during the quarter, revenues were higher compared to the same period last year. We experienced strong revenue growth in lumber products in the face of an approximate 27 percent decrease in the average price for 2x4 lumber compared to the same period in 2004. However, revenue from panel products decreased as the average price for these products was down approximately 29 percent for the quarter versus the same period in 2004. Gross profit for the quarter was $25 million versus $17.6 million in the comparable period last year. Although gross margin increased, the decrease in the average value of commodity products had a negative impact on the gross margin dollars contributed within the quarter from the lumber and panel product families. Specialty and hardware sales increased 155 percent in the third quarter versus the prior period.

"Lumber and panel products represent approximately 45 percent of the Fund's revenues; the decline in the average value of these products negatively impacted the contribution margin the Fund achieved for the third quarter compared to the same period in 2004. During the third quarter of 2005, focus within Sodisco-Howden has been on restructuring and implementing new technology. Our integration efforts are ongoing and largely behind us," noted Tom Donaldson, President and CEO.

"I am pleased with the cost savings we have generated at Sodisco-Howden which have removed approximately $5 million in annualized costs. Additionally, with our banner strategy now clearly outlined with the recently announced strategic alliance with TruServ Canada and the subsequent rebranding of our hardware unit to CanWel Hardware, our focus is solely on distribution. The foregoing demonstrates our commitment to ensuring CanWel stands for excellence in distribution of building materials and hardware in Canada," stated Amar Doman, Chairman of the Board.

Selected financial information for the second quarter is set out below. The full text version of the unaudited interim financial statements are included in CanWel's third quarter report which is available on www.sedar.com or at www.canwel.com.

Please refer to www.sedar.com or www.canwel.com for the accompanying notes, which are an integral part of these financial statements.



CanWel Building Materials Income Fund
Consolidated Balance Sheets
(Unaudited)

---------------------------------------------------------------------
September 30, December 31,
(in thousands of 2005 2004
Canadian dollars) $ $
---------------------------------------------------------------------
Assets
Current assets
Accounts receivable
Trade 137,533 86,148
Other 1,968 2,533
Inventories 104,526 115,919
Prepaid expenses 1,877 2,712
Future income taxes 1,170 1,336
--------------------------------
247,074 208,648

Property, plant and equipment 43,943 40,414
Future income taxes 1,150 1,454
Intangible assets 11,904 10,996
Goodwill - 1,103
Other assets 3,818 3,772
--------------------------------
307,889 266,387
--------------------------------

Liabilities
Current liabilities
Bank indebtedness 8,115 10,832
Accounts payable and accrued
liabilities 89,444 79,173
Due to shareholder - 7,637
Distributions payable 2,740 -
Current portion of long-term debt 2,267 3,992
--------------------------------
102,566 101,634

Deferred gain 761 816
Long-term debt 88,155 89,684
Pensions and other
post-retirement benefits 2,066 3,385
Non-controlling interest - 9,034
--------------------------------

193,548 204,553
--------------------------------

Unitholders' Equity
Unitholders' Capital 143,011 -
Share Capital - 69,534
Contributed Surplus 1,637 878
Deficit (30,307) (8,578)
--------------------------------
114,341 61,834
--------------------------------
307,889 266,387
--------------------------------


CanWel Building Materials Income Fund
Consolidated Statements of Earnings
(Unaudited)

---------------------------------------------------------------------
Three months ended Nine months ended
(in thousands of September 30, September 30,
Canadian dollars, 2005 2004 2005 2004
except per unit/share
and unit/share amounts) $ $ $ $
(restated (restated
- note3) - note3)
---------------------------------------------------------------------
Sales 264,854 168,606 791,220 469,615
Cost of sales 239,899 150,994 717,347 421,504
------------------------------------------
24,955 17,612 73,873 48,111
------------------------------------------

Expenses
Distribution, selling
and administration 18,706 10,015 54,292 29,005
Sodisco integration costs - - 584 -
Trust reorganization costs - - 1,158 -
Stock-based compensation 361 348 1,184 528
Depreciation related to
business acquisition 194 - 581 -
Depreciation 1,105 389 2,794 1,202
Amortization of
intangible assets 333 - 1,001 -
Amortization of deferred
financing costs 89 - 161 -
------------------------------------------
20,788 10,752 61,755 30,735
------------------------------------------
Operating earnings
before the following 4,167 6,860 12,118 17,376
Interest expense 1,149 728 4,191 2,836
------------------------------------------
Earnings before
income taxes 3,018 6,132 7,927 14,540
------------------------------------------
Provision for
(recovery of) income taxes
Current 243 2,220 707 5,431
Future (884) (86) 1,673 134
------------------------------------------
(641) 2,134 2,380 5,565
------------------------------------------
Net earnings for
the period 3,659 3,998 5,547 8,975
------------------------------------------

Net earnings per unit
Basic 0.11 0.16 0.19 0.48
------------------------------------------
Diluted 0.11 0.16 0.19 0.48
------------------------------------------

Weighted average number
of units/shares outstanding
Basic 33,551,401 28,919,114
24,402,720 18,786,728
------------------------------------------
Diluted 33,735,313 29,239,415
24,596,182 18,886,292
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CanWel Building Materials Income Fund
Consolidated Statements of Cash Flow
(Unaudited)

Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
(in thousands of Canadian dollars) $ $ $ $
---------------------------------------------------------------------
Cash flows from operating
activities
Net earnings (loss) for the
period 3,659 3,998 5,547 8,975
Items not affecting cash
Depreciation 1,299 389 3,375 1,202
Future income taxes (884) (86) 1,673 134
Net decrease in pensions and
other post-retirement benefits (444) (237) (1,319) (607)
Amortization of intangible
assets 333 - 1,001 -
Amortization of deferred
financing costs 89 - 161 -
Amortization of deferred gain (19) (18) (55) (46)
Loss on disposal of property,
plant and equipment 170 - 145 -
Unit/stock-based compensation 361 348 1,184 528
Other 157 - 271 -
-------------------------------------
4,721 4,394 11,983 10,186
Changes in non-cash working
capital items 15,396 13,175 (29,149) (22,397)
-------------------------------------
20,117 17,569 (17,166) (12,211)
-------------------------------------
Cash flows from financing
activities
Increase (decrease) in
revolving loan facility (3,708) (21,744) 1,489 21,657
Decrease in shareholder loans - - (7,637) (10,079)
Issue of units/shares 51 - 77,258 43,503
Unit/issuance costs - (40) (6,440) (3,642)
Dividends paid - - (15,252) (17,300)
Distributions paid (9,284) - (9,284) -
Repayment of long-term debt (764) - (4,632) -
Repayment of capital lease
obligation (180) (85) (438) (255)
Repayment of loans and
advances 70 - 368 -
Redemption of preference
shares - - - (100)
-------------------------------------
(13,815) (21,869) 35,432 33,784
-------------------------------------

Cash flows from investing
activities
Business acquisition - - (10,159) -
Increase in short term
investments - (311) - (30,960)
Additions to other assets (83) - (846) -
Purchase of property, plant
and equipment (1,076) 90 (4,712) (216)
Proceeds on disposition of
property, plant and equipment 141 - 168 4,875
-------------------------------------
(1,018) (221) (15,549) (26,301)
-------------------------------------

Increase (decrease) in cash 5,284 (4,521) 2,717 (4,728)
Cheques written in excess of
cash -
Beginning of period (13,399) (1,916) (10,832) (1,709)
-------------------------------------
Cheques written in excess of
cash -
End of period (8,115) (6,437) (8,115) (6,437)
-------------------------------------

Supplemental cash flow
information
Cash paid for income taxes 128 1,402 4,287 4,756
-------------------------------------
Cash paid for interest 1,119 1,060 4,165 2,108
-------------------------------------

Non-cash investing and
financing activities:
Conversion of shareholder
loans into common shares - 5,668 - 5,668
Acquisition of property, plant
and equipment through capital
leases 94 - 321 779
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On October 20, 2005, the Fund announced its distribution of $0.0817 for the month of October 2005, payable on November 20, 2005.

CanWel continues to emphasize its commitment to be a value-based organization. CanWel's values of being customer and supplier centric are being driven throughout the organization using an in-house marketing program. Through these internal initiatives, CanWel ensures that sales and purchasing actions each day are focused on developing value added products and services for its customers and suppliers, thereby focusing on creating value for our unitholders.

About CanWel

The Fund trades on the Toronto Stock Exchange under the symbol CWX.UN and is one of Canada's largest national distributors in the building materials and related products sector, with over $1 billion in revenues, operating 17 distribution centres across Canada. The Fund distributes a wide range of hardware, building materials, lumber, and renovation products.

Further information can be found in the disclosure documents filed by CanWel Building Materials Income Fund with the securities regulatory authorities, available at www.sedar.com.

Certain statements in this press release may constitute "forward-looking" statements. When used in this press release, such statements use words, including but not limited to, "may", "will", "expect", "believe", "plan", "intend", "anticipate" and other similar terminology. These forward-looking statements reflect the current expectations of the Fund's management regarding future events but involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund, including the performance of CanWel and Sodisco-Howden, on a consolidated basis, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual events could differ materially from those projected herein and depend on a number of factors. These factors include the risk that the Sodisco-Howden acquisition will not be integrated successfully; the risk that any cost savings and any synergies from the transaction may not be fully realized or may take longer to realize than expected; and disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers. Additional risks and uncertainties include, among others: general economic and business conditions, product selling prices, commodity price fluctuations, information systems risk, operating costs, competitive conditions and other factors referenced herein and in the Company's prospectus dated May 11, 2005 and our public filings on www.sedar.com. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this press release. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the periodic and other reports filed by The Fund with Canadian Securities Commissions and available on Sedar (http://www.sedar.com). The Fund does not undertake, and specifically disclaims, any obligation to update or revise any forward looking information, whether as a result of new information, future developments or otherwise.

(1) Please refer to our Q3, 2005 MD&A for further information.

(2) EBITDA is defined to mean Earnings before Interest expense, Income Taxes, Depreciation and Amortization. Stock based compensation expense is included in Amortization.

EBITDA is a key measure used by management to evaluate the Fund's profitability. EBITDA is not considered a measure of financial performance under generally accepted accounting principles. Items excluded from EBITDA are significant to understanding and assessing financial performance. EBITDA should not be considered in isolation or as an alternative to net income, cash flows generated by operations or other financial statement data presented in the Consolidated Financial Statements as indicators of financial performance or liquidity. Because EBITDA is not a measurement determined in accordance with generally accepted accounting principles, as presented, it may not be comparable to other similarly titled measures of other companies.

(3) Earnings per unit/share is based on the weighted average number of fund units/common shares outstanding. The weighted average number of fund units/ common shares outstanding for the period is the number of units/shares determined by relating the portion of time within the reporting period that the fund units/ common shares have been outstanding to the total time in the period.

Contact Information

  • Genoa Management Limited
    Ali Mahdavi
    Investor Relations
    (416) 962-3300
    amahdavi@genoa.ca