GRANBY INDUSTRIES INCOME FUND
TSX : GBY.UN

GRANBY INDUSTRIES INCOME FUND

August 09, 2007 17:15 ET

Granby Industries Income Fund Announces Second Quarter 2007 Results

GRANBY, QUEBEC--(Marketwire - Aug. 9, 2007) - Granby Industries Income Fund (TSX:GBY.UN) ("the Fund") reported today its financial results for the second quarter ended June 30, 2007. The Fund holds an eighty per cent (80%) interest in Granby Industries Limited Partnership ("Granby" or "Granby LP").



Financial Highlights: Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
($000s, except per unit
amounts) 2007 2006 2007 2006
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(unaudited) (unaudited) (unaudited) (unaudited)

Sales 10,690 12,714 18,085 22,686
EBITDA (1) 360 1,552 441 2,594
Goodwill and
intangible asset
impairment charges 14,501 - 14,501 -
Future income tax recovery 13,034 - 13,034 -
Net (loss) earnings (1,881) 404 (2,763) 372
Net (loss) earnings per unit (0.26) 0.05 (0.37) 0.05

Distributable cash
(shortfall) from
operations (1) (1,821) (2,226) (5,570) (3,166)
Distributable cash
(shortfall) from
operations per Fund unit (0.2469) (0.3018) (0.7552) (0.4293)
Cash distributed to Fund
unitholders - 2,074 - 4,148
Cash distributed per Fund
unit - 0.2812 - 0.5624
Units outstanding
- Fund 7,375,644 7,375,644 7,375,644 7,375,644
- Granby LP Class B 1,843,911 1,843,911 1,843,911 1,843,911

(1) See discussion on Non-GAAP Measures


Second Quarter Results

Consolidated sales for the second quarter of fiscal 2007 totalled $10.7 million compared to $12.7 million in the same quarter of 2006. Storage tank sales were $7.7 million in the quarter, down 14% from $9.0 million in the same quarter last year. The decrease resulted from lower shipments of storage tanks to both the US and Canada. The Fund sold approximately 26,300 tanks in the second quarter ended June 30, 2007 as compared to approximately 29,800 sold in the same period last year. Coated copper tubing sales for the second quarter of 2007 were $2.9 million compared with $3.7 million for the same period in 2006 with pounds shipped of 527,000 down approximately 21% from the same quarter of 2006. EBITDA for the three months ended June 30, 2007 was $0.4 million compared to $1.6 million for the three months ended June 30, 2006. The net loss in the second quarter of 2007 was $1.9 million compared to net earnings of $0.4 million in the same quarter of 2006.

"Market conditions in the HVAC and plumbing industry continued to be challenging during the second quarter as a result of the ongoing weakness in US housing activity," said Pierre Fournier, President and Chief Operating Officer. "We continued to focus on managing our balance sheet in a disciplined manner, reduced our inventory levels and made repayments on our term debt. We are also encouraged that the rate of decrease in tank shipments year-over-year slowed in the second quarter of 2007 compared to that experienced in the last two quarters of 2006 and the first quarter of 2007."

Consolidated sales for the six months ended June 30, 2007 were $18.1 million compared to $22.7 million for the same period in 2006. Storage tank sales for the first six months of 2007 were $13.2 million compared to $15.9 million. Granby LP shipped approximately 44,500 tanks in the six months of 2007 versus 52,800 shipped in the corresponding period last year. Sales at Kamco, the Fund's coated copper segment, for the six months ended June 30, 2007 totalled $4.9 million compared with $6.8 million for the same period in 2006, representing a $1.9 million or 28% decrease. Pounds shipped in the first six months of 2007 were approximately 894,000 down from 1,351,000 pounds shipped in the same period in 2006. EBITDA for the first six months of 2007 was $0.4 million compared to $2.6 million for the same period last year. The net loss for the six months ended June 30, 2007 was $2.8 million compared with net earnings of $0.4 million in the same period of 2006.

As a consequence of new income trust tax legislation substantially enacted by the Canadian Parliament on June 12, 2007 that results in the taxation of income trusts commencing in 2011 at effective income tax rates similar to Canadian corporations, the Fund is required for accounting purposes to record a future income tax asset which represents the benefit to the Fund after 2011 of the current deductible temporary differences to reverse on or after January 1, 2011. Accordingly, in the second quarter of 2007 the Fund recorded a long-term future income tax asset and non-cash income tax recovery of $13.0 million. The Fund also recorded during the quarter a non-cash goodwill and intangible asset impairment charge of $14.5 million relating to its storage tank segment. A significant amount of this impairment charge resulted from the establishment of the future income tax asset. Both the future income tax recovery and the impairment charge had no impact on the Fund's cash flow from operating activities during the quarter.

Suspension of distributions

On November 9, 2006, in response to difficult market conditions, the Fund suspended distributions on its units. The Fund regularly reviews its distribution policy in order to assess whether or not to resume the payment of monthly cash distributions. Given the prevailing market conditions in both businesses and the Fund's requirement to make term loan repayments of $3.6 million for the year ending December 31, 2007 under its credit facilities, the Fund does not currently expect that it will resume distributions in 2007 or beyond, but will continue to monitor its distributable cash position and will update it as appropriate.

Non-controlling Interest - Subordination

The Class B LP units of Granby LP are held indirectly by Torquest Partners and represent a 20% indirect interest in the Fund through Class B units held in Granby LP. The previously announced suspension of the quarterly distribution on the subordinated Class B LP units of Granby LP remains in effect. A description of the non-controlling interest and subordination may be found in the Fund's Annual Information Form for the year ended December 31, 2006.

About Granby Industries Income Fund

Granby Industries is a leading North American manufacturer of high quality tanks for the residential and light commercial storage of heating oil and other petroleum-based products and is also a leading manufacturer of coated copper tubing. Granby has been operating in the heating oil storage tank industry for more than 50 years and its primary business is manufacturing replacement residential tanks. Granby Industries has operations in Granby, Quebec and Oakville, Ontario.

Non-GAAP Measures

Distributable cash, distributable cash from operations, distributable cash per unit and maintenance capital expenditures are not measures recognized by GAAP, do not have standardized meanings prescribed by GAAP and therefore, may not be comparable to similar measures presented by other issuers. Distributable cash from operations is determined by the Fund as cash flow from operating activities for the period less principal term debt repayments and maintenance capital expenditures. The Fund believes that distributable cash as a cash flow measure is a useful supplemental measure as it helps the readers to evaluate the ability of the Fund to generate cash that could be used for distributions and provides an indication of the amount of cash available for distribution to the Fund's Unitholders. Investors are cautioned, however, that distributable cash is not meant to be an alternative to using cash flows from operating, investing and financing activities as a measure of the Fund's liquidity and cash flows.

References in this press release to the term "EBITDA" are to earnings before non-controlling interest, income taxes, amortization, interest expense, goodwill and intangible assets impairment charges and restructuring costs and to "EBITDA margin" are to the ratio of EBITDA for any period to sales for that period. EBITDA is not a recognized measure under GAAP in Canada and may not be comparable to similar measures used by other companies. The Fund believes that EBITDA is a useful supplementary measure of operating performance as it provides investors with an indication of cash available for distributions prior to debt service and capital expenditures. Investors are cautioned, however, that EBITDA should not replace net earnings or loss as an indicator of the Fund's performance, or cash flows from operating, investing and financing activities as a measure of the Fund's liquidity and cash flows. It is not intended to be representative of cash flow from operating activities or results from operations determined in accordance with GAAP or cash available for distribution.

Other

The Fund's publicly filed documents, including its interim financial statements and Management's Discussion and Analysis for the quarter ended June 30, 2007 are available at www.sedar.com.

Forward-Looking Statements

Certain information included in this press release may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information can be identified by the use of terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management's future outlook and anticipated events or results, and may include statements or information regarding the future growth, financial position, business strategy, goals, prospects and opportunities, results of operations, sales targets, budgets, projected costs, working capital requirements, capital expenditures, financial results, taxes and plans and objectives of or involving the Fund and Granby. Particularly, information regarding cash distributions is forward-looking information. Forward-looking statements reflect management's current beliefs and are based on information currently available to management.

Forward-looking information is based on certain factors and assumptions regarding, among other things, expected storage tank unit volumes, the price of raw materials and the average US/Canadian dollar exchange rate during the year. While Granby considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what we currently expect. These factors include, among other things, economic conditions, the seasonality of demand for Granby's products, the risk of increased heating oil costs, which could depress demand for heating oil storage tanks, commodity pricing volatility and foreign exchange risk, regulatory change, interest rate fluctuation, a decline in the housing and major consumer products markets, dependence on key suppliers, reliance on major customers and the risk of increased competition in the coated copper tubing market and the storage tank market.

You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While Granby may elect to, it is under no obligation and does not undertake to update this information at any particular time, except as required by law.

Contact Information

  • Granby Industries Income Fund
    Mr. Paul Antoniadis, CA
    Vice President
    Finance & CFO
    450-378-2334 ext. 225