August 30, 2007 11:49 ET

Granby Industries Income Fund Plans to File Amended Financial Statements

GRANBY, QUEBEC--(Marketwire - Aug. 30, 2007) - August 30, 2007 - Granby Industries Income Fund (TSX:GBY.UN) (the "Fund") announced today its intention to file amended and restated financial statements for the three and six month periods ended June 30, 2007 and other documents required to include additional disclosure and to correct for the effects of an accounting error. In addition, the Fund reported it expects to be in breach of certain covenants under its credit facilities as at September 30, 2007. The Fund holds an 80% interest in Granby Industries Limited Partnership ("Granby" or "Granby LP").

The Fund will correct its financial statements due to an error in the accounting of a future income tax recovery and the related asset and will include a disclosure on going concern uncertainty and the expected breach of certain financial covenants. The Fund will restate the three and six month periods ended June 30, 2007 consolidated statements of loss, and consolidated statements of unitholders' equity by recording a valuation allowance against future income taxes for $13.0 million. This adjustment to earnings will result in a reduction in the future income tax asset and unitholders' equity reported on the Fund's consolidated balance sheet from the amount previously reported. This adjustment will have no effect on the cash flows, EBITDA(i) and Distributable Cash(i) previously reported by the Fund.

The decision to amend and restate the Fund's financial statements was made by the Audit Committee of Granby's Board of Directors, upon the recommendation of management. Granby expects to file amended and restated financial statements as well as the amended and restated documents and reports by September 5, 2007. Until these restatements are complete, Granby's previously published financial statements for the three months and six months ended June 30, 2007 should not be relied upon.

As previously reported, the difficult market conditions in the HVAC and plumbing industry continue to negatively impact Granby's businesses and operating performance. This trend and an expected decline in future orders will likely result in the Fund being in breach of certain ratio covenants in its credit facilities as at September 30, 2007 and December 31, 2007. The Fund was in compliance with such covenants at June 30, 2007. The Fund currently anticipates that it will be making its scheduled principal repayments in the amount of $1.35 million on September 30, 2007 and December 31, 2007, respectively at which time the amount outstanding under its term loan facility will be $14.4 million.

"We are in regular discussions with our lenders regarding the Fund's financial position," said Paul Antoniadis, Chief Financial Officer. "Granby is working closely with its lenders toward a resolution of this matter."

Granby intends to renegotiate the terms of its credit facility or seek alternative financing prior to the maturity of the existing credit facility on January 31, 2008. There can be no assurance that Granby will be able to do so at all or on favourable terms. A failure to comply with the obligations in the credit facilities could result in the acceleration of the relevant indebtedness under the credit facilities, in which case there can be no assurance that the assets of Granby would be sufficient to repay in full that indebtedness. In addition, the ability of Granby to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities when due is dependent on the successful completion of the actions taken or planned relating to the anticipated breach of certain covenants under its credit facilities.

(i)- see Non-GAAP Measures

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 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.

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 are described in the Fund's Annual Information Form available on and include, among other things, leverage and restrictive covenants, 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
    Paul Antoniadis, CA
    Vice President, Finance & CFO
    450-378-2334 ext. 225