Hartco Income Fund

Hartco Income Fund

March 11, 2008 16:42 ET

Hartco Income Fund Announces 2007 Fourth Quarter and Year-end Results

MONTREAL, QUEBEC--(Marketwire - March 11, 2008) - Hartco Income Fund (TSX:HCI.UN) today announced financial results for the fourth quarter and the year ended December 31, 2007. For the fourth quarter, the Fund posted consolidated revenues from continuing operations of $121.2 million and net earnings of $0.5 million, or $0.04 per unit, compared to revenues of $151.4 million and net earnings of $4.7 million, or $0.34 per unit, for the corresponding period last year. Net earnings from discontinued CompuSmart operations were $0.4 million or $0.03 per unit for the fourth quarter this year, compared to a loss of $4.4 million, or $0.32 per unit, for the corresponding quarter last year.

Although the Funds revenues declined during the fourth quarter, we finished the year with positive earnings from continuing operations, said Pat Waid, President and Chief Operating Officer of the Fund. Operational improvements, including reductions in our inventory, contributed to a significant increase in our cash flow for the fourth quarter and enabled the Fund to achieve a debt-free position at year-end.

The quarterly revenue decline of $30.2 million compared to the same period last year is attributable to a $28.8 million reduction in the Funds Distribution and Franchising segment revenues, due primarily to the divestiture of the CompuSmart retail business, and a decline of $1.4 million in Commercial segment revenues.

Consolidated EBITDA from continuing operations was $2.8 million for the quarter ended December 31, 2007 compared to $5.6 million for the same quarter the previous year, a decrease of $2.8 million. Lower volume and margins had a negative impact of $2.8 million and $1.7 million respectively on the EBITDA and were partially offset by a reduction of $1.7 million in operating expenses.

Consolidated results for the year ended December 31, 2007

For the year ended December 31, 2007, net earnings from continuing operations amounted to $5.6 million, or $0.41 per unit, compared to net earnings of $9.0 million or $0.66 per unit for the previous year. Loss from discontinued operations stands at $8.3 million or $0.61 per unit for the year ended December 31, 2007, compared to $12.0 million or $0.88 per unit for the previous year.

Consolidated revenues amounted to $495.9 million for the year ended December 31, 2007, compared to $548.6 million for the previous year. Revenues in the Distribution and Franchising segment decreased by $107.1 million due to the CompuSmart divestiture while Commercial segment revenues increased by $54.4 million.

Consolidated EBITDA stood at $12.1 million for the year ended December 31, 2007, compared to $15.5 million for the previous year. Lower margins of $5.5 million and higher expenses of $4.2 million had an unfavourable impact on EBITDA and were offset by the effect of $6.3 million increase on higher volume realized in the Commercial segment.

Cash Distributions

During the fourth quarter of 2007, the Fund made cash distributions totalling $2.0 million to its unitholders and tracking shareholders. On January 15, 2008, the Fund declared a distribution of $0.05 per unit to be paid on February 15, 2008 to unitholders and tracking shareholders of record on January 31, 2008. On February 15, 2008, the Fund declared another distribution of $0.05 per unit to unitholders of record on February 29, 2008 to be paid on March 17, 2008.

Hartco Income Fund Outlook

The Fund is working towards growing its Commercial segment revenues and improving its profitability and cash flow throughout the coming year. It will be particularly important for the Fund to maximize operating synergies between its business segments and ensure an appropriate cost structure to provide adequate protection in the event of an economic slowdown.

Detailed Financial Information

Detailed financial information pertaining to the Funds fourth quarter and year to date results can be accessed at www.sedar.com.

Fund Profile

Hartco Income Fund (TSX:HCI.UN) has been a leader in the Canadian information technology business for more than thirty years. Through its operating divisions, which together include more than 60 locations operating under the Metafore, Microserv, MicroAge and Northwest Digital banners across Canada, Hartco Income Fund delivers information technology solutions to private and public sector organizations of every size.

Forward-Looking Statements

This news release contains forward-looking information. Except for historical information contained herein, the statements in this document are forward-looking. Forward-looking statements involve known and unknown risks and uncertainties, which may cause actual results in future periods to differ materially from forecasted results. Those risks include, among others, changes in customer demand for information technology products or services, changes in supplier pricing actions or terms, customer orders, pricing actions by competitors, changes in laws and regulations and general changes in economic conditions. Risks that could cause our results to differ materially from our expectations are discussed in our annual Managements Discussion & Analysis.

(In thousands of dollars, except per unit amounts)

December 31
Fourth Quarter Year end
2007 2006 2007 2006
$ $ $ $
Revenues 121,180 151,437 495,928 548,639
EBITDA (1) 2,806 5,586 12,142 15,538

Net earnings from
continuing operations 510 4,681 5,584 8,955
Earnings (loss) from
discontinued operations 399 (4,418) (8,285) (11,962)
Net earnings (loss) 909 263 (2,701) (3,007)

Earnings per unit
from continuing operations 0.04 0.34 0.41 0.66
Earnings (loss) per
unit from discontinued operations 0.03 (0.32) (0.61) (0.88)
Earnings (loss) per unit 0.07 0.02 (0.20) (0.22)

Adjusted standardized
distributable cash (2) 9,483 1,818 16,195 8,175
Cash distributions 2,000 2,008 7,999 8,023

(1) Earnings from continuing operations before financial expenses, income
taxes, depreciation and amortization, share of results of equity
investments and non-controlling interest. EBITDA is a non-GAAP financial
measure as defined in the MD&A.

(2) Cash flow from continuing and discontinued operating activities, less
capital expenditures, net of proceeds from disposal of assets, plus
collection of loans receivable.

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