Hartco Income Fund
TSX : HCI.UN

Hartco Income Fund

August 14, 2006 15:00 ET

Hartco Income Fund Announces Second Quarter 2006 Results and a Monthly Distribution

MONTREAL, QUEBEC--(CCNMatthews - Aug. 14, 2006) - Hartco Income Fund (the "Fund") (TSX:HCI.UN) today reported its financial results for the second quarter ended June 30, 2006. Due to the conversion to an income trust that occurred on August 28, 2005, the second quarter of the comparative financial statements last year covered the period from May 1 to July 30, 2005, while this year, the second quarter reflects the 3 month period from April 1 to June 30, 2006. The Fund's financial statements and management discussion and analysis ("MD&A") are available on Sedar at www.sedar.com.

Results for the second quarter ended June 30, 2006

The Fund reported a consolidated loss of $2.0 million or $0.15 per unit for the quarter ended June 30, 2006, this year, compared to net earnings of $4.3 million or $0.34 per share for the quarter ended July 30, 2005, last year, when the Fund operated as a company. Discontinued operations generated net earnings of $6.4 million or $0.50 per share last year in the quarter ended July 30, 2005, and had no impact this year in the quarter ended June 30, 2006. The gain on disposal on Cabtel of $6.7 million was included in the 2005 results.

The loss from continuing operations amounted to $2.0 million or $0.15 per unit this year for the quarter ended June 30, 2006, compared to a loss of $2.1 million or $0.16 per share last year for the quarter ended July 30, 2005. The impact of the income fund conversion expenses increased the loss per share by $0.13 in 2005.

Consolidated revenues amounted to $137.4 million for the quarter ended June 30, 2006, compared to $146.2 million for the quarter ended July 30, 2005.

Consolidated EBITDA (EBITDA is a non-GAAP measure as defined in the MD&A) declined from $0.2 million last year for the quarter ended July 30, 2005, to a loss of $1.2 million this year for the quarter ended June 30, 2006, reflecting lower volume and margins in the Distribution segment and in our retail division while the Commercial segment generated increased EBITDA due to revenue growth.

Patrick Waid, the Fund's President and Chief Operating Officer, said: "Disappointing second quarter results reflect ongoing challenges in our retail operations. We expect improved results throughout the second half of the year, based on the continued growth of the commercial segment and operational improvements in our retail division."

Results for the six-month period ended June 30, 2006

The Fund reported a consolidated loss of $1.6 million or $0.11 per unit this year for the six-month period ended June 30, 2006, compared to net earnings of $5.5 million or $0.43 per share last year for the six-month period ended July 30, 2005 last year when the Fund operated as a company. Discontinued operations, including the gain on the disposal of Cabtel, generated net earnings of $6.3 million or $0.49 per share last year in the six-month period ended July 30, 2005, and had no impact this year in the six-month period ended June 30, 2006.

The loss from continuing operations amounted to $1.6 million or $0.11 per unit this year for the six-month period ended June 30, 2006 compared to a loss of $0.8 million or $0.06 per share last year for the six-month period ended July 30, 2005. The impact of the income fund conversion expenses increased the loss per share by $0.13 in 2005.

Consolidated revenues amounted to $292.2 million this year for the six-month period ended June 30, 2006, compared to $311.2 million last year for the six-month period ended July 30, 2005. The Fund's Distribution segment and Retail division reported a decline in revenues while the commercial segment has an increase in revenue of $7.1 million.

Consolidated EBITDA declined from $2.8 million last year for the six-month period ended July 30, 2005, to $0.3 million this year for the six-month period ended June 30, 2006, reflecting lower volume and margins in the retail operations and in our Distribution segment, while the Commercial segment generated increased EBITDA due to revenue growth.

Financial Position

The Fund's financial position remains strong with a debt: equity ratio of 3:97. Distributable cash was positive due to the effective management of non-cash working capital in the second quarter. Distributable cash amounted to $6.3 million for the second quarter and $5.6 million for the six-month period.

Cash Distributions

Monthly distributions are paid on a level basis without any consideration for the Fund's normal seasonal fluctuations that occur over the course of a year. Cash distributions during the second quarter ended June 30, 2006, amounted to $2.0 million, of which $1.5 million was attributed to unitholders and $0.5 million to tracking shareholders.

In addition, on June 15, 2006, the Fund declared a distribution of $0.05 per unit to unitholders and tracking shareholders of record on June 30, 2006. The distribution, amounting to $0.7 million, was paid on July 14, 2006. On July 14, 2006, the Fund declared another distribution of $0.05 per unit to unitholders and tracking shareholders of record on July 31, 2006, to be paid on August 15, 2006.

Monthly Distribution

Also today, the Fund announced a cash distribution for the month of August 2006 of $0.05 per unit. The distribution will be payable on September 15, 2006 to unitholders of record at the close of business on August 31, 2006.

Profile

Hartco Income Fund has been a leader in the Canadian information technology business for more than thirty years. Through its operating divisions, which together include more than 90 commercial and retail locations across Canada, Montreal-based Hartco delivers digital technology products and services to consumers of every age and 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 and general changes in economic conditions.



APPENDIX

FINANCIAL HIGHLIGHTS
(in thousands of dollars, except per unit and per share amounts)




Second Quarter ended Six-month period ended
--------------------------------------------------------------------
June 30, July 30, June 30, July 30,
2006 2005 2006 2005
--------------------------------------------------------------------

Revenues 137,415 146,213 292,242 311,155

EBITDA(1) (1,174) 160 271 2,761

Net earnings (loss)
Continuing
operations (1,974) (2,074) (1,556) (756)

Discontinued
operations - 6,380 - 6,253

Net earnings (loss) (1,974) 4,306 (1,556) 5,497

Loss per unit
from continuing
operations (0.15) - (0.11) -

Loss per unit (0.15) - (0.11) -

Loss per share
from continuing
operations - (0.16) - (0.06)

Diluted earnings
per share from
discontinued
operations - 0.50 - 0.49

Diluted earnings
per share - 0.34 - 0.43

Distributable Cash(2) 6,315 n/a 5,551 n/a


(1) Earnings before non-recurring expenses, financial expenses,
depreciation and amortization, gain (loss) on disposal of
businesses, income taxes, share of results of equity investments
and non-controlling interest. EBITDA is a non-GAAP measure as
defined in the MD&A.

(2) Cash flow from operating activities less capital expenditures,
net of proceeds from disposal of assets. Distributable cash is a
non-GAAP measure as defined in the MD&A.



Contact Information

  • Hartco Administration Inc.
    Carl Gauvreau
    Vice-President Finance and Chief Financial Officer
    (514) 354-3810
    (514) 354-8989 (FAX)
    www.hartco.com