Hartco Income Fund
TSX : HCI.UN

Hartco Income Fund

November 13, 2006 17:15 ET

Hartco Income Fund Announces Third Quarter 2006 Results

MONTREAL, QUEBEC--(CCNMatthews - Nov. 13, 2006) - (TSX:HCI.UN) Hartco Income Fund (the "Fund") today reported its financial results for the third quarter ended September 30, 2006. Due to the conversion to an income trust which occurred on August 28, 2005, the third quarter of the comparative financial statements for last year covered the two-month period from August 1 to September 30, 2005, while this year, the third quarter reflects the three month period from July 1st to September 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 third quarter ended September 30, 2006

The Fund reported a consolidated loss of $1.7 million or $0.13 per unit for the quarter ended September 30, 2006, this year, compared to a loss of $1.0 million or $0.08 per unit for the two-month period ended September 30, 2005, last year, including a per unit charge of $0.04 related to the conversion to an income trust.

Consolidated revenues amounted to $129.8 million, this year, for the quarter ended September 30, 2006, compared to $100.8 million for the two-month period ended September 30, 2005, last year.

Consolidated EBITDA (EBITDA is a non-GAAP measure as defined in the MD&A) declined from $0.8 million last year for the two-month period ended September 30, 2005, to a loss of $0.7 million this year for the quarter ended September 30, 2006, reflecting lower volume and margins in the Distribution segment and in our Retail operations while the Commercial segment generated increased EBITDA due to revenue growth.

Patrick Waid, the Fund's President and Chief Operating Officer, said: "Although the Distribution and Franchising and Commercial segments produced strong operating results, the Fund's overall earnings were adversely affected by the Retail operations' continuing challenges during the third quarter. We will strive to improve the Fund's profitability and cash flow through the remainder of the year."

Results for the nine-month period ended September 30, 2006

The Fund reported a consolidated loss of $3.3 million or $0.24 per unit this year for the nine-month period ended September 30, 2006, compared to net earnings of $4.5 million or $0.34 per unit last year for the eight-month period ended September 30, 2005. Discontinued operations, including the gain on the disposal of Cabtel, generated net earnings of $6.3 million or $0.48 per share last year in the eight-month period ended September 30, 2005, and had no impact this year in the nine-month period ended September 30, 2006.

The loss from continuing operations this year for the nine-month period ended September 30, 2006, amounted to $3.3 million or $0.24 per unit compared to a loss of $1.8 million or $0.14 per unit last year for the eight-month period ended September 30, 2005, which included a per unit charge of $0.22 related to the conversion to an income trust.

Consolidated revenues amounted to $422.1 million this year for the nine-month period ended September 30, 2006, compared to $411.9 million last year for the eight-month period ended September 30, 2005. The Fund's Distribution segment and Retail operations reported a decline in revenues while the commercial segment had an increase in revenue of $8.0 million, or 3.8%, when excluding the additional month in 2006.

Consolidated EBITDA declined from $3.6 million last year for the eight-month period ended September 30, 2005, to a loss of $0.5 million this year for the nine-month period ended September 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 5:95. Distributable cash was positive due to the effective management of non-cash working capital throughout the period. Distributable cash amounted to $0.6 million for the third quarter and $6.2 million for the nine-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 third quarter ended September 30, 2006, amounted to $2.1 million, of which $1.5 million was attributed to unitholders and $0.6 million to tracking shareholders.

In addition, on September 15, 2006, the Fund declared a distribution of $0.05 per unit to unitholders and tracking shareholders of record on September 30, 2006. The distribution, amounting to $0.7 million, was paid on October 16, 2006. On October 16, 2006, the Fund declared another distribution of $0.05 per unit to unitholders and tracking shareholders of record on October 31, 2006, to be paid on November 15, 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, changes in laws and regulations and general changes in economic conditions.



APPENDIX

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

Third Two-month Nine-month Eight-month
Quarter period period period
ended ended ended ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
---------------------------------------------------------------------
Revenues 129,827 100,779 422,069 411,934
EBITDA(1) (733) 818 (462) 3,579
Net earnings
(loss)
Continuing
operations (1,714) (1,036) (3,270) (1,792)
Discontinued
operations - - - 6,253
Net earnings (loss) (1,714) (1,036) (3,270) 4,461
Loss per unit
from continuing
operations (0.13) (0.08) (0.24) (0.14)
Earnings (loss)
per unit (0.13) (0.08) (0.24) 0.34
Diluted earnings
per unit from
discontinued
operations - - - 0.48
Distributable
Cash(2) 642 n/a 6,193 n/a
Cash Distributions 2,066 n/a 6,015 n/a

(1) Earnings before income fund conversion 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