Tree Island Steel Ltd.

TSX : TSL
TSX : TSL.DB


Tree Island Steel Ltd.

May 10, 2013 15:15 ET

Tree Island Steel Announces First Quarter 2013 Results

Q1 2013 Financial Highlights:

- Gross Profit of $4.2 million or 11.1% of revenues as compared to $4.0 million or 9.1% of revenues in Q1 2012

- EBITDA(3) (before foreign exchange) at $1.8 million as compared to $1.7 million in 2012

VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 10, 2013) - Tree Island Steel Ltd. ("Tree Island Steel" or the "Company") (TSX:TSL)(TSX:TSL.DB) announced today its financial results for the three month period ended March 31, 2013(1).

For the three-month period ended March 31, 2013, Tree Island Steel's focus on profitability resulted in gross profit increasing to $4.2 million from $4.0 million, and gross profit per ton also improving to $153 per ton from $130 per ton in the same period in 2012, despite the lower revenues and sales volume. As a result of the Company's ongoing efforts and focus on cost management and operational efficiencies, EBITDA and EBITDA per ton increased to $1.8 million and $66, respectively compared to $1.7 million and $56 during the corresponding period in 2012. Revenues during the first quarter of 2013 decreased to $38.1 million versus $44.0 million and sales volumes decreased 9.9% resulting from our continued focus on profitable growth in the marketplace and a 4.0% reduction in revenue per ton from lower cost of steel.

"While revenues and sales volumes were lower in the quarter, I am pleased to see our focus on profitable growth demonstrate steady improvement in gross profit and EBITDA on a year-over-year basis," said Dale R. MacLean, President and CEO of Tree Island Steel. "While we continue to see price volatility in raw materials and selling prices, we are committed to maximize efficiencies and mitigate these factors by leveraging our brand, service and product quality while selling into end markets where we can achieve optimal returns now and in the future for the Company and our shareholders."

Amar S. Doman, Chairman of Tree Island Steel noted, "The first quarter results are a testament to the Company's ongoing focus on profitability. It is encouraging to see the Company generate improved profitability metrics on a consistent basis, which leads us to believe that our efforts are paying off in strengthening Tree Island Steel's foundation and growth platform."

Three Months Ended March 31
Summary of Results ($000's except for tonnage and per unit amounts) 2013 2012
Sales Volumes - Tons(a) 27,601 30,618
Sales $ 38,093 $ 43,997
Cost of sales (33,137) (39,237)
Depreciation (720) (768)
Gross profit 4,236 3,992
Selling, general and administrative expenses (3,147) (3,032)
Operating income 1,089 960
Foreign exchange gain 26 309
Gain on sale of property, plant and equipment - 426
Changes in financial liabilities recognized at fair value 20 -
Financing Expenses (1,439) (2,261)
Loss before income taxes (304) (566)
Income tax recovery 167 148
Net loss (137) (418)
Operating income 1,089 960
Add back depreciation 720 768
EBITDA (2) 1,809 1,728
Foreign exchange gain 26 309
EBITDA including foreign exchange 1,835 2,037
Net loss (137) (418)
Add back significant non-cash items
Non-cash financing expenses 654 1,404
Non-cash (gain) loss on renegotiated debt - -
Changes in financial liabilities recognized at fair value 20 -
Deferred income tax recovery (179) (157)
Adjusted net income (b) 358 829
Per share / unit
Net loss per share / unit - basic (0.01) (0.02)
Net loss per share / unit - diluted (0.01) (0.02)
Per ton
Gross profit per ton 153 130
EBITDA per ton 66 56
As at March 31, As at December 31,
Financial position 2013 2012
Total assets $ 91,348 $ 81,102
Total non-current financial liabilities $ 29,553 $ 29,790
(a) Sales volumes exclude tons which were processed as part of tolling arrangements
(b) See definition of EBITDA and Adjusted Net Income in footnote 2 to the press release

About Tree Island Steel

Headquartered in Richmond, British Columbia, since 1964, Tree Island Steel, through its four operating facilities in Canada and the United States, produces wire products for a diverse range of industrial, residential construction, commercial construction, agricultural, and specialty applications. Its products include bright wire; a broad array of fasteners, including packaged, collated and bulk nails; stucco reinforcing products; concrete reinforcing mesh; fencing and other fabricated wire products. The Company markets these products under the Tree Island, Halsteel, K-Lath, Industrial Alloys, TI Wire, and Tough Strand and Select Brand names. Tree Island Steel also owns and operates a China-based company that assists the international sourcing of products.

Forward-Looking Statements

This press release includes forward-looking information with respect to Tree Island Steel including its business, operations and strategies, as well as financial performance and conditions. The use of forward-looking words such as, "may," "will," "expect" or similar variations generally identify such statements. Any statements that are contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Although management believes that expectations reflected in forward-looking statements are reasonable, such statements involve risks and uncertainties including risks and uncertainties discussed under the heading "Risk Factors" in the Company's most recent annual information form and management discussion and analysis.

The forward looking statements contained herein reflect management's current beliefs and are based upon certain assumptions that management believes to be reasonable based on the information currently available. By their very nature, forward looking statements involve inherent risks and uncertainties, both general and specific, and a number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, prospective investors should specifically consider various factors including the risks outlined in the Fund's most recent annual information form and management discussion and analysis which may cause actual results to differ materially from any forward looking statement. Such risks and uncertainties include, but are not limited to: general economic, market and business conditions, the cyclical nature of our business and demand for our products, financial condition of our customers, competition, volume and price pressure from import competition, deterioration in the Company's liquidity, disruption in the supply of raw materials, volatility in the costs of raw materials, significant exposure to the Western United States due to lack of geographic diversity, dependence on the construction industry, transportation costs, foreign exchange fluctuations, leverage and restrictive covenants, labour relations, trade actions, dependence on key personnel and skilled workers, reliance on key customers, intellectual property risks, energy costs, un-insured loss, credit risk, operating risk, management of growth, changes in tax, environmental and other legislation, and other risks and uncertainties set forth in our publicly filed materials.

This press release has been reviewed by the Company's Board of Directors and its Audit Committee, and contains information that is current as of the date of this press release, unless otherwise noted. Events occurring after that date could render the information contained herein inaccurate or misleading in a material respect. Readers are cautioned not to place undue reliance on this forward-looking information and management of the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise except as required by applicable securities laws.

(1) Please refer to our Q1 2013 MD&A for further information.
(2) References made above to "EBITDA" are to operating profit plus depreciation and references to "Adjusted Net Income" are to net income per IFRS adjusted for certain non-cash items including non-cash financing expenses, changes in fair value of convertible instruments, and deferred income tax recovery. EBITDA is a measure used by many investors to compare issuers on the basis of ability to generate cash flows from operations. Adjusted Net Income is a measure for investors to understand the impact of significant non-cash items that affect our results from operations. Neither EBITDA nor Adjusted Net Income are earnings measures recognized by IFRS and do not have a standardized meaning prescribed by IFRS. We believe that EBITDA and Adjusted Net Income are important supplemental measure in evaluating the Fund's performance. You are cautioned that EBITDA and Adjusted Net Income should not be construed as alternatives to net income or loss, determined in accordance with IFRS, or as indicators of performance. Our method of calculating EBITDA and Adjusted Net Income may differ from methods used by other issuers and, accordingly, our EBITDA or Adjusted Net Income may not be comparable to similar measures presented by other issuers.
Tree Island Steel Ltd.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In thousands of Canadian dollars)
March 31 December 31
2013 2012
Assets
Current
Cash 2,569 2,371
Accounts receivable 21,616 11,984
Inventories 34,618 32,732
Prepaid expenses 1,108 2,200
59,911 49,287
Property, plant and equipment 31,229 31,592
Other non-current assets 208 223
91,348 81,102
Liabilities
Current
Senior Revolving Facility 16,981 10,785
Accounts payable and accrued liabilities 13,331 9,649
Income taxes payable 1,352 1,346
Other current liabilities 92 83
Fair value of convertible instruments 276 312
Current portion of long-term debt 1,774 1,748
33,806 23,923
Convertible Debentures 15,471 15,634
Senior Term Loan 4,167 4,292
Long-term debt 9,705 9,639
Finance Lease 72 87
Other non-current liabilities 441 449
Deferred income taxes 1,794 1,973
65,456 55,997
Shareholders' Equity 25,892 25,105
91,348 81,102
Tree Island Steel Ltd.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of Canadian dollars, except share / units and per-share / unit amounts)
Three Months Ended March 31
2013 2012
Sales $ 38,093 $ 43,997
Cost of goods sold 33,137 39,237
Depreciation 720 768
Gross profit 4,236 3,992
Selling, general and administrative expenses 3,147 3,032
Operating income 1,089 960
Foreign exchange gain 26 309
Gain on sale of property, plant and equipment - 426
Changes in financial liabilities recognized at fair value 20 -
Financing expenses (1,439) (2,261)
Loss before income taxes (304) (566)
Income tax recovery 167 148
Net loss for the period $ (137) $ (418)
Net loss per share / unit
Basic $ (0.01) $ (0.02)
Diluted $ (0.01) $ (0.02)
Weighted-average number of shares / units
Basic 23,113,661 22,337,889
Diluted 23,113,661 22,337,889
Tree Island Steel Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of Canadian dollars)
Three Months Ended March 31
2013 2012
Cash flows from operating activities
Net loss for the year $ (137) $ (418)
Adjustments for:
Depreciation 720 768
Changes in financial liabilities recognized at fair value (20) -
Gain on sale of property, plant and equipment - (426)
Amortization and write-off of deferred financing 16 70
Net finance costs 1,423 2,191
Deferred income tax recovery (179) (157)
Fair value change on Phantom Units - 22
Exchange revaluation on foreign denominated debt 226 (565)
Working capital Adjustments:
Accounts Receivable (9,526) (7,908)
Inventories (1,648) (1,645)
Accounts payable and accrued liabilities 3,595 916
Prepaid expenses 1,099 1,260
Income and other taxes 12 9
Other (268) 278
Net cash used in operating activities (4,688) (5,605)
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment - 470
Purchase of property, plant and equipment (215) (129)
Net cash (used in) provided by investing activities (215) 341
Cash flows from financing activities
Repayment of Senior Term Loan (125) -
Repayment of long-term debt (386) (598)
Conversion of Warrants 171 -
Interest paid (778) (857)
Normal course issuer bid - (205)
Advance on Senior Revolving Facility 6,196 6,354
Net cash provided by financing activities 5,078 4,694
Effect of exchange rate changes on cash 16 (14)
Increase (decrease) in cash 191 (584)
Cash, beginning of period 2,371 3,852
Cash, end of period $ 2,562 $ 3,268

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