Tree Island Steel Ltd. (TSX:TSL) -
Q4 2013 versus Q4 2012 Financial Highlights:
-- Volumes up by 26.5% to 27,295 tons
-- Revenue increases by 24.7% to $35.7 million
-- Gross Profit increases by 186.8% to $3.8 million or 10.5% of revenues
-- EBITDA(2) increases by 188.3% to $1.0 million
Full Year 2013 versus Full Year 2012 Financial Highlights:
-- Volumes up by 10.7% to 113,401 tons
-- Revenue increases by 4.9% to $153.4 million
-- Gross Profit at $17.3 million or 11.3% of revenues
-- EBITDA(2) (before foreign exchange) increases by 101.7% to $7.2 million
Tree Island Steel Ltd. ("Tree Island" or the "Company") (TSX:TSL) announced
today its financial results for the three and twelve month periods ended
December 31, 2013(1).
For the three-month period ended December 31, 2013, revenues increased to $35.7
million on 27,295 tons, versus $28.7 million on 21,583 tons during the fourth
quarter in 2012. Volumes also increased by 26.5% in the fourth quarter to 27,295
tons, primarily due to increasing demand for Industrial and Construction
products in the Company's markets. Gross profit continued to strengthen in the
quarter, amounting to $3.8 million, representing a 186.8% improvement when
compared to $1.3 million in the corresponding period in 2012. Gross margin
increased to 10.5% from 4.6%, along with gross profit per ton, which increased
to $138 per ton, from $61 per ton in the same period in 2012. EBITDA also
increased by 188.3% to $1.0 million, or $37 per ton, compared to a loss of
$(1.1) million and $(52) per ton, respectively, during the corresponding period
in 2012. The improvements in revenues, volumes, and EBITDA are the result of
ongoing focus on profitable growth, cost management and operational
efficiencies, while at the same time realizing the benefits of improving
end-market demand in certain markets.
For the twelve month period ended December 31, 2013, revenues amounted to $153.4
million on 113,401 tons, compared to $146.2 million on 102,408 tons during the
same period in 2012. The higher revenues in 2013 primarily reflect increased
volumes particularly in the Industrial and Commercial Construction market
segments. The growth in revenue was partially reduced by price adjustments
driven by competitive factors in certain business lines coupled with product mix
changes. Gross profit increased to $17.3 million at a margin of 11.3%, compared
to $13.0 million and a margin of 8.9%, while gross profit per ton also increased
to $153 per ton versus $127 per ton in the corresponding period in 2012. During
the period, EBITDA increased by 101.7% to $7.2 million versus $3.6 million
during the same period last year.
During the twelve-month period ended December 31, 2013, Tree Island did not
purchase shares under its previously announced normal course issuer bid
("NCIB"). On September 9, 2013, the NCIB was extended to September 8, 2014.
Under the renewed NCIB, the Company may purchase up to 1,800,000 of its common
shares.
Subsequent Event:
On January 27, 2014, the Company announced that by March 4, 2014 (the
"Redemption Date") it would redeem all of its 10% second lien convertible
debentures scheduled to mature on November 26, 2014. In the period between
January 1, 2014 and the Redemption date, holders of $15,969,400 of convertible
debentures elected to convert into the common shares of the Company and as a
result the outstanding common shares, as at the date of this release, are
60,687,650. On the Redemption Date, Tree Island Steel redeemed $174,600
principal plus accrued interest. The convertible debentures, which were listed
on the TSX under the symbol TSL.DB, were delisted at the close of business on
the Redemption Date.
"2013 continued our team's relentless focus on operational efficiencies, cost
containment and winning market share. Combined with increased demand in a number
of our key end-markets, we continue to drive revenue, and more importantly
earnings growth," said Dale R. MacLean, President and CEO of Tree Island Steel.
"Tree Island's fourth quarter results are indicative of the type of positive
momentum that we are building on. While cautiously optimistic, our focus in 2014
is to build on the 2013 foundation and to grow the business."
"The year-end results are a significant improvement in Tree Island's growth and
earnings and are the result of a well executed plan by management," noted Amar
S. Doman, Chairman of Tree Island Steel. "Subsequent to year-end, we
strengthened the balance sheet by redeeming the company's 10% second lien
convertible debentures, providing flexibility in exploring strategic growth
opportunities."
Summary of Results
Three Months Ended
December 31 Year Ended December 31
2013 2012 2013 2012
($000's except for
tonnage and per unit
amounts)
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
Sales Volumes - Tons 27,295 21,583 113,401 102,408
Sales $ 35,748 $ 28,657 $ 153,438 $ 146,238
Cost of sales (31,248) (26,568) (133,238) (130,132)
Depreciation (731) (775) (2,903) (3,074)
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Gross profit 3,769 1,314 17,297 13,032
Selling, general and
administrative
expenses (3,500) (3,221) (12,982) (12,527)
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------------------------------------------------- --------------------------
Operating income (loss) 269 (1,907) 4,315 505
Foreign exchange gain 5 12 114 87
Gain (loss) on sale of
property, plant and
equipment - 18 (42) 448
Property, plant and
equipment impairment
reversal 671 - 671 -
Gain on sale of
subsidiary (13) - 218 -
Changes in financial
instruments
recognized at fair
value (147) 10 (135) (717)
Gain on renegotiated
debt - - - 17,805
Financing Expenses (1,490) (1,324) (5,890) (7,299)
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
(Loss) income before
income taxes (705) (3,191) (749) 10,829
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------------------------------------------------- --------------------------
Income tax recovery
(expense) 40 846 94 (458)
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
Net (Loss) Income (665) (2,345) (655) 10,371
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
Operating income (loss) 269 (1,907) 4,315 505
Add back depreciation 731 775 2,903 3,074
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
EBITDA(a) 1,000 (1,132) 7,218 3,579
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------------------------------------------------- --------------------------
Foreign exchange gain 5 12 114 87
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------------------------------------------------- --------------------------
EBITDA including
foreign exchange 1,005 (1,120) 7,332 3,666
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
Net (Loss) Income (665) (2,345) (655) 10,371
Add back significant
non-cash items
Non-cash financing
expenses 662 648 2,750 3,961
Non-cash (gain) loss on
renegotiated debt - - - (17,805)
Changes in financial
instruments recognized
at fair value 147 (10) 135 717
Deferred income tax
expense 582 (200) 514 1,207
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
Adjusted net income
(loss)(a) 726 (1,907) 2,744 (1,549)
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------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
Per share / unit
Net (loss) income per
share / unit - basic (0.03) (0.11) (0 .03) 0.47
Net (loss) income per
share / unit -
diluted (0.03) (0.11) (0 .03) 0.25
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------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
Per ton
Gross profit per ton 138 61 153 127
EBITDA per ton 37 (52) 64 35
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
As at As at
December December
31, 31,
Financial position 2013 2012
------------------------------------------------- --------------------------
------------------------------------------------- --------------------------
Total assets $ 85,635 $ 81,102
Total non-current
financial liabilities $ 13,536 $ 29,652
------------------------------------------------- --------------------------
(a) See definition of EBITDA and Adjusted Net Income in footnote 2 to the
press release
About Tree Island Steel
Tree Island Steel, headquartered in Richmond, British Columbia, since 1964,
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 galvanized wire, 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 brand names. The Company also owns and
operates a China-based company that assists the international sourcing of
products to Tree Island and its customers.
Forward-Looking Statements
This press release includes forward-looking information with respect to Tree
Island 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 Tree Island'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 to management. 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 Company'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 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. 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 Company'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 STATEMENTS OF FINANCIAL POSITION
(in thousands of Canadian dollars)
December 31 December 31
2013 2012
------------------------------------------------------------ ---------------
Assets
Current
Cash 1,264 2,371
Accounts receivable 16,960 11,984
Inventories 35,307 32,732
Prepaid expenses 1,691 2,200
------------------------------------------------------------ ---------------
55,222 49,287
Property, plant and equipment 30,255 31,592
Other non-current assets 158 223
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85,635 81,102
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------------------------------------------------------------ ---------------
Liabilities
Current
Senior Revolving Facility 16,370 10,785
Accounts payable and accrued liabilities 7,619 9,649
Income taxes payable 201 1,346
Other current liabilities 119 83
Fair value of convertible instruments 241 312
Convertible Debentures 14,696 -
Current portion of long-term debt 1,911 1,748
------------------------------------------------------------ ---------------
41,157 23,923
Convertible Debentures - 15,634
Senior Term Loan 3,792 4,292
Long-term debt 9,718 9,639
Finance Lease 26 87
Other non-current liabilities 675 449
Deferred income taxes 2,487 1,973
------------------------------------------------------------ ---------------
57,855 55,997
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Shareholders' Equity 27,780 25,105
------------------------------------------------------------ ---------------
85,635 81,102
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Tree Island Steel Ltd.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of Canadian dollars, except share / units and per-
share / unit amounts)
Three Months Ended December
31 Year Ended December 31
2013 2012 2013 2012
----------------------------------------------- ----------------------------
Sales $ 35,748 $ 28,657 $ 153,438 $ 146,238
Cost of goods sold 31,248 26,568 133,238 130,132
Depreciation 731 775 2,903 3,074
----------------------------------------------- ----------------------------
Gross profit 3,769 1,314 17,297 13,032
Selling, general
and administrative
expenses 3,500 3,221 12,982 12,527
----------------------------------------------- ----------------------------
Operating income
(loss) 269 (1,907) 4,315 505
Foreign exchange
gain 5 12 114 87
Gain (loss) on sale
of property, plant
and equipment - 18 (42) 448
Property, plant and
equipment
impairment
reversal 671 - 671 -
Gain on sale of
subsidiary (13) - 218 -
Changes in
financial
instruments
recognized at fair
value (147) 10 (135) (717)
Gain on
renegotiated debt - - - 17,805
Financing expenses (1,490) (1,324) (5,890) (7,299)
----------------------------------------------- ----------------------------
(Loss) income
before income
taxes (705) (3,191) (749) 10,829
Income tax recovery
(expense) 40 846 94 (458)
----------------------------------------------- ----------------------------
Net (loss) income
for the period $ (665) $ (2,345) $ (655) $ 10,371
----------------------------------------------- ----------------------------
----------------------------------------------- ----------------------------
Net (loss) income
per share / unit
Basic $ (0.03) $ (0.11) $ (0.03) $ 0.47
Diluted $ (0.03) $ (0.11) $ (0.03) $ 0.25
----------------------------------------------- ----------------------------
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Weighted-average
number of shares /
units
Basic 26,267,602 21,799,448 24,294,737 21,978,006
Diluted 26,267,602 21,799,448 24,294,737 60,590,535
----------------------------------------------- ----------------------------
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Tree Island Steel Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
Three Months Ended
December 31 Year Ended December 31
2013 2012 2013 2012
----------------------------------------------- ----------------------------
Cash flows from
operating
activities
Net (loss) income
for the period $ (665) $ (2,345) $ (655) $ 10,371
Adjustments for:
Depreciation 731 775 2,903 3,074
Changes in
financial
liabilities
recognized at
fair value 147 (10) 135 717
Gain on sale of
property, plant
and equipment - (18) 42 (448)
Property, plant
and equipment
impairment
reversal (671) - (671) -
(Gain) loss on
renegotiated
debt - - - (17,805)
Net finance costs 1,538 1,324 5,891 7,299
Deferred income
tax (recovery)
expense 582 (200) 514 1,207
Fair value change
on Phantom Units - (128) - (64)
Exchange
revaluation on
foreign
denominated debt 370 123 732 (389)
Gain on sale of
subsidiary 13 - (218) -
Working capital
Adjustments:
Accounts
Receivable 1,343 2,508 (4,605) 1,738
Inventories (2,047) 10,490 (1,674) 3,095
Accounts payable
and accrued
liabilities (1,217) (4,345) (2,110) (4,021)
Income and other
taxes (1,142) (644) (1,128) (747)
Other (9) (1,081) (435) 68
----------------------------------------------- ----------------------------
Net cash provided
by (used in)
operating
activities (1,027) 6,449 (1,279) 4,095
----------------------------------------------- ----------------------------
Cash flows from
investing
activities
Proceeds from sale
of subsidiary,
net of costs - - 439 -
Proceeds on
disposal of
property, plant
and equipment 24 33 24 520
Purchase of
property, plant
and equipment (128) (117) (510) (349)
----------------------------------------------- ----------------------------
Net cash (used in)
provided by
investing
activities (104) (84) (47) 171
----------------------------------------------- ----------------------------
Cash flows from
financing
activities
Repayment of
Senior Term Loan (125) (83) (500) 4,792
Repayment of long-
term debt (407) (298) (1,519) (6,812)
Conversion of
Warrants - - 171 -
Interest paid (754) (608) (3,040) (2,929)
Normal course
issuer bid - (16) - (317)
Advance
(repayment) on
Senior Revolving
Facility 1,539 (5,846) 5,053 (462)
----------------------------------------------- ----------------------------
Net cash (used in)
provided by
financing
activities 253 (6,851) 165 (5,728)
----------------------------------------------- ----------------------------
Effect of exchange
rate changes on
cash 28 7 54 (19)
----------------------------------------------- ----------------------------
Decrease in cash (850) (479) (1,107) (1,481)
Cash, beginning of
period 2,114 2,850 2,371 3,852
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Cash, end of period $ 1,264 $ 2,371 $ 1,264 $ 2,371
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FOR FURTHER INFORMATION PLEASE CONTACT:
Tree Island Steel Ltd.
Ali Mahdavi
Investor Relations
(416) 962-3300 or +1(866) 430-6247
amahdavi@treeisland.com
www.treeisland.com
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