Arctic Glacier Posts Fourth Quarter and Year-End Results
(firmenpresse) - WINNIPEG, MANITOBA -- (Marketwire) -- 03/27/12 -- Arctic Glacier Income Fund (CNSX: AG.UN) today announced results for the fourth quarter and year ended December 31, 2011.
Summary of 2011(i)
(i)Dollar amounts in U.S. currency unless otherwise specified
"For Arctic Glacier, the events of 2011 led to far-reaching developments in 2012 that aim to find a solution to the Fund's current challenges and create a new structure for the future," said Keith McMahon, President and CEO of Arctic Glacier Inc., the Fund's operating company.
On February 21, 2012 the Fund filed for court supervised recapitalization under the Companies' Creditors Arrangement Act (CCAA). Shortly afterward a similar filing was made under Chapter 15 of the U.S. Bankruptcy Code, recognizing the Canadian supervised sale and investment solicitation process in both the United States and Canada.
Since late 2010, a special committee of the board has been engaged in a strategic and financing review, with the assistance of TD Securities. The committee was originally created to evaluate alternatives to refinance $90.6 million in convertible debentures that were scheduled to mature on July 31, 2011.
However, the Fund's weakened financial condition, caused by a prolonged antitrust investigation and related civil litigation, significant refinancing costs and reduced EBITDA in the second quarter of 2011, meant a transaction to provide the capital to retire the debentures could not be completed prior to maturity. In addition, the Fund was not in a position to negotiate an extension to the debentures and as a result, it satisfied these obligations by issuing units as permitted by the trust indenture. A total of 311.3 million Fund units were issued to debenture holders on August 2, 2011, increasing issued and outstanding equity to 350.3 million units.
Commencing with the June 30, 2011 reporting period, the Fund was in breach of certain financial covenants governing EBITDA levels and other measures under its credit facilities. The breach created a default under the terms of the credit facilities and the Fund received notices of default from its term loan lenders and revolving term credit facility lenders in September 2011, without requiring accelerated payments. As a result, the Fund no longer had the ability to make additional draws on its revolving term credit facility.
Following extensive discussions and negotiations with secured lenders in an effort to implement a recapitalization transaction that would improve the Fund's capital structure, the Trustees determined it was necessary to pursue a recapitalization under court supervision. The secured lenders supported this decision and the sale and investment process.
Subsequent to year-end, on February 21, 2012, the Fund received notices from the secured lenders demanding immediate repayment of all obligations under the term loan and revolving term credit facilities. On February 22, Arctic Glacier obtained an order from the Manitoba Court of Queen's Bench allowing the Fund to commence a court supervised recapitalization of its business through the initiation of a sale and investment solicitation process under the CCAA. The order also provides for a stay of certain creditor claims and authorizes $50 million of specialized debtor-in-possession (DIP) financing from Arctic Glacier's current lenders to enable normal business operations to be maintained during the recapitalization process. On February 23, the Fund obtained a court order in the United States recognizing the Canadian supervised process in both countries.
Fourth Quarter 2011 Review
The Fund's financial disclosure for the three months ended December 31, 2011 has been prepared in accordance with International Financial Reporting Standards ("IFRS"). Accordingly, comparative periods for fiscal 2010 have been restated in accordance with IFRS, including the January 1, 2010 transition date balance sheet.
Sales in the fourth quarter of 2011 totaled $35.6 million, an increase of $0.8 million or 2% from the same period in 2010. Excluding the effects of currency, sales in existing markets were up by $1.0 million as favorable weather in most of Arctic Glacier's markets offset the effect of higher competitive activity in west coast markets and continued weakness in the North American economy. The weaker Canadian dollar during the fourth quarter decreased the U.S. dollar value of sales generated in Canadian markets by $0.2 million.
Cost of sales including depreciation and amortization totaled $44.3 million, an increase of $3.1 million or 7% compared to the fourth quarter of 2010. Cost of sales in existing markets was up by $0.9 million, primarily due to higher energy and third-party distribution costs. Amortization and depreciation expense increased by $2.3 million, due primarily to a reduction in the amortization period for customer relationship assets in 2011. The weaker Canadian dollar decreased the U.S. dollar value of costs incurred in Canadian markets by $0.1 million.
General and administrative expenses totaled $2.7 million, an increase of $1.1 million from the same period of 2010. The change was primarily the result of mark-to-market adjustments in 2010 on unit-based compensation related to unit options granted in previous years, plus higher insurance costs.
For the fourth quarter of 2011, EBITDA was negative $1.0 million, compared to negative $0.1 million for the same quarter in 2010.
Finance costs of $10.2 million were $1.4 million higher than in the same quarter last year. The increase was primarily due to increased borrowing rates following the March 2011 loan agreement amendments and September 2011 defaults and increased amortization of deferred financing charges related to March 2011 loan amendments, which more than offset the interest savings following the settlement of the convertible debentures. The weaker Canadian dollar partly reduced the increase.
Other costs for the quarter totaled $29.6 million, comprised of a non-cash goodwill impairment charge of $15.6 million, a non-cash intangible asset impairment charge of $9.2 million and expenses of $4.8 million for the review of financing and strategic alternatives. Other costs for the same quarter of 2010 totaled $2.3 million.
The loss for the fourth quarter of 2011 totaled $54.7 million or $0.16 (basic and diluted) per unit, compared to $22.1 million or $0.57 (basic and diluted) per unit in the same period of 2010. The difference in per-unit results is partly due to a higher number of units outstanding in the period just ended, owing to debenture conversion during 2011.
Fiscal 2011 Review
Sales in 2011 totaled $237.1 million, an increase of $3.7 million or 2% compared to 2010. The increase was driven primarily by sales in new markets totaling $1.5 million and the stronger Canadian dollar during the 12-month period, which increased the U.S. dollar value of sales generated in Canadian markets by $2.5 million. These amounts were offset by a 1% sales decrease in previously serviced markets, where favorable weather in the key summer months only partially overcame the impact of poor weather from March through June 2011 in most markets, significantly increased competitive activity in west coast markets and the continued weakened state of the North American economy.
Cost of sales totaled $223.0 million in 2011, an increase of $16.4 million or 8% compared to 2010. Excluding depreciation and amortization, cost of sales totaled $183.5 million in 2011, an increase of $8.2 million or 5%. The increase resulted mainly from higher fuel, packaging, vehicle and third-party distribution costs in previously serviced markets. In addition, the stronger Canadian dollar increased the U.S. dollar value of costs incurred in Canadian markets by $1.5 million and costs of $0.9 million were incurred to service customers in new markets.
The depreciation and amortization component of cost of sales was $39.5 million in 2011, an increase of $8.2 million from 2010 primarily due to a reduction in the amortization period for customer relationship assets in 2011 that increased expense by $12.2 million. This was partially offset by the effect of certain tangible assets becoming fully depreciated.
General and administrative expenses totaled $10.2 million in 2011, compared to $7.7 million in 2010. The increase resulted primarily from mark-to-market adjustments on unit-based compensation related to unit options granted in previous years, severance expense due to restructuring, higher professional fees related to technology based initiatives, increased insurance outlays and one-time costs related to the transition to IFRS.
EBITDA in 2011 decreased by 14% to $43.6 million, largely due to poor spring weather and increased competition in west coast markets.
Finance costs increased by 15% to $38.8 million in 2011. Cash interest decreased by $0.6 million, primarily due to interest savings following conversion of the convertible debentures to equity. There were no loan amendment fees in 2011 compared to $0.4 million in 2010. This was offset by increased borrowing rates following the March 2011 loan agreement amendments and September 2011 credit agreement defaults and the stronger Canadian dollar. Non-cash finance costs increased by $6.1 million due to higher accrued interest, increased amortization of deferred financing charges and accretion of antitrust settlements payable.
Other costs totaled $42.7 million in 2011, a decrease of $39.1 million compared to 2010. They included:
Offsetting these amounts were two gains recorded during 2011 that consisted of:
The Fund ended 2011 with a loss of $84.9 million, or $0.50 per unit (basic) and $0.54 (diluted), versus $82.7 million or $2.12 per unit (basic and diluted) in 2010. However, antitrust related costs, goodwill and intangible asset impairment charges and the strategic review are not representative of normal operating expenses. If they are removed, the Fund ended 2011 with an adjusted loss of $27.9 million or $0.17 per unit (basic) and $0.21 (diluted) in 2011, compared to an adjusted loss of $18.9 million or $0.48 (basic and diluted) last year. The change was mainly caused by lower EBITDA, increased amortization, higher finance costs and loss on settlement of convertible debentures.
Financial Position
At December 31, 2011 the Fund had a working capital deficiency of $196.4 million. This resulted primarily from the classification of $202.8 million of long-term debt as current liabilities. The change was required because of the default on the secured loan agreements and the associated notices of default issued by the lenders during 2011. Excluding the long-term debt, the Fund's working capital at December 31, 2011 was $6.4 million. At December 31, 2010, the working capital deficiency, excluding the convertible debenture liability of $74.5 million, was $2.4 million.
At December 31, 2011 Arctic Glacier's net debt was $189.9 million, versus $169.7 million (excluding convertible debentures), at the same time last year. The Fund's net debt to EBITDA ratio at December 31, 2011 was 4.9 to1 as defined by the revolving term credit facility, compared to 3.7 to1 at the same time last year. The maximum permitted covenant ratio is 4.5 to 1.
On December 14, 2011, the Fund's term loan lenders acquired the revolving term credit facility from its previous holders. At December 31, 2011, the Fund was in default on its secured credit facilities, comprised of a $191.2 million term loan and an outstanding balance of $29.9 million on the revolving term credit facility.
The Fund's year-end cash on hand totaled $22.7 million.
Subsequent to year-end, the Fund arranged a $50 million DIP financing facility with its existing secured lenders as part of the CCAA and U.S. Chapter 15 proceedings. The facility is expected to provide for ongoing working capital, capital expenditure requirements and general corporate purposes during the sale or recapitalization process. The DIP facility is secured by a charge over all assets of the Fund and its subsidiaries, with the priority set out in the initial court order.
U.S. DOJ Investigation and Related Litigation
During 2011 and early 2012 considerable progress was made in the area of antitrust investigations and related civil litigation.
In March 2011 the Civil Division of the U.S. Department of Justice advised Arctic Glacier it had concluded its investigation of the packaged ice industry and will take no action against the Fund or its subsidiaries.
Also in March 2011, the Fund resolved two civil suits filed by direct purchasers of packaged ice. Arctic Glacier settled a class action filed by direct purchases or packaged ice in the U.S. with an agreement to pay $12.5 million in two installments. The same month, the Fund resolved a claim for a nominal amount in Wisconsin whose petition for class action status had previously been denied by the court. In April 2011 Arctic Glacier simultaneously settled four class actions with Canadian direct purchasers for a total of C$2.0 million. Subsequent to year-end, in February 2012 the Fund settled a class action brought by Canadian unitholders for C$13.75 million, to be funded entirely by Arctic Glacier's insurers.
Outlook
Arctic Glacier's most pressing concern during 2012 will be to complete the court-supervised recapitalization through the initiation of a sale and investment solicitation process via CCAA and U.S. Chapter 15 proceedings.
The CCAA and Chapter 15 proceedings and the DIP financing facility have provided the Fund and its subsidiaries with temporary relief and access to financial resources to enable it to continue to operate with minimal disruption while the court supervised recapitalization of the business is carried out. Arctic Glacier expects to maintain all operations at their normal capacity in both Canada and the United States during the course of these proceedings. No layoffs or lease terminations are planned and all suppliers of goods and services are intended to be paid as usual, including amounts owed to such suppliers prior to the CCAA filing.
Going forward, Arctic Glacier is focused on key operational strategies that include:
At the same time, management continues to carefully manage its cash position, operating costs and capital expenditures to provide liquidity to support operations.
Arctic Glacier is working to resolve current challenges, and as new financing initiatives are examined, the Fund's key operating principles remain unchanged: to provide value to its customers through superior product quality and industry leading customer service.
About Arctic Glacier
Arctic Glacier Income Fund, through its operating company, Arctic Glacier Inc., is a leading producer, marketer and distributor of high-quality packaged ice in North America, primarily under the brand name of Arctic Glacier® Premium Ice. Arctic Glacier operates 39 production plants and 47 distribution facilities across Canada and the northeast, central and western United States servicing more than 75,000 retail locations.
Arctic Glacier Income Fund trust units are listed on the Canadian National Stock Exchange under the trading symbol AG.UN. There are 350.3 million trust units outstanding.
Conference Call and Webcast
Arctic Glacier will discuss fourth quarter and year-end 2011 results during a conference call with a live audio webcast for investors and analysts on Tuesday, March 27 at 11 am (EDT). To access the simultaneous webcast, log on to Arctic Glacier's website at . Please note the webcast allows participants to listen only.
Forward-Looking Statements
This news release contains statements that constitute forward-looking information within the meaning of applicable securities legislation. All statements other than statements of historical fact are forward-looking statements. The forward-looking information in this news release includes, without limitation, statements regarding: (i) the continuing review by the special committee of the board of trustees of financial or strategic transactions to establish a longer-term solution to ensure the continued viability of the Fund; (ii) the Fund's active discussions with its lenders regarding alternatives to restructure its debt obligations; and (iii) the ongoing anti-trust investigations and related litigation. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.
Forward-looking information is presented for the purpose of assisting readers of this news release in understanding the Fund's financial condition and results of operations and its strategies, priorities and objectives and may not be appropriate for other purposes. Forward-looking information involves significant risks and uncertainties. Actual results, events, performances, achievements and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking information contained in this news release. The forward-looking information contained in this news release is based on a number of assumptions which may prove to be incorrect, including, but not limited to, the potential impact on the Fund of (i) any potential strategic or financial transaction, (ii) the restructuring of the Fund's debt obligations or (iii) the settlement of on-going anti-trust investigations and related litigation. Although the forward-looking statements contained in this news release are based upon what management believes to be reasonable assumptions, the Fund cannot assure readers that actual results will be consistent with these forward-looking statements. Note that there can be no assurance that the Fund will successfully locate, negotiate or complete a financial or strategic transaction, or if completed, that such a transaction will be completed on terms favorable to the Fund or its unit holders. Further, there can be no assurance as to the outcome or success of the Fund's discussions with its lenders regarding alternatives to restructure the Fund's debt obligations. And, at this time, it is not possible to predict the timeline or final outcome of the investigations or litigation, or any potential effect they may have on the Fund or its operations. All of the foregoing indicate the existence of a material uncertainty that may cast significant doubt on the ability of the Fund to continue as a going concern.
The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. These forward-looking statements are made as at the date of this news release, and, other than as required by applicable securities legislation, the Fund assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances, despite the fact that new events, information or circumstances may cause the Fund's views to change.
Non-IFRS Financial Measures
EBITDA, adjusted earnings and distributable cash are not recognized measures under International Financial Reporting Standards (IFRS). EBITDA is defined as earnings before finance costs, income taxes, depreciation, amortization, gains or losses on foreign exchange, asset impairment charges and non-operating costs such as costs of antitrust investigations and related litigation and costs of review of financing and strategic alternatives and other non-recurring expenses. EBITDA is a performance measure used by many investors to provide an indication of cash generated from ongoing operations prior to debt service, capital expenditures and income taxes and is often used to compare companies and income trusts on the basis of ability to generate cash from ongoing operations. Adjusted earnings is defined as earnings after adding back the after-tax impact of antitrust investigations and related litigation; cost of review of financing and strategic alternatives; and asset impairment charges. Adjusted earnings is used by management to evaluate the ongoing profitability of the Fund by eliminating the effect of these material non-operating costs. Distributable cash is defined as EBITDA less cash interest, cash taxes and sustaining capital expenditures required to maintain operations at their current level. Growth capital expenditures, representing outlays that are integral with acquisition initiatives or that grow the business and enhance distributable cash, are not included in the calculation of distributable cash. Distributable cash is a performance measure historically used by management to summarize the funds available for distribution to unitholders in an income trust. Investors should be cautioned that EBITDA, adjusted earnings and distributable cash should not be construed as alternatives to earnings, cash from operating activities or other financial measures determined in accordance with IFRS as indicators of the Fund's performance. The Fund's method of calculating EBITDA, adjusted earnings and distributable cash may differ from other companies and income trusts and, accordingly, may not be comparable to measures used by them.
The Toronto Stock Exchange does not approve or disapprove of the adequacy or accuracy of this release.
Contacts:
Arctic Glacier Income Fund
Keith McMahon
President & CEO
Toll free investor relations phone: 1-888-573-9237
Arctic Glacier Income Fund
Doug Bailey
Chief Financial Officer
Toll free investor relations phone: 1-888-573-9237
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Datum: 27.03.2012 - 06:00 Uhr
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