Aris Mining Corporation press release
Sun Gro Horticulture Income Fund Releases 2005 Year-End Results
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TRADING SYMBOL: Toronto Stock Exchange - GRO.UN
Sun Gro Horticulture Income Fund will hold a conference call and webcast to discuss 2005 fourth quarter and year-end results on March 14, 2006 at 7:30 am Pacific Time (10:30 am Eastern). The call can be accessed by dialing: 1-866-249-2157 or 416-644-3414. A replay will be available through March 28, 2006 at: 1-877-289-8525 or 416-640-1917. (Passcode: 21179921 followed by the number sign) The live and archived webcast can be accessed at http://www.vcall.com/IC/CEPage.asp?ID(equal sign)102224.
VANCOUVER, March 13 /CNW/ - Sun Gro Horticulture Income Fund (the "Fund") today reported financial results for the three-month and 12-month periods ended December 31, 2005. The three-month period represents the fourth quarter of the Fund's 2005 fiscal year.
Fourth Quarter Operating Results For the three months ended December 31, 2005, Sun Gro Horticulture Canada Ltd. ("Sun Gro", or the "company"), the Fund's wholly owned subsidiary, recorded revenue of $43.0 million, down by 8% from the $46.6 million recorded in the fourth quarter of 2004. The $3.6 million revenue difference was due to the inclusion of an additional week of sales in the fourth quarter of 2004 and lower peat moss volumes in 2005. Sun Gro's quarterly sales volumes, as measured in equivalent bales (the company's standard unit of volume measurement, referring to 10 cubic feet of peat), were down by 16% over the fourth quarter of 2004. The lower volumes were offset by improved pricing performance and significantly lower distribution expenses. During the quarter, Sun Gro reduced cross-regional shipments to customers normally served from its operations in Manitoba, where the company has experienced a harvest shortfall in each of the last two years. With certain volumes being shipped shorter distances, per-unit transportation costs were down by 3% year-over-year. Throughout the final quarter of 2005, Sun Gro continued to experience the negative effects of the stronger Canadian dollar on its primarily US dollar- denominated sales. The value of the Canadian dollar averaged US$0.86, compared to US$0.82 in the fourth quarter of 2004. The difference in exchange rates effectively reduced fourth quarter revenue by 4% over 2004. As a result of the decline in the Fund's unit value that occurred during the second half of 2005, Sun Gro determined during its annual goodwill impairment test that the carrying value of goodwill exceeded the fair value and recorded a goodwill impairment charge of $13.6 million. This non-cash charge did not have, and will not have, any impact on distributable cash. No impairments to the value of intangible assets or property, plant and equipment were identified. Net earnings for the fourth quarter were a loss of $11.8 million, generating a basic and diluted loss of negative $0.54 per unit. In 2004, the Fund generated basic and diluted earnings of $0.15 per unit on fourth quarter net earnings of $3.4 million. The decrease was primarily due to the goodwill impairment, differences in current and future taxes, and differences in realized and unrealized gains on forward currency contracts.
Full-year operating results For the year ended December 31, 2005, revenue of $199.9 million was up by $11.1 million, or 6%, from the $188.8 million recorded in 2004. The revenue gain was driven by a full year's sales of the bark-based Metro-Mix and Redi- Earth professional growing mix brands acquired by Sun Gro in September 2004, and generally improved pricing performance. As with the quarterly result, the higher annual revenue was offset by lower sales volumes and the continued appreciation of the Canadian dollar. Sun Gro's annual sales volumes were down by 2% year-over-year, while the average value of the dollar increased to US$0.83, compared to $0.77 in 2004. The difference in exchange rates effectively reduced Sun Gro's 2005 revenues by approximately 7%. Operating results for the year were also negatively impacted by rising freight rates and incremental expenses associated with increased cross- regional shipments in the first half of the year. Combined, these factors pushed per-unit transportation costs up by 6% year-over-year. Sun Gro's production costs were higher as well. In addition to increased raw material costs, the company experienced production inefficiencies, with some of its plants operating at reduced production levels due to lower than anticipated harvest volumes. Net earnings for the year were a loss of $3.5 million, generating basic and diluted earnings of negative $0.16 per unit. This compares to net earnings of $18.8 million, or $0.85 per unit, in 2004. As with the quarterly result, the decrease was mainly due to the impairment of goodwill, differences in current and future taxes, and differences in realized and unrealized gains on forward currency contracts.
Cash Distributions The Fund maintained its level of distributions to unitholders in the fourth quarter of 2005, declaring monthly cash distributions of $0.075 per unit for each of October, November and December. In total, the Fund earned $3.8 million of distributable cash, or $0.17 per unit, and distributed $5.0 million, or $0.225 per unit, to unitholders. By comparison, in the fourth quarter of 2004, the Fund earned $3.4 million of distributable cash, or $0.15 per unit, and distributed $5.0 million, or $0.225 per unit, to unitholders. For the twelve months ended December 31, 2005, the Fund generated distributable cash of $20.1 million, or $0.91 per unit, and distributed $19.8 million, or $0.90 per unit. In 2004, the Fund generated distributable cash of $19.9 million, or $0.90 per unit, and distributed $21.3 million, or $0.97 per unit. "We are pleased with our continued progress in implementing our pricing and acquisition growth strategies," said Mitch Weaver, Sun Gro's President and CEO, and a Trustee of the Fund. "Despite a less favourable exchange rate, we were able to maintain our gross margin at 45%, the same margin we achieved in the fourth quarter of 2004." "On a full-year basis, we continued to generate healthy revenue growth, and were successful in minimizing the ongoing negative impacts of currency exchange, higher transportation and production costs, and supply constraints on our gross margin," continued Weaver. "This enabled us to end the year on a positive note and generate sufficient distributable cash to fully fund our 2005 distributions to unitholders."
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Statement of For the For the distributable cash three three For the For the (in thousands of dollars months months year year except per unit amounts) ended ended ended ended December December December December 31, 2005 31, 2004 31, 2005 31, 2004
Cash flows from operating activities before change in non-cash operating working capital $ 4,873 $ 3,706 $ 22,377 $ 21,330 Adjustments: Capital expenditures (614) (281) (2,821) (1,405) Government grants and loans (25) (25) 588 (75) Current income taxes expected to reverse in the current fiscal year (416) Distributable cash $ 3,818 $ 3,400 $ 20,144 $ 19,850 Distributable cash per unit $ 0.17 $ 0.15 $ 0.91 $ 0.90
2005 Performance Highlights Despite the combined effects of the stronger Canadian dollar, lower sales volumes, rising freight rates, increased raw material costs, and supply- associated production inefficiencies, Sun Gro achieved a gross margin of 46% in 2005. This compares to 48% in 2004. In keeping with the company's strategic focus on the professional growers' market, professional products accounted for 88% of total sales in 2005, compared to 86% in 2004, with retail products making up the balance in both years. At the end of January 2005, Sun Gro enhanced its eastern Canadian harvest capacity through the acquisition of the operating assets of New Brunswick peat moss producer, Pigeon Hill Peat Ltd. The transaction added a 325-acre professional grade peat bog and modern processing plant to the company's holdings. In late May, Sun Gro entered into an agreement to become the North American Master Distributor of Haifa Chemicals' Multicote(R) controlled release fertilizer product line. The agreement provides for Sun Gro to sell existing Multicote(R) formulations and new jointly developed formulations. In addition to strengthening the company's position in the fertilizer segment of the professional market, the new product line is expected to expand its sales into the container nursery industry. In October, Sun Gro enhanced the stability of its financial position by amending its credit facility. The amendment extended the maturity dates of the company's term loans and revolving operating facility to September 2008 and September 2007, respectively. As a result, $23.6 million in term loans to finance acquisitions and capital expenditures for plant upgrades required to produce the Metro-Mix(R) and Redi-Earth(R) brands was reclassified as long- term debt. At December 31, 2005, Sun Gro had drawn $38.3 million on the revolving operating facility to finance working capital and general corporate requirements. Maturity of both the term loans and revolving facility may be further extended by one year annually, subject to approval of the lender. In February 2006, Sun Gro amended its credit facility further to provide an additional $10.0 million of borrowing capacity under the revolving facility. To offset foreign exchange losses on the conversion of its US sales to Canadian dollars, as well as higher raw material costs and rising transportation costs, Sun Gro implemented multiple price increases during the year; the most recent in September. As a result, average US dollar prices for growing mixes were up by 8% year-over-year and Canadian dollar revenue per EB was 1% higher than in 2004. For peat moss, pricing is affected by a supply agreement associated with Sun Gro's 2004 acquisition of the Lameque Group. Sales under this agreement exclude distribution and packaging costs, and thus provide significantly lower price realizations. Excluding these sales, Sun Gro's US dollar pricing for peat moss was up by 13% year-over-year, and Canadian dollar revenue per EB increased by 5% over 2004. Overall, Sun Gro achieved a 7% improvement in revenue per EB.
Financial Highlights
Comparative Statements of Earnings (In thousands of dollars except For the three For the three per unit amounts and number of months ended months ended units outstanding) December 31, 2005 December 31, 2004 (unaudited) (unaudited) Revenue $ 42,998 100% $ 46,599 100% Cost of goods sold 23,448 55% 25,603 55% Gross profit 19,550 45% 20,996 45%
Distribution expenses 10,001 23% 12,056 26% Selling expenses 3,496 8% 4,215 9% General and administrative expenses 4,478 10% 4,532 10% Total operating expenses 17,975 41% 20,803 45% Operating income 1,575 4% 193 0%
Other (expense) income, net (497) -1% 4,530 10% Goodwill impairment (13,572) -31% - Interest expense (812) -2% (541) -1% Earnings before income taxes (13,306) -30% 4,182 9% Income tax recovery (provision) Current 565 1% 70 0% Future 964 2% (837) -2% Net earnings for the year $ (11,777) -27% $ 3,415 7% Basic and diluted earnings per unit $ (0.54) $ 0.15 Weighted average number of units outstanding 22,023,000 22,023,000
Selected supplemental revenue information
Volume in thousands of EBs(1) Growing Mixes 1,401 1,545 Peat Moss 1,215 1,582 Fertilizer and Minerals 66 77 Total company sales 2,682 3,204
Average revenue per EB(1) (U.S. $) Growing Mixes $ 17.67 $ 16.31 Peat Moss(2) 7.61 6.77 Fertilizer and Minerals 25.62 19.89 Total company sales $ 13.31 $ 11.69 Average revenue per EB(1) (Canadian $) Growing Mixes $ 20.59 $ 20.07 Peat Moss(2) 8.87 8.48 Fertilizer and Minerals 29.87 24.44 Total company sales $ 15.51 $ 14.36 (1) An EB, or equivalent bale, is Sun Gro's standard unit of measure referring to 10 cubic feet of peat. Average revenue per EB calculation does not include transportation-related surcharges. (2) Peat moss sales price per EB is impacted by certain sales with no associated packaging, distribution or selling expense.
Comparative Statements of Earnings (In thousands of dollars except For the year For the year per unit amounts and number of ended ended units outstanding) December 31, 2005 December 31, 2004 Revenue $ 199,928 100% $ 188,804 100% Cost of goods sold 107,317 54% 97,593 52% Gross profit 92,611 46% 91,211 48%
Distribution expenses 47,441 24% 45,229 24% Selling expenses 15,954 8% 16,235 9% General and administrative expenses 19,592 10% 19,365 10% Total operating expenses 82,987 42% 80,829 43% Operating income 9,624 4% 10,382 5%
Other income, net 602 0% 10,779 6% Goodwill impairment (13,572) -7% Interest expense (2,896) -1% (1,509) -1% Earnings (loss) before income taxes (6,242) -4% 19,652 10% Income tax recovery (provision) Current (553) 0% (290) 0% Future 3,335 2% (580) 0% Net earnings (loss) for the year $ (3,460) -2% $ 18,782 10% Basic and diluted earnings (loss) per unit $ (0.16) $ 0.85 Weighted average number of units outstanding 22,023,000 22,023,000 Selected supplemental revenue information
Volume in thousands of EBs(1) Growing Mixes 6,509 5,950 Peat Moss 6,044 6,883 Fertilizer and Minerals 345 384 Total company sales 12,898 13,217 Average revenue per EB(1) (US $) Growing Mixes $ 16.70 $ 15.40 Peat Moss(2) 7.38 6.47 Fertilizer and Minerals 23.07 19.15 Total company sales $ 12.50 $ 10.86
Average revenue per EB(1) (Canadian $) Growing Mixes $ 20.25 $ 20.07 Peat Moss(2) 8.94 8.48 Fertilizer and Minerals 27.98 25.10 Total company sales $ 15.16 $ 14.18 (1) An EB, or equivalent bale, is Sun Gro's standard unit of measure referring to 10 cubic feet of peat. Average revenue per EB calculation does not include transportation-related surcharges. (2) Peat moss sales price per EB is impacted by certain sales with no associated packaging, distribution or selling expense.
Outlook Peat moss supply is anticipated to remain tight across the industry until the new harvest commences in the Spring. Sun Gro will continue to focus on production of its higher value professional growing mixes and does not expect that supply constraints will restrict its ability to fulfill its customers' orders for growing mix products. The company anticipates that its sales volumes for the first half of the year will remain flat year-over-year, assuming the 2006 harvest commences in line with historical experience, but expects to see an improvement in US dollar sales revenues as a result of its 2005 price increases. Sun Gro will continue to concentrate on reducing costs through increasing plant efficiencies, and expects to see a slight reduction in its first quarter distribution expenses. In the second half of the year, assuming normal harvest levels are achieved, Sun Gro anticipates a return to more normal, historical sales volume growth. With approximately 40% of its operating expenses incurred in US dollars, Sun Gro enjoys a natural hedge against some of the impact of foreign exchange. To manage its remaining US dollar exposure, the company continues to hold forward exchange contracts to offset a portion of the impact of any further strengthening of the Canadian dollar. For 2006, Sun Gro has entered into forward exchange contracts with a blended rate of $1.22 that will hedge approximately 80% of its expected Canadian dollar purchases. "We are optimistic about the outlook for our business, and confident in our ability to continue to manage our foreign exchange exposure through pricing adjustments and currency hedging," said Weaver. "We believe that our current cash distribution level is sustainable, and we are whole-heartedly committed to enhancing the value we deliver to our unitholders over the long term."
Forward-Looking Statements This news release contains forward-looking statements. These statements relate to future events or future performance and reflect Sun Gro's expectations regarding its growth, results of operations, performance, business prospects, opportunities or industry performance or trends. These forward-looking statements reflect management's current internal projections, expectations or beliefs and are based on information currently available. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "intend", "plan", "anticipate", "believe", "predict", "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from those discussed in the forward-looking statements. Important factors that could cause actual results to differ materially from Sun Gro's expectations include, among other things, fluctuations in currency exchange rates, the impact of adverse weather conditions on harvesting operations, an increase in freight rates, and the impact of an increase in fuel costs. Readers should specifically consider these factors, including the risks and uncertainties described in the Fund's most recent annual report. In addition, the Fund's ability to make distributions to unitholders is entirely dependent on Sun Gro's performance. Although management believes that the forward-looking statements contained in this news release are based on reasonable assumptions, readers cannot be assured that actual results will be consistent with such statements. Forward- looking statements are made as of the date of this news release and Sun Gro assumes no obligation to update or revise them to reflect new events or circumstances.
Income Fund Profile Sun Gro Horticulture Income Fund was launched with the completion of an Initial Public Offering of 22,023,000 trust units on March 27, 2002. The Fund is dependent on Sun Gro's operations, with monthly distributions to its unitholders based entirely on Sun Gro's performance.
Company Profile Sun Gro was founded in 1929 in Vancouver, BC and has grown to become North America's largest producer of sphagnum peat, and the largest distributor of peat moss and peat and bark-based growing media to professional plant growers in the US and Canada. Sun Gro sells its professional products primarily to greenhouse, nursery and specialty crop growers, as well as to golf course developers and landscapers. Sun Gro also sells peat moss and peat-based growing mixes to retail customers, either by way of private label partnerships or under its own brand names. Approximately 80% of the company's sales volume goes to the US.
Sun Gro Horticulture Income Fund Consolidated Balance Sheets (in thousands of dollars)
As at As at December 31, December 31, Assets 2005 2004 Current assets Accounts receivable $ 46,310 $ 37,743 Inventories 29,856 28,825 Unrealized gain on foreign currency contracts 3,041 6,669 Prepaid expenses and other assets 3,844 3,325 83,051 76,562
Property, plant and equipment 126,727 130,239 Unrealized gain on foreign currency contracts - 1,006 Note receivable - 1,064 Intangible assets 35,616 37,693 Goodwill 11,202 24,774 $ 256,596 $ 271,338 Liabilities and Unitholders' Equity
Current liabilities Bank indebtedness $ 1,053 $ 162 Operating line 38,329 31,789 Accounts payable and accrued liabilities 16,059 14,340 Current portion of long-term debt 200 10,600 Distribution payable to unitholders 1,652 1,652 57,293 58,543
Other liabilities 4,175 3,696 Long-term debt 24,261 10,542 Future income taxes 19,051 22,476 104,780 95,257 Unitholders' equity Capital contributions 209,733 209,733 Cumulative translation account (15,245) (14,264) Cumulative earnings 41,448 44,908 Cumulative distributions declared (84,120) (64,296) 151,816 176,081 $ 256,596 $ 271,338
Sun Gro Horticulture Income Fund Consolidated Statements of Earnings (Loss) and Cumulative Earnings (in thousands of dollars except per unit amounts and number of units outstanding)
Year ended Year ended December 31, December 31, 2005 2004 Revenue $ 199,928 $ 188,804 Cost of goods sold 107,317 97,593 Gross profit 92,611 91,211
Distribution expenses 47,441 45,229 Selling expenses 15,954 16,235 General and administrative expenses 19,592 19,365 Total operating expenses 82,987 80,829 Operating income 9,624 10,382