Pantera Silver Corp. press release
Rothmans Inc. Announces Financial Results for Fiscal 2008
TSXV - TSX Venture Exchange · Silver · Gold · Oil · Natural Gas · Natural Gas Liquids · Canada
Trading: TSE: ROC
TORONTO, May 16 /CNW/ - Rothmans Inc. today announced results for the fourth quarter and fiscal year ended March 31, 2008.
Rothmans' earnings for the year were $117.6C million or $1.73 per basic share compared with $99.8 million or $1.47 per basic share in fiscal 2007.
Sales at 60%-owned subsidiary Rothmans, Benson & Hedges Inc., net of excise duty and taxes, for the 2008 fiscal year were $670.6 million compared with $618.6 million in fiscal 2007.
Investment income of $12.2 million for fiscal 2008 was $3.1 million higher than fiscal 2007, due to the higher average cash balance held and a higher rate of return experienced during the year.
RBH's EBITDA margin was 50.9% for the year, compared with 47.6% in fiscal 2007. The increase was principally due to price increases across all product categories partially offset by volume shifts into lower-priced tiers of the cigarette price category and higher general and administrative expenses, including incentive plan costs and slightly higher spending on retail trade programs.
RBH shipped a total of 10.7 billion equivalent sticks into the domestic market during fiscal 2008, representing a 0.2% increase compared to fiscal 2007, due mainly to increased shipments of RBH price category cigarettes offsetting declines in both premium cigarette and fine cut shipments. While RBH has continued to demonstrate strong volumetric and financial performance in the face of a declining market, the reduction in overall industry profitability and the apparent growing presence of contraband product in the Canadian market are expected to continue to present significant challenges for RBH for the foreseeable future.
During fiscal 2008, the Company paid dividends of $88.5 million, versus $81.6 million in fiscal 2007. The fiscal 2008 regular dividend was $1.30 per share compared to $1.20 in fiscal 2007.
"RBH has continued to perform very well, having maintained total domestic sales volumes and increasing earnings by almost 18% compared to fiscal 2007," said John Barnett, President and Chief Executive Officer of Rothmans Inc. and RBH. "Year over year, we have grown domestic cigarette market share by 1.2 share points according to the Nielsen Company which, given our volume performance, indicates continued declines in industry tax-paid volumes sold."
Fourth Quarter
Rothmans' earnings for the fourth quarter of fiscal 2008 were $21.0 million or $0.31 basic earnings per share. This compares with earnings of $18.0 million or $0.27 basic earnings per share in the fourth quarter of fiscal 2007.
Sales, net of excise duty and taxes, at RBH were $142.7 million in the fourth quarter compared with $136.8 million in the same period in fiscal 2007.
RBH's EBITDA margin was 43.4% in the quarter compared with 39.4% in the same period of fiscal 2007, and compared to 49.8% in the third quarter of fiscal 2008. The year-over-year increase in EBITDA margin compared to the fourth quarter of fiscal 2007 is predominantly due to price increases across all product categories partially offset by lower shipment volumes and higher sales and marketing costs. The recent quarter EBITDA margin decrease compared to the third quarter of 2008 was principally due to the effect of lower shipment volumes.
Outlook
"The industry continues to be impacted by declining volumes overall and increased competition, particularly in the cigarette price category. In addition, illegal and untaxed products continue to have a negative effect on all industry participants," said Mr. Barnett. "With our new entrants into the premium cigarette category and our well established price cigarette category brands, RBH will continue to compete vigorously in this changing market."
Dividend Declared
The Board of Directors of Rothmans Inc. declared a quarterly dividend of $0.35 per share payable on June 17, 2008 to shareholders of record at the close of business on June 3, 2008.
Analyst Conference Call and Webcast
Rothmans Inc. management will hold a conference call with analysts to discuss the fourth quarter and full year results at 8:30 a.m. Toronto time on Friday, May 16, 2008. In order to listen to the conference call, shareholders are invited to call 1-866-898-9626 or 416-340-2216.
The call will also be webcast through the Company's investor website, www.rothmansinc.ca. At the completion of the conference call, a recording will be available until May 24, 2008 by calling 1-800-408-3053 and entering reservation number 3261299. The recording can also be accessed through the investor website.
Media are invited to listen to the call and to contact Karen Bodirsky at (416) 442-3660 for further information.
About Rothmans Inc.
Rothmans Inc. is a widely held, publicly traded Canadian company that participates in the Canadian tobacco industry through 60%-owned Rothmans, Benson & Hedges Inc., Canada's second largest tobacco company. RBH currently employs approximately 750 people at its head office in Toronto, its sales offices across Canada and its manufacturing facilities in Brampton, Ontario and Quebec City, Quebec where it has been operating for over 100 years. Rothmans is Canada's only publicly traded company with interests exclusively in the tobacco industry and is listed on the Toronto Stock Exchange under the symbol ROC.
Management's Discussion and Analysis
for the fiscal year and three months ended March 31, 2008
Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, provides shareholders with a review of significant developments in the Company's financial performance in the fiscal year and fiscal quarter ended March 31, 2008 compared with the prior year. It also discusses factors that could affect future performance. This MD&A should be read in conjunction with the attached unaudited consolidated financial statements for the year ended March 31, 2008. The results reported herein have been prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP) and are presented in Canadian dollars. This MD&A is current as of May 15, 2008.
Responsibility of Management and the Board of Directors
Management is responsible for the information disclosed in this MD&A and has in place the appropriate information systems, procedures and controls to ensure that information used internally by management and disclosed externally is materially complete and reliable. In addition, the Company's Audit Committee and Board of Directors provide an oversight role with respect to all public financial disclosures by the Company, and have reviewed and approved this MD&A and the accompanying unaudited consolidated financial statements.
Disclosure and Internal Controls
With respect to disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2008. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures were effective as of March 31, 2008 in providing reasonable assurance that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.
During the Company's most recent interim period, there were no changes in the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.
Forward Looking Statements
Certain statements contained in this MD&A and other sections of this document (in particular the sections entitled "Industry Overview" and "Outlook") constitute "forward-looking statements" and express views as to future events, circumstances and trends relating to RBH's business and the Company. Words such as "plans," "intends," "outlook," "expects," "anticipates," "estimates," "believes," "should" and similar expressions may identify forward-looking statements. Forward-looking statements are based on management's current expectations and assumptions and entail various risks and uncertainties. There is no assurance that any forward-looking statement will materialize. Actual results may differ materially from these expectations and forward-looking statements, if known and unknown risks or uncertainties affect RBH's business or the Company, or if management's expectations or assumptions prove to be inaccurate. Unless otherwise indicated, forward-looking statements describe expectations as of May 15, 2008.
Factors that could cause the Company's actual results to differ materially from the forward-looking statements contained herein include, but are not limited to: government claims and potential claims, including the results of ongoing investigations; product liability claims; increases in the levels of contraband product in the market; increased competition and competitor initiatives; the variability in the rate of growth in the cigarette price category; continued declines in consumption of tobacco products; RBH's ability to continue to implement price increases; fluctuating wholesaler and consumer purchasing patterns; changes in government taxation policy; changes in government legislation and regulation including, but not limited to, legislation banning the display of tobacco products in retail stores and new requirements to apply federal excise duty paid stamps on tobacco products; new product standards; and dependence on the domestic tobacco market.
The Company disclaims any obligation or intention to update or revise any forward-looking statement, whether the result of new information, future events or otherwise. Additional information concerning risks and uncertainties affecting RBH's business and the Company and other factors that could cause financial results to fluctuate is set forth below under "Risks and Uncertainties" and "Outlook" and is contained in the Company's filings with Canadian securities regulatory authorities, including the Company's Annual Information Form (in particular under "Legal Proceedings" and "Risk Factors") available on SEDAR at www.sedar.com or on the Company's website at www.rothmansinc.ca.
Terminology used in this MD&A
Throughout this MD&A, "GAAP" refers to Canadian Generally Accepted Accounting Principles, "Rothmans" and "the Company" refer to Rothmans Inc., "RBH" refers to Rothmans, Benson & Hedges Inc., which is 60%-owned by Rothmans Inc., and "EBITDA margin", a key measure of the RBH's operating performance, refers to RBH's "earnings before interest, income taxes, depreciation and amortization" as a percentage of "sales, net of excise duty and taxes".
EBITDA margin provides a measure allowing period-to-period comparisons of the core RBH operating performance before the impact of changes in capital structure, interest, income taxes and capital spending and does not include income from investments or the expenses related to operating Rothmans Inc. as a public company. EBITDA margin is a non-GAAP financial measure that does not have any standardized meaning prescribed by GAAP. It is therefore unlikely to be comparable to similar measures presented by other companies.
The "recent quarter" refers to the three months ended March 31, 2008, and "prior quarter" refers to the three months ended December 31, 2007. "Fiscal 2008" or "recent fiscal year" refers to the fiscal year ended March 31, 2008 and other similar references to a fiscal year (e.g., fiscal 2007) refer to the fiscal year then ended on March 31 (e.g., March 31, 2007).
"The three major suppliers of tobacco products" or "three majors" refers to RBH, Imperial Tobacco Canada Limited (ITL) and JTI-MacDonald Corp. (JTI). "BAT" refers to British American Tobacco p.l.c., the parent company of ITL. "Super premium" refers to tailor-made cigarettes sold at above premium retail prices. "Premium cigarettes" refers to tailor-made cigarettes sold at premium retail prices, "cigarette price category" refers to cigarettes sold at less- than-premium retail prices and "price category" refers to the combination of the cigarette price category and the fine cut category (loose tobacco and pre- portioned tobacco sticks). "Carton" refers to a selling unit containing 200 cigarettes or stick equivalents. "Domestic composite market" refers to all fully tax-paid cigarettes and fine cut tobacco products sold into the Canadian market. "Direct-to-Store Distribution" or "DSD" refers to a distribution model where a tobacco manufacturer ships directly to retail accounts instead of through a wholesale network. "Dark markets" refer to provincial jurisdictions where the display of tobacco products by retailers is banned by government regulation. "CTMC" refers to the Canadian Tobacco Manufacturers Council.
New Accounting Pronouncements
As required by the Canadian Institute of Chartered Accountants ("CICA"), on April 1, 2007, the Company adopted CICA Handbook Section 3855 "Financial Instruments - Recognition and Measurement", Section 3861 "Financial Instruments - Disclosure and Presentation" and Section 1530 "Comprehensive Income".
Sections 3855 and 3861 prescribe when a financial asset, financial liability, or non-financial derivative is to be recognized on the balance sheet, and at what amount. These sections also specify how financial instrument gains and losses are to be presented. The prospective adoption of these new standards resulted in changes in the accounting and presentation for financial instruments as well as the recognition of certain transitional adjustments that have been recorded in opening retained earnings as described in note 2. As required by the implementation of these new standards, the comparative consolidated financial statements have not been restated.
CICA Handbook Section 1530, "Comprehensive Income," introduces a new requirement to temporarily present certain gains and losses outside net income in other comprehensive income or loss. The Company determined that for the year ended March 31, 2008 there were no gains or losses that would be recorded in other comprehensive income or loss. Refer to note 2 for more details.
The implementation of these Handbook requirements did not have a material impact on the financial results of the Company.
The Company implemented the following three new accounting disclosure standards effective for the quarter and year ended March 31, 2008 in advance of the required implementation date.
CICA Handbook Section 1535 "Capital Disclosures" requires that an entity disclose information that enables users of its financial statements to evaluate an entity's objectives, policies and processes for managing capital, including disclosures of any externally imposed capital requirements and the consequences of non-compliance. This section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007 (note 4).
The new Sections 3862 and 3863 replace Handbook Section 3861 "Financial Instruments - Disclosure and Presentation," revising and enhancing its disclosure requirements, and carrying forward unchanged its presentation requirements. These new sections place increased emphasis on disclosures about the nature and extent of risks arising from financial instruments and how the entity manages those risks. Sections 3862 and 3863 apply to interim and annual financial statements for fiscal years beginning on or after October 1, 2007 (note 3).
The following is the new accounting standard the Company will adopt effective April 1, 2008. Management is evaluating the standard and its impact on the Company's consolidated financial statements.
The CICA Handbook Section 3031 "Inventories" prescribes the accounting treatment for inventories. Specifically, the section provides guidance relating to the accounting for inventories and revises and enhances the requirements for assigning costs to inventories. Section 3031 applies to interim and annual financial statements for fiscal years beginning on or after January 1, 2008.
Outstanding Shares
As at March 31, 2008, there were 68,095,608 common shares outstanding or 69,346,408 shares on a fully diluted basis when all exercisable options were included. See notes 10 and 11 to the unaudited consolidated financial statements.
Industry Volumes & Market Share Measurement
For the purpose of managing and evaluating its ongoing business, RBH continues to use various information sources, not all of which are nationally representative, including a proprietary wholesale volumetric reporting system, industry market share information purchased from the Nielsen Company "Nielsen" (a recognized market research company), selected retail data, consumer survey data, and information reported by Statistics Canada. The market share data reported in this annual report was obtained from Nielsen and measures sales of RBH cigarettes sold by selected retailers in the domestic market. RBH continues to evaluate the quality of fine cut market share information available for the purposes of external reporting. Nielsen uses a sampling approach to determine product market share for tobacco products sold at retail. This information, by its nature, is subject to sampling error and variability over a range that is not determinable. Management believes that market share information provided under this approach may be useful in reflecting market trends rather than providing an accurate absolute measure of market share at any particular point in time. Nielsen market share of retail sales cannot be meaningfully compared with market share of volumetric shipments sold to wholesalers which had been previously reported by the Company.
Company Overview, Core Business and Strategy
Rothmans participates in the Canadian tobacco industry through its 60% ownership interest in RBH. The remaining 40% of RBH is owned by FTR Holding S.A. of Switzerland, an affiliate of Philip Morris International, Inc. Rothmans is the only widely held Canadian public company with interests exclusively in the tobacco industry. Its shares are listed on the Toronto Stock Exchange under the symbol ROC. Rothmans' financial results reflect those of RBH after minority interest, plus income generated by the Company's cash reserves, less the costs associated with operating Rothmans as a public company.
RBH is the second largest supplier of tobacco products to the tax paid Canadian market and competes in all the significant categories of that market including premium cigarettes, price category cigarettes and fine cut. RBH also competes in the cigar, pipe tobacco, duty free and export categories which in aggregate represented approximately 7% of RBH's net sales revenues in the recent fiscal year.
RBH continuously evaluates its brand offerings and positioning within each market category against the opportunities presented by the marketplace. This process allows for adjustments to the execution of its brand strategy in order to best maximize performance. The adjustment in strategy can involve activities including changes in RBH's selling price to wholesalers, brand launches, brand line extensions, brand repositioning, brand acquisitions and merchandising initiatives. While RBH has continued to demonstrate strong volumetric and financial performance in the face of a declining market, the apparent growing presence of contraband product in the Canadian market is expected to continue to present significant challenges for RBH for the foreseeable future. Management continues to believe that RBH's culture, strategy, product depth, product positioning and business processes are important strengths that will need to be utilized in responding to the challenges inherent within its business.
The Company continues to believe that worldwide tobacco industry consolidation could present opportunities for Rothmans. While consolidation has occurred, Rothmans has not found any attractive complements to its existing business interest in RBH that meet the Company's objective of maximizing shareholder value at an acceptable level of risk. Rothmans will continue to assess potential opportunities with the objective of maximizing shareholder value; however, the opportunities going forward may be more limited than in the past.