Pantera Silver Corp. press release
Rothmans Inc. Reports Increased Sales and Earnings for Fiscal 2005 and Announces Special Dividend of $1.50 per share
TSXV - TSX Venture Exchange · Silver · Gold · Oil · Natural Gas · Natural Gas Liquids · Canada
Annual Results Fiscal Year Ended March 31, 2005
Trading: TSX: ROC
TORONTO, May 20 /CNW/ - Rothmans Inc. today reported results for the fiscal year ended March 31, 2005. The Company also announced that the Board of Directors has declared a special dividend of $1.50 per share in addition to the regular quarterly dividend of $0.30 per share. Rothmans' earnings for the year ended March 31, 2005 were $93.0 million, or $1.38 basic earnings per share compared with $90.3 million, or $1.34 basic earnings per share in fiscal 2004. Sales at 60%-owned Rothmans, Benson & Hedges Inc., net of excise duty and taxes, were $636.8 million for 2005 compared with $620.1 million a year earlier, an increase of $16.7 million. The increase was primarily due to higher volumes in the cigarette price category, combined with increased prices across all product categories. Investment income was $4.2 million for fiscal 2005 compared with $3.8 million a year ago as a result of higher average cash balances during the year. RBH's EBITDA margin increased to 43.8% compared with 43.4% in the previous year. The increase in margin was due to increased sales volumes of price category cigarettes, higher prices across all product categories, reduced tobacco leaf costs and reduced sales and marketing expenditures which more than offset reduced premium cigarette and fine cut volumes. RBH's share of the total composite market increased to 29.5% compared with 24.4% in 2004 as a result of increases in both the premium and price categories. Its share of the premium cigarette market increased to 15.5% compared with 14.6% the previous year due to the reduced size of the premium market as RBH's competitors repositioned brands from the premium to the price category. Although RBH increased its share of each sub-category, RBH's share of the total price category was 46.3% in fiscal 2005 compared with 47.9% in the prior year as a result of the change in relative volume contribution from price category cigarettes and fine cut products to the total price category. RBH's share of the domestic price cigarette category was 41.5% for the year, up from 39.4% in 2004. Share of the domestic fine cut market was 59.6% versus 57.6%. During 2005, the Company paid dividends of $70.9 million, or $1.05 per share on a post-split basis compared with $54.6 million, or $0.8125 per share, the previous year. "Rothmans continued to increase value for its shareholders in fiscal 2005" said John Barnett, President and Chief Executive Officer of Rothmans Inc. "Rothmans, Benson & Hedges improved its performance in all key areas last year, with higher sales, earnings and market share as the company maintained its leading position in the cigarette price category. This translated into improved value for shareholders of Rothmans Inc. as the company increased the regular quarterly dividend and effected a two-for-one stock split."
Fourth Quarter
For the fourth quarter of fiscal 2005, Rothmans' earnings were $17.3 million, or $0.26 basic earnings per share, approximately even with last year's $17.2 million, or $0.26 per share on a post-split basis. Sales, net of excise duty and taxes, at Rothmans, Benson & Hedges, were $144.2 million compared with $136.5 million last year. Investment income at Rothmans Inc. was $1.3 million compared with $1.1 million. RBH's EBITDA margin was 37.4% in the quarter compared with 36.8% in the same period last year.
Outlook
"We expect continued quarter-to-quarter volatility in the market as a result of buying patterns, high taxes and the continued presence of contraband." said Mr. Barnett. "We will continue to monitor growth of the contraband market and expect it to continue to adversely impact legitimate industry stakeholders including RBH. Despite this, we have demonstrated our ability to deliver good results in a challenging environment."
Dividends declared
The Board of Directors of Rothmans Inc. declared a special dividend of $1.50 per share in addition to the regular quarterly dividend of $0.30 per share. These dividends are payable on June 17, 2005 to shareholders of record at the close of business on June 3, 2005.
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 9:30 a.m. Toronto time on Friday, May 20, 2005. In order to listen to the conference call, shareholders are invited to call 1-800-387-6216. 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 27 by calling 1-800-408-3053 and entering reservation number 3151488. The recording can also be accessed through the investor website. Media are invited to listen to the call and to contact John McDonald 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 over 790 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.
REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED MARCH 31, 2005
To Our Shareholders
We are pleased to report that Rothmans Inc. is continuing to deliver increased shareholder value. In the year ended March 31, 2005, your Board of Directors increased the Company's regular quarterly dividend twice. These increases came on the strength of growth in revenues, earnings, cash flow and market share, the key metrics of performance at the Company's 60%-owned subsidiary Rothmans, Benson & Hedges Inc. (RBH). Continued appreciation in the share price led to the Board decision to implement a two-for-one stock split, effected by way of a stock dividend, effective March 4, 2005. RBH's success has come as a result of its leadership in the cigarette price category. In the two years following the launch of Number 7 as a price brand, RBH has significantly grown its market share, in contrast to past trends. This success is very encouraging, given the many challenges currently facing the industry. We are seriously concerned by the mounting evidence of increased contraband sales in major Canadian markets, including both smuggled and counterfeit products. Increased consumption by Canadians of non-taxed or partially taxed contraband products widely referred to in media reports has an adverse effect on the legitimate tax-paid market and all of its participants. RBH, as well as wholesalers, retailers and provincial and federal governments are all impacted detrimentally by the sale of contraband tobacco products.
Continued Strong Results
RBH increased net sales by $16.7 million or 2.7% to $636.8 million for the year, on the strength of increased volumes in the cigarette price category and higher prices, which more than offset volume declines in premium cigarettes and fine cut. Investment income increased slightly to $4.2 million as a result of higher average balances of cash and short-term investments. Operating costs increased by 1.9% to $362.6 million due to increased product variable costs associated with higher volumes, offset somewhat by lower selling and marketing expenditures. Net earnings increased by 3.0% to $93.0 million versus $90.3 million a year ago. Adjusted to reflect the stock split, basic earnings per share rose to $1.38 in the year from $1.34 a year ago, or to $1.37 from $1.34 on a fully diluted basis. Rothmans Inc. has demonstrated consistent profitability for over a decade, a record which cannot be claimed by many other companies. This profitability is backed up by solid positive cash flow, which is ultimately paid out to the Company's shareholders by way of dividend. Over the past year, we have paid to our shareholders cash dividends of $2.10 per share or $1.05 per share reflecting the stock split. At the time this report was completed, our regular annualized dividend of $1.20 per share represented a dividend yield of approximately 5%. Even with significant dividend distributions to its shareholders, Rothmans Inc. continues to accumulate cash and held approximately $2.84 per share in cash and investments as at March 31, 2005. Subsequent to the fiscal year end, the Board of Directors declared a special dividend of $1.50 per share, payable on June 17, 2005 to shareholders of record at the close of business on June 3, 2005. The Board continues to believe that shareholder interests are best served by ensuring that Rothmans Inc. is in a position to act on acquisition opportunities that are accretive and which may become available due to the worldwide trend to industry consolidation. We continue to monitor these trends and opportunities and assess our position with the ultimate goal of maximizing shareholder value.
Growing Market Share and Profitability at Rothmans, Benson & Hedges Inc.
Increased profitability at Rothmans Inc. is the result of solid performance by RBH, which increased its share of the total reported domestic tobacco market to 29.5% versus 24.4% in the previous year. Increases in RBH's share reflect its success in the cigarette price category, driven by the leading performance of its Number 7, Canadian Classics and Mark Ten trade- marks. Improved performance in the cigarette price category combined with price increases has more than offset the volume declines experienced in the premium cigarette and fine cut categories. The past year was marked by an increase in the rate of decline for reported domestic sales volume. According to Statistics Canada data, total reported domestic sales declined by 6.6% year over year versus an average annual decline rate of 4.3% experienced in the five previous years. We believe this decline rate is inflated by unreported sales of contraband product. In addition, the product mix within the industry has continued to shift, as a substantial number of consumers have left their traditional premium brands for offerings in the cigarette price category. The share of the total industry tobacco market attributed to all price category cigarettes more than doubled to over 33% in fiscal 2005 versus less than 16% in the prior year. Premium cigarette shipments fell to less than 55% of the total market last year, from about 70% the previous year, while shipments of fine cut dropped to 12% from nearly 14% in the prior year. RBH was the first of the three major manufacturers to move into the cigarette price category and we believe that its three participating trade- marks, Number 7, Canadian Classics and Mark Ten, are well positioned for future strength and continued performance. In fiscal 2005, RBH's EBITDA margin increased slightly to 43.8% versus 43.4% in the preceding year. Increasing total EBITDA margins even slightly, in a market marked by a shift towards lower margin products, is an indication of RBH's success in implementing its strategies and solid cost containment measures.
Seeking Rational Regulation
RBH acknowledges the health risks which have been associated with smoking and believes that governments have an important role to play in discouraging people from smoking and ensuring that youth do not have access to tobacco products. RBH believes that effective tobacco control is the product of constructive dialogue among governments, manufacturers, distributors, retailers and consumers and, to that end, RBH continues to seek opportunities to work co-operatively with governments. Despite continued efforts to secure a rational and inclusive dialogue with governments, RBH has had only limited success. Given the highly politicized environment which characterizes tobacco control, RBH is often faced with governments that neither desire nor permit the scope of dialogue required to ensure effective regulation. The result is regulation which neither meets the legislative mandate nor respects the rights of those affected. RBH continues to be concerned with tobacco taxation policy. While the past fiscal year has seen a relatively more moderate approach to tobacco tax increases, we continue to see the adverse impact of current high levels of taxation. Depending on the province and the product, more than 80% of the consumer price of a pack of cigarettes can represent tax. We believe that contraband is a large and growing problem for all Canadians and that this contraband market is fueled by the current high tobacco taxation rates in Canada. High taxes have been shown in Canada and elsewhere to lead to market turmoil characterized by smuggling, counterfeiting, illegal manufacturing, increased theft and other criminal activities. These activities increase enforcement costs, place the employees of manufacturers, wholesalers and retailers at risk and fail to advance governments' stated policy objectives of reducing consumption, enhancing tax revenues and restricting youth access to tobacco.
Delivering Value
RBH has a dedicated team of employees who are focused on delivering against their stated TLC objectives: Teamwork, Leadership and Commitment to Win. We thank RBH employees for their outstanding efforts and take pride in the fact that, once again, RBH has been recognized as one of the best workplaces in the country. For the second year in a row, RBH placed third out of the more than 125 companies reviewed in a major national study. RBH continues to enjoy excellent unions relations and it is pleased to have recently concluded contract negotiations with the unions representing our Quebec and Brampton manufacturing employees. The resulting collective agreement will contribute to another five years of labour stability. The RBH management team has been successful in developing innovative strategies that both anticipate and respond to the changing marketplace. Careful planning and execution has resulted in higher revenues and higher earnings. We continue to appreciate the contribution of our Board of Directors whose knowledge and advice strengthen Rothmans. Their dedication to good governance practices ensures that shareholders' interests remain the Company's first priority. We are pleased that once again, the Company was highly ranked in the Globe and Mail's annual review of governance practices among TSX-listed companies. On behalf of the Board and the employees of Rothmans and RBH, we thank you - the shareholders - for your continued support. You can be confident that we will continue to be focused on generating the greatest possible long-term return on your investment.
Joe Heffernan Chairman of the Board
John Barnett President and Chief Executive Officer
Management's Discussion and Analysis of Financial Results for March 31, 2005
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, 2005 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, 2005. 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 19, 2005.
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 financial statements. As of the financial year ending March 31, 2005, an evaluation was carried out under the supervision of and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of March 31, 2005 to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.
Forward Looking Statements
Certain statements contained herein, including MD&A, constitute "forward- looking statements". Words such as "plans", "intends", "outlook", "expects", "anticipates", "estimates", "believes", "should" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on current expectations and entail various risks and uncertainties. These risks and uncertainties include government claims and potential claims, product liability claims, price category pressure on overall cigarette margins, declining consumer consumption and dependence on price increases, changes in legislation and regulation, changes in taxation, new product standards, dependence on the domestic tobacco business, fluctuating wholesaler purchasing patterns and competition. These risks and uncertainties could cause or contribute to actual results that are materially different from those expressed or implied. 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.
Terminology used in this MD&A
Throughout this MD&A, "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 Company's operating performance, refers to "earnings before interest, taxes, depreciation and amortization" as a percentage of "sales, net of duty and taxes". EBITDA margin provides a metric allowing period-to-period comparisons of the core RBH operating performance before the impact of changes in capital structure, taxes and capital spending. 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, 2005, and "prior quarter" refers to the three months ended December 31, 2004. "Fiscal 2005" or "recent fiscal year" refers to the fiscal year ended March 31, 2005 and other similar references to a fiscal year (e.g., fiscal 2004) refer to the fiscal year then ended on March 31 (e.g., March 31, 2004). "The three major manufacturers" or "three majors" refers to RBH, Imperial Tobacco Canada Limited (ITL) and JTI-MacDonald Corp. (JTI). "Premium cigarettes" refers to tailor-made cigarettes sold at premium retail price, "cigarette price category" refers to cigarettes sold at less-than-premium prices and "price category" refers to the combination of the cigarette price category and the fine cut category (loose tobacco and pre-proportioned tobacco sticks). "Reported industry" is based on information reported by Statistics Canada and Company estimates and includes, in addition to the information reported by the three major manufacturers, information supplied by smaller regional manufacturers.
Outstanding Shares
As at March 31, 2005, there were 67,572,008 common shares outstanding or 69,346,408 shares on a fully diluted basis. See notes 8 and 9 to the unaudited consolidated financial statements.