Sabre Gold Mines Corp. press release
Sun Gro Horticulture Income Fund Releases 2006 Second Quarter Results - Fund Generates Record Distributable Cash for Period
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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 2006 second quarter and first half results on August 9, 2006 at 7:30 am Pacific Time (10:30 am Eastern). The call can be accessed by dialing: 1-800-814-4860 or 416-644-3417. A replay will be available through August 23, 2006 at: 1-877-289-8525 or 416-640-1917. (Passcode: 21196138 followed by the number sign)
To access the live and archived webcast, please go to: http://www.vcall.com/IC/CEPage.asp?ID(equal sign)106795 or to the fund's website at: www.sungro.com.
VANCOUVER, Aug. 8 /CNW/ - Sun Gro Horticulture Income Fund (the "Fund") today reported financial results for the three and six-month periods ended June 30, 2006. The three-month period represents the second quarter of its 2006 fiscal year. The Fund generated record distributable cash for both the second quarter and first half. In the three months to June 30, 2006, it earned $6.1 million, or $0.28 per unit, of distributable cash, up from $5.6 million, or $0.26 per unit, in the second quarter of 2005. Distributable cash for the six-month period totalled $12.7 million, or $0.58 per unit, up from $11.1 million, or $0.51 per unit, in 2005. Distributable cash paid to unitholders was unchanged at $5.0 million, or $0.225 per unit, for the quarter and $9.9 million, or $0.45 per unit, for the half in both years. This represents an annualized distribution rate of $0.90 per unit. "We are pleased with the significant year-over-year improvement in our distributable cash generation during the seasonally stronger first half of the year," said Mitch Weaver, Sun Gro's President and CEO and a Trustee of the Fund. "We anticipate that we will continue to generate sufficient distributable cash to meet the current rate of distributions for 2006."
<< (in thousands of dollars except per unit amounts) For the For the For the For the three three six six months months months months ended ended ended ended June 30, June 30, June 30, June 30, Statement of distributable cash 2006 2005 2006 2005
Cash flows from operating activities before change in non-cash operating working capital $ 4,792 $ 4,528 $ 11,456 $ 8,429 Adjustments Realized gain on forward currency contracts 2,045 1,386 2,536 2,782 Sustaining capital expenditures (672) (546) (1,686) (1,223) Repayment of government loan (50) (25) (100) (50) Current income taxes expected to seasonally reverse in the current fiscal year 32 295 482 1,195 Distributable cash $ 6,147 $ 5,638 $ 12,688 $ 11,133 Distributable cash per unit $ 0.28 $ 0.26 $ 0.58 $ 0.51 >>
Three Month Operating Results
In the three months to June 30, 2006, Sun Gro Horticulture Canada ("Sun Gro", or the "company"), the Fund's wholly owned subsidiary, continued the trend of gross margin improvement it began in the first quarter. The positive effect of the company's pricing strategy in offsetting the stronger Canadian dollar, a reduction in cross-regional shipments, and an earlier start to this year's peat harvest contributed to a 2% year-over-year increase in second quarter gross margin, from 46% in 2005 to 48% in 2006. Gross margin was also up from the 47% reported in the first quarter of this year. To offset foreign exchange losses on the conversion of its US dollar sales to Canadian dollars, and to help offset rising costs, Sun Gro has implemented multiple price increases since mid-2004, the most recent taking effect in June 2006. As a result, the company's average second quarter US dollar prices for growing mixes were up by 10% and Canadian dollar revenue per EB (10 cubic feet of peat) was 1% higher than in the same period of 2005. For peat moss, pricing is impacted by sales under 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 price for peat moss increased by 11% quarter-over-quarter, leading to a 2% increase in peat moss revenue per EB in Canadian dollars. For the three months ended June 30, 2006, Sun Gro recorded revenue of $52.1 million, down by $1.2 million, or 2% from the $53.3 million recorded in the second quarter of 2005. While total sales volumes for the quarter were up 4% compared to a year ago, changes in Sun Gro's sales mix had a negative impact on revenue. As in the first three months of the year, the company continued to see year-over-year increases in sales of peat moss and a proportionate decrease in sales of its higher-priced growing mixes. During the second quarter, peat moss sales volumes were up 28% and growing mix volumes were down by 15%, compared to the same period in 2005 when Sun Gro suffered from unusual peat supply constraints. Sales of fertilizers and minerals, which make up the balance of revenues, increased by $0.5 million, or 20%, compared to the second quarter of 2005 as a result of the Multicote(R) distribution agreement Sun Gro signed in mid-2005. With approximately 85% of its sales denominated in US dollars, foreign exchange continued to exert a strong impact on Sun Gro's revenue during the second quarter. The value of the Canadian dollar averaged US$0.89, compared to US$0.81 in the second quarter of 2005. The difference in exchange rates effectively reduced revenue for the period by 8%, compared to 2005. As in the first quarter, operating income was up significantly year-over- year. For the three months to June 30, 2006, Sun Gro recorded operating income of $4.1 million, up from $2.9 million in the same period in 2005. The improvement was largely the result of Sun Gro's price increases, improved operating efficiencies, and its fourth quarter 2005 decision to restrict cross- regional shipments to customers normally served from its operations in Manitoba in response to last year's peat harvest shortfall. The earlier start to this year's harvest also contributed. With certain volumes being shipped shorter distances, per-EB distribution costs during the second quarter were down by 3% from 2005. Second quarter net earnings were $8.4 million, generating basic and diluted earnings of $0.38 per unit. In the corresponding period of 2005, Sun Gro generated basic and diluted earnings of $0.07 per unit on second quarter net earnings of $1.6 million. The increase was primarily due to the improved gross profit and lower operating expenses for the quarter, as well as gains on forward currency contracts and decreases in Canadian statutory tax rates.
Six-Month Operating Results
For the six months ended June 30, 2006, revenue totalled $110.3 million, compared to $112.9 million in the same period of 2005, a decrease of $2.6 million, or 2%. As with the quarterly result, the decrease was primarily due to a year-over-year reduction in sales of higher-priced professional growing mixes. Revenue was also affected by the continued strengthening of the Canadian dollar. In the first six months of 2006, the average US dollar exchange rate was $0.87, compared to $0.81 in 2005. Net earnings for the six months rose to $12.5 million, or $0.57 per unit, compared to $3.0 million, or $0.14 per unit for the six months of 2005. As with the quarterly result, the increase was mainly due to lower operating expenses and strong gains related to the Fund's forward currency contracts.
<< Financial Highlights
Comparative Statements of Earnings (In thousands of dollars For the three For the three except per unit amounts and months ended months ended number of units outstanding) June 30, 2006 June 30, 2005 (unaudited) (unaudited) Revenue $ 52,090 100% $ 53,311 100% Cost of goods sold 27,006 52% 28,938 54% Gross profit 25,084 48% 24,373 46%
Distribution expenses 12,045 23% 12,333 23% Selling expenses 3,900 7% 4,269 8% General and administrative expenses 4,991 10% 4,841 9% Total operating expenses 20,936 40% 21,443 40% Operating income 4,148 8% 2,930 6%
Other income (expense), net 3,875 7% (1,997) -4% Interest expense (1,176) -2% (768) -2% Earnings before income taxes 6,847 13% 165 0% Income tax recovery (provision) Current (867) -2% (612) -1% Future 2,400 5% 2,006 4% Income tax recovery (provision), net 1,533 3% 1,394 3% Net earnings for the period $ 8,380 16% $ 1,559 3%
Basic and diluted earnings per unit $ 0.38 $ 0.07 Weighted average number of units outstanding 22,023,000 22,023,000
Selected supplemental revenue information
Volume in thousands of EBs(1) Growing Mixes 1,528 1,796 Peat Moss 1,794 1,402 Fertilizer and Minerals 93 87 Total company sales 3,415 3,285
Average revenue per EB(1) (US $) Growing Mixes $ 17.99 $ 16.38 Peat Moss 8.23 7.71 Fertilizer and Minerals 28.49 23.43 Total company sales $ 13.16 $ 12.87
Average revenue per EB(1) (Canadian $) Growing Mixes $ 20.38 $ 20.21 Peat Moss 9.30 9.52 Fertilizer and Minerals 32.30 28.91 Total company sales $ 14.89 $ 15.88
(1) An EB, or equivalent bale, is Sun Gro's standard unit of measure referring to 10 cubic feet of peat.
Comparative Statements of Earnings (In thousands of dollars For the six For the six except per unit amounts and months ended months ended number of units outstanding) June 30, 2006 June 30, 2005 (unaudited) (unaudited) Revenue $ 110,345 100% $ 112,943 100% Cost of goods sold 57,786 52% 61,737 55% Gross profit 52,559 48% 51,206 45%
Distribution expenses 24,765 22% 26,564 24% Selling expenses 7,680 7% 8,489 7% General and administrative expenses 9,996 9% 10,258 9% Total operating expenses 42,441 38% 45,311 40% Operating income 10,118 10% 5,895 5%
Other income (expense), net 3,583 3% (3,310) -3% Interest expense (2,225) -2% (1,422) -1% Earnings before income taxes 11,476 11% 1,163 1% Income tax (provision) recovery Current (1,952) -2% (1,751) -1% Future 2,955 3% 3,584 3% Income tax (provision) recovery, net 1,003 1% 1,833 2% Net earnings for the period $ 12,479 12% $ 2,996 3%
Basic and diluted earnings per unit $ 0.57 $ 0.14 Weighted average number of units outstanding 22,023,000 22,023,000 Selected supplemental revenue information
Volume in thousands of EBs(1) Growing Mixes 3,372 3,838 Peat Moss 3,254 2,806 Fertilizer and Minerals 196 203 Total company sales 6,822 6,847
Average revenue per EB(1) (US $) Growing Mixes $ 18.18 $ 16.60 Peat Moss 8.37 7.79 Fertilizer and Minerals 28.47 21.47 Total company sales $ 13.80 $ 13.14
Average revenue per EB(1) (Canadian $) Growing Mixes $ 20.77 $ 20.42 Peat Moss 9.53 9.59 Fertilizer and Minerals 32.53 26.39 Total company sales $ 15.75 $ 16.16
(1) An EB, or equivalent bale, is Sun Gro's standard unit of measure referring to 10 cubic feet of peat. >>
Outlook
For the first six months of 2006, Sun Gro's combined growing mix and peat moss sales volumes were level with the first half of 2005, with a higher proportion of peat moss shipped this year. The company is now implementing a number of sales and production initiatives designed to increase sales of its growing mixes and expects that mix volumes will benefit from these over the coming months. The improved conditions and earlier start to this year's peat harvest should support Sun Gro's efforts to grow sales of all its products. So far this year, it has had sufficient peat on hand to meet all of its growing mix demand, as well as the increased demand from peat-only customers. The harvest season began in April and should last into October. By the end of June, the company's year-over-year peat harvest volumes were in line with long-term historical experience. Subsequent to the end of the quarter, wet conditions in New Brunswick have reduced harvest volumes in that region. At this point, it is too early to predict the overall 2006 harvest, however, the company expects that tight supply conditions will persist until the 2007 harvest season. Sun Gro's decision to reduce cross-regional shipments to customers in the central US contributed to a 5% year-over-year reduction in its per-EB distribution costs in the first half of 2006. With the Manitoba peat harvest progressing in line with historical experience, it does not foresee as much need to ship peat moss from one region to another to meet its sales commitments this year. Foreign exchange continues to present a challenge. So far, Sun Gro has been able to offset most of the currency movement with price increases and gains from its forward currency contracts. The company continues to hold forward currency contracts to manage the impact of the ongoing strengthening of the Canadian dollar. For the remainder of 2006, it has entered into forward currency contracts with a blended rate of $1.22 (US$ 0.82) that will offset approximately 80% of its expected net US dollar cash flows. For 2007, Sun Gro has thus far entered into forward currency contracts with a blended rate of $1.14 (US$ 0.87) that will offset approximately 70% of its expected net US dollar cash flows. "With the peat harvest and a number of initiatives to enhance our sales volumes underway, we remain cautiously optimistic about the prospects for the balance of the year and confident in the sustainability of our current cash distribution level," said Weaver.
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. You should specifically consider these factors, including the risks and uncertainties described in the Fund's most recent annual information form for the year ended December 31, 2005. 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.
Non-GAAP Measures
Distributable cash is not an earnings measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. Therefore, the distributable cash of the Fund may not be comparable to the distributable cash measures presented by other issuers. However, distributable cash is commonly used by Canadian open-ended trusts as an indicator of financial performance and we believe that distributable cash is a useful supplemental measure that may assist in assessing the potential return on an investment in the Fund. The calculation of distributable cash is based on cash flows from operating activities before changes in non-cash operating working capital, adjusted for sustaining capital expenditures, realized gains from forward currency contracts, government grants and loans, and such reserves as the Board of Directors and Trustees of the Fund may consider appropriate. Certain expenditures that are incurred as part of earnings-enhancing capital projects and acquisitions are excluded from the determination of distributable cash flow if the project or acquisition is funded by term debt or equity financing.
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 Sheet (in thousands of dollars) (unaudited)
As at As at June 30, December 31, Assets 2006 2005
Current assets Accounts receivable $ 48,710 $ 46,310 Inventories 25,488 29,856 Unrealized gain on forward currency contracts 3,718 3,041 Prepaid expenses and other assets 3,555 3,844 81,471 83,051
Property, plant and equipment 123,525 126,727 Unrealized gain on forward currency contracts 609 - Intangible assets 34,634 35,616 Goodwill 11,202 11,202 $ 251,441 $ 256,596 Liabilities and Unitholders' Equity
Current liabilities Bank indebtedness $ 1,152 $ 1,053 Operating line 36,292 38,329 Accounts payable and accrued liabilities 15,635 16,059 Current portion of long-term debt 200 200 Distribution payable to unitholders 1,652 1,652 54,931 57,293
Other liabilities 4,289 4,175 Long-term debt 23,761 24,261 Future income taxes 16,120 19,051 99,101 104,780 Unitholders' equity Capital contributions 209,733 209,733 Cumulative translation account (17,288) (15,245) Cumulative earnings 53,927 41,448 Cumulative distributions declared (94,032) (84,120) 152,340 151,816 $ 251,441 $ 256,596
Sun Gro Horticulture Income Fund Consolidated Statements of Earnings and Cumulative Earnings (in thousands of dollars except per unit amounts and number of units outstanding) (unaudited) For the For the For the For the three three six six months months months months ended ended ended ended June 30, June 30, June 30, June 30, 2006 2005 2006 2005
Revenue $ 52,090 $ 53,311 $ 110,345 $ 112,943 Cost of goods sold 27,006 28,938 57,786 61,737 Gross profit 25,084 24,373 52,559 51,206
Distribution expenses 12,045 12,333 24,765 26,564 Selling expenses 3,900 4,269 7,680 8,489 General and administrative expenses 4,991 4,841 9,996 10,258 Total operating expenses 20,936 21,443 42,441 45,311 Operating income 4,148 2,930 10,118 5,895
Other income (expense), net 3,875 (1,997) 3,583 (3,310) Interest expense (1,176) (768) (2,225) (1,422) Earnings before income taxes 6,847 165 11,476 1,163 Income tax (provision) recovery Current (867) (612) (1,952) (1,751) Future 2,400 2,006 2,955 3,584 Income tax (provision) recovery, net 1,533 1,394 1,003 2,162 Net earnings for the period 8,380 1,559 12,479 2,996 Cumulative earnings - beginning of period 45,547 46,345 41,448 44,908 Cumulative earnings - end of period $ 53,927 $ 47,904 $ 53,927 $ 47,904 Basic and diluted earnings per unit $ 0.38 $ 0.07 $ 0.57 $ 0.14 Weighted average number of units outstanding 22,023,000 22,023,000 22,023,000 22,023,000
Sun Gro Horticulture Income Fund Consolidated Statements of Cash Flows (in thousands of dollars) (unaudited) For the For the For the For the three three six six months months months months ended ended ended ended June 30, June 30, June 30, June 30, 2006 2005 2006 2005 Cash flows from operating activities Net earnings for the period $ 8,380 $ 1,559 $ 12,479 $ 2,996 Items not affecting cash Depreciation, depletion and accretion 2,389 2,429 4,770 4,771 Amortization of intangible assets 491 605 982 1,210 Loss (gain) on forward currency contracts (4,072) 1,962 (3,822) 3,074 Loss (gain) on disposal of property, plant and equipment 4 (21) 2 (38) Future income tax recovery (2,400) (2,006) (2,955) (3,584) 4,792 4,528 11,456 8,429 Change in non-cash operating working capital 11,813 12,569 123 1,388 16,605 17,097 11,579 9,817 Cash flows from investing activities Acquisitions - - - (3,250) Realized gain on forward currency contracts 2,045 1,386 2,536 2,782 Additions to property, plant and equipment (672) (546) (1,686) (1,223) Proceeds from disposal of property, plant and equipment - 404 2 421 1,373 1,244 852 (1,270) Cash flows from financing activities Distributions paid to unitholders (4,956) (4,956) (9,912) (9,912) Proceeds from term loans - - - 3,250 Decrease in operating line (13,448) (14,460) (2,037) (3,077) Repayment of government loan (50) (25) (100) (50) (18,454) (19,441) (12,049) (9,789)