CALGARY, Aug. 13 /CNW/ - Trimac Income Fund (TSX Symbol TMA.UN) (the "Fund") today released the financial results of the Fund and Trimac Transportation Services Limited Partnership ("Trimac" or the "Partnership") for the second quarter ended June 30, 2007.
Three months Six months
ended June 30, ended June 30,
Partnership 2007 2006 2007 2006
--------------------------------------------------
(millions of dollars, except per unit
amounts and numbers of units)
Revenues 84.2 79.4 163.3 160.0
EBITDA(1) 10.5 10.3 18.8 20.1
Net earnings 7.9 4.3 9.4 8.0
Three months Six months
ended June 30, ended June 30,
The Fund 2007 2006 2007 2006
--------------------------------------------------
Distributable cash
per unit(1)(2) $0.3864 $0.0873 $0.4355 $0.4164
Distributions per
unit(1) $0.2313 $0.2313 $0.4626 $0.4542
Basic and diluted
earnings per unit $0.1744 $0.0832 $0.2256 $0.1560
Weighted average
number of units used
in computing basic
earnings per unit 12,528,515 12,528,515 12,528,515 12,528,515
Weighted average
number of units
outstanding used in
computing diluted
earnings per unit 23,609,506 23,012,751 23,609,506 23,012,751
(1) EBITDA, distributable cash per unit and distributions per unit are
not recognized measures under Generally Accepted Accounting
Principles (GAAP) and do not have a standardized meaning prescribed
by GAAP. Therefore, these amounts may not be comparable to similar
measures presented by other issuers. Management considers EBITDA and
Distributable cash as key measures that indicate the ability of the
Fund to meet its capital and financing commitments.
(2) Distributable cash available will fluctuate on a monthly basis due to
seasonal cash flows, sustaining capital incurred and income taxes and
interest paid. See "Distributable Cash" for additional commentary.
Strong revenue growth in the British Columbia and Prairie Provinces
operations, a significant short-term contract, the sale of a non-strategic
facility, and a one-time future tax recovery on a corporate reorganization
positively influenced results in the quarter. These improved results were
reduced by continued volatility in the woodchips operations and general
weakness in the central Canadian economy.
Divisional highlights in the second quarter were as follows:
- Western division experienced strong revenue growth in British
Columbia and the Prairie Provinces, which grew by 20.3 percent.
Partially offsetting this growth was a 22.5 percent decline in
woodchip revenue.
- Eastern division experienced a modest decline in revenue that was
predominantly a result of business losses resulting from the highly
competitive market conditions and lower revenue with existing
customers due to general economic weakness in central Canada.
- Bulk Plus Logistics (BPL) experienced strong revenue growth as a
result of increased volumes in the freight brokerage business.
However, profitability was negatively impacted by decreased transload
revenue and a customer contamination claim.
- The Partnership successfully concluded the sale of a non-strategic
facility in June 2007 for $5.9 million (net of disposal costs). A
gain on disposal of $2.9 million was recorded in the quarter.
- The Partnership recorded a one-time future tax recovery of
$1.7 million due to a corporate reorganization during the quarter.
- The Partnership successfully concluded the acquisition of Ken Angeli
Trucking Ltd. (KAT) on April 30, 2007 and the purchase of certain
assets of Logistics Express, Inc. (Logex) on June 1, 2007. Management
is pleased with the results of these acquisitions to-date.
In commenting on the results for the second quarter, Terry Owen, President & CEO of Trimac, said:
"In the quarter, the Partnership recorded improved results in difficult market conditions. The western division achieved solid results, eastern division profitability deteriorated slightly due to difficult economic conditions and BPL's results were impacted by transload operating challenges. Overall, our strategy of diversification by product, customer, industry and geography enabled us to deliver improvements in revenue, EBITDA, and net income over the same time period in the prior year.
Operationally, our western division benefited from increased seasonal construction activity due to strong economic conditions in western Canada; the acquisition of KAT; and the purchase of certain assets of Logex. Partially offsetting the higher revenue was continued volatility in the division's woodchip operations. As we have indicated in previous quarters, the forestry industry continues to struggle with the strengthening Canadian dollar and other adverse industry conditions, which has resulted in further mill closures in Ontario and weaker demand for transportation throughout our woodchips operations.
Results in our eastern division were negatively impacted by business losses in the cement, dry bulk, and chemical product lines; general economic weakness in central Canada; and severance costs associated with both business losses and the closure and sale of a non-strategic facility. Our logistics business experienced strong growth in freight management volumes, however, profitability was negatively impacted by decreased transload revenue and costs resulting from a product contamination claim."
In commenting on the future activities and outlook for the business, Terry Owen noted:
"As management looks ahead to the remainder of 2007, we expect favourable economic activity levels in B.C. and the Prairie Provinces, offset by continued volatility in the woodchip operations. In the eastern division, management believes that a higher Canadian dollar will contribute to a reduced level of manufacturing activity and slower economic growth in central Canada, resulting in a highly competitive operating environment for the remainder of 2007. Management remains confident that our strategy of diversification within the bulk trucking sector will continue to provide the framework for our success in the future."
Financial Highlights
Three months ended Six months ended
June 30, June 30,
--------------------------------------------------
(millions of dollars) 2007 2006 2007 2006
--------------------------------------------------
Revenues
Western 48.5 44.0 92.6 89.4
Eastern 30.2 30.8 60.1 61.6
--------------------------------------------------
Canadian trucking 78.7 74.8 152.7 151.0
Bulk Plus Logistics 5.5 4.6 10.6 9.0
--------------------------------------------------
84.2 79.4 163.3 160.0
Direct costs 61.7 58.0 121.5 118.1
Selling and
administrative 12.0 11.1 23.0 21.8
--------------------------------------------------
EBITDA(1) 10.5 10.3 18.8 20.1
Depreciation net of
gains on disposal
of capital assets(2) 2.8 5.0 8.5 10.1
--------------------------------------------------
Operating earnings 7.7 5.3 10.3 10.0
Interest expense (net) 1.3 1.0 2.5 2.0
--------------------------------------------------
Earnings before taxes 6.4 4.3 7.8 8.0
Income tax recovery(3) (1.5) - (1.6) -
--------------------------------------------------
Net earnings 7.9 4.3 9.4 8.0
--------------------------------------------------
--------------------------------------------------
As a percentage of revenue
--------------------------
Direct costs 73.3% 73.0% 74.4% 73.8%
Selling and administrative 14.3% 14.0% 14.1% 13.6%
EBITDA(1) 12.4% 13.0% 11.5% 12.6%
Depreciation(2) 3.3% 6.3% 5.2% 6.3%
Operating earnings 9.1% 6.7% 6.3% 6.3%
As at As at
June 30, December 31,
(millions of dollars) 2007 2006
-----------------------------
Total assets 160.5 157.9
Total long-term
liabilities 62.0 61.6
(1) EBITDA (earnings before interest, taxes, depreciation and
amortization) is not a recognized measure under GAAP, does not have a
standardized meaning prescribed by GAAP and, therefore, may not be
comparable to similar measures presented by other issuers. Management
believes that EBITDA is a useful measure of cash available for
distribution before debt service expense, capital expenditures and
income taxes and that indicates the ability of the Fund to meet its
capital and financing commitments.
(2) Includes a $2.9 million gain on the disposal of a non-strategic
facility.
(3) Includes the reversal of a previously recorded future tax liability
resulting from a corporate reorganization.
Distributable Cash
The table below represents the Partnership's distributable cash beginning
with net cash provided by operations.
(millions of dollars
except unit amounts, Three months ended Six months ended
certain percentages June 30, June 30,
and numbers of units) 2007 2006 2007 2006
-------------------------------------------------------------------------
Net cash provided by
operations 8.4 3.7 14.4 15.9
Net change in non-cash
working capital(1) 0.7 5.5 1.8 2.1
------------------------ ------------------------
Cash provided by
operations 9.1 9.2 16.2 18.0
Less adjustment for:
net sustaining capital
expenditures
(net of proceeds)(2)(3) 5.3 (6.6) (0.4) (7.5)
provision for
sustaining capital
commitments(4) (4.7) - (4.0) -
provision for long-term
unfunded contractual
operational
obligations(5) - - (0.2) -
------------------------ ------------------------
Total estimated cash
available for
distribution (before
public expenses) 9.7 2.6 11.6 10.5
Percentage of available
cash distributable to
unitholders(6) 53% 54% 53% 54%
------------------------ ------------------------
Cash available for
distribution to
unitholders (before
public expenses) 5.1 1.4 6.2 5.7
Public expenses(7) (0.3) (0.3) (0.7) (0.5)
------------------------ ------------------------
Distributable cash
from operations(2)(8) 4.8 1.1 5.5 5.2
Distributions declared
and payable 2.9 2.9 5.8 5.7
Distributable cash
per unit(2)(8) 0.3864 0.0873 0.4355 0.4164
Distributions declared
per unit 0.2313 0.2313 0.4626 0.4542
Payout ratio(2)(8) 59.9% 264.9% 106.2% 109.1%
Weighted average
number of units
outstanding 12,528,515 12,528,515 12,528,515 12,528,515
Net capital expenditures
Sustaining capital
expenditures(2) 1.5 7.5 7.5 9.4
Proceeds on disposal
of capital assets(4) (6.8) (0.9) (7.1) (1.9)
------------------------ ------------------------
Net sustaining capital
expenditures(2)(3) (5.3) 6.6 0.4 7.5
Growth capital
expenditures(2)(9) 0.6 3.1 1.9 5.3
------------------------ ------------------------
(4.7) 9.7 2.3 12.8
------------------------ ------------------------
------------------------ ------------------------
(1) Changes in non-cash operating assets and liabilities are not included
in the calculation of distributable cash. Working capital investments
are funded through a combination of cash flow not distributed and the
use of credit facilities available to the Partnership.
(2) Distributable cash from operations, sustaining capital expenditures,
net sustaining capital expenditures, payout ratio, and growth capital
expenditures are not measures recognized by GAAP, do not have
standardized meanings prescribed by GAAP and may not be comparable to
similarly named measures presented by other issuers. Management
believes that they are important and useful measures for readers to
evaluate the performance of the Fund.
(3) Net sustaining capital expenditures refers to capital expenditures,
net of proceeds on disposal of assets replaced, which are necessary
to sustain current revenue levels. See "Liquidity and Capital
Resources - Capital Expenditures".
(4) Represents a partial reversal of $0.3 million in the quarter
($1.0 million year to date) of a cash reserve accrued in the fourth
quarter of 2006 for a facility capital expansion that commenced in
2006. In addition, the company has reserved $5.0 million of proceeds
on the disposal of a non-strategic facility in June 2007 to be used
to acquire replacement facilities in 2008.
(5) Represents a provision for cash requirements relating to a long-term
incentive plan and an executive pension liability.
(6) Percentage is equal to units outstanding of 12,528,515 divided by
fully diluted units of 23,609,506.
(7) Represents expenses associated with the Fund's status as a reporting
issuer.
(8) Distributable cash available will fluctuate on a monthly basis due to
seasonal cash flows, sustaining capital expenditures incurred, income
taxes paid and interest costs on outstanding debt. The distributable
cash payout ratio in the second quarter of 2007 was influenced by
reduced sustaining capital expenditures as compared to the prior
period. The decrease in sustaining capital expenditures is due
primarily to the delivery of substantially all of the 2007 sustaining
tractor capital purchases during the previous quarter.
(9) Cash used to fund growth capital expenditures does not affect
distributable cash to unitholders where financing is available for
these purposes. The Partnership funds growth capital from
undistributed cash from operations, cash available from distributions
on non-cash exchangeable shares, and, to the extent available, cash
and unused lines of credit.
Distributable cash from operations was $4.8 million in the three month period ended June 30, 2007 (the "current period"), an increase of $3.7 million over the three month period ended June 30, 2006 (the "prior period"). The increase was due primarily to a decrease in net sustaining capital expenditures. In the six month period ended June 30, 2007 distributable cash from operations was $5.5 million, an increase of $0.3 million compared to the same period in 2006. The increase was due primarily to reduced net sustaining capital expenditures, partially offset by decreased net cash provided by operations and increased public expenses.
Distributions in the current period were funded from cash generated from operations. On a year-to-date basis, distributions were paid using cash generated from operations, available cash from distributions on non-cash exchangeable shares, and from borrowing on the credit facilities of the Partnership. Due to the seasonal nature of the Partnership's business and the timing of sustaining capital purchases, the amount of distributable cash may vary from quarter to quarter. Trimac's Board of Directors approves the level of monthly distributions based upon estimated cash flow on an annual basis, less estimated cash amounts required for debt service obligations, sustaining capital expenditures, cash taxes, other expense amounts and reserves (including amounts for capital expenditures and working capital) and to stabilize the monthly amount of distributions to unitholders. Growth capital expenditures are funded from undistributed cash from operations, cash available from distribution on non-cash exchangeable shares, and, to the extent available, cash and unused lines of credit.
Distributable cash from operations is not a defined term under Canadian generally accepted accounting principles (GAAP) but is determined by the Partnership as net cash provided by operations for the period, adjusted to remove specific non-cash items, including changes in non-cash working capital, and reduced by net sustaining capital expenditures, reserves for funding long-term liabilities, reserves (including amount for capital expenditures and working capital), and public costs.
Management believes that distributable cash from operations is a useful supplemental measure of performance as it provides investors with an indication of the amount of cash available for distribution to unitholders. Investors are cautioned, however, that distributable cash from operations should not be construed as an alternative to using net income as a measure of profitability or as an alternative to the statement of cash flows. In addition, the Fund's method of calculating distributable cash from operations may not be comparable to calculations used by other income trusts.
Operating Results
Trimac's total revenue in the current period was $84.2 million, an increase of $4.8 million or 6.1 percent from $79.4 million recorded in the prior period. EBITDA grew to $10.5 million in the current period as compared to $10.3 million in the prior period, a gain of $0.2 million or 1.9 percent. On a year-to-date basis revenue increased by $3.3 million or 2.1 percent to $163.3 million compared to $160.0 million in the prior six month period. EBITDA for the current six month period totalled $18.8 million, a decrease of $1.3 million or 6.5 percent over the same period last year.
Bulk Trucking Operations
The western division generated $48.5 million in revenue in the current period, an increase of $4.5 million or 10.2 percent from $44.0 million recorded in the prior period. The division achieved strong revenue growth of approximately 20.3 percent in its British Columbia and Prairie Province operations. Driving this revenue growth was increased cement revenue attributed to higher construction and oil and gas activity; improved weather conditions compared to the prior quarter; increased petroleum revenue due to contracts secured in 2006; the acquisition of KAT on April 30, 2007; and the June 1, 2007 acquisition of certain assets of Logex. Revenue gains were partially offset by a 22.5 percent reduction in revenues from the division's woodchip operation. The woodchip revenue decline was primarily the result of business losses and the closure of sawmills and pulp mills during the last six months of 2006 and the current year. The division was successful in obtaining customer rate increases that mostly offset annual wage increases provided in the first quarter of 2007. Higher revenues and improved operating costs as a percentage of revenue resulted in a $1.3 million or 20.0 percent increase in EBITDA in the western division to $7.8 million in the current period.
On a year-to-date basis, the western division's revenues increased to $92.6 million from $89.4 million in 2006, an increase of $3.2 million or 3.6 percent. Operations in British Columbia and the Prairie Provinces experienced year-over-year growth of 14.0 percent. This revenue growth was reduced by a 29.1 percent decline in the woodchip product line. The division generated EBITDA of $12.8 million, a slight improvement over the prior year's six-month period as the strong results in the second quarter offset the impact of poor weather on the results in the first quarter of the year.
Second quarter revenue in the eastern division decreased from $30.8 million in the prior period to $30.2 million in the current period, a decrease of $0.6 million or 1.9 percent. A short-term contract that contributed revenue of $1.6 million in the current period and $2.1 million of revenue generated from the 4th quarter 2006 acquisition of Jeff Brett Group of Companies (JBE) mostly offset revenue declines due to business losses and lower revenue in existing product lines. EBITDA decreased by $0.3 million to $2.6 million in the current period. The decrease was a result of lower revenue; severance costs associated with both business losses and the closure and sale of a non-strategic facility; and downward customer rate pressure due to weak economic conditions.
For the six months ended June 30, 2007, the eastern division's revenues decreased to $60.1 million, compared to $61.6 million in 2006, the decrease of $1.5 million or 2.5 percent was primarily a result of business losses in the cement, dry bulk, plastics, and liquid chemical product lines and a reduction in volumes with existing customers. EBITDA was reduced to $5.2 million as compared to $5.4 million in the prior six-month period, a decrease of $0.2 million or 3.7 percent over the prior year. Lower revenue and downward customer rate pressure due to weak economic conditions in central Canada were the main factors contributing to the decrease in EBITDA. Despite experiencing a decrease in revenue, operations in the Atlantic Provinces experienced increased EBITDA due to an improvement in operating costs as a result of the successful restructuring of the business.
Logistics Operations
BPL's current period revenue was $5.5 million, an increase of $0.9 million or 19.6 percent over the prior period. BPL's Canadian freight brokerage revenue gains more than offset reduced transload revenue. Increased freight brokerage revenue was primarily due to a short-term contract that contributed $1.9 million in the quarter, offset by lower revenue with existing customers. U.S. freight brokerage and third-party logistics management experienced slight reductions in revenue when compared to the prior period. In the current period BPL recorded EBITDA of $0.6 million, a decrease of $0.2 million or 25.0 percent. The reduction in EBITDA was primarily due to decreased transload revenue and a product contamination claim.
For the first half of 2007, BPL's revenues were $10.6 million compared to $9.0 million in 2006, an increase of $1.6 million or 17.8 percent. Increased volumes were achieved in Canadian and U.S. freight brokerage. Lower Canadian and U.S. transload volumes and the translation impact of reduced Canadian dollars for the U.S. operations due to the strengthening of the Canadian dollar tempered the revenue growth over the same six-month period in 2006. BPL's EBITDA for the first six months of 2007 was $1.0 million, a decrease of $0.5 million or 33.3 percent from the same period last year. The decreased EBITDA was primarily due to increased operating costs in transload operations, lower transload revenue, and customer product contamination claims during the past six months.
Capital Expenditures
Net capital expenditures of the Partnership represented a cash inflow of $4.7 million in the current period compared to expenditures of $9.7 million in the prior period. The $14.4 million difference in net capital expenditures from the prior year was made up of a $6.0 million decrease in sustaining capital, $2.5 million less growth capital, and an increase of $5.9 million in proceeds on disposal resulting from sale of a non-strategic facility in Oakville, Ontario. The decrease in sustaining capital expenditures over the prior period was primarily the result of the purchase of $4.2 million of tractors in the first quarter of 2007, which represents substantially all of the sustaining capital requirements for tractors in 2007. In addition, the partnership incurred higher sustaining capital purchases in the prior period due to late deliveries of tractors and in-cab technology purchases. Tractor and trailer purchases accounted for approximately 55 percent of the $1.5 million of gross sustaining capital expenditures in the current period, with the balance applicable to other assets required in the operations. Growth capital spending decreased by $2.5 million to $0.6 million in the current period. The decrease in growth capital relates to higher trailer purchases delivered in the prior period for new business secured. Trailer purchases accounted for substantially all of the growth capital expenditures in the current period.
For the six months ended June 30, 2007, net capital expenditures totalled $2.3 million compared to $12.8 million for the prior year. The $10.5 million difference in net capital expenditures from the prior year was made up of a $1.9 million decrease in gross sustaining capital, $3.4 million less growth capital, and an increase of $5.2 million in proceeds on disposal resulting primarily from the aforementioned sale of a non-strategic facility. Sustaining capital purchases decreased when compared to the prior year due to a reduction in the number of power units purchased and substantial capital spending on tractor in-cab technology during the first half of 2006. On a year-to-date basis, the reduction in growth capital spending was due to tractor and trailer purchases in the prior year for new business secured.
Net annual capital expenditures relating to sustaining capital requirements will vary from year to year based on the economic life of the capital assets, historical purchase dates, the mix of life cycles expiring in a given year, other factors affecting equipment cost, disposal proceeds of replaced assets and annual equipment utilization. Estimated net ongoing sustaining capital expenditure requirements for 2007 are expected to be in the range of $10.5 million to $11.5 million. Year to date net sustaining capital purchases total $4.4 million, after adjusting for the net facility replacement reserve of $4.0 million, leaving approximately $6.1 million to $7.1 million of remaining net sustained capital purchases in 2007. Sustaining capital purchases are funded from the Partnership's net cash provided by operations in the year, cash available from distributions on non-cash exchangeable shares, and thereafter, to the extent required, available credit facilities.
Fuel Costs
Fuel costs fluctuated during the current period with average daily posted rack prices for diesel fuel at refineries across Canada ranging from $0.73 per litre to $0.87 per litre. Trimac has fuel surcharge programs in place with substantially all of its customers and the effect of changes in fuel prices has generally been neutral to its results in past years.
The bulk trucking industry and its customers have generally agreed to monthly fuel surcharges, a practice which tends to create a shortfall in fuel recoveries in periods of rising fuel prices and an over-recovery when fuel prices decline. Fuel surcharges averaged approximately 10.9 percent of base trucking revenue during the current period and 10.4 percent on a year-to-date basis.
Forward-Looking Statements
This news release contains statements concerning the outlook for Trimac's business and estimates for sustaining capital or other expectations, plans, goals, objectives, assumptions, information or statements about future events, conditions, results of operations or performance that may constitute forward-looking statements or information under applicable securities legislation. Words such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", and words and expressions of similar import are intended to identify these forward-looking statements. Such forward-looking statements or information are based on a number of assumptions, which may prove to be incorrect. In addition to any other assumptions identified in this news release, certain assumptions have been made concerning the forward-looking information contained herein including, among other things: Trimac will be successful in maintaining its customer relationships and such customers will not materially reduce the volume of business provided to Trimac; general economic conditions will not be materially different from those prevailing in the second quarter of 2007; Trimac will continue to attract and retain a sufficient number of qualified drivers and mechanics; Trimac will continue to be successful in recovering fuel price increases from its customers; adverse weather will not unduly impact Trimac's operations; the Canadian dollar will not materially strengthen against the United States dollar; distributions payable by Trimac to its unitholders will not be subject to tax in 2007; there will be no material changes to the laws and regulations applicable to Trimac or its businesses; the seasonality of Trimac's business will be consistent with historical trends; no irreparable damage will be done to Trimac's operating systems and databases or information contained thereon; Trimac will maintain or improve upon its competitive position within the bulk trucking sector; adequate financing will be available to Trimac to fund capital expenditures, working capital and distributions on terms and conditions favourable to Trimac; Trimac will not have any judgment entered against it in a court of law which would have a material adverse effect on Trimac or its businesses; Trimac will continue to have all material licences and permits required by law to conduct its businesses as presently conducted; there will not be a material increase in the price of equipment required in the business of Trimac; and the estimated useful life of equipment and the proceeds received on the disposition thereof will be consistent with historical trends at Trimac.
Although the Fund believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Fund can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Fund and described in the forward-looking statements or information. These risks and uncertainties include but are not limited to:
- General economic conditions - Certain product lines of Trimac are
dependent on the general economic conditions of the regions in which
it operates and cash flows may be negatively impacted by economic
downturns in any particular region;
- Labour - Trimac's cash flow and growth are dependent on its ability
to hire and retain quality drivers and mechanics;
- Fuel - Rising fuel prices and the ability of Trimac to recover cost
increases in the marketplace may impact cash flow;
- Weather - Adverse weather may impact Trimac's transportation of goods
and increase operating costs;
- Foreign currency exchange - The strengthening Canadian dollar may
impact Trimac's customers' cost competitiveness and negatively impact
the volume of goods transported;
- Tax structure - Changes in government regulation may negatively
impact Trimac's distributable cash;
- Environmental considerations - Changes in environmental law may
impact operating costs;
- Seasonality of business - Financial results may be impacted by the
seasonality of the business;
- Information technology - Cash flow could be adversely affected by an
event that caused irreparable damage to Trimac's operating systems
and databases or information contained in the databases;
- Competitive conditions - There can be no assurance that Trimac will
be able to compete successfully against its current or future
competitors or that competition will not have a material adverse
affect on its results of operations and financial condition; and
- Financing - No assurances can be made that financing will be
available when required by business needs.
The foregoing list of risks and uncertainties is not exhaustive. Additional information on these and other factors which may affect Trimac's operations or financial results and those of the Fund are included under the heading "Risk Factors" in the Fund's current Annual Information Form and as may be updated in the Fund's annual and interim Management's Discussion and Analysis and Annual Information Form, which are or will be filed with securities regulators. The Fund undertakes no obligation to update publicly or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Trimac is Canada's largest provider of bulk trucking services, with operations from coast to coast. In addition, through its wholly owned subsidiary, BPL, Trimac provides third-party transportation logistics services in Canada and the United States. Trust units of Trimac Income Fund are traded on The Toronto Stock Exchange under the symbol TMA.UN
You are invited to join us on a conference call at 10:00 a.m. Eastern Time on Tuesday, August 14, 2007. For North American participants, please dial 1-800-525-6384 or for international participants, please dial ++1-780-409-1668 at least 10 minutes prior to the start time of the call.
A playback of the call will be available starting at 12:30 p.m. Eastern Time on Tuesday, August 14, 2007 until midnight August 21, 2007. To hear the playback dial 1-888-562-2824 or for international participants, please dial ++1-402-220-7739 and give the conference ID number: 11245298.
Trimac Income Fund
Consolidated Balance Sheet
(unaudited)
-------------------------------------------------------------------------
(thousands of dollars)
As at As at
June 30, December 31,
2007 2006
$ $
------------------------
Assets
Current assets
Cash 71 223
Interest receivable 230 237
Distributions receivable 811 949
Prepaid expenses 118 75
------------------------
1,230 1,484
Investment in Trimac Transportation
Services Limited Partnership 75,580 78,431
Note receivable from Trimac Transportation
Services Inc. 35,000 35,000
------------------------
111,810 114,915
------------------------
------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 129 236
Due to associated companies and partnerships 363 310
Distributions payable 966 966
------------------------
1,458 1,512
Unitholders' equity 110,352 113,403
------------------------
111,810 114,915
------------------------
------------------------
The Fund commenced business operations on February 25, 2005 and earnings
of the Fund's investment in Trimac have been accounted for using the equity
method of accounting since commencement. Under this method, the Fund's share
of earnings of Trimac, adjusted for the amortization of certain tangible and
intangible assets arising from the use of purchase accounting is reflected in
the statement of earnings of the Fund as "Share of earnings of Trimac
Transportation Services Limited Partnership". The results of operations of the
Fund are predominately dependent on the performance of the Partnership.
Trimac Income Fund
Consolidated Statement of Earnings, Comprehensive Income and
Unitholders' Equity
(unaudited)
-------------------------------------------------------------------------
(thousands of dollars, except for numbers of units)
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
------------------------ -------------------------
$ $ $ $
Share of earnings of
Trimac Transportation
Services Limited
Partnership(1) 1,747 619 2,089 1,023
Interest income 698 699 1,392 1,390
Administrative costs (260) (276) (654) (459)
------------------------ -------------------------
Net earnings 2,185 1,042 2,827 1,954
Other comprehensive
loss - share of
Partnership other
comprehensive loss (45) - (48) -
------------------------ -------------------------
Comprehensive income 2,140 1,042 2,779 1,954
Opening unitholders'
equity 111,110 118,242 113,403 120,122
Adoption of new
accounting standard - - (35) -
Distributions (2,898) (2,898) (5,795) (5,690)
------------------------ -------------------------
Closing unitholders'
equity 110,352 116,386 110,352 116,386
------------------------ -------------------------
------------------------ -------------------------
Basic and diluted
earnings per unit(2) 0.1744 0.0832 0.2256 0.1560
Weighted average
number of units
outstanding used in
computing basic
earnings per unit 12,528,515 12,528,515 12,528,515 12,528,515
Weighted average
number of units
outstanding used in
computing diluted
earnings per unit(2) 23,609,506 23,012,751 23,609,506 23,012,751
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
--------------------------------------------------
$ $ $ $
Net earnings of the
Partnership 7,922 4,259 9,430 7,959
Add: Interest expense
on TTSI debt included
in Partnership
earnings 1,019 1,019 2,026 2,026
--------------------------------------------------
Adjusted Partnership
earnings 8,941 5,278 11,456 9,985
Less: Purchase price
allocation
adjustments:
Increase in
amortization of
capital assets
and loss on
disposal of
capital assets (2,990) (533) (3,533) (1,066)
Amortization of
intangible assets (1,010) (3,084) (2,020) (6,169)
--------------------------------------------------
Partnership earnings
after purchase price
adjustments 4,941 1,661 5,903 2,750
--------------------------------------------------
Share of Partnership
earnings 1,747 619 2,089 1,023
--------------------------------------------------
--------------------------------------------------
(1) The net earnings of the Partnership are allocated between TTSI and
the Fund based on the terms of the partnership agreement. The
following is a reconciliation of net earnings recorded in the
consolidated financial statements of the Partnership to the amount
recorded by the Fund.
(2) Pursuant to an investor liquidity agreement, holders of TTSI
Exchangeable Shares have the right to effectively liquidate their
9,912,140 shares of TTSI and receive units in the Fund. Following the
full exercise of such liquidation rights, the Fund would own
100 percent of the Partnership. The number of units used in the
calculation of diluted earnings per unit assumes full liquidation at
the beginning of the period. The impact of the liquidation for the
period ended June 30, 2007 has not been disclosed, as it is anti-
dilutive.
Trimac Income Fund
Consolidated Statement of Cash Flows
(unaudited)
-------------------------------------------------------------------------
(thousands of dollars)
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
------------------------ -------------------------
$ $ $ $
Cash provided (used)
Operations
Net earnings 2,185 1,042 2,827 1,954
(Deduct) add items
not affecting cash:
Share of earnings
from Trimac
Transportation
Services Limited
Partnership (1,747) (619) (2,089) (1,023)
Distributions from
Trimac Transportation
Services Limited
Partnership 1,747 619 2,089 1,023
------------------------ -------------------------
Cash provided by
operations 2,185 1,042 2,827 1,954
Net change in non-cash
working capital 100 54 (90) 140
------------------------ -------------------------
Net cash provided by
operations 2,285 1,096 2,737 2,094
------------------------ -------------------------
Investments
Distributions from
Trimac Transportation
Services Limited
Partnership 670 1,765 2,906 3,494
------------------------ -------------------------
Cash provided by
investing activities 670 1,765 2,906 3,494
------------------------ -------------------------
Financing
Distributions paid (2,898) (2,898) (5,795) (5,637)
------------------------ -------------------------
Cash used in financing
activities (2,898) (2,898) (5,795) (5,637)
------------------------ -------------------------
Increase (decrease)
in cash 57 (37) (152) (49)
Cash, beginning of
period 14 125 223 137
------------------------ -------------------------
Cash, end of period 71 88 71 88
------------------------ -------------------------
------------------------ -------------------------
Supplemental information
Cash received from
interest 706 707 1,399 1,398
The financial statements included in this news release do not contain the
notes to the statements. Financial statements with note disclosure are filed
with securities regulators.
Trimac Transportation Services Limited Partnership
Consolidated Balance Sheet
(unaudited)
-------------------------------------------------------------------------
(thousands of dollars)
As at As at
June 30, December 31,
2007 2006
$ $
------------------------
Assets
Current assets
Cash and term deposits 1,196 -
Accounts receivable 35,593 33,058
Materials and supplies 1,988 1,823
Due from associated companies and partnerships 1,299 1,012
Income taxes recoverable - -
Prepaid expenses 11,206 9,978
------------------------
51,282 45,871
Capital assets 101,087 105,163
Intangible assets 1,984 1,093
Goodwill 4,855 4,471
Other 1,252 1,287
------------------------
160,460 157,885
------------------------
------------------------
Liabilities
Current liabilities
Bank indebtedness 1,058 699
Accounts payable and accrued liabilities 32,649 29,681
Distributions payable 5,165 5,099
Income taxes payable 358 540
Due to associated companies 2,458 3,138
------------------------
41,688 39,157
Long-term debt 60,000 58,260
Future income taxes 188 1,830
Other long-term liabilities 1,783 1,574
------------------------
103,659 100,821
Partnership equity 56,801 57,064
------------------------
160,460 157,885
------------------------
------------------------
The Partnership provides bulk trucking services throughout Canada and
complementary logistics services in Canada and the United States. Effective
January 1, 2005, the Partnership purchased substantially all of the assets of
Trimac Transportation Services Inc. ("TTSI") relating to its Canadian bulk
trucking business and its North American logistics business. TTSI and certain
of its subsidiaries conducted the business operations of the Partnership prior
to January 1, 2005.
Trimac Transportation Services Limited Partnership
Consolidated Statement of Earnings, Comprehensive Income and Equity
(unaudited)
-------------------------------------------------------------------------
(thousands of dollars)
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
(restated) (restated)
------------------------ -------------------------
$ $ $ $
Transportation revenue 74,985 71,199 146,384 144,395
Fuel surcharges 9,194 8,206 16,938 15,630
------------------------ -------------------------
Total revenues 84,179 79,405 163,322 160,025
------------------------ -------------------------
Operating costs and
expenses
Direct 61,728 57,998 121,593 118,099
Selling and
administrative 12,002 11,104 22,988 21,865
Depreciation and
amortization 5,942 5,197 11,791 10,563
Gain on sale of
assets (net) (3,164) (182) (3,330) (492)
------------------------ -------------------------
Operating expense 76,508 74,117 153,042 150,035
------------------------ -------------------------
Operating earnings 7,671 5,288 10,280 9,990
Interest on long-term
debt 1,233 1,067 2,405 2,123
Other interest expense
(income) 19 (77) 32 (141)
------------------------ -------------------------
1,252 990 2,437 1,982
------------------------ -------------------------
Earnings before income
taxes 6,419 4,298 7,843 8,008
Income tax expense
(recovery)
Current 221 115 323 143
Future (1,724) (76) (1,910) (94)
------------------------ -------------------------
(1,503) 39 (1,587) 49
------------------------ -------------------------
Net earnings 7,922 4,259 9,430 7,959
Other comprehensive
loss - net change in
cumulative translation
adjustments (127) (41) (136) (35)
------------------------ -------------------------
Comprehensive income 7,795 4,218 9,294 7,924
Opening equity 53,606 58,778 57,064 59,650
Adoption of new
accounting standard - - (81) -
Distributions declared (4,600) (4,748) (9,476) (9,326)
------------------------ -------------------------
Closing partnership
equity 56,801 58,248 56,801 58,248
------------------------ -------------------------
------------------------ -------------------------
Accumulated other
comprehensive losses
(included in
partnership equity)
----------------------
Opening balance as
previously recorded (29) - - -
Adjustment on adoption
of accounting policy - (25) (20) (31)
------------------------ -------------------------
(29) (25) (20) (31)
Other comprehensive
loss (127) (41) (136) (35)
------------------------ -------------------------
Closing balance (156) (66) (156) (66)
------------------------ -------------------------
------------------------ -------------------------
Trimac Transportation Services Limited Partnership
Consolidated Statement of Cash Flows
(unaudited)
-------------------------------------------------------------------------
(thousands of dollars)
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
------------------------ -------------------------
$ $ $ $
Cash provided (used)
Operations
Net earnings 7,922 4,259 9,430 7,959
Add back (deduct) items
not affecting cash:
Depreciation and
amortization 5,942 5,197 11,791 10,563
Gain on sale of
assets (net) (3,164) (182) (3,330) (492)
Future income tax
recovery (1,724) (76) (1,910) (94)
Other non-cash items 86 51 163 120
------------------------ -------------------------
Cash provided by
operations 9,062 9,249 16,144 18,056
Net change in non-cash
working capital (697) (5,547) (1,798) (2,133)
------------------------ -------------------------
Net cash provided by
operations 8,365 3,702 14,346 15,923
------------------------ -------------------------
Investments
Purchases of capital
assets (2,124) (10,561) (9,399) (14,707)
Proceeds on sale of
capital assets 6,778 878 7,106 1,881
Acquisition of
transportation assets (3,264) - (3,264) -
Increase (decrease) in
accounts payable and
accrued liabilities
relating to investing
activities (176) 438 (197) 366
Increase in accounts
receivable relating to
investing activities 79 - 3 -
Other (73) (19) (87) (22)
------------------------ -------------------------
Cash provided by
(used in) investing
activities 1,220 (9,264) (5,838) (12,482)
------------------------ -------------------------
Financing
Increase in long-term
debt - - 7,618 -
Distributions paid (4,368) (4,109) (9,411) (7,923)
------------------------ -------------------------
Cash used in financing
activities (10,246) (4,109) (7,671) (7,923)
------------------------ -------------------------
(Decrease) increase in
cash and term deposits (661) (9,671) 837 (4,482)
Cash and term deposits
(bank indebtedness),
beginning of period 799 11,936 (699) 6,747
------------------------ -------------------------
Cash and term deposits,
end of period 138 2,265 138 2,265
------------------------ -------------------------
------------------------ -------------------------
Supplemental Information
Income taxes paid (50) 27 607 61
Interest paid 234 (28) 2,443 2,010
Cash consists of the
following:
Cash and term deposits 1,196 2,265
Bank indebtedness (1,058) -
-------------------------
138 2,265
-------------------------
-------------------------
The financial statements included in this news release do not contain the notes to the statements. Financial statements with note disclosure are filed with securities regulators.
