Legumex Walker Reports First Quarter 2012 Financial Results
- Quarter Marked by Consistent Gross Margins, Strategic Acquisitions, and Continued Progress on Capacity Optimization -
WINNIPEG, May 14, 2012 /CNW/ - Legumex Walker Inc. (TSX: LWP) (the "Company") today reported its financial results for the first quarter 2012. All figures are in Canadian dollars unless otherwise stated.
Highlights for the First Quarter of 2012
- Revenue of $65.8 million;
- EBITDA1 of $2.2 million;
- Adjusted net loss1 of $0.8 million, or $0.06 per share (excludes impact of certain charges related to the acquisition and transaction costs and non-cash foreign exchange);
- Net loss of $1.3 million, or $0.10 per share;
- Special Crops Division EBITDA1 of $3.3 million;
- Cash flow from operations1 of $1.0 million;
- Completed a divisional amalgamation within the Canadian Special Crops Division forming Legumex Walker Canada Inc. ("LWC") to further integrate and streamline operations within the Company;
- Acquired Minnesota based St. Hilaire Seed Company ("SHS"), one of the largest dry bean processors in the United States;
- Formed Legumex Walker Sunflower ("LWS") and acquired sunflower seed processing assets in Mentor, Minnesota;
- Expanded processing capabilities outside of North America with an investment in a bean processing facility in Tianjin, China, which has now commenced operations;
- Secured new combined $124 million credit facilities;
- Completed hiring senior management team for Oilseed Processing Division;
- Pacific Coast Canola project remains on schedule and on budget.
Highlights Subsequent to the end of First Quarter 2012
- Sold stake in Blue Hills Processors for $1.8 million as part of ongoing initiative to optimize its wholly‐owned processing capacity; and
- Commenced canola seed purchasing program to meet requirements for commissioning and commercial operations for Pacific Coast Canola.
"Our financial results reflect our success in maintaining consistent gross margins and sales amidst the continuing industry headwinds - a testament to the underlying strength of our Special Crops business," said Joel Horn, Legumex Walker's president and chief executive officer. "The quarter also saw significant progress on each of our strategic initiatives. The integration of our first acquisition, St. Hilaire Seed Company, is proceeding well and the operations there are meeting our expectations. Our continued progress optimizing processing capacity allowed us to monetize our stake in Blue Hills and should benefit our bottom line as we adjust our cost structure downward in the current environment. At the same time, we continue to be focused on driving sales of high margin products, while exploring opportunities to expand our sourcing and processing capabilities internationally. All of this positions us well over both the short and long terms."
Mr. Horn added, "The Pacific Coast Canola facility continues to take shape and we recently took an important next step in our commercial preparations, initiating our canola seed purchasing program. Construction of the Pacific Coast Canola crushing facility remains on budget and on schedule and we look forward to commencing operations in less than a year."
Financial Results
As LWI was not in existence during the three-month period ended March 31, 2011 and the merger of the predecessor companies does not constitute a continuation of the business for accounting purposes, the Company's financial results for the three-month period ended March 31, 2012 are presented without comparative results for the same period in the prior year.
Selected Financial Information
(in thousands of Cdn $) | Three Months Ended March 31, 2012 (unaudited) |
Sales | 65,793 |
Cost of sales | 60,099 |
Gross margin | 5,694 |
Add: Earnings from investment in associates | 20 |
Less: Selling, general and administrative costs | 4,302 |
Add: Non-recurring costs2 | 800 |
EBITDA1 | 2,212 |
Less: Depreciation and amortization | 1,974 |
EBIT1 | 238 |
Less: Financing costs | 763 |
Less: Provision for income taxes | 309 |
Adjusted net earnings (loss)1 | (834) |
Less: Non cash foreign exchange | 249 |
Add: Finance income | 73 |
Less: Non-recurring costs2 | 800 |
Net earnings (loss) per financial statements | (1,810) |
Attributable to: | |
Non-controlling interests | (21) |
Shareholders of the Company | (1,789) |
Total net earnings (loss) | (1,810) |
Basic weighted average number of shares (000s) | 13,297 |
Net earnings (loss) per share | (0.13) |
Adjusted net earnings (loss) per share1 | (0.06) |
Total assets | 259,732 |
Non-current portion of long-term debt and obligations under finance lease |
20,880 |
Results for the First Quarter
Consolidated sales for the first quarter of 2012 were $65.8 million and were generated entirely by the Special Crops Division. Earnings before interest, taxes, depreciation, amortization and non-recurring charges (EBITDA)1 was $2.2 million. Net loss was $1.8 million, or $0.13 per share, and includes the impact of non-cash foreign exchange and non-recurring charges. Excluding non-cash foreign exchange and non-recurring charges, adjusted net loss was $0.8 million, or $0.06 per share.1
Segment Results
Selected Financial Results1 Three Months Ended March 31, 2012 (unaudited, in thousands of Cdn $) |
||||
Special Crops | Oilseed Processing |
Corporate | Total | |
Sales | 65,793 | - | - | 65,793 |
Cost of sales | 60,099 | - | - | 60,099 |
Gross margin | 5,694 | - | - | 5,694 |
Add: Earnings from investment in associates | 20 | - | - | 20 |
Less: Selling, general and administrative costs | 2,464 | 140 | 1,698 | 4,302 |
Add: Non-recurring costs2 | - | - | 800 | 800 |
EBITDA1 | 3,250 | (140) | (898) | 2,212 |
Less: Depreciation and amortization | 1,961 | - | 13 | 1,974 |
EBIT1 | 1,289 | (140) | (911) | 238 |
Special Crops Division
Sales for the Special Crops Division, generated through the sale of pulse and other special crops, for the first quarter of 2012 were $65.8 million. Sales were negatively impacted by a number of market factors, including the European financial crisis, currency fluctuations and political instability in some of the Company's traditional markets, which contributed to the reluctance of buyers to purchase additional product. In addition, the Company experienced increased competition from emerging pulse-producing countries. Management believes many of these factors to be temporary in nature. Moreover, it is a fundamental part of the Company's growth strategy to diversify its sourcing into new geographic regions to reduce risk, increase flexibility and strengthen its competitive position versus companies in emerging pulse-producing nations.
Cost of sales, which includes the cost of special crops, internal processing costs, third-party processing costs and freight costs, for the first quarter of 2012, was $60.1 million, resulting in a gross margin of $5.7 million (8.7% of sales). SHS and LWS (the U.S. Special Crops operations) generated $4.3 million of sales for the first quarter of 2012, but did not provide a positive contribution to the Company's overall gross margin. The measurement standards prescribed by IFRS 3 required the Company to revalue inventories acquired as part of the business combination at fair value upon acquisition. This value was higher than the historical cost and accordingly resulted in increased cost of sales for accounting purposes relative to the amount that would have been recorded had the inventory not been revalued. This increase in cost of sales together with approximately $0.5 million in fixed plant overhead and other costs included in cost of sales during the period resulted in the U.S. Special Crops operation's negative impact on gross margin. Excluding the U.S. Special Crops sales and fixed plant overhead costs, gross margin generated by the Canadian Special Crops operations was $6.2 million (10.1% of sales). Gross margin percentage will vary from quarter to quarter and year to year based on the strength of demand, product mix, as well as the timing and location of purchases by LWI of pulses and other special crops.
Selling, general, and administrative expenses for the first quarter of 2012 were $4.3 million (6.5% of sales). Category expenses reflect the relatively fixed nature of the Company's indirect costs which consist primarily of personnel salaries and benefits, professional fees, insurance, property and business taxes, and utilities. Approximately $0.8 million of selling, general and administrative costs during the quarter were non-recurring costs attributable to events and factors related to the commencement of business as a going concern, integration activities and the acquisition of SHS and assets of LWS.
EBITDA for the Special Crops division for the first quarter of 2012 was $3.3 million.
Oilseed Processing Division
Construction of the Pacific Coast Canola ("PCC") plant commenced in the third quarter of 2011. Plant operations are expected to commence in early 2013. Operating expenses for the first quarter of 2012 were $0.1 million. The majority of costs incurred by PCC during the quarter were capitalized as PCC Plant costs.
Construction of the PCC Plant is progressing on schedule and on budget. Approximately 90 percent of construction costs had been contracted to date. Above-ground construction commenced in February, 2012 and the Company is on target for its staffing and operations plans.
1Non-GAAP Measures
This press contains references to "EBIT" "EBITDA," cash flow from operations and adjusted net earnings (loss). EBIT is defined for the purposes of this press release as earnings from operations before interest, taxes and non-recurring costs. EBITDA is defined for the purposes of this press release as earnings from operations before other income (expenses), amortization, financings costs, income taxes and non-recurring charges. Cash flow from operations is the cash from (or used in) operating activities excluding non cash working capital changes. LWI uses cash flow provided by operations as a financial measure of liquidity. Management believes excluding the seasonal swings of non cash working capital assists in evaluation of long term liquidity. Adjusted net earnings is EBIT less financing costs and income taxes. Management believes that EBIT, EBITDA cash flow from operations and adjusted net earnings are useful supplemental measures of cash flow prior to debt service, capital expenditures, income taxes and other non-cash items included in earnings. EBIT, EBITDA, cash flow from operations and adjusted net earnings are not recognized earnings measures under Canadian Generally Accepted Accounting Principles ("Canadian GAAP") and do not have standardized meanings prescribed by Canadian GAAP. Therefore, EBIT, EBITDA, cash flow from operations and adjusted net earnings may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBIT, EBITDA, cash flow from operations and adjusted net earnings should not be construed as an alternative to net earnings or loss (which are determined in accordance with Canadian GAAP) as an indicator of the performance of the Company or as a measure of liquidity and cash flows. The Company's method of calculating EBIT, EBITDA, cash flow from operations and adjusted net earnings may differ materially from the methods used by other public companies and, accordingly, may not be comparable to similarly titled measures used by other public companies.
2Non-Recurring Costs
One-time costs deemed to be non-recurring by Management relating to acquisitions, financing and other.
Reconciliation of each of these terms is provided in the table below:
(in thousands of Cdn $) | Three Months Ended March 31, 2012 (unaudited) |
Sales | 65,793 |
Cost of sales | 60,099 |
Gross margin | 5,694 |
Add: Earnings from investment in associates | 20 |
Less: Selling, general and administrative costs | 4,302 |
Add: Non-recurring costs | 800 |
EBITDA | 2,212 |
Less: Depreciation and amortization | 1,974 |
EBIT | 238 |
Less: Financing costs | 763 |
Less: Provision for income taxes | 309 |
Adjusted net earnings (loss) | (834) |
Less: Non cash foreign exchange | 249 |
Less: Write down of investment | - |
Less: (Gain) loss on disposal of property, plant, equipment | - |
Add: Finance income | 73 |
Less: Non-recurring costs | 800 |
Net earnings (loss) per financial statements | (1,810) |
EBITDA | 2,212 |
Less: Non-recurring costs | 336 |
Add: Stock based compensation | 102 |
Less: Earnings from investment in associates | 20 |
Add: Finance income (loss) | 73 |
Less: Income taxes paid | 680 |
Less: Maintenance capital expenditure | 280 |
Cash flow from operations | 1,071 |
Less: Financing costs | (763) |
Less: Foreign exchange | 249 |
Add: Income taxes (non-cash paid/recovered) | 115 |
Add: Financing activities | 7,123 |
Less: Non-cash loss on derivative financial instruments | 397 |
Less: Investing activities and acquisition costs (net of maintenance capital expenditure) | 21,300 |
Cash flow prior to working capital changes | (14,401) |
Increase (decrease) in cash resources per financial statements | (37,765) |
Add: Net changes in working capital accounts | (23,364) |
Cash flow prior to working capital changes per financial statements | (14,401) |
Financial Statements and MD&A
Legumex Walker's financial statements and management's discussion and analysis ("MD&A") for the period ended March 31, 2012 are available on the Company's website at www.legumexwalker.com in the "Investors" section.
Conference Call
Legumex Walker will host a conference call on Monday, May 14, 2012 at 8:30 a.m. ET to discuss its first quarter 2012 financial results. To access the conference call by telephone, dial (647) 427-7450 or (888) 231-8191. Please connect approximately 10 minutes prior to the start of the call to ensure access.
A recording of the conference call will be archived for replay by telephone until Monday, May 21, 2012 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 76243797.
A live audio webcast of the conference call will be available http://www.legumexwalker.com/investors-presentations.php. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.
About Legumex Walker Inc.
Legumex Walker is a growth-oriented processor and merchandiser of pulses (lentils, peas, beans and chickpeas), other special crops and canola products. The Company is one of the largest processors of pulses and other special crops in Canada with 11 processing facilities strategically located in key growing regions in the Canadian Prairie Provinces, the American Midwest, and China, a global sales, logistics, and distribution platform and access to multimodal transportation capabilities. In addition the Company has an 85 percent interest in Pacific Coast Canola, LLC, a company that is constructing a canola oilseed processing facility in Washington State.
Cautionary Note on Forward Looking Statements
This press release contains certain forward-looking statements. Forward-looking statements include, but are not limited to, those with respect to the cost of production, currency fluctuations, construction, staffing and operations of the PCC Plant, the growth of LWI's business, strategic initiatives, planned capital expenditures, and expectations regarding future margins and expenses. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of LWI (including its operating subsidiaries) to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such risks and uncertainties include, among others, timing and cost overrun risks associated with the construction of the PCC Plant (as defined herein), risks related to the operation of the PCC Plant, product liabilities, environmental risks, regulations related to agricultural commodities, weather related risks, the demand for and availability of rail, port and other transportation services, the actual results of harvests, fluctuations in the price of pulses and other crops, failure of plant, equipment or processes to operate as anticipated, accidents, labour disputes, risks relating to the integration of acquisitions, as well as those factors referred to in the section entitled "Risk Factors" in LWI's Management's Discussion and Analysis for the period ended March 31, 2012, which is available on SEDAR at www.sedar.com and which should be reviewed in conjunction with this document. Although LWI has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Although LWI believes the assumptions inherent in forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this press release. LWI expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.
For further information:
INVESTOR & MEDIA RELATIONS:
Marin Landis
Investor Relations - Legumex Walker
[email protected]
(206) 535‐2427
Lawrence Chamberlain
Equicom
[email protected]
(416) 815-0700 ext. 257
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