Oceanex Reports First Quarter Results



    ST-JOHN'S, April 25 /CNW Telbec/ - Oceanex Income Fund (TSX: OAX.UN)
today announced operating income of $0.6 million for the first quarter of 2007
compared to an operating loss of $0.8 million in the first quarter of 2006.
Net income was $1.2 million or $0.14 per unit compared to net loss of
$0.2 million, or $0.03 per unit a year earlier.
    "Given that the first quarter is seasonally our weakest quarter, we are
delighted with our operating results, which show a marked improvement over
first quarter 2006. Despite total volume being slightly lower, the improvement
reflects a 5.3% increase in volume to Newfoundland, higher average freight
rates and the positive impact of lower vessel operating costs following the
Cicero sale in December", said Peter Henrico, President and Chief Executive
Officer of Oceanex.
    Revenue at $25.2 million was up 4.0% compared to $24.3 million for the
same period last year principally due to strong volume to Newfoundland and
higher rates. Higher revenue was achieved in spite of soft return traffic and
the reduction in vehicle shipments which were down 969 units or 18.3% to
4,330 units due to the strike at CN Rail.
    Operating expenses were $20.4 million, a reduction of $1.2 million or
5.6% compared to last year mostly due to lower vessel operating costs which
reflected a reduced fleet size following the sale of the Cicero in December
2006. It should be noted that scheduled dry dock costs are no longer included
in vessel operating costs but are deferred and amortized. Selling and
administrative expenses were $2.3 million, $0.5 million higher as a result of
employment terminations, new hires in the second half of 2006, and
professional fees. Amortization expense, which now includes the amortization
of scheduled dry dock costs, was $2.0 million compared to $1.6 million for
Q1 2006.
    Investment income from the ship replacement fund was $1.0 million as
compared to $0.5 million in 2006. Investment income for 2007 includes realized
and unrealized gains and losses in accordance with the new accounting policy.
Interest expense, was unchanged at $0.9 million.
    Cash flow from operations was $2.1 million compared to a negative cash
flow of $3.6 million for Q1 2006. Sustaining capital expenditures were
$0.9 million, mostly for the purchase of 75 new 53' containers, compared to
$0.1 million during Q1 2006.
    "With an early start of summer navigation in the Saint Lawrence River,
the outlook for the second quarter is positive as we anticipate additional
volume resulting from the seasonal build-up of inventories. We also expect
vehicle shipments to resume their pre-strike level and we further anticipate
improvements in backhaul volume, especially fish exports to international
markets," said Mr. Henrico.
    Oceanex made distributions to unitholders of $2.5 million during the
quarter and expects distributions to continue at the same level for the
balance of the year.
    Following the adoption of new accounting rules for scheduled dry dock
costs comparative 2006 figures have been restated where applicable. In
addition, following the adoption of new accounting standards for financial
instruments, the opening retained earnings balance was restated.
    For more information, consult the Fund's Management Discussion and
Analysis (MD&A) filed on SEDAR for the quarter ended March 31, 2007.

    Forward Looking Statement

    This press release may contain forward looking statements. All statements
other than statements of historical fact contained in this press release are
forward looking statements, including, without limitation, statements
regarding the future financial position, status for income tax purposes,
distribution levels, business strategy, proposed transactions, budgets,
litigation, projected costs and plans and objectives of or involving the Fund
or the Company. Readers can identify many of these statements by looking for
words such as "believes", "expects", "will", "intends", "projects",
"anticipates", "estimates", "continues" or similar words or the negative
thereof. These forward looking statements may include statements with respect
to the amount and timing of the payment of the distributions of the Fund.
There can be no assurance that the plans, intentions or expectations upon
which these forward looking statements are based will occur. Forward looking
statements are subject to risks, uncertainties and assumptions, including, but
not limited to, those discussed in this press release and in the reports of
the Fund, including its Annual Information Form and Management's Discussion
and Analysis, on file with Canadian securities regulatory authorities which
may be accessed through the SEDAR website (www.sedar.com) or at the Fund's
website (www.oceanex.com) or by contacting the Secretary of the Fund.
    Some of the factors that could affect future results and could cause
results to differ materially from those expressed in the forward looking
statements contained herein include: risks relating to changes in economic
conditions; dependence upon key customers; competition; marine accidents or
other property losses; insurance recoveries; strikes or lock-outs involving
unionized employees; government regulation; the Company's ability to adapt to
changing market conditions; dependence of the Fund on the Company; leverage
and restrictive covenants in agreements relating to current and future
indebtedness of the Company; restrictions on the potential growth of the
Company as a consequence of the payment by the Company of substantially all of
its operating cash flow; and income tax related risks. Readers are cautioned
that the foregoing list of factors is not exhaustive.
    The forward looking statements contained in this press release are
expressly qualified in their entirety by this cautionary statement. The
forward looking statements included in this press release are made as of the
date of this press release and the Fund assumes no obligation to update or
revise them to reflect new information, events or circumstances or otherwise
except as may be expressly required by applicable securities law.
    Oceanex Income Fund is a Montreal based limited purpose trust that
operates through its wholly owned subsidiary Oceanex Inc. Oceanex provides
intermodal transportation between points throughout North America and
Newfoundland and Labrador.
    Oceanex Income Fund is traded on the Toronto Stock Exchange under the
symbol "OAX.UN". Learn more about Oceanex at www.oceanex.com.


    
                             OCEANEX INCOME FUND
                      CONSOLIDATED FINANCIAL STATEMENTS
                               March 31, 2007


    Notice:  The attached consolidated financial statements as at March 31,
    -------  2007 and 2006, and for the three-month periods ended March 31,
             2007 and 2006, have been prepared by management of Oceanex Inc.
             in accordance with Canadian GAAP and have not been reviewed by
             the external auditors of Oceanex Income Fund.

    April 25, 2007


    OCEANEX INCOME FUND
    CONSOLIDATED BALANCE SHEETS
    (Unaudited - In thousands of dollars)

                                                  March 31       December 31
    -------------------------------------------------------------------------
                                                      2007              2006
    ASSETS                                               $                 $
                                                                 (restated -
                                                                  see note 1)
    Current assets
      Cash and cash equivalents                      5,884             7,928
      Accounts receivable                           10,695            13,502
      Prepaid expenses, supplies and other
       current assets                                3,543             1,816
      Income taxes receivable                        1,463             1,492
    -------------------------------------------------------------------------
                                                    21,585            24,738

    Capital assets                                  84,646            85,242

    Deferred dry dock costs (note 1)                 2,568             3,101

    Ship replacement fund (notes 1 and 5)           32,420            22,354
     (market value Dec 31, 2006: $31,429)

    Goodwill                                        18,740            18,740
    -------------------------------------------------------------------------
                                                   159,959           154,175
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LIABILITIES AND UNITHOLDERS' EQUITY

    Current liabilities

      Trade accounts payable and
       accrued liabilities                           5,768             6,716
      Other current liabilities                      4,068             3,833
      Distributions payable to unitholders             817               817
      Current portion of long-term debt              3,972             3,949
    -------------------------------------------------------------------------
                                                    14,625            15,315

    Long-term debt (note 1)                         43,738            44,700

    Derivative liability (notes 1 and 5)             2,049                 -

    Employee future benefit obligations (note 6)       858               741

    Future income tax liability (note 4)            11,569            10,533

    Unitholders' equity
      Trust units                                   80,662            80,662
      Retained earnings                              7,818             2,224
      Accumulated other comprehensive
       loss                                         (1,360)                -
    -------------------------------------------------------------------------
                                                    87,120            82,886
    -------------------------------------------------------------------------

                                                   159,959           154,175
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    OCEANEX INCOME FUND
    CONSOLIDATED STATEMENTS OF INCOME (LOSS)
    (Unaudited - In thousands of dollars, except per unit amounts)

                                                        Three-month period
                                                           ended March 31
    -------------------------------------------------------------------------
                                                      2007              2006
                                                                 (restated -
                                                                  see note 1)

                                                         $                 $

     Revenue                                        25,241            24,275

     Expenses
     Operating                                      20,446            21,670
     Selling and administrative                      2,252             1,761
     Amortization (notes 1 and 2)                    1,964             1,648

    -------------------------------------------------------------------------

     Operating income (loss)                           579              (804)


    Income from ship replacement
     fund (notes 1 and 3)                              991               468
    Interest on long-term debt (note 1)               (859)             (889)

    -------------------------------------------------------------------------

    Income (loss) before income tax recovery           711            (1,225)

    Income tax recovery (note 4)                      (500)             (989)

    -------------------------------------------------------------------------

    Net income (loss)                                1,211              (236)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) per trust unit                    0.14             (0.03)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    OCEANEX INCOME FUND
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited - In thousands of dollars)
                                                        Three-month period
                                                           ended March 31
    -------------------------------------------------------------------------
                                                      2007              2006
    OPERATING ACTIVITIES                                         (restated -
                                                                  see note 1)

                                                         $                 $

    Net income (loss)                                1,211              (236)
    Items not affecting cash:
      Amortization (note 2)                          1,964             1,648
      Amortization of long-term debt discount           39                73
      Employee future benefit obligations              117               127
      Future income taxes                             (500)             (174)
      Gain on disposal of capital assets              (101)             (151)
      Re-investment of income from the ship
       replacement fund                               (991)             (468)
    Increase in deferred dry dock costs                  -            (2,236)
    Refundable income taxes                            (14)              683
    Change in non-cash working capital items
     related to operating activities                   396            (2,852)
    -------------------------------------------------------------------------

    Cash flows related to operating activities       2,121            (3,586)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES

    Repayment of long-term debt                       (978)             (785)
    Distributions to unitholders (note 7)           (2,453)           (2,453)
    -------------------------------------------------------------------------

    Cash flows related to financing activities      (3,431)           (3,238)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES

    Purchase of capital assets                        (884)             (112)
    Proceeds on disposal of  capital assets            150               151
    -------------------------------------------------------------------------

    Cash flows related to investing activities        (734)               39
    -------------------------------------------------------------------------

    Net change in cash and cash equivalents
     during the period                              (2,044)           (6,785)
    Cash and cash equivalents
      - beginning of period                          7,928             9,007
    -------------------------------------------------------------------------

    Cash and cash equivalents
      - end of period                                5,884             2,222
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    OCEANEX INCOME FUND
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
    (Unaudited - In thousands of dollars)
                                                         Three-month period
                                                           ended March 31
    -------------------------------------------------------------------------
                                                      2007              2006
                                                         $                 $

    Net income (loss)                                1,211              (236)

    Other Comprehensive income,
     net of income taxes:
       Gain on derivative designated
        as cash flow hedge                             129                 -
    -------------------------------------------------------------------------

    Comprehensive income (loss)                      1,340              (236)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF ACCUMULATED
    COMPREHENSIVE LOSS
    (Unaudited - In thousands of dollars)
                                                         Three-month period
                                                           ended March 31
    -------------------------------------------------------------------------
                                                      2007              2006
                                                         $                 $
    Accumulated other comprehensive loss,
     beginning of period                                 -                 -

    Restatement of opening balance,
     net of income taxes (note 1)
      Financial instrument - Derivative liability   (1,489)                -

    Gain on derivative designated as cash flow hedge,
     net of income taxes                               129                 -
    -------------------------------------------------------------------------

    Accumulated other comprehensive loss,
     end of period                                  (1,360)                -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    OCEANEX INCOME FUND
    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
    (Unaudited - In thousands of dollars)

                                                         Three-month period
                                                           ended March 31
    -------------------------------------------------------------------------
                                                      2007              2006
                                                                 (restated -
                                                                  see note 1)

                                                         $                 $
    Retained earnings (deficit), beginning of period,
     as previously reported
                                                      (721)             (372)
    Restatement of prior period,
     net of income taxes (note 1)
      Change in dry dock accounting policy           2,945             3,303
      Financial instrument - Ship replacement fund   6,773                 -
    -------------------------------------------------------------------------

     Restated opening retained earnings,
     beginning of period                             8,997             2,931

      Net income (loss)                              1,211              (236)
      Refundable income taxes                           63               683
      Distributions to unitholders                  (2,453)           (2,453)
    -------------------------------------------------------------------------

    Retained earnings, end of period                 7,818               925
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    OCEANEX INCOME FUND
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For the three-month period ended March 31, 2007
    (Unaudited - All tabular figures are in thousands of dollars)


    1. Summary of significant accounting policies

    These unaudited consolidated financial statements as at March 31, 2007 and
2006 and for the three-month periods ended March 31, 2007 and 2006 have been
prepared by management of Oceanex Inc. (the "Company") and have not been
reviewed by the external auditors of Oceanex Income Fund (the "Fund"). These
financial statements have been prepared in accordance with Canadian generally
accepted accounting principles ("GAAP") using the same accounting policies as
outlined in Note 1 of the Fund's audited consolidated financial statements for
the year ended December 31, 2006, except as follows:

    Vessel dry dock costs

    In 2006, the United States Financial Accounting Standards Board ("FASB")
issued a Staff Position that addresses accounting for planned major
maintenance activities ("PMMA"). The Fund believes that dry dock costs are
PMMA and the Fund's accounting policy for dry dock costs for the year ended
December 31, 2006 was to accrue-in-advance. The guidance in this Staff
Position precludes the accrue-in-advance method for years beginning on or
after December 15, 2006, and recommends one of the direct expensing, built-in
overhaul or deferral methods. Such a change in accounting policy must be
applied retroactively with restatement of prior periods. Currently, there are
no formal Canadian guidelines on how to account for PMMA. In the absence of
Canadian guidelines, the Fund decided to follow the FASB Staff Position and to
adopt the deferral method on January 1, 2007.
    Under the deferral method, dry dock costs are deferred when incurred and
amortized on a straight-line basis over the period to the next scheduled dry
dock. In the event of a change in the timing of the next scheduled dry dock,
the amortization of deferred dry dock costs is modified prospectively and the
impact of such modification could be material. The adoption by the Fund of
this new accounting policy for PMMA has been applied retroactively and the
2006 consolidated financial statements presented for comparative purposes have
been restated. The impact of this restatement on the Fund's 2006 opening
balance sheet was an increase in deferred dry dock costs of $438,000, a
decrease in dry dock accruals of $4,734,000, an increase in future income tax
liability of $1,869,000, and an increase in retained earnings of $3,303,000.
    For the first quarter of 2006, operating expenses were reduced by
$299,000, a new dry dock amortization expense of $156,000 was recorded, and
the future income tax provision was increased by $51,000 for a reduction of
$92,000 in net loss (or $0.01 per trust unit).

    Comprehensive income, financial instruments - recognition and
    measurement, and hedges

    In 2005, the Canadian Institute of Chartered Accountants ("CICA") issued
Handbook Sections 1530, "Comprehensive income", 3855, "Financial instruments -
recognition and measurement" and 3865, "Hedges". The new statement of
comprehensive income shows the change in equity (net assets) of an enterprise
during a period from transactions and other events and circumstances from
non-owner sources. The new financial instruments sections establish standards
for recording and measuring financial assets, financial liabilities and
non-financial derivatives. The Fund adopted these rules effective January 1,
2007 and changed its accounting policies, with a restatement of the January 1,
2007, opening retained earnings.

    Ship replacement fund

    In accordance with the new CICA Handbook section 3855, "Financial
    instruments - recognition and measurement", the Fund has designated the
    ship replacement fund ("SRF") as financial instruments held for trading
    and all realized and unrealized gains and losses relating to changes in
    the SRF market value are now recorded as investment income or loss in the
    statement of income. The Fund's 2007 opening balance sheet was adjusted
    by increasing the SRF accounting value by $9,075,000 to its January 1,
    2007 market value, and by increasing the future income tax liability by
    $2,302,000 for a net increase of $6,773,000 on opening retained earnings.

    Hedges

    In accordance with the new CICA Handbook section 3865, "Hedges", the
    Company's interest rate swap agreement is a "Cash flow hedge" and the
    Fund has elected to apply hedge accounting for this swap as all criteria
    under Section 3865 are met. The swap is therefore recorded on the balance
    sheet at its fair value and any change in fair value of the swap is
    recognized in the statement of other comprehensive income. The Fund's
    2007 opening balance sheet was adjusted by recording a new long-term
    liability of $2,243,000, by reducing the future income tax liability by
    $754,000, for a net increase of $1,489,000 on opening accumulated other
    comprehensive loss.

    Long-term debt and interest expense on long-term debt

    In accordance with the new CICA Handbook section 3855, "Financial
    instruments - recognition and measurement", the financing fees that are
    directly attributable to the issuance of the long-term debt have been re-
    classified as a reduction of the debt, and the amortization of those fees
    is now part of interest on long-term debt. The Fund's 2007 opening
    balance sheet was adjusted by removing the deferred financing fees
    balance of $921,000, and by reducing long-term debt by that same amount,
    and interest expense on long-term debt for the 3-month period ended on
    March 31, 2007, includes $39,000 of deferred financing fees amortization
    ($73,000 in 2006).


    The consolidated financial results of the Fund are directly influenced by
freight volumes which vary during the year, being at their lowest from
mid-December through March, and reaching their maximum in early Summer and in
the Fall.
    These financial statements do not include all of the information and
disclosure required by GAAP for annual financial statements. Accordingly,
readers should refer to the Fund's audited consolidated financial statements
published in the Fund's annual report and the accompanying notes.

    2. Amortization
                                                         Three-month period
                                                           ended March 31
    -------------------------------------------------------------------------
                                                      2007              2006
                                                         $                 $
                                                                 (restated -
                                                                  see note 1)

    Capital assets                                   1,243             1,365
    Assets under capital lease                         188               127
    Deferred dry dock costs                            533               156
    -------------------------------------------------------------------------
                                                     1,964             1,648
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    3. Income from the ship replacement fund
                                                         Three-month period
                                                           ended March 31
    -------------------------------------------------------------------------
                                                      2007              2006
                                                         $                 $

    Dividend and interest income                       179               173
    Administration expense                              30                25
    Realized change in market value                  1,361               270
    Unrealized change in market
     value (see note 1)                               (579)                -
    -------------------------------------------------------------------------
                                                       991               468
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    4. Income taxes

    The reconciliation of income tax computed at combined statutory tax rates
to income tax expense (recovery) is:

                                                        Three-month period
                                                           ended March 31
    -------------------------------------------------------------------------
                                                      2007              2006
                                                                 (restated -
                                                                  see note 1)

                                                         $                 $

    Income (loss) before income tax recovery           711            (1,225)
    -------------------------------------------------------------------------


    Combined income tax expense (recovery) at          252              (437)
     statutory rates -  35.48% (2006 - 35.65%)
    Impact of interest expense of
     the Company paid
     to the Fund, eliminated on consolidation         (816)             (820)
    Tax-rate differential on passive income             26               311
    Non-taxable portion of capital gains              (139)              (48)
    Dividends from Canadian corporations                (4)              (17)
    Other                                              181                22
    -------------------------------------------------------------------------

                                                      (500)             (989)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Represented by:
    Current income taxes (recovery)                      -              (815)
    Future income taxes (recovery)                    (500)             (174)
    -------------------------------------------------------------------------

                                                      (500)             (989)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The tax effect of significant
     temporary differences is as follows:
                                                  March 31       December 31
    -------------------------------------------------------------------------
                                                      2007              2006
                                                                 (restated -
                                                                  see note 1)

                                                         $                 $

    Capital assets                                   9,087             8,599
    Goodwill                                         1,146             1,126
    Non-capital loss carryforwards                  (1,565)             (714)
    Write-down of investments                         (144)             (144)
    Financing fees                                     148               146
    Dry docks                                        1,802             1,833
    Timing of accruals                                (372)             (313)
    Carrying value of investment in
     excess of tax basis                             2,156                 -
    Interest rate swap agreement                      (689)                -
    -------------------------------------------------------------------------

    Net future income tax liability                 11,569            10,533
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    5. Financial instruments

    Ship replacement fund

    The ship replacement fund consists of investments in money market
investments, Canadian and foreign bonds and debentures and Canadian and
foreign corporate equity instruments. The investments in Canadian bonds and
debentures mature between June 1, 2007 and December 1, 2031 and have coupon
rates ranging from 3.0% to 7.88%. No individual investment accounts for more
than 10% of the total value of the ship replacement fund.

    The book and market values of the different classes of financial assets in
the ship replacement fund are as follows:

                                       Book value          Market value
                                March 31  December 31  March 31  December 31
    -------------------------------------------------------------------------
                                    2007         2006      2007         2006
                                       $            $         $            $

    Cash and money market          1,951          758     1,943          755
    Canadian bonds
     and debentures                8,978        8,913     9,773        9,720
    Foreign bonds and
     debentures                     416          410       371          367
    Canadian corporate equity
     instruments                   4,293        4,763     9,398       12,848
    Foreign corporate equity
     instruments                   8,286        7,510    10,935        7,739
    -------------------------------------------------------------------------

                                  23,924       22,354    32,420       31,429
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest rate risk

    The Company's exposure to interest rate risk related to its long-term loan
has been mitigated by entering into a swap agreement. The approximate fair
value of this swap as at March 31, 2007, had the Company decided to terminate
the agreement, would have been a liability of $2,049,000 (a liability of
$2,243,000 as at December 31, 2006). Since January 2007, this liability is
recorded as a long-term derivative liability on the Fund's balance sheet.

    Long-term debt

    The carrying value of the Company's term loan approximates its fair value
due to its floating market rate. The carrying values of the obligations under
capital leases approximate their fair values.

    6. Employee future benefit obligations

    Total net benefit costs for the three-month period ended March 31, 2007
were $150,000 ($172,000 for the three-month period ended March 31, 2006).

    7. Distributions to unitholders

    The Fund's policy is to make distributions to unitholders equal to cash
flows from operations before variations in working capital and such reserves
for working capital, dry dock costs and capital expenditures as may be
considered appropriate by the directors of the Company. For the quarter ended
March 31, 2007, the Fund made cash distributions of $2,453,000 ($0.2811 per
unit), same as in 2006.

    8. Comparative figures

    Certain comparative figures have been reclassified to conform with the
presentation used in the current period.
    
    %SEDAR: 00009429EF




For further information:

For further information: Daniel Bélisle, Vice-President, Finance &
Administration, Oceanex Inc. (514) 875-9244, dbelisle@oceanex.com

Organization Profile

OCEANEX INCOME FUND

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890