Oceanex reports fourth quarter results



    MONTREAL, March 1 /CNW Telbec/ - Oceanex Income Fund (TSX: OAX.UN) today
announced operating income of $2.7 million for the fourth quarter of 2006,
after a non-cash loss of $0.8 million on disposal of the Cicero, compared to
$2.4 million for the same period last year. Net income for the quarter was
$2.6 million or $0.30 per unit compared to last year's $2.5 million, or
$0.29 per unit.
    For the year ended December 31, 2006, operating income was $8.3 million
compared to $8.4 million in 2005. Net income was $8.8 million or $1.01 per
unit, compared to $9.1 million or $1.04 per unit in 2005.

    FOURTH QUARTER RESULTS

    Volume for the quarter was 21,781 TEUs (twenty-foot equivalent unit),
324 TEUs(1) or 1.5% more than the same period last year in spite of two fewer
sailings in Q4 2006. Volume to Newfoundland, which increased 3.8%, was
partially offset by a reduction of 8.7% in backhaul shipments, a reflection of
reduced activity in the newsprint and fisheries industries. In the quarter, we
also carried 3,453 motor vehicles, 231 units or 6.3% less than in 2005 due to
the Sanderling dry dock. Revenue was $32.0 million, an increase of 1.3% over
fourth quarter 2005 revenue of $31.6 million, which included an insurance
recovery for $1.2 million.
    Operating expenses for the quarter were $24.6 million, a reduction of
$0.9 million or 3.5% compared to 2005. Vessel costs were lower due to the
reduced fleet size from four to three vessels following the sale of the Cicero
in December 2006 and lower dry dock provisions compared to fourth quarter 2005
which included $1.2 million for special repairs to the Cabot. Inland costs
were higher due to the utilization of substitute road transport to reposition
empty containers and deliver time sensitive cargo during the Sanderling dry
dock. Selling and administrative expenses were $2.3 million, an increase of
$0.3 million compared to 2005 due to higher legal and professional fees and
costs related to employment terminations.
    Cash flow from operations was $4.1 million compared to $8.7 million in
2005. The reimbursement, in the fourth quarter of 2005, of $3.8 million in
recoverable sales taxes related to the purchase of the Oceanex Avalon is
reflected in changes in non-cash working capital items and explains most of
the variance. Net capital expenditures were $3.7 million including a new crane
in St. John's ordered in third quarter 2006 and financed with a five-year,
$4.2 million capital lease.
    As previously announced, the Company terminated its mid-week sailing in
Halifax in November. In December, the Cicero was sold for $4.1 million which
resulted in a loss on disposal of $1.9 million; of this amount, $1.1 million
had been recorded as an impairment loss in the third quarter 2006.
    "During the quarter, in spite of two fewer sailings and the loss of the
use of a crane in St. John's for five weeks, volume increased by 1.5% compared
to 2005. Following our decision to terminate the mid-week sailing in Halifax,
we decided to sell the Cicero. The reduction of our fleet to three vessels is
expected to deliver cost savings and should not have a material impact on
volume", said Peter Henrico, President and Chief Executive Officer of Oceanex.

    2006 RESULTS

    Volume for the year was 86,407 TEUs, 0.3% more than 2005 volume of
86,135 TEUs(1). Volume to Newfoundland was up 0.7%: Montreal, with two
additional sailings, increased 1.5% whereas Halifax, with eight fewer
sailings, was down 0.7%. Return traffic was lower on both services for an
overall reduction of 1.3%. Motor vehicle shipments from Halifax increased by
842 units or 4.5% to 19,585 units compared to 2005.
    Revenue for the year was $124.3 million, an increase of $5.8 million or
4.9% compared to 2005 revenue of $118.5 million. The increase was attributable
to higher freight rates, inclusive of fuel surcharge, and an increased
proportion of higher revenue Montreal volume. Revenue for 2006 included an
insurance recovery of $0.5 million while the Cabot was in dry dock; in 2005,
$1.2 million was included in revenue for a similar insurance recovery related
to the Sanderling.
    Operating expenses were $99.2 million, $2.4 million or 2.4% higher than
2005. Higher vessel costs were due to operating a four-vessel fleet for eleven
months in 2006 compared to seven months in 2005, and increased insurance and
fuel costs. Higher vessel operating costs were, however, partially offset by
the reversal of a $1.4 million dry dock provision due to the sale of the
Cicero and an insurance recovery of $0.75 million for repairs that had been
included in the 2005 additional Cabot dry dock costs of $4 million. Increased
equipment maintenance, container refurbishment and additional inland costs
incurred for the shipment of time sensitive cargo by road during dry dock
periods also contributed to the increase in operating expenses.
    Selling and administrative expenses were $8.1 million, $0.8 million or
10.3% higher than 2005. The increase was due to higher professional fees,
corporate expenses and severance costs due to employment terminations.
Amortization of capital assets and deferred financing fees was $6.9 million
compared to $6.0 million in 2005; the increase is mostly due to the
acquisition of the Avalon in May 2005 and the amortization of deferred
financing fees related to the vessel loan.
    The $1.9 million loss on disposal of vessel resulted from the sale of the
Cicero in December 2006 for net proceeds of $4.1 million.
    Income from the ship replacement fund was $2.3 million $0.1 million
higher than 2005. Interest on the debt was $3.2 million, made up of interest
on the vessel loan which started on May 4 2005 and two capital leases entered
into in October 2005 and December 2006. In 2005, interest expense was
$2.0 million.
    After income tax recovery of $1.4 million ($0.5 million in 2005), net
income was $8.8 million ($9.1 million in 2005).
    Cash flow from operations was $8.6 million for the year ended December
31, 2006 compared to $15.1 million in 2005. Lower cash flow from operations in
2006 was mainly attributable to changes in non-cash working capital items and
in particular the payment in 2006 of 2005 dry dock accruals. Debt repayments
were $3.2 million compared to $1.4 million in 2005. Net capital expenditures
were $4.8 million ($5.7 million in 2005) including the purchase of a crane
which was financed with a $4.2 million, five-year capital lease on December
1, 2006. In October 2005, the purchase of 350 containers was financed with a
$5 million, five-year capital lease.

    DISTRIBUTIONS

    The Fund made distributions to unitholders of $9.8 million ($112.44 per
100 trust units) in 2006 and 2005. In accordance with the Fund's policy, and
as deemed appropriate by the Board of Directors of the Company, these
distributions were made after setting aside reserves for working capital and
sustaining capital expenditures. The Fund expects distributions to continue at
the same level.

    OUTLOOK

    The projected 2006 expansion at our St. John's terminal was not completed
as scheduled, however work is progressing and the additional land should be
ready by the summer of 2007. This expansion will improve productivity and
increase container storage space at a lower cost than other alternatives
considered.
    In 2007, no vessel dry docks are scheduled. We expect our next dry docks
to take place in 2008 at which time we will charter a replacement vessel for a
three to four month period to maintain regular schedule while consecutive
vessel dry docks take place.
    With 2007 economic growth for Newfoundland and Labrador currently
forecast at over 4 %, Oceanex has the organization and infrastructure to meet
anticipated market growth.
    "We look forward to a year without interruption as we have not scheduled
any vessel dry dock in 2007 and, with a reduced fleet of three vessels, we
should benefit from reduced vessel operating costs. We have also recently
ordered 75 new 53-foot containers for delivery in April that should enable us
to continue the ongoing conversion to 53-foot high cube containers in
anticipation of working closely with the road transport sector which we expect
to be a major source of growth in 2007", said Peter Henrico.
    On October 31, 2006, the Federal Minister of Finance announced proposals
relating to the taxation of distributions from business income and certain
other trusts. The effect of the proposals on Oceanex is still not yet fully
known and we will be continuing to closely monitor progress of the draft
legislation through 2007.

    FORWARD LOOKING STATEMENTS

    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; strikes or lock-outs involving unionized employees;
government regulation; the Company's ability to adapt to changing market
conditions; insurance recoveries; 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.

    ------------------------
    (1) Beginning with Q1 2006, container volume includes revenue -
    generating empty containers carried on behalf of third parties. 2005
    volume has been adjusted accordingly.

    
                             OCEANEX INCOME FUND
                      CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 2006


    Notice:  The attached consolidated financial statements as at
    -------  December 31, 2006 and for the three and twelve-month periods
             ended December 31, 2006 and 2005, 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.

    March 1, 2007


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

                                                           Dec. 31   Dec. 31
    -------------------------------------------------------------------------
                                                              2006      2005

    ASSETS                                                       $         $

    Current assets
      Cash and cash equivalents                              7,928     9,007
      Accounts receivable (note 3)                          13,502    13,385
      Prepaid expenses, supplies and other
       current assets                                        1,816     2,908
      Income taxes receivable                                1,492       280
    -------------------------------------------------------------------------
                                                            24,738    25,580

    Capital assets                                          85,242    92,675

    Deferred financing fees                                    921     1,117
      (net of accumulated amortization
       of $276 ; 2005: $80)

    Ship replacement fund, at cost (note 5)                 22,354    20,036
      (market value: $31,429 ; 2005: $26,944)

    Goodwill                                                18,740    18,740
    -------------------------------------------------------------------------
                                                           151,995   158,148
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY

    Current liabilities

      Trade accounts payable and accrued
       liabilities                                           6,716     8,142
      Current portion of dry dock accruals
       and other current liabilities                         3,833    10,332
      Distributions payable to unitholders                     817       817
      Current portion of long-term debt                      3,949     3,155
    -------------------------------------------------------------------------
                                                            15,315    22,446

    Dry dock accruals                                        1,335        52

    Long-term debt                                          45,621    45,479

    Employee future benefit obligations (note 6)               741       300

    Future income tax liability (note 4)                     9,042     9,581

    Unitholders' equity
      Trust units                                           80,662    80,662
      Deficit                                                 (721)     (372)
    -------------------------------------------------------------------------
                                                            79,941    80,290
    -------------------------------------------------------------------------
                                                           151,995   158,148
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes


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

                                             Three-month        Twelve-month
                                            period ended        period ended
                                                 Dec. 31             Dec. 31
    -------------------------------------------------------------------------
                                          2006      2005      2006      2005

                                             $         $         $         $

    Revenue                             32,049    31,632   124,279   118,491

    Expenses
    Operating                           24,581    25,479    99,151    96,791
    Selling and administrative           2,250     2,000     8,085     7,330
    Amortization of capital assets       1,712     1,679     6,657     5,895
    Amortization of deferred financing
     fees                                   41        30       196        80
    Loss on disposal of vessel (note 2)    764         -     1,866         -
    -------------------------------------------------------------------------

    Operating income                     2,701     2,444     8,324     8,395


    Income from ship replacement fund      770       904     2,318     2,180
    Interest on long-term debt            (801)     (833)   (3,216)   (2,006)
    -------------------------------------------------------------------------

    Income before income tax
     expense (recovery)                  2,670     2,515     7,426     8,569

    Income tax expense
     (recovery) (note 4)                    52        (6)   (1,396)     (508)
    -------------------------------------------------------------------------

    Net income                           2,618     2,521     8,822     9,077
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per trust unit               0.30      0.29      1.01      1.04
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes


    OCEANEX INCOME FUND
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited - In thousands of dollars)

                                             Three-month        Twelve-month
                                            period ended        period ended
                                                 Dec. 31             Dec. 31
    -------------------------------------------------------------------------
                                          2006      2005      2006      2005

    OPERATING ACTIVITIES                     $         $         $         $

      Net income                         2,618     2,521     8,822     9,077
      Items not affecting cash:
        Amortization of capital assets   1,712     1,679     6,657     5,895
        Amortization of deferred
         financing fees                     41        30       196        80
        Employee future benefit
         obligations                        62       193       441       235
        Future income taxes                 33      (549)     (539)     (486)
        Gain on disposal of capital
         assets                            (55)      (38)     (333)     (202)
        Loss on disposal of vessel
         (note 2)                          764         -     1,866         -
        Re-investment of income from
         the ship replacement fund        (770)     (904)   (2,318)   (2,180)
      Refundable income taxes              (17)     (349)      639       178
      Change in dry dock accruals and
       other current liabilities        (1,894)     (197)   (5,216)    5,483
      Change in other non-cash working
       capital items related to
       operating activities              1,653     6,285    (1,663)   (3,004)
    -------------------------------------------------------------------------
      Cash flows related to operating
       activities                        4,147     8,671    (8,552)   15,076
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES

      Increase in long-term debt         4,171     1,595     4,171    50,000
      Increase in deferred financing
       fees                                  -         -         -      (621)
      Repayment of long-term debt         (874)     (804)   (3,235)   (1,366)
      Distributions to unitholders      (2,452)   (2,452)   (9,810)   (9,810)
    -------------------------------------------------------------------------
      Cash flows related to financing
       activities                          845    (1,661)   (8,874)   38,203
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES

      Purchase of capital assets        (3,759)     (278)   (5,168)   (5,949)
      Proceeds on disposal of vessel
       (note 2)                          4,074         -     4,074         -
      Proceeds on disposal of other
       capital assets                       55        38       337       280
      Purchase of new vessel                 -       (11)        -   (44,316)
    -------------------------------------------------------------------------
      Cash flows related to investing
       activities                          370      (251)     (757)  (49,985)
    -------------------------------------------------------------------------
      Net change in cash and cash
       equivalents during the period     5,362     6,759    (1,079)    3,294

      Cash and cash equivalents
       - beginning of period             2,566     2,248     9,007     5,713
    -------------------------------------------------------------------------

      Cash and cash equivalents
       - end of period                   7,928     9,007     7,928     9,007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes


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

                                             Three-month        Twelve-month
                                            period ended        period ended
                                                 Dec. 31             Dec. 31
    -------------------------------------------------------------------------
                                          2006      2005      2006      2005

                                             $         $         $         $
    Retained earnings (deficit),
     beginning of period                  (870)      (92)     (372)      183

      Net income                         2,618     2,521     8,822     9,077
      Refundable income taxes              (17)     (349)      639       178
      Distributions to unitholders      (2,452)   (2,452)   (9,810)   (9,810)
    -------------------------------------------------------------------------

    Deficit, end of period                (721)     (372)     (721)     (372)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes


    OCEANEX INCOME FUND
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For the twelve-month period ended December 31, 2006
    (Unaudited - All tabular figures are in thousands of dollars)

    1. Summary of significant accounting policies

    These unaudited consolidated financial statements as at December 31, 2006
and for the three and twelve month periods ended December 31, 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, 2005.
    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. Loss on disposal of vessel

    In November 2006, the Company cancelled the Halifax mid-week service and
withdrew a vessel from service. The dry dock accrual of $1,400,000 was
reversed and the company disposed of the vessel in December 2006. The net
proceeds from disposition totalled $4,074,000 resulting in a loss on
disposition of $1,866,000, of which $1,102,000 had been recorded as an
impairment charge in the third quarter results of 2006.

    3. Accounts receivable
                                                           Dec. 31   Dec. 31
                                                              2006      2005
    -------------------------------------------------------------------------
                                                                 $         $

    Trade receivables                                       13,048    10,652
    Insurance claims                                           313     2,275
    Other                                                      141       458
    -------------------------------------------------------------------------
                                                            13,502    13,385
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The insurance claims amount of $313,000 is mainly for a claim under the
hull and machinery insurance policy for vessel repairs. The December 31, 2005
insurance claims receivable consisted of $1,075,000 of costs incurred for
repairs which were recovered under the Company's hull and machinery insurance
policies, and a claim for loss of revenue of $1,200,000 included in revenue.
All 2005 amounts were recovered in 2006.
    A claim for loss of revenue of $500,000 was included in revenue in 2006
and was fully collected by year end. All insurance claims receivable are
recorded based on management's best estimates of the actual amount
recoverable.

    4. Income taxes

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

                                             Three-month        Twelve-month
                                            period ended        period ended
                                                 Dec. 31             Dec. 31
    -------------------------------------------------------------------------
                                          2006      2005      2006      2005
                                             $         $         $         $

    Income before income tax
     expense (recovery)                  2,670     2,515     7,426     8,569
    -------------------------------------------------------------------------

    Combined income tax expense at
     statutory rates                       939       889     2,635     3,030
      - 35.48% (2005 - 35.36%)
    Impact of interest expense of
     the Company paid to the Fund,
     eliminated on consolidation          (804)     (813)   (3,263)   (3,252)
    Large corporations tax                   -        26         -       144
    Tax rate differential on
     passive income                        (15)     (151)      301        56
    Non-taxable portion of capital
     gains                                (118)     (161)     (265)     (299)
    Dividends from Canadian corporations   (18)       (6)      (63)      (44)
    Impact of federal income tax rate
     changes                                18         -      (614)        -
    Other                                   50       210      (127)     (143)
    -------------------------------------------------------------------------
                                            52        (6)   (1,396)     (508)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Represented by:
    Current taxes (recovery)                19       543      (857)      (22)
    Future income taxes (recovery)          33      (549)     (539)     (486)
    -------------------------------------------------------------------------
                                            52        (6)   (1,396)     (508)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The tax effect of significant temporary differences is as follows:

                                                           Dec. 31   Dec. 31
    -------------------------------------------------------------------------
                                                              2006      2005
                                                                 $         $

    Capital assets                                           8,599     9,171
    Goodwill                                                 1,126     1,118
    Non-capital loss carryforwards                            (714)        -
    Write-down of investment                                  (144)     (138)
    Financing fees                                             146       158
    Timing of accruals                                          29      (728)
    -------------------------------------------------------------------------
    Net future income tax liability                          9,042     9,581
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at December 31, 2006, the Company had available non-capital loss
carryforwards totalling $2,124,000 which expire in 2026 and can be used to
reduce future years' taxable income. The tax benefit from these losses
amounted to approximately $714,000 as at December 31, 2006, and has been
recorded by the Company.

    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
                                       Dec. 31   Dec. 31   Dec. 31   Dec. 31
    -------------------------------------------------------------------------
                                          2006      2005      2006      2005
                                             $         $         $         $

    Cash and money market                  758     1,557       755     1,557
    Canadian bonds and debentures        8,913     8,251     9,720     9,283
    Foreign bonds and debentures           410       407       367       365
    Canadian corporate equity
     instruments                         4,763     4,908    12,848     9,401
    Foreign corporate equity
     instruments                         7,510     4,913     7,739     6,338
    -------------------------------------------------------------------------
                                        22,354    20,036    31,429    26,944
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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 December 31, 2006, had the Company decided to
terminate the agreement, would have been a liability of $2,243,000 (a
liability of $2,913,000 as at December 31, 2005).

    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 and twelve-month periods ended
December 31, 2006 were $197,000 and $717,000 respectively ($306,000 and
$483,000 for 2005).

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

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