OFI Income Fund Postponing Start-Up of New Tillsonburg Plant and Provides Warning for Q1



    
    -  Makes "prudent" decision to delay bringing additional production on
       stream while North American demand for insulation remains uncertain
    -  Enables OFI to focus on maximizing operating efficiencies at its
       Ottawa and Redcliff plants
    -  Will take a one-time charge of less than $100,000 in the second
       quarter of 2007 for expenses related to delaying Tillsonburg
       production
    -  Expects to maintain current level of distributions to holders of
       publicly traded units
    -  Sales, gross profit, net income and EBITDA for the first quarter will
       be negatively impacted by weaker market conditions
    

    OTTAWA, April 25 /CNW/ - OFI Income Fund (TSX: OFB.UN), a manufacturer of
fibreglass insulation products, today announced that it is delaying the
planned start-up of its new Tillsonburg, Ontario fibreglass insulation
manufacturing plant until demand improves in North American markets.
    On March 7, 2007, when the Fund announced its 2006 year-end financial
results, it stated that the start-up of the new Tillsonburg plant was delayed
because of technical issues and that for the first time, in December, the Fund
had experienced signs of softening in demand resulting from the widely
reported downturn in construction in various regions of North America. "The
softening in demand continued through the first quarter and it is now
widespread and is also evident in the non-residential markets. We also have
begun to see some downward pressure on pricing in some regions, particularly
in the Eastern United States and Eastern Canada," said Joseph Skarzenski,
President and Chief Executive Officer. "We have had some success in adding new
customers in North America, as well as in Europe, however this is a slow
process and difficult to predict.
    "Accordingly, in view of the uncertainty about how long these more
challenging market conditions may continue and despite the resolution of our
technical issues" he said, "we have determined that it is prudent for OFI to
delay putting the Tillsonburg plant into production until demand warrants it.
We believe that it will be late in the year before orders justify our
increasing manufacturing capacity. The restarting of the Tillsonburg facility
is forecast to take approximately two months.
    "We also made this decision based on our analysis that it will be of
greater benefit to OFI and its unitholders, as well as to our customers, to
focus on maximizing the operating efficiencies of our two established
fibreglass manufacturing plants in Ottawa, Ontario and Redcliff, Alberta," Mr.
Skarzenski said.
    As the result of the decision, OFI said that it expects to take a
one-time charge in the second quarter of less than $100,000 (about $0.008 per
unit) for expenses related to the delay in production start-up of the
Tillsonburg plant.
    "In the first quarter, as we have previously reported," Mr. Skarzenski
said, "we expect that the Fund's monthly distributions payout will exceed
distributable cash((*)). Preliminary results indicate that the first-quarter
distributions have amounted to approximately 165 percent of distributable
cash, taking into account approximately $2 million of capital expenditures
(excluding Tillsonburg).
    The Fund's sales, gross profit, net income and EBITDA for the first
quarter were negatively impacted by market conditions. However, the Fund's
financial reserves accumulated since its inception, which amounted to $9.2 
million at the 2006 year-end, enabled the Fund to pay out its distributions.
Furthermore, assuming market demand continues at current levels, the Fund
expects to be able to maintain through 2007 the monthly distributions at the
current level for the holders of its publicly traded units and to proceed with
its commitment made at the time of its initial public offering in September
2005 to increase distributions later this year by 4 percent.
    In 2007, while monthly distributions paid to the public were $0.104 per
unit, equivalent to $1.25 per unit annually, Class B Subordinated Exchangeable
unitholders have not been paid any distributions for 2007.

    ((*)) Non-GAAP Measures

    Management views Distributable Cash as an operating performance measure.
It is a non-GAAP measure generally used by Canadian income funds as an
indicator of financial performance. As the Fund will distribute its available
cash to the maximum extent possible on an on-going basis (after providing for
certain amounts) and since EBITDA and Normalized EBITDA are metrics used by
many investors to compare issuers (and hence may be a factor for prospective
investors) on the basis of the ability to generate cash from operations,
management believes that, in addition to net income or loss, EBITDA and
Normalized EBITDA are useful supplemental measures from which to make
adjustments to determine Distributable Cash. References to EBITDA are to
earnings before interest, taxes, depreciation, amortization, unrealized
gain/loss on derivative instruments, non-controlling interest and unrealized
foreign exchange (gain)/loss on cash and cash equivalents.
    Consequently, management believes that Distributable Cash is a useful
supplemental measure that may assist prospective investors in assessing an
investment in Fund units. Investors are cautioned that Distributable Cash
should not be construed as an alternative to net income or loss determined in
accordance with GAAP as an indicator of the Fund's performance or to cash
flows from operating, investing and financing activities as a measure of
liquidity and cash flows. The method of calculating the Fund's Distributable
Cash may differ from similar computations, as reported by other issuers and
accordingly, may not be comparable to Distributable Cash as reported by other
issuers.
    Because the Fund will distribute all of its cash on an ongoing basis
(after providing for certain amounts), management believes that in addition to
net income or loss, EBITDA is a useful supplemental measure of cash available
for distribution prior to debt service, changes in working capital and capital
expenditures. However, EBITDA is not a recognized measure and does not have a
standardized meaning under generally accepted accounting principles (GAAP).
Investors are cautioned that EBITDA should not be construed as an alternative
to net income (as determined in accordance with GAAP) as an indicator of the
Fund's performance, or as an alternative to cash flows from operating,
investing and financing activities as a measure of the Fund's liquidity and
cash flows. The Fund's method of calculating EBITDA may differ from the
methods used by other issuers and accordingly, the Fund's EBITDA may not be
comparable to similar measures used by other issuers.

    Forward-Looking Statements

    Certain statements contained in this news release constitute forward-
looking information within the meaning of securities laws. Forward-looking
information may relate to the Fund's future outlook and anticipated events,
the Fund's business, its operations, its financial performance, its financial
condition or its results. Particularly, statements regarding the Fund's future
operating results and economic performance, the Fund's objectives and
strategies to achieve those objectives, are forward-looking statements. While
these statements are based on certain factors and assumptions that management
considers to be reasonable based on information currently available to it,
they may prove to be incorrect. Forward looking-information is also subject to
certain factors, including risks and uncertainties described in our Annual
Information Form, many of which are beyond management's control, that could
cause actual results to differ materially from what management currently
expects. Therefore, future events and results may vary significantly from what
management currently foresees. You should not place undue importance on
forward-looking information and should not rely upon this information as of
any other date. While the Fund may elect to, it is under no obligation (and
expressly disclaims any such obligation) and does not undertake to update or
alter this information at any particular time.

    About OFI Income Fund

    Since 1980, OFI has been manufacturing and distributing a broad range of
fibreglass insulation products, including fibreglass ceiling tiles, designed
for thermal and acoustical applications and destined for the Canadian, U.S.,
and international residential and non-residential/industrial markets. OFI
operates under a low-cost structure and has been profitable for the past 23
years. Additional information is available at www.sedar.com or the company's
website at www.ofigroup.com.

    %SEDAR: 00022462E




For further information:

For further information: Catherine Skarzenski, Executive Vice President
and Chief Financial Officer, Tel. (613) 247-7116, Fax (613) 736-7281, e-mail
investors@ofiincomefund.com

Organization Profile

OFI 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