OFI Income Fund Reports 2007 Year-End Results



    
    -  U.S. construction industry difficulties result in significant decline
       in US business, while Canadian sales are flat
    -  EBITDA of $16.1 million for the year and distributable cash of
       $16.7 million
    -  Goodwill (non-cash) impairment charge of $39.4 million primary cause
       of reported net loss for the year of $21 million
    -  Uncertain outlook for construction industry causes Fund to suspend
       monthly distributions effective this month until conditions improve
    -  Fund taking steps to align sales program, production levels and cost
       structure with market conditions
    -  Conference call March 20, at 8:30 a.m. Eastern
    

    OTTAWA, March 20 /CNW/ - OFI Income Fund (TSX: OFB.UN), a producer of
fibreglass insulation products, today announced its 2007 year-end and
fourth-quarter financial results for the period ended December 31, 2007.
    "2007 was a challenging year in the construction materials sector in
North America. OFI faced a weak market in the US, a market it had
strategically grown to more than 50% of its sales before 2007. Further to
this, we felt the impacts from the ensuing significant price pressures and the
weak US dollar. However, OFI's low-cost structure assisted in maintaining our
business position so that we remain a cost effective supplier of choice. We
believe that during 2007 OFI retained its market share in the US and increased
its share of the Canadian and European markets," said Joseph Skarzenski,
President and Chief Executive Officer.

    
    Fourth-Quarter and Annual 2007 Financial Highlights

    -  Gross profit in the fourth quarter of 2007 was 18.4 percent of sales
       compared with 32.3 percent in the comparable period of 2006. Gross
       profit for the full year in 2007 was $17.8 million, down 44.7 percent
       from $32.2 million in 2006. These changes result from price erosion,
       weaker US dollar and manufacturing inefficiencies caused by lower
       production levels.
    -  The Fund determined that the carrying value assigned to goodwill at
       the time of its initial public offering now exceeds fair value.
       Accordingly, the Fund took a $39.4 million write-down (non-cash) of
       the value of the goodwill.
    -  Excluding the non-cash goodwill impairment charge, the Fund incurred a
       loss in the 2007 fourth quarter of $1 million before non-controlling
       interest and taxes compared to income of $ 2.7 million for the fourth
       quarter of 2006. Excluding the non-cash goodwill impairment charge,
       income before non-controlling interest and taxes was $6.7 million for
       the full year in 2007 compared to $17.4 million in the same period in
       2006.
    -  The Fund's net loss for the 2007 fourth quarter was $23.6 million. In
       the fourth-quarter 2006, the Fund's net income was $1.5 million. The
       net loss for 2007 was $21.0 million, with the loss primarily
       attributable to the non-cash goodwill impairment write-down. For 2006,
       OFI reported net income of $9.7 million.
    -  Earnings before interest, taxes, depreciation, and amortization
       (EBITDA(*)) were $4.0 million in the 2007 fourth quarter, a
       45.4 percent decrease from $7.3 million in the 2006 period. For the
       full year, EBITDA was $16.1 million in 2007, down 46.2 percent from
       $30.0 million in 2006.
    

    Distributions, Distributable Cash ((*)), and Liquidity

    OFI generated $5.4 million and $16.7 million in distributable cash in the
2007 fourth quarter and for the year, respectively. The Fund declared payouts
on its publicly traded units of $2.6 million and $12.6 million for those
respective 2007 periods, representing payout ratios of 46.7 percent and
75.8 percent. No distributions were declared to the holders of the Class B
Subordinated Exchangeable units. Further, the Fund now estimates that the
exchange ratio at September 30, 2009 will be zero rather than the one-to-one
it had been previously estimated for the year ended December 31, 2007 and
prior periods (see note "Class B Subordinated Exchangeable LP Units" below).
If market conditions improve, market share increases or the US dollar
strengthens, future results could vary materially and therefore the position
of the Class B Subordinated Exchangeable units could change.
    "The Fund's gross profit in the first two months of 2008 has shown a
decrease compared to the most recent quarter ended on December 31, 2007. In
light of this performance, continued weakness in the market and sensitivity to
US currency exchange rate, the Board of Trustees decided to suspend
distributions starting with the March 2008 period. We recognize the importance
of regular distributions to our unitholders, but feel that this decision had
to be taken in the current environment to give us more financial flexibility
in meeting this difficult market head-on. The Fund intends to resume its
monthly distributions when market conditions have stabilized and our financial
results improve," Mr. Skarzenski said.

    Outlook

    "We expect the construction industry in the U.S. will continue to be weak
for some time. The Fund might experience a more pronounced impact of seasonal
fluctuations in the Canadian construction industry but the Canadian market
should stay flat overall. The Fund's performance will be affected by external
elements, such as the U.S. general economic market conditions and U.S. foreign
exchange developments," Mr. Skarzenski said. "In this regard we are taking
appropriate action such as securing new customers in North America and
overseas, adjusting production levels of different product lines to meet
expected market demand, reducing headcounts and cutting overhead expenses. We
are still well-positioned for the medium and long term, and ready to execute
on the plans we have in place when the market strengthens" he said.

    Consolidated Financial Statements

    The Fund's 2007 fourth-quarter and 2007 year-end Financial Statements and
Management's Discussion and Analysis have been filed with SEDAR and are also
available at the Fund's website at www.ofigroup.com.

    
                                    Three month period   Twelve month period
                                            ended                 ended
                                   --------------------  --------------------
                                         December 31           December 31
                                         -----------           -----------
                                       2007       2006       2007       2006
                                       ----       ----       ----       ----
                                                (in thousands)
                                                  (unaudited)

    Sales                          $ 17,884   $ 23,260   $ 73,013   $ 94,850
    Cost of sales                    14,597     15,746     55,210     62,654
                                   ------------------------------------------
    Gross profit                      3,287      7,514     17,803     32,196

    Selling, general and
     administrative expenses          3,264      3,329     12,639     13,544
    Income (loss) before taxes and
     non-controlling interest       (40,378)     2,717    (32,739)    17,408
                                   ------------------------------------------
    Net income (Loss)              $(23,575)  $  1,518   $(20,993)  $  9,726
                                   ------------------------------------------
    Normalized EBITDA(*)           $  3,985   $  7,296   $ 16,227   $ 29,989
                                   ------------------------------------------

    Distributable Cash(*)          $  5,410              $ 16,692

    Distributions declared
     on Fund Units                    2,528                12,649
    Distributions declared on
     Class B Subordinated
     Exchangeable LP Units of OFI LP      -                     -
                                   ---------             ---------
    Total Distributions declared   $  2,528              $ 12,649
                                   ---------             ---------
    Payout Ratio                      46.7%                 75.8%
                                   ---------             ---------
    

    Conference Call

    OFI will hold a conference call for analysts and investors to discuss its
financial results on Thursday, March 20 at 8:30 a.m. (Eastern).
    Joseph Skarzenski, President and Chief Executive Officer, and Catherine
Skarzenski, Executive Vice President and Chief Financial Officer, will be
available to answer questions during the call.
    To participate in the conference call, please dial 613-688-0197 or
416-644-3431 or 1-800-587-1893 about five minutes prior to the start of the
call.
    A live audio webcast of the conference call will be available at
www.newswire.ca.
    An archived recording of the call will be available at 416-640-1917 or
1-877-289-8525 (Passcode 21265529 followed by the number sign) from 10:30 a.m.
on March 20 to 11:59 p.m. on March 27, 2008. An archived recording of the
webcast will also be available at OFI's website.

    ((*))Definition of EBITDA, Normalized EBITDA and Other Non-GAAP Measures

    References to EBITDA are to earnings before interest, taxes, amortization
and unrealized foreign exchange (gain)/loss on cash and cash equivalents,
unrealized (gain)/loss on derivative instruments and non-controlling interest.
Because the Fund will distribute its available cash to the maximum extent
possible 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, capital expenditures, non-controlling interest and
taxes. However, EBITDA is not a recognized measure and does not have a
standardized meaning under 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.
    "Normalized EBITDA" is EBITDA after removing the effects of items that
have impacted the operations of the business of the Fund and OFI Holdings and,
in management's view, are not expected to recur in the foreseeable future. In
2007 a normalizing entry was made for a one-time restructuring cost related to
the postponing the start-up of the Tillsonburg fibreglass manufacturing
facility. Normalized EBITDA is not a recognized measure under GAAP and the
qualifications outlined above with respect to EBITDA apply equally to
Normalized EBITDA.
    A reconciliation of net income to EBITDA and Normalized EBITDA is
provided under the headings "Results of Fund's Operations - Summary of
Selected Consolidated Financial Information".
    Management views distributable cash as a cash flow measure. It is a
non-GAAP measure generally used by Canadian income funds as an indicator of
their ability to generate cash that could be used for distributions to
unitholders. As the Fund will distribute its available cash to the maximum
extent possible on an on-going basis (after providing for certain amounts),
management believes that distributable cash is a useful supplemental measure
that may assist prospective investors in assessing an investment in Fund
units. See "Summary of Distributable Cash of the Fund". 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.

    Class B Subordinated Exchangeable LP units

    The Class B Subordinated Exchangeable LP units represent 44.1% of the
total votes that may be cast at meetings of the Unitholders. Any take-over bid
made on the Units must also be made on the same conditions and for the same
consideration on the Class B Subordinated Exchangeable LP units. In addition,
until September 30, 2009, the holders of the B Subordinated Exchangeable LP
units were granted a number of governance rights, including the right to veto
certain transactions such as the sale of all or substantially all of the
assets of OFI LP, under the various agreements governing the relationship
between the Fund, its various subsidiaries and the holders of the B
Subordinated Exchangeable LP units. As a result of these governance rights,
the holders of the B Subordinated Exchangeable LP units may be able to exert
significant influence over matters that are to be determined by votes of
Unitholders.

    Forward-Looking Statements

    Certain statements contained in this discussion 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 and, in some cases, can be
identified by terminology such as "may", "will", "should", "expect", "plan",
"anticipate", "believe", "intend", "estimate", "predict", "potential",
"continue" or other similar expressions concerning matters that are not
historical facts. 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. These
statements are based on certain factors and assumptions including expected
growth, results of operations, performance and business prospects and
opportunities. While management considers these assumptions 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 that could cause actual results to differ
materially from what management currently expects. These factors include
changes in market and competition, governmental or regulatory developments,
general economic conditions, the strength of the construction industry in
North America, the fluctuations in foreign currency, the development of new
products and services, the enhancement of existing products and services, the
introduction of competing products, many of which are beyond the Fund's
control. Therefore, future events and results may vary significantly from what
management currently foresees. For more exhaustive information on these risks
and uncertainties you should refer to the section entitled "Risks and
Uncertainties" presented later in this document as well as in the Annual
Information Form for the year ended December 31, 2007 dated March 19, 2008.
Forward-looking information contained in this discussion is based on
management's current estimates, expectations and projections, which management
believes are reasonable as of the current date. 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 except as
required under applicable securities legislation.

    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. Additional information is available at
www.sedar.com or the company's website at www.ofigroup.com.


    
    OFI Income Fund

                         CONSOLIDATED BALANCE SHEETS
                     (in thousands of Canadian dollars)
                                  (audited)

                                                   December 31,  December 31,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                            6,930         9,188
    Restricted cash                                          -            82
    Accounts receivable                                  6,346         9,769
    Investment tax credits receivable                       98             -
    Inventories                                          8,384         7,975
    Prepaid expenses                                       337           425
    Derivative financial instruments                       742             -
    -------------------------------------------------------------------------
    Total current assets                                22,837        27,439
    -------------------------------------------------------------------------
    Long-term
    Property, plant and equipment                       54,186        53,961
    Other assets                                         3,757           787
    Intangible assets                                   55,979        62,944
    Goodwill                                            57,183        96,580
    -------------------------------------------------------------------------
    Total long-term assets                             171,105       214,272
    -------------------------------------------------------------------------
    Total assets                                       193,942       241,711
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current
    Accounts payable                                     3,474         3,548
    Accrued liabilities                                  3,174         5,464
    Distributions payable to Fund unitholders              843         1,350
    Distributions payable to Class B unitholders             -         3,200
    Derivative financial instruments                       110         1,502
    -------------------------------------------------------------------------
    Total current liabilities                            7,601        15,064
    -------------------------------------------------------------------------

    Long-term debt                                      39,525        34,443
    Future income taxes                                  3,554             -
    -------------------------------------------------------------------------
    Total long-term liabilities                         43,079        34,443
    -------------------------------------------------------------------------

    Non-controlling interest                            62,035        77,335
    -------------------------------------------------------------------------

    Commitments and contingencies

    UNITHOLDERS' EQUITY
    Fund units                                         123,370       123,370
    Deficit                                            (42,143)       (8,501)
    -------------------------------------------------------------------------
    Total unitholders' equity                           81,227       114,869
    -------------------------------------------------------------------------
    Total liabilities and unitholders' equity          193,942       241,711
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    OFI Income Fund

                CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
                         COMPREHENSIVE INCOME (LOSS)
      (in thousands of Canadian dollars and units, except per unit amounts)
                                  (audited)

                                                   December 31,  December 31,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------

    Sales                                               73,013        94,850
    Cost of sales                                       55,210        62,654
    -------------------------------------------------------------------------
    Gross profit                                        17,803        32,196
    -------------------------------------------------------------------------

    OTHER INCOME & EXPENSES
    Selling, general and administrative                 12,639        13,544
    Research and development                               738           150
    Foreign exchange gain                               (1,315)         (840)
    Amortization of deferred financing charges             161           174
    Interest on long-term debt                           1,285           686
    Changes in unrealized derivative
     financial instruments                              (2,134)        1,532
    Interest income                                       (229)         (458)
    Goodwill impairment charge                          39,397             -
    -------------------------------------------------------------------------
    Income (loss) before taxes and
     non-controlling interest                          (32,739)       17,408
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Future income taxes                                 (3,554)            -
    -------------------------------------------------------------------------
    Income (loss) before non-controlling interest      (36,293)       17,408
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Non-controlling interest                           (15,300)        7,682
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income (loss) and comprehensive
     income (loss) for the year                        (20,993)        9,726
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income (loss) per unit
    Basic                                               (1.620)        0.750
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted                                             (1.620)        0.750
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number of units outstanding
    Basic                                               12,963        12,963
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted (note 18)                                   12,963        23,202
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    OFI Income Fund

                    CONSOLIDATED STATEMENTS OF CHANGES IN
                             UNITHOLDERS' EQUITY
                (in thousands of Canadian dollars and units)
                                  (audited)

                                         Units    Amount   Deficit     Total
                                           No.         $         $         $
    -------------------------------------------------------------------------

    Unitholders' Equity
     December 31, 2005                  12,963   123,370    (2,402)  120,968
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income attributable to Fund units                    9,726     9,726
    Distributions declared on Fund units                   (15,825)  (15,825)
    -------------------------------------------------------------------------
    Unitholders' Equity
     December 31, 2006                  12,963   123,370    (8,501)  114,869
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss attributable to Fund units                    (20,993)  (20,993)
    Distributions declared on Fund units                   (12,649)  (12,649)
    -------------------------------------------------------------------------
    Unitholders' Equity
     December 31, 2007                  12,963   123,370   (42,143)   81,227
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    OFI Income Fund

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                     (in thousands of Canadian dollars)
                                  (audited)

                                                   December 31,  December 31,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income (loss) for the year                     (20,993)        9,726
    Add (deduct) items not involving cash:
    Non-controlling interest share of income (loss)    (15,300)        7,682
    Amortization of property, plant and equipment        3,254         3,548
    Amortization of other assets                           198             -
    Amortization of deferred financing costs               161           174
    Amortization of intangible assets                    6,965         6,965
    Loss on disposal of equipment                          166             -
    Future income taxes                                  3,554             -
    Goodwill impairment charge                          39,397             -
    Changes in unrealized derivative
     financial instruments                              (2,134)        1,532
    Unrealized foreign exchange (gain) loss
     on cash and cash equivalents                          (22)          135
    -------------------------------------------------------------------------
                                                        15,246        29,762
    Net change in non-cash working capital
     balances related to operations                      2,648        (1,799)
    -------------------------------------------------------------------------
    Cash provided by operating activities               17,894        27,963
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Purchase of property, plant and equipment           (5,649)      (19,406)
    Additions to other assets                           (3,168)         (787)
    Change in cash restricted for payment on
     interest on non-revolving construction loan            82           841
    -------------------------------------------------------------------------
    Cash used in investing activities                   (8,735)      (19,352)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Issuance of debt                                     5,010        15,791
    Debt amendment costs                                   (92)            -
    Cash distributions paid to Fund and Class B units  (16,357)      (21,847)
    -------------------------------------------------------------------------
    Cash used in financing activities                  (11,439)       (6,056)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Unrealized foreign exchange gain (loss)
     on cash and cash equivalents                           22          (135)

    Net (decrease) increase in cash
     and cash equivalents                               (2,258)        2,420
    Cash and cash equivalents, beginning of year         9,188         6,768
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year               6,930         9,188
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental disclosures of cash flow information:
      Interest paid                                      2,365         1,527
      Interest received                                    229           458
      Income taxes paid                                      -             -
    -------------------------------------------------------------------------
    





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

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