OFI Income Fund Reports Year-End 2006 Results



    
    -  Normalized EBITDA((*)) increases 27.2% for 2006 on 10.9% gain in sales
    -  Fourth-quarter EBITDA increases 8.8%; sales decline 4.0% from 2005
       period
    -  Fourth-quarter 2006 affected by loss of significant customer
       (acquired),
    -  Some softening in insulation market;
    -  OFI adding new residential, non-residential/industrial, and
       international customers
    -  New Tillsonburg plant started up; full production expected in second
       half of 2007
    -  Expects to maintain current distributions to holders of publicly
       traded units
    -  Conference call Thursday, March 8 at 8:30 a.m. Eastern
    

    OTTAWA, March 7 /CNW/ - OFI Income Fund (TSX: OFB.UN), a producer of
fibreglass insulation products, today announced its 2006 fourth-quarter and
year-end financial results for the period ended December 31, 2006.
    Sales for 2006 were $94.9 million, up 10.9 percent from $85.5 million in
2005 recorded by OFI Holdings Ltd. and the Fund. Fourth-quarter 2006 sales
were $23.3 million, a 4.0 percent decline from $24.2 million in the 2005
period.
    "Overall, we performed well in 2006, benefiting, in particular, from
increased production capacity as well as stronger pricing in our markets,"
said Joseph Skarzenski, President and Chief Executive Officer.
    "However," he continued, "fourth-quarter sales were affected by the loss
of one of our four largest customers, which accounted for nearly 13 percent of
our 2006 sales, following its acquisition at the end of November by a
competing insulation manufacturer. We also experienced the first softening in
demand in December resulting from the widely reported downturn in construction
in various regions of North America.
    "We have been able to respond, add customers, and shift some sales
efforts to the non-residential/industrial and international markets that
capacity constraints previously limited our ability to serve. While we are
pleased with our progress, the results likely will take some months to be
fully evident in our sales levels," Mr. Skarzenski said.

    
    Financial Highlights

    -  Gross profit was $32.2 million in 2006 and $7.5 million in the fourth
       quarter (margins of 33.9 percent and 32.3 percent, respectively),
       compared with $26.0 million and $7.7 million in the respective 2005
       periods (margins of 30.4 percent and 32.0 percent).
    -  Selling, general, and administrative expenses were $13.5 million in
       2006 and $3.3 million in the fourth quarter, compared with
       $13.3 million and $3.4 million in the respective 2005 periods.
    -  Normalized EBITDA was $30.0 million in 2006, a 27.2 percent increase
       from normalized EBITDA of $23.6 million in 2005. For the fourth
       quarter, EBITDA increased 8.8 percent in the 2006 period to
       $7.3 million from $6.7 million a year earlier.
    

    Tillsonburg Plant

    "We commenced startup procedures at our new Tillsonburg, Ontario plant on
November 22 with the heating up of its melter and melting of raw materials and
glass. We have signed a collective labour agreement and the training of our
new employees is underway. When in full production, this plant will increase
our capacity by more than 55 percent," Mr. Skarzenski said.
    "The product we are producing is meeting our quality standards and has
begun to generate sales in 2007. However, as we tested the plant's new
equipment in a continuous-processing environment, we identified several
weaknesses affecting our ability to produce at full volume. While we have
already addressed many of these matters, some issues remain and are delaying
our achieving full production. We currently believe that fully remedying the
issues identified will delay reaching full production from mid-2007, as had
been intended, into the second half of the year. This will affect the Fund's
profitability as we ramp up production," he said.

    Distributable Cash((*))

    OFI generated $27.7 million in distributable cash in 2006 compared with
payouts declared on the Fund's publicly traded units and Class B Subordinated
Exchangeable units of $24.1 million, a payout ratio of 87.2 percent. In the
2006 fourth quarter, distributable cash amounted to $6.5 million, with
declared payouts on the publicly traded and Class B Subordinated Exchangeable
units of $7.3 million, a payout ratio of 112.0 percent.
    "We expect that as we bring the Tillsonburg plant into full production,
it is likely that our payouts will exceed distributable cash. We also expect
that the reserves that the Fund accumulated since its inception will be
adequate during this temporary situation to enable us to maintain the current
distribution level for our public unitholders. Our 2006 year-end cash balance
was $9.2 million, up substantially from $6.8 million at the end of 2005," said
Mr. Skarzenski.
    Since August 2006, the Fund's monthly cash distributions on the publicly
traded Fund units and on the subordinated Class B units has been $0.104 per
unit, equivalent to $1.25 per unit annually.

    Consolidated Financial Statements

    The Fund's 2006 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.

    
    Selected Financial and Operating Information for the three month and
                         Twelve months periods ended
                         December 31, 2006 and 2005
    


    The following summary of selected consolidated financial information has
been derived from the unaudited consolidated interim financial statements of
the Fund for the fourth quarter and year end periods ended December 31, 2006,
with comparable combined unaudited figures for the corresponding periods ended
December 31, 2005 for OFI Holdings and the Fund.


    
                                           Three month          Twelve month
                                          period ended          period ended
                                           December 31           December 31
                                           -----------           -----------
                                       2006       2005       2006       2005
                                       ----       ----       ----       ----
                                                  (in thousands)
                                                    (unaudited)

    Sales                          $ 23,260   $ 24,225   $ 94,850   $ 85,495
    Cost of sales                    15,746     16,479     62,654     59,514
                                   ------------------------------------------
    Gross profit                      7,514      7,746     32,196     25,981

    Selling, general and
     administrative expenses          3,329      3,373     13,544     13,322
    Income before non-controlling
     interest and taxes(1)            2,717      4,214     17,408     12,135
    Net income                        1,518      2,355      9,726      7,556
                                   ------------------------------------------
    EBITDA(2)                         7,296      6,707     29,989     16,246
                                   ------------------------------------------
    Normalized EBITDA(2)(3)        $  7,296   $  6,707   $ 29,989   $ 23,583
                                   ------------------------------------------
      Deduct:
        Capital Expenditures
         (excluding Tillsonburg)       (650)               (1,639)
        Interest                       (173)                 (686)
                                    --------             ---------
    Distributable Cash(*)           $ 6,473              $ 27,664
                                    --------             ---------

    Distributions declared on
     Fund Units                       4,051                15,825
    Distributions declared on
     Class B Subordinated
     Exchangeable LP Units
     of OFI LP                        3,200                 8,303
                                    --------             ---------
    Total Distributions declared    $ 7,251              $ 24,128
                                    --------             ---------
    Payout Ratio                     112.0%                  87.2%
                                    --------             ---------
    


    Conference Call

    OFI will hold a conference call for analysts and investors to discuss its
financial results on Thursday, March 8, 2007 at 8:30 a.m. (Eastern).
    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
416-644-3430 or 1-800-589-8577 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 21221452 followed by the number sign) from 10:30 a.m.
on March 8 to 11:59 p.m. on March 15, 2007. An archived recording of the
webcast will also be available at OFI's website.

    ((*)) Non-GAAP Measures

    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. 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.
    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.
Normalized EBITDA is not a recognized measure under GAAP and the
qualifications outlined above with respect to EBITDA apply equally to
Normalized EBITDA.
    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. 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.

    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. OFI's plant in Tillsonburg, Ontario will increase production
capacity by more than 55 percent when fully operational. The IPO prospectus
and additional information are 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   December
                                                         31, 2006   31, 2005
                                                                $          $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                               9,188      6,768
    Restricted cash                                            82        456
    Accounts receivable                                     9,769     10,442
    Related party receivable                                    -        298
    Inventories                                             7,975      4,763
    Prepaid expenses                                          425        287
    Other asset                                                 -        156
    -------------------------------------------------------------------------
    Total current assets                                   27,439     23,170
    -------------------------------------------------------------------------
    Long-term
    Restricted cash                                             -        467
    Deferred financing costs                                  297        475
    Property, plant and equipment                          54,748     38,327
    Intangible assets                                      62,944     69,909
    Goodwill                                               96,580     96,580
    -------------------------------------------------------------------------
    Total long-term assets                                214,569    205,758
    -------------------------------------------------------------------------
    Total assets                                          242,008    228,928
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current
    Accounts payable                                        3,548      5,118
    Accrued liabilities                                     5,464      3,542
    Distributions payable to Fund unitholders               1,350      1,296
    Distributions payable to Class B unitholders            3,200        973
    Accrued other                                           1,502        126
    -------------------------------------------------------------------------
    Total current liabilities                              15,064     11,055
    -------------------------------------------------------------------------

    Long-term debt                                         34,740     18,949
    -------------------------------------------------------------------------

    Non-controlling interest                               77,335     77,956
    -------------------------------------------------------------------------

    Commitments and contingencies

    UNITHOLDERS' EQUITY
    Fund units                                            123,370    123,370
    Deficit                                                (8,501)    (2,402)
    -------------------------------------------------------------------------
    Total unitholders' equity                             114,869    120,968
    -------------------------------------------------------------------------
    Total liabilities and unitholders' equity             242,008    228,928
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    OFI Income Fund

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

                                                                     For the
                                                                      period
                                                          For the     Sep. 1,
                                                       year ended    2005 to
                                                          Dec. 31,   Dec. 31,
                                                             2006       2005
                                                                $          $
    -------------------------------------------------------------------------

    Sales                                                  94,850     31,928
    Cost of sales                                          62,654     22,283
    -------------------------------------------------------------------------
    Gross profit                                           32,196      9,645
    -------------------------------------------------------------------------

    OTHER INCOME & EXPENSES
    Selling, general and administrative                    13,544      4,418
    Research and development                                  150         64
    Foreign exchange loss (gain)                             (840)        35
    Amortization of deferred financing charges                174         58
    Interest on long-term debt                                686        195
    Unrealized loss (gain) on derivative
     financial instruments                                  1,532        (30)
    Interest income                                          (458)         -
    -------------------------------------------------------------------------
    Income before non-controlling interest                 17,408      4,905
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Non-controlling interest                                7,682      2,165
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income for the period                               9,726      2,740
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income per unit
    Basic                                                   0.750      0.214
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted                                                 0.750      0.211
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Weighted average number of units outstanding
    Basic                                                  12,963     12,808
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted                                                23,202     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.          $          $          $
    -------------------------------------------------------------------------

    Fund units issued on initial
     public offering                 11,784    117,842               117,842
    Fund units issued pursuant to
     over-allotment                   1,179     11,784                11,784
    Issuance costs                              (6,256)               (6,256)
    Net income for the four month
     period September 1, 2005 to
     December 31, 2005                                      2,740      2,740
    Distributions declared on
     Fund units                                            (5,142)    (5,142)
    -------------------------------------------------------------------------
    Unitholders' Equity
     December 31, 2005               12,963    123,370     (2,402)   120,968
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income for the twelve
     month period                                           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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    OFI Income Fund

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

                                                                     For the
                                                                      period
                                                          For the     Sep. 1,
                                                       year ended    2005 to
                                                          Dec. 31,   Dec. 31,
                                                             2006       2005
                                                                $          $
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income for the period                               9,726      2,740
    Add (deduct) items not involving cash:
    Non-controlling interest share of income                7,682      2,164
    Amortization of property, plant and equipment           3,548        779
    Amortization of deferred financing costs                  174         58
    Amortization of intangible assets                       6,965      2,322
    Unrealized loss (gain) on derivative financial
     instruments                                            1,532        (30)
    Unrealized foreign exchange loss on cash and
     cash equivalents                                         135         18
    -------------------------------------------------------------------------
                                                           29,762      8,052
    Net change in non-cash working capital balances
     related to operations                                 (1,973)     3,566
    -------------------------------------------------------------------------
    Cash provided by operating activities                  27,789     11,618
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Acquisition of net operating assets of
     OFI Holdings Ltd.                                          -   (121,003)
    Purchase of property, plant and equipment             (20,019)    (5,051)
    Change in cash restricted for payment on interest
     on non-revolving construction loan                       841       (923)
    -------------------------------------------------------------------------
    Cash used in investing activities                     (19,178)  (126,978)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Issuance of trust units on initial public offering          -    117,842
    Issuance of trust units to over-allotment                   -     11,784
    Acquisition of Class C Exchangeable units of OFI LP         -    (11,077)
    Expenses related to exercise of over-allotment              -       (707)
    Expenses related to initial issuance of trust units         -     (9,952)
    Issuance of debt                                       15,791     18,949
    Debt issuance costs                                         -       (535)
    Cash distributions paid to Fund and Class B units     (21,847)    (4,159)
    -------------------------------------------------------------------------
    Cash provided (used) in financing activities           (6,056)   122,146
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Unrealized foreign exchange loss on cash and cash
     equivalents                                             (135)       (18)

    Net increase in cash and cash equivalents               2,420      6,768
    Cash and cash equivalents, beginning of period          6,768          -
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period                9,188      6,768
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental disclosures of cash flow information:
      Interest paid                                         1,527        271
      Interest received                                       458          -
    -------------------------------------------------------------------------
    

    %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