Armtec Infrastructure Income Fund delivers revenue and cash flow growth for 2006

    GUELPH, ON, March 8 /CNW/ - Armtec Infrastructure Income Fund
(TSX: ARF.UN) (the "Fund" or "Armtec") today reported financial results for
the year and fourth quarter ended December 31, 2006 and finishes the year on a
positive note.
    "2006 was a very important year with several key accomplishments as we
continued to execute on our growth strategy. Operating results improved in
every measure of performance as we benefited from the healthy demand in public
infrastructure across Canada and new investments in natural resource projects,
particularly in Western Canada," said Charles Phillips, President and Chief
Executive Officer. "As 2007 unfolds, we are confident about the underlying
strength of our company as we build upon the momentum that has been
established and we remain steadfastly focused on delivering profitable growth
for our unitholders."

                            RESULTS OF OPERATIONS
             Operating Results for the period ended December 31

                                   Fourth Quarter            Year Ended
    (in thousands of              2006        2005        2006        2005
     Canadian dollars)        (unaudited) (unaudited)
    Revenue                       35,825      35,765     166,166     154,904
    Cost of sales                 24,642      25,066     113,555     107,836
    Amortization of property,
     plant and equipment             909         924       3,493       3,676
    Gross Margin                  10,274       9,775      49,118      43,392
    As a % of revenue              28.7%       27.3%       29.6%       28.0%

    Distribution and warehousing   1,913       2,031       8,555       7,932
    Selling, general and
     administrative                5,685       5,491      21,719      20,022
    Amortization of
     intangible assets               536         550       2,428       2,210
    Earnings from operations       2,140       1,703      16,416      13,228
    Interest and financing
     expenses                        421         302       2,328       1,661
    Net earnings before taxes      1,719       1,401      14,088      11,567
    Interest and financing
     expenses                        421         302       2,328       1,661
    Total amortization             1,445       1,474       5,921       5,886

    EBITDA(1) (unaudited)          3,585       3,177      22,337      19,114
    As a % of Revenue              10.0%        8.9%       13.4%       12.3%

    Highlights for the Year             Highlights for the Quarter
    -----------------------             --------------------------
    -  Revenue grew by 7.3%             -  Consistent revenues
    -  Gross margin improved to 29.6%   -  Gross margin improved to 28.7%
       from 28.0%                          from 27.3%
    -  EBITDA(1) increased 16.9% to     -  EBITDA(1) increased 12.8% to
       $22.3 million due to revenue        $3.6 million due to improved
       growth at improved margins          margins
    -  Generated distributable cash(2)  -  Generated distributable cash(2)
       of $18.6 million                    of $2.5 million
    -  Declared distributions of        -  Declared special distribution
       $15.9 million, up 17% over          of $0.17 per unit
       prior year

    Full Year Results
    Revenues increased by $11.3 million or 7.3% to $166.2 million for the
year ended December 31, 2006 compared to revenues of $154.9 million for the
year ended December 31, 2005. The revenue increase was due primarily to the
continued strength in public infrastructure markets across the country and the
growth in demand from certain resource markets. The diversity of the end
markets and geographic regions resulted in the Fund reporting growth despite
declines in some markets. In 2006, the Fund recorded growth in all geographic
regions with public infrastructure investment across Canada considered to be
the main driver of the increase in revenues. The Fund's resource market also
reported growth with increased revenues from investment in mining and energy
projects, particularly in Western Canada, offsetting a softer forestry sector
in 2006 as compared to 2005 levels. Building trades remained consistent with
2005 levels. However, the agricultural market in Ontario and Quebec continued
to be soft in 2006 with poor installation conditions in conjunction with
unfavourable farming economics negatively affecting this sector's demand for
drainage tubing.
    Gross margin for the year ended December 31, 2006 was $49.1 million, an
improvement of $5.7 million, or 13.2% over the $43.4 million earned in 2005.
On a percentage basis, the gross margin improved to 29.6% of revenue in 2006
from 28.1% in 2005. The improvement was primarily attributed to increased
sales revenues with a favourable product mix - a result of success in the
promotion of engineered solutions and the Fund's continued efforts to respond
to raw material price fluctuations. The continuing focus on lean manufacturing
across all manufacturing locations has also contributed through production
efficiencies which result in a more consistent manufacturing output and better
utilization of raw materials.
    EBITDA(1) for the year ended December 31, 2006 was $22.3 million compared
to $19.1 million in the year ended December 31, 2005, an increase of
$3.2 million, or 16.9%. The growth in EBITDA(1) was principally due to a 7.3%
growth in revenue with improved margins, which increased gross margin before
depreciation by $5.5 million. This improvement was partially offset by a
$1.7 million increase related to additional selling, general and
administrative expenses and a $0.6 million increase in distribution and
warehousing costs as compared to 2005.
    The Fund generated $18.6 million in distributable cash(2) during 2006 and
declared distributions totalling $15.9 million including a special
distribution in the fourth quarter of $0.17 per unit. Comparatively, the Fund
generated $16.0 million in distributable cash(2) and declared distributions
totalling $13.5 million in 2005. During 2006, the Fund declared a special
distribution for the third year in a row and monthly distribution levels were
increased twice during the year. Distributions in the fourth quarter of 2005
included a $0.22 per unit special distribution.

    Fourth Quarter Results
    Revenues for the fourth quarter of 2006 were consistent with 2005 at
$35.8 million. Pipe revenues increased marginally to $23.5 million in the
fourth quarter of 2006 as compared to $23.2 million in 2005. Infrastructure
sales, particularly in Western Canada, improved over 2005 levels. Agricultural
shipments were lower than volumes in the comparable quarter of 2005 due to a
combination of poor economic and installation conditions.
    Gross margin for the three months ended December 31, 2006 was
$10.3 million or 28.7% of sales which was a $0.5 million improvement over the
$9.8 million or 27.3% of sales in 2005. The improvement was primarily
attributed to favourable product mix and continuing price leadership in
response to raw material price fluctuations.
    EBITDA(1) for the fourth quarter of 2006 was $3.6 million or 10.0% of
revenues, compared to $3.2 million or 8.9% of revenues in the comparable
quarter in 2005. The improvement was the result of improved gross margins in
the quarter.
    During the fourth quarter, the Fund generated $2.5 million in
distributable cash(2) and declared distributions totalling $5.8 million
including a $1.8 million special distribution ($0.17 per unit). Distributable
cash(2) for the fourth quarter of 2005 was $2.4 million with declared
distributions of $5.0 million. Distributions are higher than the comparable
quarter of 2005 as distributions per unit were higher and there were an
increased number of units outstanding. An additional 1,289,000 units were
issued on October 26, 2006 to which distributions were made.

    The diversity of the markets served by Armtec helps insulate the Fund
from significant fluctuations in any one market or geographic region. The
outlook for infrastructure markets remains stable as a result of the spending
increases and multi-year commitments announced in the 2006 provincial budgets.
The next budgets are to be announced in the spring and will be an important
barometer of activity in 2007. The 2006 business acquisitions in Alberta and
Saskatchewan and production expansion in Alberta will increase Armtec's
manufacturing capacity in this active marketplace.
    The outlook for natural resource markets is mixed. Investment activity in
energy and mining projects is expected to continue, but further growth beyond
levels reached in 2006 is not anticipated. The implementation of the softwood
lumber agreement should be a positive factor for the forestry sector in
Canada, although when and how this resolution will impact forestry demand
cannot be predicted. Agricultural markets appear to be improving due to rising
crop prices and farm economies as a result of increased demand for ethanol.
The Fund's demand from residential markets is expected to be consistent with
prior years.
    A new linear corrugator purchased by Armtec, which will commence
production in 2007, positions Armtec as the only manufacturer of both high
density polyethylene pipe and corrugated steel pipe in the province of
Alberta. The expanded ability to offer both HDPE and steel should position
Armtec as a supplier of choice in this very active region. Resources such as
proven oil, uranium and potash reserves are expected to generate new
investment in Saskatchewan. Armtec is well-positioned to capitalize on
anticipated growth opportunities through the recent acquisition of the culvert
division of Prairie Steel.
    The 2006 addition of the BEBO concrete arch bridge systems and CONTECH
Stormwater Solutions(TM) to Armtec's product offering is expected to
contribute to revenues in 2007. Both new product lines are complementary to
Armtec's current product offering and customers will now have access to a
broader range of solutions that should generate additional revenues with
minimal capital outlay. The management of storm water and run-off has become a
significant aspect of drainage design in the United States as a result of
increased environmental awareness. The new offering of a complete line of
storm water quality management products in Canada establishes Armtec as a
coast-to-coast supplier in a market with strong growth potential. BEBO is a
concrete arched bridge system that provides Armtec access to new markets in
Central and Western Canada with a product that meets longer span bridge
requirements of the marketplace. In February 2007, the Fund received its first
BEBO order. The 42 foot bridge system will be used for a stream crossing in
the James Bay area of Quebec.
    The Fund expects sustaining capital expenditures for 2007 to be
consistent with historical levels. In addition to these expenditures the Fund
expects to complete the installation of the new ERP system during fiscal 2007.

    Taxability of 2006 Distributions
    Of the distributions declared in 2006, 10.8% was a return of capital and
the remaining 89.2% was subject to income tax in the hands of unitholders.

    For More Information
    Armtec's full annual consolidated financial statements, notes to
financial statements and management's discussion and analysis are available at or at

    Conference Call & Webcast
    Management will host a conference call at 10:00 a.m. (ET) on Friday,
March 9, 2007 to discuss the results. Investors who wish to participate can
access the call using the following numbers: 416-849-9305 or 1-866-838-4337.
The call will be webcast live and archived on the Armtec website at A taped rebroadcast will be available to listeners
following the call until 12 a.m. on Friday, March 16, 2007. To access the
rebroadcast, please dial 416-915-1035 or 1-866-245-6755 and quote the pass
code 463101 followed by the number sign.

    About Armtec
    Armtec is a leading manufacturer and marketer of drainage products and
engineered solutions for infrastructure applications in a diverse
cross-section of industries, including the public infrastructure market and
private sector markets such as natural resources, residential drainage and
agricultural drainage in Canada. Armtec is Canada's only national
multi-material manufacturer specializing in corrugated high-density
polyethylene pipe, corrugated steel pipe and related engineered products.
Armtec also distributes a broad range of water control and geosynthetic
products, and manufactures and distributes certain high value-added engineered
products internationally.

    Non-GAAP Measures
    References to "EBITDA" are to earnings before interest, taxes (other than
capital taxes), depreciation and amortization. Management believes that in
addition to net earnings, EBITDA is a useful supplemental measure of cash
available for distribution prior to debt service, changes in working capital,
capital expenditures and taxes. However, EBITDA is not a recognized measure
under Canadian GAAP. Investors are cautioned that EBITDA should not be
construed as an alternative to net earnings 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 similarly titled measures used by other issuers.
    "Distributable cash" is not a defined term under Canadian GAAP but is
determined by the Fund as net earnings for the period adjusted to remove
non-cash items, including amortization and future income taxes, and reduced by
capital expenditures excluding items that are considered growth related.
Management believes that distributable cash is a useful measure of performance
as it provides investors with an indication of the amount of cash available
for distribution to unitholders. Investors are cautioned, however, that
distributable cash should not be construed as an alternative to using net
earnings as a measure of profitability or the statement of cash flows.
Furthermore, the Fund's method of calculating distributable cash may not be
comparable to other similarly named calculations.

    Risks and Uncertainties
    The Fund is subject to certain risks and uncertainties that could have a
material adverse effect on Armtec's results of operations, business prospects,
financial condition, cash distributions to unitholders and the trading price
of the Fund's units. These uncertainties and risks include, but are not
limited to: industry cyclicality; competition; acquisition and expansion;
capital and liquidity; reductions in demand for Armtec's products; collections
from customers; relationships with suppliers; lack of long-term agreements;
expiration of rights under license and distribution arrangements; availability
and price volatility of raw materials; product liability; intellectual
property; reliance on key personnel; collective bargaining agreements;
interest rates; uninsured and underinsured losses; environment, health and
safety requirements; operating hazards; risk of future legal proceedings;
securities laws compliance and corporate governance changes; tax law changes;
dependence of the Fund on Armtec Limited Partnership; and certain risks
associated with the structure of the Fund including income tax matters;
leverage and restrictive covenants; credit facility; nature of units; effect
of market interest rates on the price of units; restrictions on potential
growth; and cash distributions are not guaranteed. Further information about
these and other risks and uncertainties can be found in the disclosure
documents filed by Armtec Infrastructure Income Fund with the securities
regulatory authorities, available at

    Forward-Looking Statements
    This MD&A may contain "forward-looking" statements which involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Fund or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Forward-looking
statements contain such words as "may", "will", "expect", "believe", "plan"
and other similar terminology. These statements reflect current expectations
regarding future events and operating performance and speak only as of
March 8, 2007.
    Forward-looking statements involve significant risks and uncertainties,
should not be read as guarantees of future performance or results, and will
not necessarily be accurate indications of whether or not such results will be
achieved. A number of factors could cause actual results to differ materially
from the results discussed in the forward-looking statements, including, but
not limited to, the factors discussed under "Risks and Uncertainties".
Although the forward-looking statements contained in this report are based
upon what management of Armtec believes are reasonable assumptions, the Fund
can not assure investors that actual results will be consistent with these
forward-looking statements. These forward-looking statements are made as of
the date of this MD&A and the Fund assumes no obligation to update or revise
them to reflect new events or circumstances.

    (1) EBITDA is not a defined term under Canadian GAAP. For more
        information, refer to the Non-GAAP Measures section of this press
    (2) Distributable cash is not a defined term under Canadian GAAP.
        For more information, refer to the Non-GAAP Measures section of this
        press release.

For further information:

For further information: Armtec Limited Partnership, Charles M.
Phillips, President and Chief Executive Officer, Tel: (519) 822-0210; Armtec
Limited Partnership, R. John Slattery, Senior Vice President, Finance and
Chief Financial Officer, Tel: (519) 822-0210

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