Armtec Infrastructure Income Fund Reports Second Quarter Results

    Toronto Stock Exchange: ARF.UN

    GUELPH, ON, Aug. 12 /CNW/ - Armtec Infrastructure Income Fund (TSX:
ARF.UN) today reported financial results for the three months and six months
ended June 30, 2009.

    -   Revenues of $118.0 million, an increase of 30% over the same period
        in 2008 reflecting the 2008 Acquisitions and Groupe Tremca in May
        2009. Year to date, revenues were $181.7 million, an increase of
        32.4% over 2008.
    -   EBITDA was $23.7 million for the quarter, compared to $15.6 million
        in the comparable period of 2008. Year to date, EBITDA was $24.6
        million, compared to $17.4 million in the prior year.
    -   Fund completed the acquisitions of Groupe Tremca in May and Pre-Con
        in June for $47.4 million and $49.1 million, respectively. These were
        major steps in its goal of establishing a national precast platform.
    -   Distributable cash(1) increased to $20.1 million or $1.00 per unit in
        the quarter, from $13.0 million, or $0.85 per unit, in the second
        quarter of 2008. Year to date, distributable cash was $16.3 million
        or $0.84 per unit, up from $13.2 million or $0.87 per unit in the
        comparable period in 2008.
    -   Declared distributions were $10.9 million, or $0.54 per unit, in the
        second quarter of 2009 up from $7.5 million, or $0.49 per unit in the
        same period of the prior year. Year to date, declared distributions
        were $21.3 million, or $1.08 per unit for 2009 up from $14.3 million,
        or $0.94 per unit in the comparable period of 2008.

    "In the second quarter of 2009, the Fund recorded solid operational
performance with increased revenues in infrastructure, agricultural,
residential and commercial markets which seem to indicate the early signs of
renewed economic activity compared to the first quarter," said Charles
Phillips, President and Chief Executive Officer. "Over the same period, our
acquisitions of Groupe Tremca and Pre-Con have established Con-Force as a
national precast provider of large-scale engineered concrete structures and
diverse standard products, and have strengthened our competitive position
across Canada. With this strategic growth initiative largely behind us, and a
stronger balance sheet in place, the Fund is positioned to focus on internal
initiatives which allow us to be responsive to our customers' needs."

    Results of Operations

    (in thousands of
     Canadian dollars               Three Months Ended      Six Months Ended
     unless otherwise noted)        June 30,   June 30,   June 30,   June 30,
    (unaudited)                        2009       2008       2009       2008
    Revenue                       $ 117,952   $ 90,758  $ 181,699  $ 137,185
    Cost of sales                    75,582     62,671    124,631     96,895
    Amortization of property,
     plant and equipment              2,981      1,662      5,775      3,116

    Gross margin                     39,389     26,425     51,293     37,174
    As a % of revenue                  33.4%      29.1%      28.2%      27.1%
    Distribution and warehousing      5,499      3,177      8,343      4,406
    Selling, general and
     administrative                  14,092      9,538     25,602     18,711
    Amortization of intangible
     assets                           2,798      3,066      5,278      5,845

    Earnings from operations         17,000     10,644     12,070      8,212
    Interest and financing expenses  (2,413)    (1,173)    (5,295)    (2,249)

    Earnings before taxes            14,587      9,471      6,775      5,963
    Interest and financing expenses   2,413      1,173      5,295      2,249
    Total amortization                5,779      4,728     11,053      8,961
    Restructuring expenses              756          -      1,277          -
    Fair value increments of
     acquired inventory                 127        184        168        184

    EBITDA                         $ 23,662   $ 15,556   $ 24,568   $ 17,357
    As a % of revenue                  20.1%      17.1%      13.5%      12.7%

    Second Quarter Results


    During the second quarter of 2009, the Fund recorded revenue of $118.0
million; an increase of $27.2 million or 30.0% over the same period of 2008.
Increases in the Fund's revenues from the infrastructure, agricultural,
residential and commercial end-use markets more than offset declines in
natural resources. Geographically, increases in revenue were experienced
across all regions served by the Fund.
    The second quarter represented the beginning of the installation season
for the Fund's standard products, which more than doubled the level in the
first quarter of 2009 and contributed approximately 60% of the total Fund
    Con-Force revenue increased 70.8% over the same period in 2008.
Incremental revenue contributions from Groupe Tremca and the 2008 Con-Force
Acquisitions contributed to this revenue growth. The British Columbia ("B.C.")
region continued to experience soft demand conditions in structural projects,
following a very strong quarter in 2008 characterized by the finalization of
the Golden Ears Bridge project. Geographic and product line diversification
more than offset this weakness.
    Durisol contributed $10.2 million of revenue in the current quarter of
2009. Acquired in June of 2008, the division generated revenue of $5.4 million
for the period ended June 30, 2008. It continued work on a significant sound
barrier project in St. Catharines, Ontario and commenced new projects in the
Mid-western United States ("U.S.").
    The Armtec division's revenue declined 4.0% in comparison to the same
period in the prior year. The division recorded consistent revenue levels from
highway improvement projects for municipalities and provinces, with good
project activity in Central and Eastern Canada offsetting a slow start in the
West. The revenue derived from the agricultural drainage market increased
slightly when compared to the prior period due to the geographic and customer
base expansion. As expected, revenue in the commercial and residential end use
markets were below prior year levels, offsetting the gains noted above. The
natural resource market was well below the prior year due to reduced demand,
particularly in the forestry sector.

    Earnings from Operations

    For the three months ended June 30, 2009, earnings from operations were
$17.0 million compared to $10.6 million in the same period of 2008. Gross
margin for the second quarter of 2009 was $39.4 million, an increase of $13.0
million, over the same period of 2008. As a percentage of revenue, gross
margin improved to 33.4% as compared to 29.1% in 2008. The improvement was
attributable to the change in product mix combined with the seasonal volume
increases in the standard product groups.
    Distribution and warehousing costs in the second quarter of 2009 were
$5.5 million or 4.7% of revenue as compared to $3.2 million, or 3.5% of
revenue, for the second quarter of 2008. These costs vary with the mix and
volume of products sold, particularly the seasonally increased volumes related
to the standard product lines acquired.
    Selling, general and administrative expenses for the current quarter,
adjusted for $0.8 million in restructuring costs, were 11.3% of revenue, or
$13.3 million, compared to $9.5 million or 10.5% of revenue for 2008. The
dollar increase related primarily to the 2008 Acquisitions.
    Amortization of intangible assets of $2.8 million decreased by $0.3
million versus the second quarter of 2008 due principally to the customer
contract intangibles acquired with Con-Force in 2007, which were fully
amortized in 2008. This decrease was partially offset by additional
amortization in the second quarter of 2009 related to the 2008 Acquisitions.

    Year to Date Results


    The Fund achieved revenue of $181.7 million for the six months ended June
30, 2009, an increase of $44.5 million or 32.4% over the same period of 2008.
Revenue from the acquisition of Groupe Tremca in May 2009 and the 2008
Acquisitions contributed $57.3 million of incremental revenue in the first six
months. Increased revenue in the infrastructure, agricultural, residential and
commercial end-use markets offset declines in the natural resources end-use
    While structural products from Con-Force and Durisol (and some Armtec
Engineered solutions) can be installed in a wide variety of weather
conditions, many of the standard products are buried or require outdoor
installation. As such, weather impacts the seasonality of these types of
revenue with lower levels in the first and fourth quarters. The growth in
standard product volumes in the second quarter, particularly in the
residential end-use market, supported improved results to date despite the
general market conditions. For the six months ended June 30, 2009, standard
products represented approximately 60% of total revenue in comparison to 50%
in the prior year.

    Earnings from Operations

    Earnings from operations for the six-month period ended June 30, 2009 was
$12.1 million, compared to $8.2 million in the same period of 2008. Gross
margin was $51.3 million or 28.2% of revenue as compared to $37.2 million or
27.1% of revenue for the six months ended June 30, 2008 attributable to the
seasonal volume increase in the standard products as noted in the second
quarter and improved gross margin percentage achieved on structural projects.
    Distribution and warehousing costs increased in 2009, by $3.9 million
over the 2008 levels, to $8.3 million or 4.6% of revenue. These costs vary
with the sales mix and volume of products sold. As a percentage of revenue,
these costs were higher than 2008 levels due to the shift in sales mix to a
greater proportion of standard products.
    Selling, general and administrative expenses were 13.4% of revenue, after
adjusting for $1.3 million in costs related to restructuring activities were
comparable to the same period in 2008.
    Amortization of intangible assets of $5.3 million decreased by $0.5
million versus the first half of 2008 due principally to the customer contract
intangibles acquired with Con-Force in 2007, which were fully amortized in
2008. This decrease was partially offset by additional amortization related
primarily to the 2008 Acquisitions.


    The Fund has effectively completed its immediate strategic goal of
building a national precast platform. With the acquisitions of Groupe Tremca
and Pre-Con completed in the second quarter of 2009, the Fund is now well
positioned as one of the leading precast producers in the Quebec and Ontario
marketplaces, which management anticipates will be strong markets due to
incremental government infrastructure investment.
    The timing of a full economic recovery, and a return of confidence
amongst consumers and businesses, remains unclear. Activity levels,
particularly in the Western Canadian natural resources and commercial markets
have slowed dramatically. As noted in the first quarter, activity in these
private end-use markets had declined from a year ago and the Fund expects
little improvement throughout 2009, although Federal government support for
residential renovation and repair is starting to have a modest beneficial
impact in residential end-use markets during 2009. While housing starts have
rebounded, they have not returned to 2008 levels.
    The agriculture market continues to be influenced by the improved
financial strength of its end-use customers. Management believes that this has
and will continue to translate into stable demand for yield enhancing drainage
products, although success in this market is heavily dependent on weather
conditions during the limited installation season.
    The outlook for the infrastructure market remains positive with various
levels of government having committed to stimulus programs that include
increased infrastructure spending. While the incremental impact of these
initiatives was delayed, there are early signs that these initiatives are
starting to have an impact. Accordingly, many announced projects are now
anticipated to commence late in the fourth quarter of 2009 and into 2010.
    With the national precast platform largely in place, the management team
is focused on the next phase of integration of the acquired businesses.
Management's emphasis remains on revenue growth opportunities afforded by the
expanded customer and product base, productivity enhancing activities,
reducing costs and the continued management of working capital levels. Lean
manufacturing has been adopted in each of the Fund's manufacturing locations
with a formal program to assess and monitor the advancement of each facility.
Other projects underway include a review of procurement opportunities with an
emphasis on logistics costs. Also, the Fund currently runs on eight discrete
ERP systems which over the next two years will be migrated to a common


    Management will host a conference call at 10:00 a.m. (ET) on Thursday,
August 13, 2009 to discuss the results. Investors who wish to participate can
access the call using the following numbers: 416-644-3414 or 1-800-733-7560.
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 midnight on August 20, 2009. To access the rebroadcast, please dial
416-640-1917 or 1-877-289-8525 and quote the passcode 21309852 followed by the
number sign.
    Armtec's full interim consolidated financial statements, notes to the
interim consolidated financial statements and management's discussion and
analysis are available at or at


    The Fund is a leading manufacturer and marketer of a comprehensive range
of infrastructure products and engineered construction solutions for customers
in a diverse cross-section of industries that are located in every region of
Canada, as well as in selected markets in North America and worldwide. These
markets include Canada's national and regional public infrastructure markets
and private sector markets in agricultural drainage, commercial building,
residential construction and natural resources. Operating through its three
divisions and with a network of offices and production facilities across the
country, the Fund is Canada's only national multi-material manufacturer. The
Armtec division specializes in high density polyethylene and corrugated steel
pipe products for drainage, bridge applications and water management systems.
The Con-Force division offers a wide variety of precast and pre-stressed
concrete products, that includes advanced construction components and
high-value engineered solutions to large project customers. The Durisol
division provides a full suite of highway noise barriers and related
infrastructure products to the transportation sector.


    Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA")

    References to EBITDA are to earnings before interest, taxes (other than
capital taxes), depreciation and amortization, certain non-recurring expenses
and certain non-cash impacts resulting from purchase accounting. Management
believes that in addition to net earnings, EBITDA is a useful supplemental
measure of cash available for distributions prior to debt service, changes in
working capital, capital expenditures and income 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 and comprehensive 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 named
measures used by other issuers.


    This news release may contain "forward-looking" statements within the
meaning of applicable securities legislation 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, events, expectations, performance or
achievements expressed or implied by such forward-looking statements. All such
forward-looking statements are made pursuant to the "safe harbour" provisions
of applicable Canadian securities legislation. Forward-looking statements may
include comments with respect to the Fund's objectives, strategies to achieve
those objectives, expected financial results, and the outlook for the Fund's
business. Forward-looking statements typically contain such words or phrases
such as "may", "outlook", "objective", "intend", "estimate", "anticipate",
"should", "could", "would", "will", "expect", "believe", "plan" and other
similar terminology suggesting future outcomes or events. These statements
reflect current expectations regarding future events and operating performance
and are based on information currently available to the Fund's management.
    Forward-looking statements involve numerous assumptions and should not be
read as guarantees of future performance or results. Such statements will not
necessarily be accurate indications of whether or not such future performance
or results will be achieved. You should not unduly rely on forward-looking
statements as a number of factors, many of which are beyond the control of the
Fund, could cause actual results to differ materially from the results
discussed in the forward-looking statements, including, but not limited to the
factors listed below and those discussed in the Fund's materials filed with
the Canadian securities regulatory authorities from time to time including the
Annual Information Form. These uncertainties and risks include, but are not
limited to: industry cyclicality; competition; acquisition and expansion risk;
capital and liquidity risk; current global financial conditions; reduction in
demand for products; information management; credit risk; 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; labour markets; environmental; collective bargaining; currency
fluctuations; interest rates; uninsured and underinsured losses; operating
hazards; risk of future legal proceedings; securities laws compliance and
corporate governance standards; geographical risk; seasonality and adverse
weather; geopolitical; and certain risks related to the structure of the Fund
including dependence on the Fund's subsidiaries; income tax matters;
unitholder limited liability; leverage and restrictive covenants; credit
facilities; nature of units; distribution of securities on redemption or
termination of the Fund; restrictions on potential growth; effect of market
interest rates on price of units; undiversified and illiquid holdings in
Armtec Operating Trust; potential dilution. These and other factors may cause
the Fund's performance to differ materially from that contemplated by
forward-looking statements.
    There have been no material changes to the Fund's business or other
events or circumstances from January 1, 2009 to August 12, 2009, that require
an update to the discussion of the applicable risks or forward-looking
statements. Although the forward-looking statements contained in this release
are based upon what management of the Fund believes are reasonable
assumptions, the Fund cannot assure investors that actual results will be
consistent with these forward-looking statements. All forward-looking
statements in this news release are qualified by these cautionary statements.
These forward-looking statements and outlook are made as of the date of this
news release and, except as required by applicable law, the Fund assumes no
obligation to update or revise them to reflect new events or circumstances.

For further information:

For further information: Charles M. Phillips, President & Chief
Executive Officer, Armtec Limited Partnership, Tel: (519) 822-0210, Fax: (519)
822-8894; James R. Newell, Chief Financial Officer, Armtec Limited
Partnership, Tel: (519) 822-0210, Fax: (519) 822-8894; Carrie Boutcher, Vice
President, Finance, Armtec Limited Partnership, Tel: (519) 822-0210, Fax:
(519) 822-8894

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