Legumex Walker Reports Fourth Quarter and 2011 Financial Results
-Company Achieves Strong Progress on Strategic Initiatives -
WINNIPEG, March 29, 2012 /CNW/ - Legumex Walker Inc. (TSX: LWP) (the "Company") today reported its financial results for 2011. As the Company was established on July 14, 2011, its financial results for the year reflect operations for the Special Crops Division beginning July 14, 2011 and ending December 31, 2011 (171 days).
Highlights for the Fourth Quarter of 2011
- Revenue of $62.4 million;
- EBITDA1 of $2.7 million;
- Net earnings of $2.0 million, or $0.16 per share;
- Adjusted net loss1 of $0.8 million or $0.06 per share (excludes impact of certain charges related to acquisition and transaction costs and non-cash foreign exchange);
- Special Crops Division EBITDA1 of $4.2 million;
- Cash flow from operations1 of $1.9 million;
- Substantially completed integration of the Roy Legumex Group of Companies and Walker Seeds Ltd., which comprise the Special Crops Division of the Company; and,
- Continued to progress in optimizing its processing capacity.
Highlights for the Year Ended December 31, 2011
- Revenue of $103.8 million;
- EBITDA1 of $4.6 million;
- Net loss of $0.4 million, or $0.04 per share;
- Adjusted net earnings1 of $0.1 million or $0.01 per share (excludes impact of certain charges related to acquisition and transaction costs and non-cash foreign exchange);
- Special Crops Division EBITDA1 of $6.8 million;
- Cash flow from operations1 of $3.2 million;
- Incorporated under the laws of Canada and acquired a 100% interest in the Roy Legumex Group of Companies, a 100% interest in Walker Seeds Ltd., and an 85% interest in Pacific Coast Canola, LLC; and,
- Completed an initial public offering of common shares generating gross proceeds of $70.0 million and commenced trading on the Toronto Stock Exchange under the symbol "LWP".
Highlights Subsequent to the end of 2011
- Entered into agreements for a new combined $107.0 million secured credit facility with HSBC Bank Canada and Farm Credit Canada to refinance existing debt on more favorable terms to support working capital and fund potential acquisitions;
- Completed recruitment of the senior management team for Pacific Coast Canola;
- Acquired St. Hilaire Seed Company and sunflower seed processing assets previously owned by Anderson Seed Company, diversifying the Company's dry bean sourcing and processing through expansion into the American Midwest and expanding the scope of the Company's sunflower seed business;
- Commenced bean processing operations at its facility in Tianjin, China, building on existing local sourcing, distribution, and logistical relationships to capture additional margin and further diversify the Company's sourcing and processing capabilities geographically; and,
- Commenced above-ground construction for the new canola oilseed processing plant in Warden, Washington, the construction of which continues to proceed on schedule and on budget.
"Our first nine months have been exhilarating," said Joel Horn, Legumex Walker's president and chief executive officer. "We've made tremendous progress on both strategic and operational levels. Our integration is essentially complete and we are operating as one company from the grower to the customer. We completed our first acquisition, which diversified our Special Crops Division into the U.S., and construction of the Pacific Coast Canola plant is rapidly moving forward. Even so, this has been a period during which our industry has experienced significant headwinds created by broader market forces. Some of these - currency valuations and an excessive supply of competing crops - should be transient. Increasing competition from emerging pulse producing nations appears to be more structural. We have quickly responded by expanding our sourcing - first outside Canada and then beyond North America - and we are adjusting our strategy with an imperative to strengthen our competitive position globally. The long-term fundamentals of the special crops industry are very compelling and we're excited about new opportunities to leverage our longstanding customer relationships in more than 70 countries around the world."
Mr. Horn added, "Construction of the PCC canola crushing facility, which will be the first commercial-scale facility west of the Rockies, is proceeding on budget and on schedule, with start-up targeted for early next year. Our investment in Pacific Coast Canola is a significant opportunity to further diversify our business into higher margin products and to capitalize on the favourable trends in canola oil consumption."
Financial Results
As LWI was not in existence during the three-month period ended December 31, 2010 and the merger of the predecessor companies does not constitute a continuation of the business for accounting purposes, the Company's financial results for the three-month period ended December 31, 2011 and for the stub-period fiscal year that began July 14, 2011 are presented without comparative results for the same periods in the prior year.
Selected Financial Information
Summary of Three-Month & 171-Day Period Results (in thousands of Cdn $ except as indicated) |
||
Three Months Ended December 31, 2011 (unaudited) |
171-Days Ended December 31, 2011 |
|
Sales | 62,389 | 103,788 |
Cost of sales | 55,982 | 92,966 |
Gross margin | 6,407 | 10,822 |
Add: Earnings from investment in associates | 42 | 34 |
Less: Selling, general and administrative costs | 3,702 | 6,258 |
EBITDA1 | 2,747 | 4,598 |
Less: Depreciation and Amortization | 1,573 | 2,906 |
EBIT1 | 1,174 | 1,692 |
Less: Financing costs | 649 | 1,090 |
Less: Provision for (recovery of) income taxes | 1,323 | 523 |
Adjusted net earnings (loss)1 | (798) | 79 |
(Less)/add: Non cash foreign exchange | 2,793 | 523 |
Less: Write down of investment | - | 1,000 |
Less: (Gain) loss on disposal of property, plant, equipment | - | 1 |
Add: Finance income | 34 | 46 |
Net earnings (loss) per financial statements | 2,029 | (353) |
Attributable to: | ||
Non-controlling interests | (11) | (18) |
Shareholders of the Company | 2,040 | (335) |
Total net earnings (loss) | 2,029 | (353) |
Basic weighted average number of shares (000s) | 12,802 | 8,533 |
Net earnings (loss) per share | 0.16 | (0.04) |
Adjusted Net Earnings (Loss) Per Share1 | (0.06) | 0.01 |
Total assets | $204,438 | $204,438 |
Non-current portion of long-term debt | $15,883 | $15,883 |
Results for the Fourth Quarter
Consolidated sales for the fourth quarter of 2011 were $62.4 million and were generated entirely by the Special Crops Division. Earnings before interest, taxes, depreciation and amortization (EBITDA)1 was $2.7 million. Net earnings were $2.0 million, or $0.16 per share, and include the impact of non-cash foreign exchange. Excluding non-cash foreign exchange, adjusted net loss was $0.8 million, or $0.06 per share.1
Segment Results for the Fourth Quarter
Selected Financial Results1 Three Months Ended December 31, 2011 (unaudited, in thousands of Cdn $) |
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Special Crops | Oilseed Processing |
Corporate | Total | |
Sales | 62,389 | - | - | 62,389 |
Cost of sales | 55,982 | - | - | 55,982 |
Gross margin | 6,407 | - | - | 6,407 |
Add: Earnings from investment in associates | 42 | - | - | 42 |
Less: Selling, general and administrative costs | 2,228 | 103 | 1,371 | 3,702 |
EBITDA1 | 4,221 | (103) | (1371) | 2,747 |
Less: Depreciation and Amortization | 1,567 | - | 6 | 1,573 |
EBIT1 | 2,654 | (103) | (1,377) | 1,174 |
Special Crops Division
Sales for the Special Crops Division, generated through the sale of pulse and other special crops, for the fourth quarter of 2011 were $62.4 million. Sales were negatively impacted by a number of market factors, including the European financial crisis, currency fluctuations and political instability in some of the Company's traditional markets, which contributed to the reluctance of buyers to purchase additional product. In addition, the Company experienced increased competition from emerging pulse-producing countries. Management believes many of these factors to be temporary in nature. Moreover, it is a fundamental part of the Company's growth strategy to diversify its sourcing into new geographic regions to reduce risk, increase flexibility and strengthen its competitive position versus companies in emerging pulse-producing nations.
Cost of sales, which includes the cost of special crops, internal processing costs, third-party processing costs and freight costs, for the fourth quarter of 2011 was $56.0 million, resulting in a gross margin of $6.4 million (10.3% of sales). Gross margin percentage will vary from quarter to quarter and year to year based on the strength of demand, product mix, as well as the timing and location of purchases by LWI of pulses and other special crops.
Selling, general, and administrative expenses for the fourth quarter of 2011 were $2.2 million (3.6% of sales). Category expenses reflect the relatively fixed nature of the Company's indirect costs which consist primarily of personnel salaries and benefits, professional fees, insurance, property and business taxes and utilities.
EBITDA for the Special Crops division for the fourth quarter of 2011 was $4.2 million.
Oilseed Processing Division
Construction of the Pacific Coast Canola ("PCC") plant commenced in the third quarter of 2011. Plant operations are expected to commence in early 2013. Operating expenses for the fourth quarter of 2011 were $0.1 million. The majority of costs incurred by PCC during the quarter were capitalized as PCC Plant costs.
Construction of the PCC Plant is progressing on schedule and on budget. 80 percent of construction costs had been contracted as of December 31, 2011. Above-ground construction commenced in February, 2012 and the Company is on target for its staffing and operations plans.
Year End Financial Results
Consolidated sales for the 171-day stub period ended December 31, 2011 were $103.8 million and were generated entirely by the Special Crops Division. Earnings before interest, taxes, depreciation and amortization (EBITDA)1 was $4.6 million. Net loss was $0.4 million, or $0.04 per share, and includes the impact of certain charges related to the acquisition, transaction costs and non-cash foreign exchange. Excluding these items, adjusted net earnings1 were $0.1 million, or $0.01 per share.
Segment Results for the Year
Selected Financial Results1 171- Day Period Ended December 31, 2011 (in thousands) |
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Special Crops | Oilseed Processing |
Corporate | Total | |
Sales | 103,788 | - | - | 103,788 |
Cost of sales | 92,966 | - | - | 92,966 |
Gross margin | 10,822 | - | - | 10,822 |
Add: Earnings from investment in associates | 34 | - | - | 34 |
Less: Selling, general and administrative costs | 4,099 | 149 | 2,010 | 6,258 |
EBITDA1 | 6,757 | (149) | (2,010) | 4,598 |
Less: Depreciation and Amortization | 2,900 | 6 | 2,906 | |
EBIT1 | 3,857 | (149) | (2,016) | 1,692 |
Special Crops Division
Sales for the Special Crops Division for the 171-day stub year ended December 31, 2011 were $103.8 million. Sales for the period were impacted by the factors outlined in the discussion of the fourth quarter 2011 results for the Division.
Cost of sales was $93.0 million, resulting in a gross margin of $10.8 million (10.4% of sales). The components of cost of sales and the variability of gross margin are outlined in the discussion of the fourth quarter 2011 results for the Division.
Selling, general, and administrative expenses were $4.1 million (3.9% of sales).
Division EBITDA1 was $6.8 million.
If the combination of RLI and WSL had taken place as at April 1, 2011, sales for the period ended December 31, 2011 would have increased to $167.2 million (an increase of $63.4 million) and earnings before other items and income taxes would have increased to $9.7 million (an increase of $2.9 million).
Oilseed Processing Division
Operating expenses for the 171-day stub year ended December 31, 2011 were $0.1 million.
1Non-GAAP Measures
This press contains references to "EBIT" "EBITDA," cash flow from operations and adjusted net earnings (loss). EBIT is defined for the purposes of this press release as earnings from operations before interest and taxes. EBITDA is defined for the purposes of this press release as earnings from operations before other income (expenses), amortization, financings costs and income taxes. Cash flow from operations is the cash from (or used in) operating activities excluding non cash working capital changes. LWI uses cash flow provided by operations as a financial measure of liquidity. Management believes excluding the seasonal swings of non cash working capital assists in evaluation of long term liquidity. Adjusted net earnings is EBIT less financing costs and income taxes. Management believes that EBIT, EBITDA cash flow from operations and adjusted net earnings are useful supplemental measures of cash flow prior to debt service, capital expenditures, income taxes and other non-cash items included in earnings. EBIT, EBITDA, cash flow from operations and adjusted net earnings are not recognized earnings measures under Canadian Generally Accepted Accounting Principles ("Canadian GAAP") and do not have standardized meanings prescribed by Canadian GAAP. Therefore, EBIT, EBITDA, cash flow from operations and adjusted net earnings may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBIT, EBITDA, cash flow from operations and adjusted net earnings should not be construed as an alternative to net earnings or loss (which are determined in accordance with Canadian GAAP) as an indicator of the performance of the Company or as a measure of liquidity and cash flows. The Company's method of calculating EBIT, EBITDA, cash flow from operations and adjusted net earnings may differ materially from the methods used by other public companies and, accordingly, may not be comparable to similarly titled measures used by other public companies.
Reconciliation of each of these terms is provided in the table below:
Non-IFRS Terms, Reconciliations and Calculations (in thousands) | |||
Three Months Ended December 31, 2011 (unaudited) |
171-Day Period Ended December 31, 2011 |
||
Sales | 62,389 | 103,788 | |
Cost of sales | 55,982 | 92,966 | |
Gross margin | 6,407 | 10,822 | |
Add: Earnings from investment in associates | 42 | 34 | |
Less: Selling, general and administrative costs | 3,702 | 6,258 | |
EBITDA | 2,747 | 4,598 | |
Less: Depreciation and Amortization | 1,573 | 2,906 | |
EBIT | 1,174 | 1,692 | |
Less: Financing costs | 649 | 1,090 | |
Less: Provision for (recovery of) income taxes | 1,323 | 523 | |
Adjusted net earnings (loss) | (798) | 79 | |
Add: Non cash foreign exchange | 2,793 | 523 | |
Less: Write down of investment | - | 1,000 | |
Less: (Gain) loss on disposal of property, plant, equipment | - | 1 | |
Add: Finance income | 34 | 46 | |
Net earnings (loss) per financial statements | 2,029 | (353) | |
EBITDA | 2,747 | 4,598 | |
Stock based compensation | 101 | 189 | |
Earnings from investment in associates | (42) | (34) | |
(Gain) loss on disposal of property, plant, equipment | - | 1 | |
Finance income | 34 | 46 | |
Income taxes (paid) recovered | (566) | (796) | |
Maintenance capital expenditure | (385) | (807) | |
Cash Flow from Operations | 1,889 | 3,197 | |
Financing costs | (649) | (1,090) | |
Foreign exchange | 2,793 | 523 | |
Income taxes (non cash paid / recovered) | (1,073) | (912) | |
Financing activities | (1,432) | 62,951 | |
Non-cash loss on derivative financial instruments | (3,564) | 307 | |
Investing activities (net of maintenance capital expenditure) | (6,156) | (29,453) | |
Minority interest | - | - | |
Cash flow prior to working capital changes | (8,192) | 35,523 | |
Increase (decrease) in cash resources per financial statements | 1,550 | 25,430 | |
Add: Net changes in working capital accounts | (9,742) | 10,093 | |
Cash flow prior to working capital changes per financial statements | (8,192) | 35,523 |
Financial Statements and MD&A
Legumex Walker's financial statements and management's discussion and analysis ("MD&A") for the period ended December 31, 2011 are available on the Company's website at www.legumexwalker.com in the "Investors" section.
Conference Call
Legumex Walker will host a conference call on Thursday, March 29, 2012 at 8:30 a.m. ET to discuss its year-end and fourth quarter 2011 financial results. The Company expects to report its financial results on Thursday, March 29, 2012 before market open. To access the conference call by telephone, dial (647) 427-7450 or (888) 231-8191. Please connect approximately 10 minutes prior to the start of the call to ensure access.
A recording of the conference call will be archived for replay by telephone until April 5, 2012 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 60459021.
A live audio webcast of the conference call will be available http://www.legumexwalker.com/investors-presentations.php. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.
About Legumex Walker Inc.
Legumex Walker is a growth-oriented processor and merchandiser of pulses (lentils, peas, beans and chickpeas), other special crops and canola products. The Company is one of the largest processors of pulses and other special crops in Canada with 12 processing facilities strategically located in key growing regions in the Canadian Prairie Provinces, the American Midwest, and China, a global sales, logistics, and distribution platform and access to multimodal transportation capabilities. In addition the Company has an 85 percent interest in Pacific Coast Canola, LLC, a company that is constructing a canola oilseed processing facility in Washington State.
Cautionary Note on Forward Looking Statements
This press release contains certain forward-looking statements. Forward-looking statements include, but are not limited to, those with respect to the cost of production, currency fluctuations, construction, staffing and operations of the PCC Plant, the growth of LWI's business, strategic initiatives, planned capital expenditures, and expectations regarding future margins and expenses.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of LWI (including its operating subsidiaries) to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such risks and uncertainties include, among others, timing and cost overrun risks associated with the construction of the PCC Plant (as defined herein), risks related to the operation of the PCC Plant, product liabilities, environmental risks, regulations related to agricultural commodities, weather related risks, the demand for and availability of rail, port and other transportation services, the actual results of harvests, fluctuations in the price of pulses and other crops, failure of plant, equipment or processes to operate as anticipated, accidents, labour disputes, risks relating to the integration of acquisitions, as well as those factors referred to in the section entitled "Risk Factors" in LWI's Management's Discussion and Analysis for the period ended December 31, 2011, which is available on SEDAR at www.sedar.com and which should be reviewed in conjunction with this document. Although LWI has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
Although LWI believes the assumptions inherent in forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this press release.
LWI expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.
MEDIA:
Jon Austin
[email protected]
(612) 839-5172
INVESTOR RELATIONS:
Marin Landis
Manager of Investor Relations - Legumex Walker Inc.
[email protected]
(206) 535-2427
Lawrence Chamberlain
TMX Equicom
[email protected]
(416) 815-0700 ext. 257
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