Arctic Glacier Income Fund (CNSX:AG.UN) today announced results for the fourth
quarter and year ended December 31, 2011.
Summary of 2011(i)
-- Sales increased by $3.7 million or 2% compared to prior year
-- EBITDA decreased by $6.9 million or 14% compared to prior year
-- Recorded goodwill and intangible asset impairment charges totaling $40.7
million
-- Converted C$90.6 million convertible debentures to equity
-- DOJ Civil Division concluded investigation with no action taken against
Arctic Glacier
-- Settled U.S. direct purchaser class action for $12.5 million and
Canadian direct purchaser class action for $2.0 million
-- Subsequent to year-end, the Fund reached agreement to settle Canadian
unitholder class action for $13.75 million, to be entirely funded by the
Fund's insurers
-- Subsequent to year-end, the Fund was delisted from TSX and listed on
CNSX
-- Subsequent to year-end, the Fund initiated a court supervised
recapitalization under the Companies' Creditors Arrangement Act
(i)Dollar amounts in U.S. currency unless otherwise specified
"For Arctic Glacier, the events of 2011 led to far-reaching developments in 2012
that aim to find a solution to the Fund's current challenges and create a new
structure for the future," said Keith McMahon, President and CEO of Arctic
Glacier Inc., the Fund's operating company.
On February 21, 2012 the Fund filed for court supervised recapitalization under
the Companies' Creditors Arrangement Act (CCAA). Shortly afterward a similar
filing was made under Chapter 15 of the U.S. Bankruptcy Code, recognizing the
Canadian supervised sale and investment solicitation process in both the United
States and Canada.
Since late 2010, a special committee of the board has been engaged in a
strategic and financing review, with the assistance of TD Securities. The
committee was originally created to evaluate alternatives to refinance $90.6
million in convertible debentures that were scheduled to mature on July 31,
2011.
However, the Fund's weakened financial condition, caused by a prolonged
antitrust investigation and related civil litigation, significant refinancing
costs and reduced EBITDA in the second quarter of 2011, meant a transaction to
provide the capital to retire the debentures could not be completed prior to
maturity. In addition, the Fund was not in a position to negotiate an extension
to the debentures and as a result, it satisfied these obligations by issuing
units as permitted by the trust indenture. A total of 311.3 million Fund units
were issued to debenture holders on August 2, 2011, increasing issued and
outstanding equity to 350.3 million units.
Commencing with the June 30, 2011 reporting period, the Fund was in breach of
certain financial covenants governing EBITDA levels and other measures under its
credit facilities. The breach created a default under the terms of the credit
facilities and the Fund received notices of default from its term loan lenders
and revolving term credit facility lenders in September 2011, without requiring
accelerated payments. As a result, the Fund no longer had the ability to make
additional draws on its revolving term credit facility.
Following extensive discussions and negotiations with secured lenders in an
effort to implement a recapitalization transaction that would improve the Fund's
capital structure, the Trustees determined it was necessary to pursue a
recapitalization under court supervision. The secured lenders supported this
decision and the sale and investment process.
Subsequent to year-end, on February 21, 2012, the Fund received notices from the
secured lenders demanding immediate repayment of all obligations under the term
loan and revolving term credit facilities. On February 22, Arctic Glacier
obtained an order from the Manitoba Court of Queen's Bench allowing the Fund to
commence a court supervised recapitalization of its business through the
initiation of a sale and investment solicitation process under the CCAA. The
order also provides for a stay of certain creditor claims and authorizes $50
million of specialized debtor-in-possession (DIP) financing from Arctic
Glacier's current lenders to enable normal business operations to be maintained
during the recapitalization process. On February 23, the Fund obtained a court
order in the United States recognizing the Canadian supervised process in both
countries.
Fourth Quarter 2011 Review
The Fund's financial disclosure for the three months ended December 31, 2011 has
been prepared in accordance with International Financial Reporting Standards
("IFRS"). Accordingly, comparative periods for fiscal 2010 have been restated in
accordance with IFRS, including the January 1, 2010 transition date balance
sheet.
Sales in the fourth quarter of 2011 totaled $35.6 million, an increase of $0.8
million or 2% from the same period in 2010. Excluding the effects of currency,
sales in existing markets were up by $1.0 million as favorable weather in most
of Arctic Glacier's markets offset the effect of higher competitive activity in
west coast markets and continued weakness in the North American economy. The
weaker Canadian dollar during the fourth quarter decreased the U.S. dollar value
of sales generated in Canadian markets by $0.2 million.
Cost of sales including depreciation and amortization totaled $44.3 million, an
increase of $3.1 million or 7% compared to the fourth quarter of 2010. Cost of
sales in existing markets was up by $0.9 million, primarily due to higher energy
and third-party distribution costs. Amortization and depreciation expense
increased by $2.3 million, due primarily to a reduction in the amortization
period for customer relationship assets in 2011. The weaker Canadian dollar
decreased the U.S. dollar value of costs incurred in Canadian markets by $0.1
million.
General and administrative expenses totaled $2.7 million, an increase of $1.1
million from the same period of 2010. The change was primarily the result of
mark-to-market adjustments in 2010 on unit-based compensation related to unit
options granted in previous years, plus higher insurance costs.
For the fourth quarter of 2011, EBITDA was negative $1.0 million, compared to
negative $0.1 million for the same quarter in 2010.
Finance costs of $10.2 million were $1.4 million higher than in the same quarter
last year. The increase was primarily due to increased borrowing rates following
the March 2011 loan agreement amendments and September 2011 defaults and
increased amortization of deferred financing charges related to March 2011 loan
amendments, which more than offset the interest savings following the settlement
of the convertible debentures. The weaker Canadian dollar partly reduced the
increase.
Other costs for the quarter totaled $29.6 million, comprised of a non-cash
goodwill impairment charge of $15.6 million, a non-cash intangible asset
impairment charge of $9.2 million and expenses of $4.8 million for the review of
financing and strategic alternatives. Other costs for the same quarter of 2010
totaled $2.3 million.
The loss for the fourth quarter of 2011 totaled $54.7 million or $0.16 (basic
and diluted) per unit, compared to $22.1 million or $0.57 (basic and diluted)
per unit in the same period of 2010. The difference in per-unit results is
partly due to a higher number of units outstanding in the period just ended,
owing to debenture conversion during 2011.
Fiscal 2011 Review
Sales in 2011 totaled $237.1 million, an increase of $3.7 million or 2% compared
to 2010. The increase was driven primarily by sales in new markets totaling $1.5
million and the stronger Canadian dollar during the 12-month period, which
increased the U.S. dollar value of sales generated in Canadian markets by $2.5
million. These amounts were offset by a 1% sales decrease in previously serviced
markets, where favorable weather in the key summer months only partially
overcame the impact of poor weather from March through June 2011 in most
markets, significantly increased competitive activity in west coast markets and
the continued weakened state of the North American economy.
Cost of sales totaled $223.0 million in 2011, an increase of $16.4 million or 8%
compared to 2010. Excluding depreciation and amortization, cost of sales totaled
$183.5 million in 2011, an increase of $8.2 million or 5%. The increase resulted
mainly from higher fuel, packaging, vehicle and third-party distribution costs
in previously serviced markets. In addition, the stronger Canadian dollar
increased the U.S. dollar value of costs incurred in Canadian markets by $1.5
million and costs of $0.9 million were incurred to service customers in new
markets.
The depreciation and amortization component of cost of sales was $39.5 million
in 2011, an increase of $8.2 million from 2010 primarily due to a reduction in
the amortization period for customer relationship assets in 2011 that increased
expense by $12.2 million. This was partially offset by the effect of certain
tangible assets becoming fully depreciated.
General and administrative expenses totaled $10.2 million in 2011, compared to
$7.7 million in 2010. The increase resulted primarily from mark-to-market
adjustments on unit-based compensation related to unit options granted in
previous years, severance expense due to restructuring, higher professional fees
related to technology based initiatives, increased insurance outlays and
one-time costs related to the transition to IFRS.
EBITDA in 2011 decreased by 14% to $43.6 million, largely due to poor spring
weather and increased competition in west coast markets.
Finance costs increased by 15% to $38.8 million in 2011. Cash interest decreased
by $0.6 million, primarily due to interest savings following conversion of the
convertible debentures to equity. There were no loan amendment fees in 2011
compared to $0.4 million in 2010. This was offset by increased borrowing rates
following the March 2011 loan agreement amendments and September 2011 credit
agreement defaults and the stronger Canadian dollar. Non-cash finance costs
increased by $6.1 million due to higher accrued interest, increased amortization
of deferred financing charges and accretion of antitrust settlements payable.
Other costs totaled $42.7 million in 2011, a decrease of $39.1 million compared
to 2010. They included:
-- A non-cash goodwill asset impairment charge of $27.7 million and a non-
cash intangible asset impairment charge of $13.0 million following a
determination that the carrying values exceeded estimated recoverable
amounts
-- Expense of $12.1 million due to the special committee review of
financing and strategic alternatives
-- A loss on settlement of convertible debentures totaling $5.3 million
-- Legal fees and settlement outlays of $4.2 million, incurred in relation
to antitrust investigations and related civil litigation
Offsetting these amounts were two gains recorded during 2011 that consisted of:
-- An $18.5 million unrealized gain on fair value of convertible debentures
and warrants
-- A $1.1 million gain on settlement of acquisition consideration stemming
from a write-off of a liability initially set up upon the acquisition of
an ice business in a previous year
The Fund ended 2011 with a loss of $84.9 million, or $0.50 per unit (basic) and
$0.54 (diluted), versus $82.7 million or $2.12 per unit (basic and diluted) in
2010. However, antitrust related costs, goodwill and intangible asset impairment
charges and the strategic review are not representative of normal operating
expenses. If they are removed, the Fund ended 2011 with an adjusted loss of
$27.9 million or $0.17 per unit (basic) and $0.21 (diluted) in 2011, compared to
an adjusted loss of $18.9 million or $0.48 (basic and diluted) last year. The
change was mainly caused by lower EBITDA, increased amortization, higher finance
costs and loss on settlement of convertible debentures.
Financial Position
At December 31, 2011 the Fund had a working capital deficiency of $196.4
million. This resulted primarily from the classification of $202.8 million of
long-term debt as current liabilities. The change was required because of the
default on the secured loan agreements and the associated notices of default
issued by the lenders during 2011. Excluding the long-term debt, the Fund's
working capital at December 31, 2011 was $6.4 million. At December 31, 2010, the
working capital deficiency, excluding the convertible debenture liability of
$74.5 million, was $2.4 million.
At December 31, 2011 Arctic Glacier's net debt was $189.9 million, versus $169.7
million (excluding convertible debentures), at the same time last year. The
Fund's net debt to EBITDA ratio at December 31, 2011 was 4.9 to1 as defined by
the revolving term credit facility, compared to 3.7 to1 at the same time last
year. The maximum permitted covenant ratio is 4.5 to 1.
On December 14, 2011, the Fund's term loan lenders acquired the revolving term
credit facility from its previous holders. At December 31, 2011, the Fund was in
default on its secured credit facilities, comprised of a $191.2 million term
loan and an outstanding balance of $29.9 million on the revolving term credit
facility.
The Fund's year-end cash on hand totaled $22.7 million.
Subsequent to year-end, the Fund arranged a $50 million DIP financing facility
with its existing secured lenders as part of the CCAA and U.S. Chapter 15
proceedings. The facility is expected to provide for ongoing working capital,
capital expenditure requirements and general corporate purposes during the sale
or recapitalization process. The DIP facility is secured by a charge over all
assets of the Fund and its subsidiaries, with the priority set out in the
initial court order.
U.S. DOJ Investigation and Related Litigation
During 2011 and early 2012 considerable progress was made in the area of
antitrust investigations and related civil litigation.
In March 2011 the Civil Division of the U.S. Department of Justice advised
Arctic Glacier it had concluded its investigation of the packaged ice industry
and will take no action against the Fund or its subsidiaries.
Also in March 2011, the Fund resolved two civil suits filed by direct purchasers
of packaged ice. Arctic Glacier settled a class action filed by direct purchases
or packaged ice in the U.S. with an agreement to pay $12.5 million in two
installments. The same month, the Fund resolved a claim for a nominal amount in
Wisconsin whose petition for class action status had previously been denied by
the court. In April 2011 Arctic Glacier simultaneously settled four class
actions with Canadian direct purchasers for a total of C$2.0 million. Subsequent
to year-end, in February 2012 the Fund settled a class action brought by
Canadian unitholders for C$13.75 million, to be funded entirely by Arctic
Glacier's insurers.
Outlook
Arctic Glacier's most pressing concern during 2012 will be to complete the
court-supervised recapitalization through the initiation of a sale and
investment solicitation process via CCAA and U.S. Chapter 15 proceedings.
The CCAA and Chapter 15 proceedings and the DIP financing facility have provided
the Fund and its subsidiaries with temporary relief and access to financial
resources to enable it to continue to operate with minimal disruption while the
court supervised recapitalization of the business is carried out. Arctic Glacier
expects to maintain all operations at their normal capacity in both Canada and
the United States during the course of these proceedings. No layoffs or lease
terminations are planned and all suppliers of goods and services are intended to
be paid as usual, including amounts owed to such suppliers prior to the CCAA
filing.
Going forward, Arctic Glacier is focused on key operational strategies that
include:
-- Adding new sales volumes at attractive margins in retail and non-retail
channels in current markets;
-- Working with customers to expand product categories and improve product
mix to increase sales and profitability; and,
-- Pursuing technology-based initiatives in manufacturing and distribution
to improve efficiencies and reduce costs.
At the same time, management continues to carefully manage its cash position,
operating costs and capital expenditures to provide liquidity to support
operations.
Arctic Glacier is working to resolve current challenges, and as new financing
initiatives are examined, the Fund's key operating principles remain unchanged:
to provide value to its customers through superior product quality and industry
leading customer service.
About Arctic Glacier
Arctic Glacier Income Fund, through its operating company, Arctic Glacier Inc.,
is a leading producer, marketer and distributor of high-quality packaged ice in
North America, primarily under the brand name of Arctic Glacier(R) Premium Ice.
Arctic Glacier operates 39 production plants and 47 distribution facilities
across Canada and the northeast, central and western United States servicing
more than 75,000 retail locations.
Arctic Glacier Income Fund trust units are listed on the Canadian National Stock
Exchange under the trading symbol AG.UN. There are 350.3 million trust units
outstanding.
Conference Call and Webcast
Arctic Glacier will discuss fourth quarter and year-end 2011 results during a
conference call with a live audio webcast for investors and analysts on Tuesday,
March 27 at 11 am (EDT). To access the simultaneous webcast, log on to Arctic
Glacier's website at www.arcticglacier.com. Please note the webcast allows
participants to listen only.
Forward-Looking Statements
This news release contains statements that constitute forward-looking
information within the meaning of applicable securities legislation. All
statements other than statements of historical fact are forward-looking
statements. The forward-looking information in this news release includes,
without limitation, statements regarding: (i) the continuing review by the
special committee of the board of trustees of financial or strategic
transactions to establish a longer-term solution to ensure the continued
viability of the Fund; (ii) the Fund's active discussions with its lenders
regarding alternatives to restructure its debt obligations; and (iii) the
ongoing anti-trust investigations and related litigation. Such forward-looking
statements reflect management's current beliefs and are based on information
currently available to management.
Forward-looking information is presented for the purpose of assisting readers of
this news release in understanding the Fund's financial condition and results of
operations and its strategies, priorities and objectives and may not be
appropriate for other purposes. Forward-looking information involves significant
risks and uncertainties. Actual results, events, performances, achievements and
developments are likely to differ, and may differ materially, from those
expressed or implied by the forward-looking information contained in this news
release. The forward-looking information contained in this news release is based
on a number of assumptions which may prove to be incorrect, including, but not
limited to, the potential impact on the Fund of (i) any potential strategic or
financial transaction, (ii) the restructuring of the Fund's debt obligations or
(iii) the settlement of on-going anti-trust investigations and related
litigation. Although the forward-looking statements contained in this news
release are based upon what management believes to be reasonable assumptions,
the Fund cannot assure readers that actual results will be consistent with these
forward-looking statements. Note that there can be no assurance that the Fund
will successfully locate, negotiate or complete a financial or strategic
transaction, or if completed, that such a transaction will be completed on terms
favorable to the Fund or its unit holders. Further, there can be no assurance as
to the outcome or success of the Fund's discussions with its lenders regarding
alternatives to restructure the Fund's debt obligations. And, at this time, it
is not possible to predict the timeline or final outcome of the investigations
or litigation, or any potential effect they may have on the Fund or its
operations. All of the foregoing indicate the existence of a material
uncertainty that may cast significant doubt on the ability of the Fund to
continue as a going concern.
The forward-looking statements contained herein are expressly qualified in their
entirety by this cautionary statement. These forward-looking statements are made
as at the date of this news release, and, other than as required by applicable
securities legislation, the Fund assumes no obligation to update or revise them,
either publicly or otherwise, to reflect new events, information or
circumstances, despite the fact that new events, information or circumstances
may cause the Fund's views to change.
Non-IFRS Financial Measures
EBITDA, adjusted earnings and distributable cash are not recognized measures
under International Financial Reporting Standards (IFRS). EBITDA is defined as
earnings before finance costs, income taxes, depreciation, amortization, gains
or losses on foreign exchange, asset impairment charges and non-operating costs
such as costs of antitrust investigations and related litigation and costs of
review of financing and strategic alternatives and other non-recurring expenses.
EBITDA is a performance measure used by many investors to provide an indication
of cash generated from ongoing operations prior to debt service, capital
expenditures and income taxes and is often used to compare companies and income
trusts on the basis of ability to generate cash from ongoing operations.
Adjusted earnings is defined as earnings after adding back the after-tax impact
of antitrust investigations and related litigation; cost of review of financing
and strategic alternatives; and asset impairment charges. Adjusted earnings is
used by management to evaluate the ongoing profitability of the Fund by
eliminating the effect of these material non-operating costs. Distributable cash
is defined as EBITDA less cash interest, cash taxes and sustaining capital
expenditures required to maintain operations at their current level. Growth
capital expenditures, representing outlays that are integral with acquisition
initiatives or that grow the business and enhance distributable cash, are not
included in the calculation of distributable cash. Distributable cash is a
performance measure historically used by management to summarize the funds
available for distribution to unitholders in an income trust. Investors should
be cautioned that EBITDA, adjusted earnings and distributable cash should not be
construed as alternatives to earnings, cash from operating activities or other
financial measures determined in accordance with IFRS as indicators of the
Fund's performance. The Fund's method of calculating EBITDA, adjusted earnings
and distributable cash may differ from other companies and income trusts and,
accordingly, may not be comparable to measures used by them.
ARCTIC GLACIER INCOME FUND
Consolidated Balance Sheets
As at December 31, 2011 and 2010 (audited)
(thousands of U.S. dollars) 2011 2010
----------------------------------------------------------------------------
ASSETS
Current assets
Cash $ 22,743 $ 9,240
Accounts receivable 12,109 11,804
Inventories 10,091 10,493
Prepaid expenses 5,106 3,703
---------------- ----------------
50,049 35,240
Deferred tax asset - 13,415
Property, plant and equipment 129,183 137,388
Intangible assets 73,258 105,570
Goodwill 43,630 71,762
---------------- ----------------
$ 296,120 $ 363,375
---------------- ----------------
---------------- ----------------
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 15,733 $ 15,277
Provisions 309 335
Antitrust related litigation
settlements 11,667 11,393
Other financial liabilities 11,053 8,228
Convertible debentures - 74,490
Principal due within one year on long-
term debt 207,668 2,391
---------------- ----------------
246,430 112,114
Unit options - 80
Warrants - -
Long-term debt 5,016 176,522
Convertible debentures - -
Deferred tax liability 663 7,254
Unitholders' equity
Units 389,922 325,170
Deficit (338,577) (253,693)
Accumulated other comprehensive loss (7,334) (4,072)
---------------- ----------------
44,011 67,405
---------------- ----------------
$ 296,120 $ 363,375
---------------- ----------------
---------------- ----------------
ARCTIC GLACIER INCOME FUND
Consolidated Statements of Operations
Three and twelve months ended December 31, 2011 and 2010
Three Months Twelve Months
----------------------- ----------------------
(unaudited) (audited)
(thousands of U.S. dollars,
except per unit amounts) 2011 2010 2011 2010
----------------------------------------------------------------------------
Sales $ 35,623 $ 34,782 $ 237,099 $ 233,398
Cost of sales 44,286 41,187 222,983 206,577
----------------------- ----------------------
(8,663) (6,405) 14,116 26,821
General and administrative
expenses 2,650 1,578 10,213 7,706
----------------------- ----------------------
Operating earnings (11,313) (7,983) 3,903 19,115
Finance costs 10,166 8,782 38,810 33,763
Other costs 29,551 2,299 42,722 81,795
----------------------- ----------------------
Loss before income taxes (51,030) (19,064) (77,629) (96,443)
Income taxes
Current 98 36 465 328
Deferred (reduction) 3,610 2,963 6,790 (14,100)
----------------------- ----------------------
3,708 2,999 7,255 (13,772)
----------------------- ----------------------
Loss $ (54,738) $ (22,063) $ (84,884) $ (82,671)
----------------------- ----------------------
----------------------- ----------------------
Loss per unit - basic $ (0.16) $ (0.57) $ (0.50) $ (2.12)
Loss per unit - diluted $ (0.16) $ (0.57) $ (0.54) $ (2.12)
----------------------- ----------------------
ARCTIC GLACIER INCOME FUND
Consolidated Statement of Comprehensive Loss
Three and twelve months ended December 31, 2011 and 2010
Three Months Twelve Months
---------------------- ----------------------
---------------------- ----------------------
(unaudited) (audited)
(thousands of U.S. dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Loss $ (54,738) $ (22,063) $ (84,884) $ (82,671)
---------------------- ----------------------
Other comprehensive loss
Foreign currency
translation adjustments (18) (2,528) (3,262) (4,072)
---------------------- ----------------------
Comprehensive loss for the
period $ (54,756) $ (24,591) $ (88,146) $ (86,743)
---------------------- ----------------------
---------------------- ----------------------
ARCTIC GLACIER INCOME FUND
Consolidated Statements of Changes in Unitholders' Equity
Three and twelve months ended December 31, 2011 and 2010
Three Months Twelve Months
---------------------- ----------------------
---------------------- ----------------------
(unaudited) (audited)
(thousands of U.S. dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Units
Balance, beginning of period $ 389,922 $ 325,170 $ 325,170 $ 325,170
Unit issuance - - 64,752 -
---------------------- ----------------------
Balance, end of period 389,922 325,170 389,922 325,170
---------------------- ----------------------
Deficit
Balance, beginning of period (283,839) (231,630) (253,693) (171,022)
Loss (54,738) (22,063) (84,884) (82,671)
---------------------- ----------------------
Balance, end of period (338,577) (253,693) (338,577) (253,693)
---------------------- ----------------------
Accumulated other
comprehensive loss
Balance, beginning of period (7,316) (1,544) (4,072) -
Other comprehensive loss (18) (2,528) (3,262) (4,072)
---------------------- ----------------------
Balance, end of period (7,334) (4,072) (7,334) (4,072)
---------------------- ----------------------
Total Unitholders' Equity $ 44,011 $ 67,405 $ 44,011 $ 67,405
---------------------- ----------------------
---------------------- ----------------------
ARCTIC GLACIER INCOME FUND
Consolidated Statements of Cash Flows
Three and twelve months ended December 31, 2011 and 2010
Three Months Twelve Months
---------------------- ---------------------
---------------------- ---------------------
(unaudited) (audited)
(thousands of U.S. dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Cash from (used in):
Operating activities
Loss $ (54,738) $ (22,063) $(84,884) $ (82,671)
Adjustments for:
Depreciation and
amortization 10,122 7,824 39,515 31,330
Finance costs 10,166 8,782 38,810 33,763
Interest paid (539) (6,015) (25,442) (26,488)
Antitrust litigation
settlement paid - - (2,500) -
Antitrust related
litigation settlements - 11,393 1,993 11,393
Recognition of rents on a
straight-line basis 28 178 399 715
Unit-based compensation
expense - (476) (82) (1,102)
Loss on disposals of non-
current assets 152 34 223 144
Gain on settlement of
acquisition payable - - (1,091) -
Gain on fair value
adjustments on
convertible debentures - (9,699) (18,047) (8,524)
Loss on settlement of
convertible debentures - - 5,268 -
Gain on fair value
adjustments on warrants - (44) (428) (1,549)
Loss on U.S. denominated
debt - - - 283
Deferred income tax
(reduction) 3,610 2,963 6,790 (14,100)
Goodwill impairment 15,551 - 27,670 76,008
Intangibles impairment 9,240 - 13,047 -
---------------------- ---------------------
(6,408) (7,123) 1,241 19,202
Changes in non-cash
working capital items 9,239 6,368 (500) (767)
---------------------- ---------------------
2,831 (755) 741 18,435
---------------------- ---------------------
Investing activities
Additions to property, plant
and equipment (3,852) (3,743) (12,867) (18,423)
Proceeds from disposal of
property, plant and
equipment 10 25 242 187
Additions to intangible
assets - (250) (200) (250)
---------------------- ---------------------
(3,842) (3,968) (12,825) (18,486)
---------------------- ---------------------
Financing activities
Proceeds from long-term debt - - 30,300 212,598
Principal repayments on
long-term debt (24) (1,374) (1,210) (185,970)
Payment of deferred
financing charges - (152) (2,799) (18,292)
Units issuance costs - - (157) -
---------------------- ---------------------
(24) (1,526) 26,134 8,336
---------------------- ---------------------
Foreign currency translation
adjustments 185 156 (547) 228
---------------------- ---------------------
Increase (decrease) in cash (850) (6,093) 13,503 8,513
Cash, beginning of period 23,593 15,333 9,240 727
---------------------- ---------------------
Cash, end of period $ 22,743 $ 9,240 $ 22,743 $ 9,240
---------------------- ---------------------
---------------------- ---------------------
ARCTIC GLACIER INCOME FUND
Schedule of Distributable Cash
Three and twelve months ended December 31, 2011 and 2010 (unaudited)
Three Months Twelve Months
---------------------- ----------------------
(thousands of U.S. dollars,
except per unit amounts) 2011 2010 2011 2010
----------------------------------------------------------------------------
Cash from (used in) operating
activities $ 2,831 $ (755) $ 741 $ 18,435
Adjustments:
Changes in non-cash working
capital items(1) (9,239) (6,368) 500 767
Accrued interest(1) (7,263) (1,613) (4,421) (3,177)
Less sustaining capital
expenditures(2) (2,811) (2,190) (9,269) (8,201)
---------------------- ----------------------
Distributable cash
(deficiency) (16,482) (10,926) (12,449) 7,824
Add back costs of antitrust
investigations and related
litigation(3) - 649 4,684 4,184
Add back costs of review of
financing and strategic
alternatives 4,760 - 12,126 -
---------------------- ----------------------
Distributable cash
(deficiency) excluding costs
of antitrust investigation
and related litigation $ (11,722) $ (10,277) $ 4,361 $ 12,008
---------------------- ----------------------
---------------------- ----------------------
Weighted average number of
units 350,318 39,043 168,741 39,043
Distributable cash
(deficiency) per unit $ (0.05) $ (0.28) $ (0.07) $ 0.20
Distributable cash
(deficiency) per unit
excluding costs of antitrust
investigation and related
litigation $ (0.03) $ (0.26) $ 0.03 $ 0.31
(1) Changes in non-cash working capital items and accrued interest have been
excluded from cash from operating activities so as to remove the effects
of timing differences in cash receipts and cash disbursements, which
have significant seasonal fluctuations and vary significantly across
quarters but generally reverse themselves.These fluctuations are funded
from cash resources or the revolving term credit facility, and thus will
not significantly affect the level of cash that would be available for
distribution.
(2) Sustaining capital expenditures represent the replacement of property,
plant and equipment to sustain current business operations and are
funded from operating cash flow.
(3) Net costs of antitrust investigation and related litigation added back
are comprised as follows:
Three Months Twelve Months
--------------------- ----------------------
2011 2010 2011 2010
----------------------------------------------------------------------------
Cost of antitrust
investigations and related
litigation $ - $ 12,042 $ 4,177 $ 15,577
Deduct discounted present
value of litigation
settlements - (11,393) (1,993) (11,393)
Add back litigation settlement
paid - - 2,500 -
--------------------- ----------------------
Total $ - $ 649 $ 4,684 $ 4,184
--------------------- ----------------------
ARCTIC GLACIER INCOME FUND
Reconciliation of Adjusted Earnings
Three months and twelve months ended December 31, 2011 and 2010 (unaudited)
Three Months Twelve Months
--------------------- ---------------------
--------------------- ---------------------
(thousands of U.S. dollars,
except per unit amounts) 2011 2010 2011 2010
----------------------------------------------------------------------------
Loss for the period $ (54,738) $ (22,063) $ (84,884) $ (82,671)
Add:
Costs of antitrust
investigations and related
expenses(1) - 12,042 4,177 15,577
Cost of review of financing
and strategic alternatives 4,760 - 12,126 -
Goodwill impairment(2) 15,551 - 27,670 48,190
Intangible asset
impairment(3) 9,240 - 13,047 -
---------------------- ----------------------
Adjusted loss for the period (25,187) (10,021) (27,864) (18,904)
---------------------- ----------------------
Dilutive effect of
convertible debentures - - (9,276) -
---------------------- ----------------------
Diluted adjusted loss for the
period $ (25,187) $ (10,021) $ (37,140) $ (18,904)
---------------------- ----------------------
---------------------- ----------------------
Loss per unit - basic $ (0.16) $ (0.57) $ (0.50) $ (2.12)
Loss per unit - diluted $ (0.16) $ (0.57) $ (0.54) $ (2.12)
Adjusted loss per unit -
basic $ (0.07) $ (0.26) $ (0.17) $ (0.48)
Adjusted loss per unit -
diluted $ (0.07) $ (0.26) $ (0.21) $ (0.48)
(1) Net of tax effect of $nil and $nil for the three and twelve months ended
December 31, 2011 since 2011 future tax recoveries are offset by
valuations against future tax assets in U.S. subsidiaries which may not
be fully realized (2010 - $nil and $nil).
(2) Net of tax effect of $nil and $nil for the three and twelve months ended
December 31, 2011 since 2011 future tax recoveries are offset by
valuations against future tax assets in U.S. subsidiaries which may not
be fully realized (2010 - $nil and $27,818).
(3) Net of tax effect of $nil and $nil for the three and twelve months ended
December 31, 2011 since 2011 future tax recoveries are offset by
valuations against future tax assets in U.S. subsidiaries which may not
be fully realized (2010 - $nil and $nil).
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