CORRECTION: Harrowston Reports First Quarter Results.Business Editors NOTE TO EDITORS: The following release is a corrected replacement of the press release sent earlier today. TORONTO--(BUSINESS WIRE)--May 11, 2000 Harrowston Inc. (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :HRW HRW Human Rights Watch HRW Heathrow (London Airport) HRW Heated Rear Window .) today reported a net loss of $6.2 million in the first quarter ended March 31, 2000 compared to net earnings of $0.9 million in the same period last year. The loss included two special charges totaling $19.9 million offset by a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta gain of $11.4 million from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. ($6.3 million after tax). EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become * was $17.9 million compared to $18.8 million for the period a year earlier. Revenue totaled $146.3 million in the first quarter 2000 compared to $154.3 million in the 1999 period. As previously announced, a special restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. was recorded in the first quarter as part of an agreement to terminate Terminate (terminat.exe) was a shareware modem terminal and host program for MS-DOS and compatible operating systems developed from the early to the late 1990s by the Dane Bo Bendtsen. The last release (5. the rights held by two senior executives under the Company's incentive compensation plan. Anchor anchor, device cast overboard to secure a ship, boat, or other floating object by means of weight, friction, or hooks called flukes. In ancient times an anchor was often merely a large stone, a bag or basket of stones, a bag of sand, or, as with the Egyptians, a Lamina LAMINA - A concurrent object-oriented language. ["Experiments with a Knowledge-based System on a Multiprocessor", Third Intl Conf Supercomputing Proc, 1988]. also recorded pre-tax charges totalling $8.8 million in the quarter resulting from the closure of its plant in Cheshire, Connecticut Cheshire is a town in New Haven County, Connecticut, United States. The population was 28,543 at the 2000 census. The center of population of Connecticut is located in Cheshire [1]. and the rationalization rationalization, in psychology: see defense mechanism. of its U.S. distribution facilities. Harrowston's after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. share of these charges was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.9 million. In addition, Harrowston recorded after-tax special gains from discontinued operations of $6.3 million in the first quarter, including a $4.6 million gain from the settlement of an unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. guarantee issued by a subsidiary, and a gain of $1.7 million representing the balance of contingent Fortuitous; dependent upon the possible occurrence of a future event, the existence of which is not assured. The word contingent denotes that there is no present interest or right but only a conditional one which will become effective upon the happening of the proceeds received from the 1998 sale of SPI (1) (Stateful Packet Inspection) See stateful inspection. (2) (Service Provider Interface) The programming interface for developing Windows drivers under WOSA. Holding Company. During the first few months of 2000, Harrowston was successful on the acquisition front. On March 31, the Company completed the acquisition of 50% of Key Media Ltd., Canada's third largest English language English language, member of the West Germanic group of the Germanic subfamily of the Indo-European family of languages (see Germanic languages). Spoken by about 470 million people throughout the world, English is the official language of about 45 nations. magazine company. In March, Harrowston participated in a $122.5 million equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. for Norigen Communications Group Inc., a fast-growing adj. 1. tending to spread quickly; - used mostly of plants. Adj. 1. fast-growing - tending to spread quickly; "an aggressive tumor" strong-growing, aggressive privately held integrated communications provider to the Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. market. Harrowston also recently reported its direct ownership of 320,000 shares of Delano Delano (dĕl`ənō), city (1990 pop. 22,762), Kern co., S central Calif., in the fertile San Joaquin valley; inc. 1915. The city's economy is based on agriculture (grain and fruit) and related enterprises, especially vineyards and wineries. Technology Corporation acquired through Harrowston's 3.97% interest in XDL (language) XDL - An object-oriented extension to ITU-T's SDL. ["XDL: An Object-Oriented Extension to SDL", S.J. Ochuodho et al]. Ventures Corp., a privately held technology investment company. "We have been able to extend Harrowston's presence in a number of exciting new areas," said Brent Brent, outer borough (1991 pop. 226,100) of Greater London, SE England. The area is a rail and industrial center. Its manufactures include automobile parts, clocks and watches, and electrical equipment. Belzberg, President and Chief Executive Officer. "At the same time, we are beginning to see tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. progress in the key strategic initiatives at both Marsulex and Anchor." At Marsulex, revenue in the quarter was $91.7 million versus $99.8 million in the same period last year, while EBITDA* was $10.9 million compared to $13.3 million. Revenue and EBITDA* in the current period declined due to an unexpected interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. at Falconbridge's Kidd Creek smelter as well as lower sulphuric acid sulphuric acid: see sulfuric acid. prices and volumes. In early April, Marsulex announced the signing of 10-year outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. contracts to provide technology-driven environmental compliance services to Petro-Canada Petro-Canada (TSX: PCA, NYSE: PCZ) is a Canadian oil and gas firm. Its headquarters are in the Petro-Canada Centre in Calgary, Alberta. History Petro-Canada was founded as a Crown Corporation in 1975 by an act of Parliament. and Shell Canada Shell Canada Limited (TSX: SHC) is one of Canada's largest integrated oil companies. Exploration and production of oil, natural gas and sulphur is a major part of its business, as well as the marketing of gasoline and related products through the company's approximately 1,800 . The agreements, which extend long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. existing relationships, will generate fees of approximately $100 million, plus additional income produced by the marketing of added value Added value in financial analysis of shares is to be distinguished from value added. Used as a measure of shareholder value, calculated using the formula:
materials generated incidentally to the production of a principal product in an industry or industrial enterprise. In the meat industry by-products include blood, bone, fat, bristle, hair, wool, hide, skin, hoof, horn and offal products prepared in various ways for use . The company also signed letters of intent with three new U.S. customers to design, build and own full-service full-ser·vice adj. Associated with or offering complete service: full-service gasoline pumps; full-service banks. compliance facilities with a total value of $175 million. Marsulex's cash position remains strong at $67.4 million at March 31, 2000. Anchor Lamina revenue for the three months ended March 31 was $53.0 million compared to $54.4 million in the same period last year while EBITDA* rose to $9.0 million from $7.0 million. Gross margins continued to improve as a company-wide program to streamline streamline, path of a fluid flowing steadily and without appreciable turbulence. A body is said to be streamlined if its shape offers the least possible resistance to a current of air, water, or other fluid. business processes begins to take effect. At March 31, 2000, Harrowston's cash balance available for new investments is approximately $136.0 million. Harrowston Inc. (www.harrowston.ca) is a Canadian company dedicated to building long-term shareholder value and consistent earnings by pursuing a growth strategy built on internal expansion and acquisitions. Its operating businesses include Marsulex Inc., a global provider of technology-based environmental compliance solutions; Anchor Lamina Inc., a major manufacturer and supplier of die sets, mould mould, n See mold. mould mold. bases and related accessories in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). ; and Conexus conexus /co·nex·us/ (ko-nek´sus) pl. conex´us [L.] connexus. conexus a connecting structure. Media Inc., a North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. media company that owns 50% of Key Media Ltd., publisher of Toronto Life Toronto Life is a monthly Canadian magazine about entertainment, politics and life in Toronto, Ontario, Canada. Established in 1966, it currently has a total readership of 863,000 and is published by St. , WEDDINGBELLS, Fashion and Fashion File TV. * Earnings from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the before interest, depreciation and amortization, taxes, gains, interest and fee income, and non-controlling interest and special charges.
HARROWSTON INC.
CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS For the three months
ended March 31 (In thousands of dollars except per share amounts)
(Unaudited)
2000 1999
--------------------------------------------------------------
NET SALES $146,346 $154,253
--------------------------------------------------------------
EARNINGS BEFORE THE UNDERNOTED $17,922 $18,756
Interest expense (9,316) (11,135)
Depreciation and amortization (10,350) (10,410)
Interest, fee and other income 3,596 2,776
(Loss) gain on dispositions of assets (53) 194
--------------------------------------------------------------
1,799 181
Restructuring costs (Note 1) (11,137) -
Reorganization costs of subsidiary
company (Note 2) (8,755) -
--------------------------------------------------------------
(LOSS) EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES AND
NON-CONTROLLING INTERESTS (18,093) 181
Income tax (recovery) provision (2,593) 465
--------------------------------------------------------------
Loss from continuing operations before
non-controlling interests (15,500) (284)
Non-controlling interest in loss (3,029) (786)
--------------------------------------------------------------
(LOSS) EARNINGS FROM CONTINUING
OPERATIONS (12,471) 502
Net earnings from discontinued
operations of subsidiary companies
(Note 3) 6,282 374
--------------------------------------------------------------
NET (LOSS) EARNINGS FOR THE PERIOD (6,189) 876
Retained earnings, beginning of period 158,454 143,609
Excess of purchase price over stated
value of shares purchased for
cancellation (Note 4) (804) (1,431)
Adjustment to reflect adoption of new
accounting standard for income taxes
(Note 5) 788 -
--------------------------------------------------------------
RETAINED EARNINGS, END OF PERIOD $152,249 $143,054
--------------------------------------------------------------
(LOSS) EARNINGS PER SHARE
Basic
Continuing operations $(0.47) $0.02
Net (loss) earnings $(0.23) $0.03
--------------------------------------------------------------
HARROWSTON INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
March 31 December 31
2000 1999
--------------------------------------------------------------
(Unaudited)
ASSETS
Cash and cash equivalents (Note 1) $253,742 $260,130
Other current assets 137,948 139,206
Property, plant and equipment, net 250,689 256,415
Other assets 33,807 24,134
Goodwill, net 192,960 180,495
Assets of discontinued operations of
subsidiary companies 2,570 2,332
--------------------------------------------------------------
$871,716 $862,712
--------------------------------------------------------------
LIABILITIES
Bank indebtedness $783 $-
Other current liabilities 142,925 125,817
Long-term debt of subsidiary operating
companies 363,247 361,284
Other long-term liabilities 27,559 14,454
Non-controlling interests 109,193 116,525
Liabilities of discontinued operations
of subsidiary companies 1,920 10,377
--------------------------------------------------------------
645,627 628,457
--------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock (Note 4) 72,902 74,234
Retained earnings (Note 4) 152,249 158,454
Cumulative translation adjustment 938 1,567
--------------------------------------------------------------
226,089 234,255
--------------------------------------------------------------
$871,716 $862,712
--------------------------------------------------------------
HARROWSTON INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended
March 31 (In thousands of dollars) (Unaudited)
2000 1999
--------------------------------------------------------------
OPERATING ACTIVITIES
(Loss) earnings from continuing operations
adjusted for non-cash items
(Loss) earnings from continuing
operations $(12,471) $502
Depreciation and amortization 10,350 10,410
Reorganization costs (Note 2) 2,882 -
Loss (gain) on dispositions of assets 53 (192)
Future income taxes (2,175) (366)
Non-controlling interest in loss (3,029) (786)
Non-cash interest expense - 1,439
Other 665 324
--------------------------------------------------------------
(3,725) 11,331
Changes in other non-cash working capital
items 16,935 12,805
--------------------------------------------------------------
13,210 24,136
--------------------------------------------------------------
FINANCING ACTIVITIES
Repayment of long-term debt (128) -
Issue of common shares by subsidiary
company 790 -
Purchase for cancellation of common
shares (2,136) (2,969)
Decrease in other long-term liabilities (600) -
--------------------------------------------------------------
(2,074) (2,969)
--------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition (Note 6) (9,397) -
Purchase of property, plant and
equipment, net of disposals (4,717) (4,283)
Net increase in investments and other (6,001) (3,519)
--------------------------------------------------------------
(20,115) (7,802)
--------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
HELD IN FOREIGN CURRENCY 185 (1,206)
--------------------------------------------------------------
CASH (USED IN) PROVIDED FROM CONTINUING
OPERATIONS (8,794) 12,159
Cash provided from discontinued operations 1,623 282
--------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (7,171) 12,441
Cash and cash equivalents, beginning of
period 260,130 210,052
--------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $252,959 $222,493
--------------------------------------------------------------
Cash and cash equivalents as at March 31, 2000 and 1999 comprises:
Cash and short-term investments $253,742 $222,493
Bank indebtedness (783) -
--------------------------------------------------------------
$252,959 $222,493
--------------------------------------------------------------
HARROWSTON INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(All tabular figures are expressed in thousands of dollars)
(Unaudited)
1. TERMINATION OF INCENTIVE COMPENSATION RIGHTS
Effective March 31, 2000, the Company has recorded the effects of
the restructuring of its incentive compensation arrangements with two
senior executives, the terms of which included the termination of the
executives' rights under the Company's Incentive Compensation Plan
(the "ICP"). The ICP entitled the executives to purchase, at the
Company's cost, up to 10% of each of its investments and entitled them
to 10% of the Company's cash income. The $11.1 million of
restructuring costs represents the cost to the Company, including
transaction costs, of terminating the executives' rights under the
ICP.
Under the agreement, Harrowston will also pay approximately $9.2
million, including transaction costs, to purchase the executives'
participation interests in nine existing investments including
Harrowston's two principal investments, Marsulex Inc. ("Marsulex") and
Anchor Lamina Inc. ("Anchor Lamina"). As a result, Harrowston's
interest in the earnings of Marsulex will increase to 41.8% from
38.5%, and in Anchor Lamina will increase to 34.2% from 31.1%.
In connection with these arrangements, the executives will,
subject to certain conditions, use a significant portion of their
after-tax proceeds to acquire common shares of the Company in the
market.
The payments in respect of this transaction will be made in May
2000.
2. REORGANIZATION COSTS
In early 2000, Anchor Lamina announced its plans to close its
Cheshire, Connecticut facility and rationalize its U.S. distribution
facilities. The $8.8 million of reorganization costs represents the
estimated pre-tax charge to provide for these activities as well as
certain other Anchor Lamina restructuring charges. The pre-tax charge
of $8.8 million includes asset write-downs of approximately $2.9
million.
3. DISCONTINUED OPERATIONS
Real Estate
Liabilities of discontinued operations at December 31, 1999
included an $8.4 million liability related to an unsecured guarantee
issued by a subsidiary of the Company, Harrowston Developments
Corporation ("HDC"). In March 2000, HDC was fully released from its
obligation to satisfy the deficiency under the guarantee. In
connection with this release, Harrowston recorded a gain of $8.4
million in the first quarter of 2000. This gain is reduced by a tax
provision of $3.8 million, recorded to eliminate the future tax asset
applicable to this liability recorded January 1, 2000 in connection
with adopting the new accounting standard for income taxes (see Note
5).
SPI
In March 2000, Harrowston received $3.0 million representing the
balance of the net contingent proceeds owing in connection with the
1998 sale of SPI Holding Company ("SPI"). The resulting gain of $1.7
million is reported net of a tax provision of $1.3 million.
4. NORMAL COURSE ISSUER BID
Harrowston acquired for cancellation 485,400 of its Class A common
shares during the period from January 1, 2000 to March 31, 2000 at a
cost of $2,136,000. The excess of the price paid over the stated value
of the shares, aggregating $804,000, was charged to retained earnings.
The number of Class A common shares issued and outstanding at March
31, 2000 is 26,570,253.
5. ADOPTION OF NEW ACCOUNTING STANDARD FOR INCOME TAXES
The Company has adopted, effective January 1, 2000, the new
recommendations of the Canadian Institute of Chartered Accountants
relating to the accounting for income taxes which requires the use of
the liability method. Under this new accounting policy, future income
taxes will reflect the tax effect of differences between the book and
tax basis of assets and liabilities. The cumulative effect, as at
January 1, 2000, of adopting these recommendations retroactively,
without restatement of prior years is an increase in retained earnings
of $0.8 million, with corresponding adjustments to future income tax
assets and non-controlling interests.
6. ACQUISITION
On March 31, 2000, the Company acquired a 50% interest in Key
Media Ltd. ("Key Media"), an English language magazine company.
Harrowston proportionately consolidates its investment in Key Media.
7. BUSINESS SEGMENT INFORMATION
The Company operates primarily in two industries, environmental
services and manufacturing, as well as conducting its corporate
activities. The environmental services segment's operations consist of
the operations of Marsulex and the manufacturing segment's operations
consist of the operations of Anchor Lamina. Parent Company and Other
includes the operations of Wright Mogg and Associates Ltd. and
effective April 1, 2000, will include the operations of Key Media. The
results from SPI and the Company's real estate operations are
reflected as discontinued operations and accordingly are not included
in the segmented information presented below.
Reportable Operating Segments
Environmental
Services Manufacturing
-------- ------------
2000
Net sales $91,694 $53,034
========= ===========
Earnings from continuing operations before
the undernoted items $10,866 $8,996
Interest expense (4,931) (4,379)
Depreciation and amortization (7,043) (3,186)
Interest, fee and other income 753 377
(Loss) gain on dispositions of assets (79) 26
Restructuring costs - -
Reorganization costs - (8,755)
Income tax recovery 416 2,146
Non-controlling interest (328) 3,304
-------- ------------
Loss from continuing operations $(346) $(1,471)
========= ===========
Parent
Company Consolidation Consolidated
2000 and Other(1) Adjustments Total
-------- -------- ---------
Net sales 1,618 $- $146,346
======= ======= ========
Earnings from continuing
operations before the
undernoted items (2,196) $256 $17,922
Interest expense (6) - (9,316)
Depreciation and amortization (166) 45 (10,350)
Interest, fee and other
income 2,767 (301) 3,596
(Loss) gain on dispositions
of assets - - (53)
Restructuring costs (11,137) - (11,137)
Reorganization costs - - (8,755)
Income tax recovery 31 - 2,593
Non-controlling interest 53 - 3,029
-------- -------- ---------
Loss from continuing
operations (10,654) $- $(12,471)
======= ======= ========
Reportable Operating Segments
Environmental
Services Manufacturing
1999
Net sales $99,848 $54,405
========= ===========
Earnings from continuing operations
before the undernoted items $13,323 $7,044
Interest expense (5,340) (6,586)(2)
Depreciation and amortization (7,075) (3,345)
Interest, fee and other income 538 -
Gain on dispositions of assets 74 118
Income tax (provision) recovery (733) 601
Non-controlling interest (770) 1,556
-------- ------------
Earnings (loss) from continuing operations $17 $(612)
========= ===========
Parent
Company Consolidation Consolidated
and Other(1) Adjustments Total
-------- -------- ---------
1999
Net sales $- $- $154,253
======= ======= ========
Earnings from continuing
operations before the
undernoted items $(1,864) $253 $18,756
Interest expense - 791(2) (11,135)
Depreciation and
amortization (35) 45 (10,410)
Interest, fee and
other income 3,327 (1,089) 2,776
Gain on dispositions
of assets 2 - 194
Income tax (provision)
recovery (333) - (465)
Non-controlling interest - - 786
-------- -------- ---------
Earnings (loss) from
continuing operations $1,097 $- $502
======= ======= ========
(1) In 2000, the amounts include the corporate activities of the
parent company as well as the operations of Wright Mogg, acquired in
September 1999.
(2) Includes interest expense relating to Anchor's subordinated
debt of which the portion payable to Harrowston is eliminated on
consolidation.
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