Legumex Walker Reports Third Quarter 2012 Financial Results

- Third quarter marked by a key acquisition, a strengthening balance sheet, and the evolution of our corporate structure in preparation for the canola processing facility coming online in 2013 -

WINNIPEG, Nov. 13, 2012 /CNW/ - Legumex Walker Inc. (TSX: LWP) (the "Company") today reported its financial results for the three months and nine months ended September 30, 2012.  All figures are in Canadian dollars unless otherwise stated.

Highlights for the Three Months Ended September 30, 2012

• Revenues of $56.5 million for the three months ended September 30, 2012 compared to $41.4 million for the 79-day period beginning July 14, 2011 and ending September 30, 2011 (the "79-day period in 2011");
• Gross profit for the three months ended September 30, 2012 was $3.1 million ($88 per tonne, excluding plant costs) compared with $4.4 million ($94 per tonne, excluding plant costs) for the 79-day period in 2011;
• Loss before interest, taxes, depreciation and amortization, and other items of $2.0 million for the three months ended September 30, 2012 compared to EBITDA¹ of $1.9 million for the 79-day period in 2011;
• Net loss for the three months ended September 30, 2012 of $5.5 million, or $0.40 per share compared to a net loss of $2.5 million, or $0.22 per share, for the 79-day period in 2011;
• Special Crops segment loss before interest, taxes, depreciation and amortization, and other itemsof $0.3 million for the three months ended September 30, 2012 compared to EBITDA¹$2.5 million for the 79-day period in 2011;
• Cash flow used in operations¹ of $4.9 million for the three months ended September 30, 2012 compared to cash flow provided by operations of $3.0 million for the 79-day period in 2011;
• Pacific Coast Canola LLC ("PCC") expanded its agreement with CHS Inc. to include the sales of canola oil products produced at the PCC canola processing facility in Warden, Washington;
• PCC completed the hiring of all essential plant staff including six department managers and the General Manager, Matt Upmeyer;
• Anthony Kulbacki was promoted to Chief Operating Officer, Special Crops Division and David Carefoot was hired as Chief Financial Officer.

Highlights Subsequent to the Three Months Ended September 30, 2012

• Acquired Keystone Grain Ltd. ("Keystone"), a leading Manitoba-based processor and marketer of sunflowers, flax, specialty crops and organic commodities;
• Completed a bought-deal offering, including exercise of over-allotment option by the Underwriters, of 2,135,500 common shares at $7.75 per share for gross proceeds of $16,550,125.

"During the third quarter we continued to make progress in strengthening our Company to capitalize on the significant growth opportunities inherent across our business," said Joel Horn, President and Chief Executive Officer, Legumex Walker Inc.  "The quarter was highlighted by the acquisition of Keystone Grain and the successful equity offering that added over $15 million to our balance sheet.  However, despite a strong performance in our bean business and growth from our acquisitions in the U.S. and expansion in China, we experienced a slowdown in sales for certain of our commodities, especially lentils and peas, which dampened our Q3 results. At the same time, we continued to steadily advance towards the start-up of operations of the Pacific Coast Canola facility on schedule in the first quarter of 2013, and we expanded our canola marketing agreement with CHS Inc. to include the sales of PCC canola oil products. This agreement provides access to some of the world's largest food processors and distributors.  With the first commercial-scale canola processing facility west of the Rockies, we are well positioned to capitalize on the anticipated long-term growth in demand for canola."

Mr. Horn continued, "The third quarter is typically the most volatile in the special crops industry and our profits were negatively impacted as buyers of certain products postponed purchases based on the expectation of a larger and less expensive new crop. As a company, we also passed on some low margin business due to heightened credit risk. However, we took the steps to invest in plant efficiencies to allow us to compete for these lower priced contracts going forward. We continue to see signs of improved importer sentiment, which combined with depleted stock in many markets, give us cause to expect a return to normal volumes in the fourth quarter."

Results for the Three Months Ended September 30, 2012

Total consolidated sales for the three months ended September 30, 2012 was $56.5 million compared to $41.4 million for 79-day period in 2011. The year over year increase is primarily attributable to incremental sales from the US operations acquired in February 2012, offset by lower shipping volumes from Canada. Revenue was generated entirely from sales from the Special Crops Segment through the sale of pulse and other special crops.

Selling, general, and administrative expenses for the three months ended September 30, 2012 were $5.6 million compared to $2.6 million for the 79-day period in 2011. These 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. The Company has deemed $0.4 million of its selling, general and administrative costs during the quarter to be non-recurring costs attributable to events and factors related to the acquisition of St. Hilaire Seed Company and assets of Anderson Seed Company, the acquisition of Keystone, integration activities and the structuring of its foreign subsidiaries.

Loss before interest, taxes, depreciation and amortization, and other items for the three months ended September 30, 2012 was $2.0 million compared to EBITDA¹ of $1.9 million for the 79-day period in 2011.

Net loss for the three months ended September 30, 2012 was $5.5 million, or $0.40 per share compared to a net loss of $2.5 million, or net loss per share of $0.22 for the 79-day period in 2011. Excluding the impact of certain charges related to management's estimate of non-recurring costs, gain on sale of investment and foreign exchange and derivative gains and losses, write-down of investment and other assets, the adjusted net loss¹ was $4.6 million, or $0.34 per share for the three months ended September 30, 2012 compared to adjusted net earnings¹ of $0.8 million, or $0.07 per share for the 79-day period in 2011.

Special Crops

Sales for the three months ended September 30, 2012 was $56.5 million compared to $41.4 million for the 79-day period in 2011. The year over year increase is primarily attributable to incremental sales from the US operations acquired in February 2012, offset by lower shipping volumes from Canada. The third quarter is typically the most volatile for the special crops business depending on the timing of harvest, as the market transitions from old crop to new crop and the Company undertakes plant shutdowns for regular maintenance. During the third quarter of 2011, a larger carry-out of a poorer quality and lower value crop favoured sales of old crop over new crop and enhanced sales. During the third quarter of 2012, the expectation of a larger and less expensive new crop caused some buyers to delay purchases. The Company also deliberately reduced sales to some markets where compressed margins did not justify the associated credit risk.

Gross profit for the three months ended September 30, 2012 was $3.1 million compared with $4.4 million for the 79-day period in 2011. Gross margin per tonne, after excluding plant costs, for the three months ended September 30, 2012 was $88 per tonne compared to $94 per tonne for the 79-day period in 2011.

Special Crops segment loss before interest, taxes, depreciation and amortization, and other itemsfor the three months ended September 30, 2012 was $0.3 million compared to EBITDA¹ of $2.5 million for the 79-day period in 2011.

Oilseed Processing

Construction of the Pacific Coast Canola processing facility continues to proceed on schedule and the Company continues preparations for the start-up operations, expected during the first quarter of 2013.

Operating expenses for the three months ended September 30, 2012 were approximately $0.5 million. All borrowing costs incurred by the Oilseed Processing segment were capitalized as plant costs.

Results for the Nine Months Ended September 30, 2012

Total consolidated sales for the nine months ended September 30, 2012 was $190.8 million.

Selling, general, and administrative expenses for the nine months ended September 30, 2012 were $14.3 million.  Approximately $1.8 million of selling, general and administrative costs during the first nine months of 2012 were deemed by management to be non-recurring costs.

EBITDA¹ for the nine months ended September 30, 2012 was $2.6 million.  Net loss for the nine months ended September 30, 2012 was $7.2 million, or $0.52 per share, and includes the impact of non-cash foreign exchange and non-recurring charges.  Excluding non-cash foreign exchange and non-recurring charges, adjusted net loss¹ for the nine months ended September 30, 2012 was $6.4 million, or $0.47 per share.

Special Crops

Sales for the Special Crops segment for the nine months ended September 30, 2012 were $190.8 million.

Cost of sales for the nine months ended September 30, 2012 was $175.7 million, resulting in a gross profit of $15.1 million. Gross margin per tonne, after and excluding fixed plant costs was $104 per tonne.

EBITDA for the Special Crops segment for the nine months ended September 30, 2012 was $6.3 million.

Oilseed Processing

Operating expenses for the nine months ended September 30, 2012 were $1.0 million. All borrowing costs incurred by PCC during the quarter were capitalized as PCC Plant costs.

¹Non-GAAP Measures

This press release contains references to "Loss before interest, taxes and depreciation and amortization", "EBIT", "EBITDA", "Cash Flow from Operations", "Non-recurring Costs" and "Adjusted Net Earnings." EBIT is defined for the purposes of this MD&A as earnings from operations before other income and expenses, finance costs, income taxes and non-recurring costs. EBITDA is defined for the purposes of this MD&A as earnings from operations before other income and expenses, depreciation and amortization, finance costs, non-recurring costs and income taxes. Cash Flow from Operations is defined for the purposes of this MD&A as the cash from or used in operating activities excluding non-cash working capital changes. Management believes excluding the seasonal swings of non-cash working capital assists in evaluation of long-term liquidity. Non-recurring Costs is defined as one-time costs deemed to be non-recurring by management relating to acquisitions, financing and other corporate activities. Adjusted Net Earnings is defined for the purposes of this MD&A as 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. Management uses Cash Flow from Operations as a financial measure of liquidity. EBIT, EBITDA, Cash Flow from Operations and Adjusted Net Earnings are not recognized earnings measures under Canadian Generally Accepted Accounting Principles or IFRS (collectively referred to herein as "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 income 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 believes that EBIT, EBITDA and cash flow from operations are useful supplemental measures of cash flow prior to debt service, investing and financing activities and income taxes. The Company also believes that Adjusted Net Earnings is a useful supplemental measure of net earnings prior to giving effect to certain items. 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.

Financial Statements and MD&A

Legumex Walker's financial statements and management's discussion and analysis ("MD&A") for the periods ended September 30, 2012 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 Wednesday, November 14, 2012 at 8:30 a.m. ET to discuss its third quarter 2012 financial results. 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 Wednesday, November 21, 2012 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 64030763.

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.  Legumex Walker has 14 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 positive trend in demand for special crops; construction, staffing and operations of the PCC Plant, the growth of the Company's business. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company (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 the Company's Management's Discussion and Analysis for the period ended September 30, 2012, which is available on SEDAR at www.sedar.com and which should be reviewed in conjunction with this document. Although the Company 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 the Company 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. The Company 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.

SOURCE: Legumex Walker Inc.