Armtec Infrastructure Income Fund today reported financial results for the year and fourth quarter ended December 31, 2006 and finishes the year on a positive note.

“2006 was a very important year with several key accomplishments as we continued to execute on our growth strategy. Operating results improved in every measure of performance as we benefited from the healthy demand in public infrastructure across Canada and new investments in natural resource projects, particularly in Western Canada,” said Charles Phillips, President and Chief Executive Officer. “As 2007 unfolds, we are confident about the underlying strength of our company as we build upon the momentum that has been established and we remain steadfastly focused on delivering profitable growth for our unitholders.”

RESULTS OF OPERATIONS
Operating Results for the period ended December 31

Fourth Quarter Year Ended
(in thousands of 2006 2005 2006 2005
Canadian dollars) (unaudited) (unaudited)
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Revenue 35,825 35,765 166,166 154,904
Cost of sales 24,642 25,066 113,555 107,836
Amortization of property,
plant and equipment 909 924 3,493 3,676
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Gross Margin 10,274 9,775 49,118 43,392
As a % of revenue 28.7% 27.3% 29.6% 28.0%

Distribution and warehousing 1,913 2,031 8,555 7,932
Selling, general and
administrative 5,685 5,491 21,719 20,022
Amortization of
intangible assets 536 550 2,428 2,210
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Earnings from operations 2,140 1,703 16,416 13,228
Interest and financing
expenses 421 302 2,328 1,661
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Net earnings before taxes 1,719 1,401 14,088 11,567
Interest and financing
expenses 421 302 2,328 1,661
Total amortization 1,445 1,474 5,921 5,886
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EBITDA(1) (unaudited) 3,585 3,177 22,337 19,114
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As a % of Revenue 10.0% 8.9% 13.4% 12.3%

Highlights for the Year Highlights for the Quarter
———————– ————————–
- Revenue grew by 7.3% - Consistent revenues
- Gross margin improved to 29.6% - Gross margin improved to 28.7%
from 28.0% from 27.3%
- EBITDA(1) increased 16.9% to - EBITDA(1) increased 12.8% to
$22.3 million due to revenue $3.6 million due to improved
growth at improved margins margins
- Generated distributable cash(2) - Generated distributable cash(2)
of $18.6 million of $2.5 million
- Declared distributions of - Declared special distribution
$15.9 million, up 17% over of $0.17 per unit
prior year

Full Year Results

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Revenues increased by $11.3 million or 7.3% to $166.2 million for the year ended December 31, 2006 compared to revenues of $154.9 million for the year ended December 31, 2005. The revenue increase was due primarily to the continued strength in public infrastructure markets across the country and the growth in demand from certain resource markets. The diversity of the end markets and geographic regions resulted in the Fund reporting growth despite declines in some markets. In 2006, the Fund recorded growth in all geographic regions with public infrastructure investment across Canada considered to be the main driver of the increase in revenues. The Fund’s resource market also reported growth with increased revenues from investment in mining and energy projects, particularly in Western Canada, offsetting a softer forestry sector in 2006 as compared to 2005 levels. Building trades remained consistent with 2005 levels. However, the agricultural market in Ontario and Quebec continued to be soft in 2006 with poor installation conditions in conjunction with unfavourable farming economics negatively affecting this sector’s demand for drainage tubing.

Gross margin for the year ended December 31, 2006 was $49.1 million, an improvement of $5.7 million, or 13.2% over the $43.4 million earned in 2005. On a percentage basis, the gross margin improved to 29.6% of revenue in 2006 from 28.1% in 2005. The improvement was primarily attributed to increased sales revenues with a favourable product mix - a result of success in the promotion of engineered solutions and the Fund’s continued efforts to respond to raw material price fluctuations. The continuing focus on lean manufacturing across all manufacturing locations has also contributed through production efficiencies which result in a more consistent manufacturing output and better utilization of raw materials.

EBITDA(1) for the year ended December 31, 2006 was $22.3 million compared to $19.1 million in the year ended December 31, 2005, an increase of $3.2 million, or 16.9%. The growth in EBITDA(1) was principally due to a 7.3% growth in revenue with improved margins, which increased gross margin before depreciation by $5.5 million. This improvement was partially offset by a $1.7 million increase related to additional selling, general and administrative expenses and a $0.6 million increase in distribution and warehousing costs as compared to 2005.

The Fund generated $18.6 million in distributable cash(2) during 2006 and declared distributions totalling $15.9 million including a special distribution in the fourth quarter of $0.17 per unit. Comparatively, the Fund generated $16.0 million in distributable cash(2) and declared distributions totalling $13.5 million in 2005. During 2006, the Fund declared a special distribution for the third year in a row and monthly distribution levels were increased twice during the year. Distributions in the fourth quarter of 2005 included a $0.22 per unit special distribution.

Fourth Quarter Results

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Revenues for the fourth quarter of 2006 were consistent with 2005 at $35.8 million. Pipe revenues increased marginally to $23.5 million in the fourth quarter of 2006 as compared to $23.2 million in 2005. Infrastructure sales, particularly in Western Canada, improved over 2005 levels. Agricultural shipments were lower than volumes in the comparable quarter of 2005 due to a combination of poor economic and installation conditions.

Gross margin for the three months ended December 31, 2006 was $10.3 million or 28.7% of sales which was a $0.5 million improvement over the $9.8 million or 27.3% of sales in 2005. The improvement was primarily attributed to favourable product mix and continuing price leadership in response to raw material price fluctuations.

EBITDA(1) for the fourth quarter of 2006 was $3.6 million or 10.0% of revenues, compared to $3.2 million or 8.9% of revenues in the comparable quarter in 2005. The improvement was the result of improved gross margins in the quarter.

During the fourth quarter, the Fund generated $2.5 million in distributable cash(2) and declared distributions totalling $5.8 million including a $1.8 million special distribution ($0.17 per unit). Distributable cash(2) for the fourth quarter of 2005 was $2.4 million with declared distributions of $5.0 million. Distributions are higher than the comparable quarter of 2005 as distributions per unit were higher and there were an increased number of units outstanding. An additional 1,289,000 units were issued on October 26, 2006 to which distributions were made.

Outlook

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The diversity of the markets served by Armtec helps insulate the Fund from significant fluctuations in any one market or geographic region. The outlook for infrastructure markets remains stable as a result of the spending increases and multi-year commitments announced in the 2006 provincial budgets. The next budgets are to be announced in the spring and will be an important barometer of activity in 2007. The 2006 business acquisitions in Alberta and Saskatchewan and production expansion in Alberta will increase Armtec’s manufacturing capacity in this active marketplace.

The outlook for natural resource markets is mixed. Investment activity in energy and mining projects is expected to continue, but further growth beyond levels reached in 2006 is not anticipated. The implementation of the softwood lumber agreement should be a positive factor for the forestry sector in Canada, although when and how this resolution will impact forestry demand cannot be predicted. Agricultural markets appear to be improving due to rising crop prices and farm economies as a result of increased demand for ethanol. The Fund’s demand from residential markets is expected to be consistent with prior years.

A new linear corrugator purchased by Armtec, which will commence production in 2007, positions Armtec as the only manufacturer of both high density polyethylene pipe and corrugated steel pipe in the province of Alberta. The expanded ability to offer both HDPE and steel should position Armtec as a supplier of choice in this very active region. Resources such as proven oil, uranium and potash reserves are expected to generate new investment in Saskatchewan. Armtec is well-positioned to capitalize on anticipated growth opportunities through the recent acquisition of the culvert division of Prairie Steel.

The 2006 addition of the BEBO concrete arch bridge systems and CONTECH Stormwater Solutions(TM) to Armtec’s product offering is expected to contribute to revenues in 2007. Both new product lines are complementary to Armtec’s current product offering and customers will now have access to a broader range of solutions that should generate additional revenues with minimal capital outlay. The management of storm water and run-off has become a significant aspect of drainage design in the United States as a result of increased environmental awareness. The new offering of a complete line of storm water quality management products in Canada establishes Armtec as a coast-to-coast supplier in a market with strong growth potential. BEBO is a concrete arched bridge system that provides Armtec access to new markets in Central and Western Canada with a product that meets longer span bridge requirements of the marketplace. In February 2007, the Fund received its first BEBO order. The 42 foot bridge system will be used for a stream crossing in the James Bay area of Quebec.

The Fund expects sustaining capital expenditures for 2007 to be consistent with historical levels. In addition to these expenditures the Fund expects to complete the installation of the new ERP system during fiscal 2007.

Taxability of 2006 Distributions

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Of the distributions declared in 2006, 10.8% was a return of capital and the remaining 89.2% was subject to income tax in the hands of unitholders.

For More Information

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Armtec’s full annual consolidated financial statements, notes to financial statements and management’s discussion and analysis are available at www.sedar.com or at www.armtecincomefund.com.

Conference Call & Webcast

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Management will host a conference call at 10:00 a.m. (ET) on Friday, March 9, 2007 to discuss the results. Investors who wish to participate can access the call using the following numbers: 416-849-9305 or 1-866-838-4337. The call will be webcast live and archived on the Armtec website at www.armtecincomefund.com. A taped rebroadcast will be available to listeners following the call until 12 a.m. on Friday, March 16, 2007. To access the rebroadcast, please dial 416-915-1035 or 1-866-245-6755 and quote the pass code 463101 followed by the number sign.

About Armtec

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Armtec is a leading manufacturer and marketer of drainage products and engineered solutions for infrastructure applications in a diverse cross-section of industries, including the public infrastructure market and private sector markets such as natural resources, residential drainage and agricultural drainage in Canada. Armtec is Canada’s only national multi-material manufacturer specializing in corrugated high-density polyethylene pipe, corrugated steel pipe and related engineered products. Armtec also distributes a broad range of water control and geosynthetic products, and manufactures and distributes certain high value-added engineered products internationally.

Non-GAAP Measures

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References to “EBITDA” are to earnings before interest, taxes (other than capital taxes), depreciation and amortization. Management believes that in addition to net earnings, EBITDA is a useful supplemental measure of cash available for distribution prior to debt service, changes in working capital, capital expenditures and taxes. However, EBITDA is not a recognized measure under Canadian GAAP. Investors are cautioned that EBITDA should not be construed as an alternative to net earnings determined in accordance with GAAP as an indicator of the Fund’s performance or as an alternative to cash flows from operating, investing and financing activities as a measure of the Fund’s liquidity and cash flows. The Fund’s method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, the Fund’s EBITDA may not be comparable to similarly titled measures used by other issuers.

“Distributable cash” is not a defined term under Canadian GAAP but is determined by the Fund as net earnings for the period adjusted to remove non-cash items, including amortization and future income taxes, and reduced by capital expenditures excluding items that are considered growth related. Management believes that distributable cash is a useful measure of performance as it provides investors with an indication of the amount of cash available for distribution to unitholders. Investors are cautioned, however, that distributable cash should not be construed as an alternative to using net earnings as a measure of profitability or the statement of cash flows. Furthermore, the Fund’s method of calculating distributable cash may not be comparable to other similarly named calculations.

Risks and Uncertainties

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The Fund is subject to certain risks and uncertainties that could have a material adverse effect on Armtec’s results of operations, business prospects, financial condition, cash distributions to unitholders and the trading price of the Fund’s units. These uncertainties and risks include, but are not limited to: industry cyclicality; competition; acquisition and expansion; capital and liquidity; reductions in demand for Armtec’s products; collections from customers; relationships with suppliers; lack of long-term agreements; expiration of rights under license and distribution arrangements; availability and price volatility of raw materials; product liability; intellectual property; reliance on key personnel; collective bargaining agreements; interest rates; uninsured and underinsured losses; environment, health and safety requirements; operating hazards; risk of future legal proceedings; securities laws compliance and corporate governance changes; tax law changes; dependence of the Fund on Armtec Limited Partnership; and certain risks associated with the structure of the Fund including income tax matters; leverage and restrictive covenants; credit facility; nature of units; effect of market interest rates on the price of units; restrictions on potential growth; and cash distributions are not guaranteed. Further information about these and other risks and uncertainties can be found in the disclosure documents filed by Armtec Infrastructure Income Fund with the securities regulatory authorities, available at www.sedar.com.

Forward-Looking Statements

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This MD&A may contain “forward-looking” statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements contain such words as “may”, “will”, “expect”, “believe”, “plan” and other similar terminology. These statements reflect current expectations regarding future events and operating performance and speak only as of March 8, 2007.

Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under “Risks and Uncertainties”. Although the forward-looking statements contained in this report are based upon what management of Armtec believes are reasonable assumptions, the Fund can not assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this MD&A and the Fund assumes no obligation to update or revise them to reflect new events or circumstances.

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(1) EBITDA is not a defined term under Canadian GAAP. For more
information, refer to the Non-GAAP Measures section of this press
release.
(2) Distributable cash is not a defined term under Canadian GAAP.
For more information, refer to the Non-GAAP Measures section of this
press release.

For further information

Armtec Limited Partnership, Charles M. Phillips, President and Chief Executive Officer, Tel: (519) 822-0210
Armtec Limited Partnership, R. John Slattery, Senior Vice President, Finance and Chief Financial Officer, Tel: (519) 822-0210

Source: Armtec Infrastructure Income Fund