Connors Bros. Income Fund Announces Fourth Quarter and 2007 Year Results - Despite Challenges in Meats Business, Seafood Delivered a Record Year



    TORONTO, March 25 /CNW/ - Connors Bros. Income Fund (TSX: CBF.UN) (the
"Fund"), whose subsidiaries market consumer food products under brands such as
Bumble Bee(R), Clover Leaf(R), Brunswick(R), Castleberry's(R) and Sweet
Sue(R), today announced its results for the year ended December 31, 2007.
(Note: amounts in U.S. dollars unless otherwise noted).
    Fourth quarter results included charges related to the Recall (defined
below) and a non-cash asset impairment charge to recognize the diminished
value of meats business assets. Excluding these items, Adjusted EBITDA was up
3.9% as strong seafood performance offset lost sales and profit from the meats
business. Financial highlights for the quarter are presented in the table
below.

    
    Fourth Quarter Highlights:

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                    Summary Results - Fourth Quarter 2007
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                                              Quarters ended
                               ----------------------------------------------
                                       December 31, 2007
                               ----------------------------------
    (in millions, except per   Excluding      Recall   Including      Dec 31,
     unit data)                 Recall(1)  Charges(2)     Recall        2006
                               ----------------------------------------------

    Revenue                    $   225.6   $    (2.3)  $   227.9   $   239.3
    Net earnings (loss)        $    11.1   $   (82.2)  $   (71.1)  $    18.0
    Asset impairment charges           -   $   (78.4)  $   (78.4)          -
    Net earnings (loss) per
     unit - diluted            $    0.22   $   (1.63)  $   (1.41)  $    0.35
    Adjusted EBITDA(3)         $    25.2         n/a         n/a   $    24.3
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    (1) Pro forma net earnings excluding Recall charges and non-cash asset
        impairment charges
    (2) Includes Recall charges and non-cash asset impairment charges
    (3) Adjustments to EBITDA include elimination of impact of recall
        charges, gains on insurance claims, non-cash asset impairment
        charges, and restructuring and other transition costs.


    - The Fund reported a net loss for the fourth quarter of 2007 of
      $71.1 million, or a loss of $1.41 per unit as a result of recall
      charges and a $78.4 million non-cash charge related to impairment of
      goodwill, intangible assets and property, plant and equipment located
      in Augusta, Georgia. Excluding the impact of non-cash asset impairment
      charges and recall charges, pro forma net earnings for the quarter
      would have been $11.1 million.

    - Revenues decreased by $11.4 million, or 4.8% to $227.9 million due to
      lower meat and poultry sales as a result of halted shipments following
      a recall of certain U.S. meat products announced in July 2007 (the
      "Recall").

    - Market shares for seafood products remained strong in both the U.S. and
      Canada behind the Bumble Bee(R) and Clover Leaf(R) brands,
      respectively, maintaining the company's position as the leading branded
      seafood company in North America by a solid margin.

    - EBITDA for the fourth quarter of 2007, as adjusted to exclude the
      impact of the items noted above, increased by 3.9% to $25.2 million
      from $24.3 million for the fourth quarter of 2006 reflecting strong
      seafood performance offset by lost meat sales.

    - Standardized distributable cash for the fourth quarter was a negative
      (C$7.1) million or (C$0.14) per unit (diluted) due to increases in
      year-end working capital, Recall costs and capital expenditures for a
      new ERP system. No distributions were paid in the quarter due to the
      temporary suspension of distributions following the Recall. As such, no
      standardized distributable cash payout ratio is applicable.

    - In February 2008, Connors Trustees approved the reinstatement of
      distributions at an annualized rate of C$0.80 per unit.

    Highlights for 2007 Year:

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                               Summary Results
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                                                Years ended
                               ----------------------------------------------
                                       December 31, 2007
                               ----------------------------------
    (in millions, except per   Excluding      Recall   Including     Dec. 31,
     unit data)                 Recall(1)  Charges(2)     Recall        2006
                               ----------------------------------------------

    Revenue                    $   927.5   $   (11.1)  $   916.4   $   938.2
    Net earnings (loss)        $    43.4   $  (116.5)  $   (73.2)  $    46.5
    Asset impairment charges           -   $   (81.9)  $   (81.9)          -
    Net earnings (loss) per
     unit - diluted            $    0.84   $   (2.30)  $   (1.44)  $    0.90
    Adjusted EBITDA(3)         $    91.2         n/a         n/a   $    86.2
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    (1) Pro forma net earnings excluding Recall charges and non-cash asset
        impairment charges
    (2) Includes Recall charges and non-cash asset impairment charges
    (3) Adjustments to EBITDA include elimination of impact of recall
        charges, gains on insurance claims, non-cash asset impairment
        charges, and restructuring and other transition costs.


    - The Fund reported a net loss for 2007 of $73.2 million as a result of
      Recall charges and non-cash impairment charges related to the red meats
      assets. Excluding the non-cash asset impairment charge and the Recall
      charges, pro forma net earnings for the year would have been
      $43.4 million.

    - Revenues decreased by $21.9 million, or 2.3% due to lower meat and
      poultry sales lost as a result of halted shipments following the
      Recall. U.S. seafood revenue posted record results in 2007 due to
      successful pricing actions on top of a 1% increase in seafood
      shipments.

    - EBITDA, as adjusted to exclude the Recall, restructuring charges and
      insurance recovery gains increased by 5.8% to $91.2 million from
      $86.2 million reflecting strong seafood performance offset by lost meat
      and poultry sales.

    - Standardized distributable cash for 2007 was C$39.6 million or
      C$0.77 per unit (diluted), resulting in a standardized distributable
      cash payout ratio of 102.3%, with Recall costs and capital expenditures
      for a new ERP system offsetting reduced distributions as a result of
      the suspension of distributions.

    "We ended 2007 with solid performance in the fourth quarter, particularly
in our seafood business which continues to deliver strong results", said Chris
Lischewski, president and chief executive officer of the Fund's operating
subsidiaries. "While overall net sales were down in the quarter, this was
primarily driven by lost meat product sales following the Recall. We were able
to deliver a 7.2% improvement in gross profit driven by seafood pricing taken
to recover raw material cost increases, improved product mix as a larger part
of our sales came from more profitable seafood products, and lower freight and
warehousing costs as we begin to see the benefit of the distribution center
consolidation we completed in 2007. These factors contributed to a 3.9%
increase in adjusted EBITDA in the fourth quarter."
    "In looking back at 2007 as a whole, despite rising costs and an intensely
competitive environment, we were able to build on our position as the leading
branded seafood company in North America. While many categories in which we
compete were flat to down in 2007, we were able to increase our overall
seafood shipments, and coupled with price increases, we delivered a 4.5%
increase in seafood revenue versus 2006. Our factories performed well in 2007
in handling this record volume and contributed to a 70 basis point improvement
in gross margin. We made significant progress in the development of our new
ERP system which is scheduled to be implemented in 2008, and we increased our
leadership in the seafood sustainability arena through the establishment of a
company sustainability fund and an outreach program to other stakeholders to
maintain and increase our stewardship of our important seafood resources."
    "The most notable event for the company in 2007 was, however, the recall
of meat products produced on one production line of our Augusta, Georgia
factory. The Recall resulted in a $38 million pretax charge to earnings for
the year and resulted in the suspension of distributions for a six month
period that ended with the reinstatement of distributions announced in
February. As a result of the Recall, in the fourth quarter, we recorded a
one-time, non-cash impairment charge to earnings of $78.4 million to recognize
the decreased value of the meat business' tangible and intangible assets. In
addition, in February we announced that we were evaluating strategic options
for this business to determine whether it can meet our strategic and financial
expectations. We expect to complete the initial evaluation by the end of the
second quarter of 2008 which could lead to the divestiture of part or all of
the meats business."

    Impact of New Marketing Plan in 2008

    The company also announced a new marketing campaign to be launched in
2008. "As the shelf stable seafood market leader in both the U.S. and Canada,
we are committed to ensuring that the categories in which we compete are
healthy and that we continue to increase our market share," continued
Lischewski. "In 2008, we are implementing a more aggressive marketing campaign
to increase awareness of the Bumble Bee and Clover Leaf brand names, and to
communicate to consumers the many benefits of our products. We are planning a
national launch of a campaign in Canada this year, and are test marketing
concepts in the U.S. with the intent of launching nationally in 2009. We
estimate the incremental marketing spending in 2008 to be about $7 million, a
60% increase versus the prior year. We believe this increased spending in 2008
and 2009 will result in higher sales and EBITDA in future years, although a
period of investment will be required to execute a successful marketing
launch. As a result of this investment, we expect 2008 full year EBITDA to be
down about 5% versus 2007 Adjusted EBITDA of $91.2 million. The marketing
investment was considered at the time of the reinstatement of distributions,
as was the strategic review of the meats business. As a result, we are
confident in the company's ability to sustain the distribution level of C$0.80
per unit. "

    Fourth Quarter Operational and Financial Summary:

    Revenue for the fourth quarter of 2007 was $227.9 million as compared to
$239.3 million for the fourth quarter of 2006, a decrease of $11.4 million or
4.8%. Case-equivalent volumes decreased by 16.9% as a result of the Recall
with meats and poultry products accounting for the majority of the decrease.
Seafood volume was down 6.2% reflecting category declines in light meat tuna
due to significant cost increases passed on in pricing, and aggressive
promotional activity by competitors during the fourth quarter of 2007.
Excluding light meat tuna volume, U.S. seafood volumes were flat versus the
fourth quarter of 2006. Fourth quarter revenue was $225.6 million, down
$13.7 million or 5.7% versus year ago when excluding the benefit of a
$2.3 million credit to sales as a result of Recall allowance adjustments.
    The net loss for the fourth quarter was $71.1 million as a result of a
$78.4 million non-cash impairment charge taken to recognize the diminished
value of the red meat assets following the Recall. In addition, the reserve
for Recall related items was increased by $3.8 million in the quarter. Higher
gross profit as a result of improved seafood margins, factory efficiencies,
lower freight and warehousing expense, and favourable product mix was offset
by a $4.0 million increase in selling, general and administrative expenses.
SG&A was up due to the accelerated write-off of the existing ERP system, and
increases in workers compensation and contract services expenses.
    Fourth quarter adjusted EBITDA, excluding the impact of the Recall,
restructuring, and insurance recovery gains, increased by $0.9 million, or
3.9%, to $25.2 million.

    Standardized Distributable Cash and Distributable Cash

    In the second quarter of 2007, the Fund began to measure and report on
standardized distributable cash, a new measure of distributable cash
recommended by the Canadian Institute of Chartered Accountants. This
measurement is most meaningful on a full year basis as seasonal changes in
working capital may have a significant impact on a quarter's performance which
is not indicative of the cash generation of the business. As a result, the
Fund reports standardized distributable cash over a 12 month period.
    Standardized distributable cash for the 12 months ended December 31, 2007
was C$39.6 million or C$0.77 per unit (diluted), resulting in a standardized
distributable cash payout ratio of 102.3%, with Recall costs and capital
expenditures for a new ERP system offsetting reduced distributions as a result
of the suspension of distributions announced in August 2007. Distributions in
excess of standardized distributable cash for the twelve months ended
December 31, 2007 were paid from cash flows from operations, as capital
expenditures were financed, in part by new borrowing.
    We have defined "distributable cash" as EBITDA less maintenance capital
expenditures, interest paid and cash taxes. Distributable cash for the
fourth quarter of 2007 was a negative (C$58.7) million, or (C$1.16) per unit
(diluted), compared to distributable cash of C$21.1 million, or C$0.41 per
unit (diluted) for the fourth quarter of 2006. The negative distributable cash
in 2007 reflects the $81.9 million write-down of assets associated with the
red meats business.
    Excluding the Recall charges, asset impairment charges, insurance gains,
and restructuring charges, adjusted distributable cash for the twelve months
ended December 31, 2007 was C$75.7 million or C$1.47 per unit (diluted),
resulting in an adjusted distributable cash payout ratio for the twelve months
ended December 31, 2007 of 53.6%. The payout ratio for the 12 months ended
December 31, 2007 reflects the suspension of distributions for August through
December 2007.

    Other Financial Highlights

    As of December 31, 2007, consolidated debt was $275.3 million, resulting
in a twelve-month leverage ratio of 3.0x, which is in compliance with the
Fund's senior debt facilities credit agreement.
    During the three and twelve months ended December 31, 2007, the company
invested $5.7 million and $21.3 million, respectively, in property, plant, and
equipment (including a $2.5 million payment for the new ERP platform which had
been accrued at December 31, 2006), and, in the first quarter of 2007 made a
$6.1 million investment for a minority position in a tuna processing business
headquartered in Thailand. These investments were financed primarily from cash
from operations, insurance proceeds earmarked for reinvestment, and additional
borrowing.
    Inventory balances increased to $275.8 million from $259.2 million at
September 29, 2007, an increase of $16.6 million as a result of the year-end
inventory build of seafood products prior to the Lenten season sales in
Q1 2008. Overall net working capital decreased $26.4 million as compared to
ending balances on December 31, 2006.


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                          CONNORS BROS. INCOME FUND
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             EBITDA and Adjusted EBITDA (see Non-GAAP Measures)
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                                  Three months ended     Twelve Months Ended
                               ----------------------  ----------------------
    (in thousands
     except for                  Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
     per unit data)                 2007        2006        2007        2006
                               ----------  ----------  ----------  ----------
    Net earnings (loss)        $ (71,091)  $  17,989   $ (73,162)  $  46,477

    Add interest expense, net      5,447       4,416      18,339      16,653
    Add debt issuance costs
     related to extinguished
     debt                              -           -           -       4,321
    Add (less) income taxes
     (benefit)                     7,358      (1,333)      7,962       3,004
    Depreciation                   3,314       2,514      16,434      10,122
    Amortization of
     intangibles                   1,045       1,019       4,165       4,166
                               ----------   ---------------------  ----------
    EBITDA                       (53,927)     24,605     (26,262)     84,743
    Adjustments:
    Add impact of product
     recall                        3,751           -      38,557           -
    Add Non-cash Asset
     Impairment Charges           78,446           -      81,946           -
    Add (less) restructuring
     and other transition costs
     (recovery)                        -        (348)          -       1,529
    Gain on insurance claims      (3,076)          -      (3,076)        (77)
                               ----------  ----------  ----------  ----------
    Adjusted EBITDA            $  25,194   $  24,257   $  91,165   $  86,195
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------
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                          CONNORS BROS. INCOME FUND
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                       Results of Operations - Quarter
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                                             Three months ended
                               ----------------------------------------------
                                          Dec. 31, 2007              Dec. 31,
                               ----------------------------------
    (in thousands, except      Excluding      Recall   Including
     earnings per unit)         Recall(1)  Charges(2)     Recall        2006
                               ----------------------------------------------

    Volume - equivalent cases      7,072                   8,514

    Revenue                    $ 225,565   $   2,334   $ 227,899   $ 239,270
    Gross profit                  44,604      (2,691)     41,913      41,590
    Selling, general and
     administrative               23,996           -      23,996      20,400
    expenses
    Asset impairment charges           -      78,446      78,446           -
    Product recall expenses            -       1,060       1,060           -
    Restructuring and other
     transition costs                  -           -           -        (348)
    Net interest expense           5,447           -       5,447       4,416
    Gain on insurance
     settlement                   (3,076)          -      (3,076)          -
    Other (income) expense,
     net                            (227)          -        (227)        466
    Net earnings (loss)        $  11,106   $ (82,197)  $ (71,091)  $  17,989
    Net earnings (loss)
     per unit - basic          $    0.22   $   (1.63)  $   (1.41)  $    0.35
    Net earnings (loss)
     per unit - diluted        $    0.22   $   (1.63)  $   (1.41)  $    0.35

        (1) Pro forma net earnings excluding Recall charges and non-cash
            asset impairment charges
        (2) Includes Recall charges and non-cash asset impairment charges


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                      Results of Operations - 2007 Year
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                                                  Years ended
                               ----------------------------------------------
                                          Dec. 31, 2007              Dec. 31,
                               ----------------------------------
    (in thousands, except      Excluding      Recall   Including
     earnings per unit)         Recall(1)  Charges(2)     Recall        2006
                               ----------------------------------------------

    Volume - equivalent
     cases                        29,584                  32,037

    Revenue                    $ 927,497   $ (11,141)  $ 916,356   $ 938,225
    Gross profit                 156,370     (27,983)    128,387     151,673
    Selling, general and
     administrative               90,258           -      90,258      80,648
    expenses
    Asset impairment charges           -      81,946      81,946           -
    Product recall expenses            -      10,574      10,574           -
    Restructuring and other
     transition costs                  -           -           -       1,529
    Net interest expense          18,339           -      18,339      16,653
    Debt issuance costs
     related to extinguished
     debt                              -           -           -       4,321
    Gain on insurance
     settlement                   (3,076)          -      (3,076)        (77)
    Other income, net             (4,454)          -      (4,454)       (882)
    Net earnings (loss)        $  43,380   $(116,542)  $ (73,162)  $  46,477
    Net earnings (loss)
     per unit - basic          $    0.86   $   (2.30)  $   (1.44)  $    0.91
    Net earnings (loss)
     per unit - diluted        $    0.84   $   (2.30)  $   (1.44)  $    0.90

        (1) Pro forma net earnings excluding Recall charges and non-cash
            asset impairment charges
        (2) Includes Recall charges and non-cash asset impairment charges


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                          CONNORS BROS. INCOME FUND
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           Standardized Distributable Cash (see Non-GAAP Measures)
    -------------------------------------------------------------------------
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                            Three months ended              Years ended
                          -----------------------     -----------------------
    (in thousands
     except for per         Dec 31,       Dec 31,       Dec 31,       Dec 31,
     unit data)               2007          2006          2007          2006
                          ---------     ---------     ---------     ---------

    Cash provided
     by operating
     activities           $ (1,523)     $  8,078      $ 58,123      $ 30,179
    Less capital
     expenditures            5,713         3,168        21,267         7,608
                          ---------     ---------     ---------     ---------
      Standardized
       Distributable
       Cash - USD           (7,236)        4,910        36,856        22,571
    Average exchange
     rate for the
     period                 0.9790        1.1373        1.0750        1.1341
                          ---------     ---------     ---------     ---------
      Standardized
       Distributable
       Cash - C$      C$  $ (7,084) C$  $  5,584  C$  $ 39,620  C$  $ 25,598
                          ---------     ---------     ---------     ---------
                          ---------     ---------     ---------     ---------
    Cash
     distributions
     declared         C$         -  C$  $ 17,371  C$  $ 40,532  C$  $ 69,484
    Standardized
     Distributable
     Cash payout
     ratio                     n/a         311.1%        102.3%        271.4%

    Standardized
     Distributable
     Cash per trust
     unit
    Weighted
     average units
     outstanding
     - basic                50,639        50,962        50,639        51,232
      Basic           C$  $  (0.14) C$  $   0.11  C$  $   0.78  C$  $   0.50
    Weighted
     average units
     outstanding
     - diluted              50,639        51,470        51,470        51,470
      Diluted         C$  $  (0.14) C$  $   0.11  C$  $   0.77  C$  $   0.50
    Cash
     Distributions
     per unit
     - basic          C$  $      -  C$  $   0.34  C$  $   0.80  C$  $   1.36
    Cash
     Distributions
     per unit
     - diluted        C$  $     -   C$  $   0.34  C$  $   0.79  C$  $   1.35

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        Note - The Fund has adopted the recommendations of CICA Interpretive
        Release - Standardized Distributable Cash in Income Trusts and Other
        Flow-Through Entities, which defines standardized distributable cash.


    Conference Call and Webcast

    The Fund will host a conference call to review its financial results on
Wednesday, March 26, 2008, at 11:00 a.m. Eastern Time. Please call
416-644-3419 or 1-800-732-6179 to access the call. The call will be webcast
live and archived on the Fund's web site. After opening remarks, there will be
a question and answer session for participants.
    A taped rebroadcast will be available to listeners following the call
until April 1, 2008, at midnight. To access the rebroadcast, please dial
1-877-289-8525 and quote passcode 21265426#.

    Non-GAAP Measures

    EBITDA, adjusted EBITDA, distributable cash and adjusted distributable
cash are not recognized measures and do not have standardized meanings under
Canadian generally accepted accounting principles. Standardized distributable
cash has been defined by the Canadian Institute of Chartered Accountants,
however it is also a non-GAAP measure. Accordingly, these measures may not be
comparable to similar measures presented by other issuers. Please refer to the
Fund's Management's Discussion and Analysis for the three and twelve months
ended December 31, 2007, which is available at www.sedar.com, for additional
information concerning these measures and a reconciliation of these measures
to the relevant GAAP measure for the periods presented.

    Forward Looking Statements

    Certain statements contained or incorporated by reference in this news
release constitute forward-looking statements. The use of any of the words
"anticipate", "continue", "estimate", "expect", "may", "will", "project",
"should", "believe" and similar expressions are intended to identify
forward-looking statements. These statements are based on, but not limited to,
management's assessment of such factors as expected consumer demand, resource
supply, and competitive environment. These statements involve known and
unknown risks, uncertainties and other factors, including those described in
the Annual Information Form of the Fund under Risk Factors that may cause
actual results or events to differ materially from those anticipated in such
forward-looking statements. The Fund believes the expectations reflected in
the forward-looking statements are reasonable but no assurance can be given
that these expectations will prove to be correct and such forward-looking
statements included in, or incorporated by reference into, this news release
should not be unduly relied upon. These statements speak only as of the date
of this news release. In particular, this news release contains
forward-looking statements pertaining to distributable cash and distributions
per unit. The Fund does not undertake any obligation to publicly update or
revise any forward-looking statements, except as required by securities laws.

    About Connors Bros. Income Fund

    Connors Bros. Income Fund indirectly owns, through its subsidiaries, a
100% interest in Clover Leaf Seafoods, L.P. and Bumble Bee Foods, LLC.
Together, these two operating companies comprise North America's largest
branded seafood company, offering a full line of canned tuna, salmon, sardine
and specialty seafood products, marketed under leading brands including Clover
Leaf(R), Bumble Bee(R), Brunswick(R), Snow's(R) and Beach Cliff(R), as well as
a full-line of canned chicken and canned meat products in the U.S. under the
American Originals(TM), Castleberry's(R), and Sweet Sue(R) brand names. For
further information, please visit the Fund's website at www.connors.ca.
    




For further information:

For further information: Kent McNeil, Executive Vice President & Chief
Financial Officer, Connors Bros., Ltd., (858) 715-4076

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