Connors Bros. Income Fund Announces Second Quarter 2008 Results - Solid Performance in Seafood Offsets Weakness in Meats Business



    TORONTO, Aug. 12 /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 Su(R),
today announced its results for the quarter ended June 28, 2008. (Note:
amounts in U.S. dollars unless otherwise noted).

    Second Quarter Highlights:

    Results from the second quarter of 2008 are presented on a comparative
basis to the second quarter of 2007, which included charges related to the
recall of all red-meat products produced on one line of the Augusta, Georgia
processing facility ("the Recall"). No Recall charges were incurred in 2008.
2007 results are presented below on a pro forma basis to exclude the Recall
charges and certain non-cash asset impairment charges related to the Recall.

    
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                    Summary Results - Second Quarter 2008
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                                         Quarters ended
                          ---------------------------------------------------
                                                  June 30, 2007
                                          -----------------------------------
    (in millions, except      June 28,   Excluding       Recall    Including
     per unit data)              2008     Recall(1)   Charges(2)      Recall
                          ---------------------------------------------------

    Revenue               $     250.5  $     231.8  $     (13.5) $     218.3
    Net earnings
     (loss)               $       9.9  $       8.3  $     (34.3) $     (26.1)
    Asset impairment
     charges                        -            -  $      (3.5) $      (3.5)
    Net earnings
     (loss) per unit -
     diluted              $      0.19  $      0.16  $     (0.68) $     (0.51)
    Standardized
     distributable
     cash - CDN          C$      24.1          n/a          n/a C$      22.7
    Standardized
     distributable cash
     per unit - diluted -
     CDN                 C$      0.47          n/a          n/a C$      0.44
    Adjusted EBITDA(3)    $      19.7  $      20.8          n/a          n/a
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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

    - The Fund reported net earnings for the second quarter of 2008 of
      $9.9 million, or $0.19 per unit (diluted), as compared to a net loss
      for the second quarter of 2007 of $26.1 million, or $0.51 per unit
      (diluted), and net earnings excluding the impact of the Recall of
      $8.3 million, or $0.16 per unit (diluted).

    - Revenues increased by $18.7 million, or 8.1% to $250.5 million as
      compared to revenues excluding the impact of the Recall of
      $231.8 million for the second quarter of 2007 due to higher volume and
      pricing for the core seafood product lines in both the U.S. and Canada.

    - Adjusted EBITDA for the second quarter of 2008 decreased 5.0%
      reflecting increased expenses related to a long-term marketing program
      as well as weak performance of the meat business. Excluding the
      incremental marketing expense in 2008 and the gain on sale of certain
      non-strategic brands in 2007, adjusted EBITDA for the second quarter of
      2008 would have increased 15.7% as a result of strong seafood
      performance.

    - Standardized distributable cash for the second quarter of 2008 was
      C$24.1 million or C$0.47 per unit (diluted) as compared to
      C$22.7 million or C$0.44 per unit (diluted) for the second quarter of
      2007.

    - Standardized distributable cash and the payout ratio for the twelve
      months ended June 28, 2008 were C$30.9 million and 74.3%, respectively.

    - Net earnings increased $1.4 million to $19.4 million, or $0.38 per unit
      (diluted) for the first six months of 2008 from net earnings excluding
      Recall charges of $18.0 million, or $0.35 per unit (diluted) for the
      first six months of 2007 as a result of improved gross profit and lower
      income tax expense, offset by increased marketing expense and the gain
      on sale of certain non-strategic brands in 2007.

    "The results of the second quarter of 2008 confirmed the strength of our
core seafood business, which offset continued weakness in the meats business,"
said Chris Lischewski, president and chief executive officer of the Fund's
operating subsidiaries.
    "We improved volumes in nearly all seafood categories for the quarter,
except in the light-meat tuna and pouched tuna categories. This has enabled us
to offset continuing cost inflation and ongoing volume and margin shortfalls
in the meats business to achieve targeted profitability," continued
Lischewski. "During the past quarter, we made progress on a number of fronts
which are critical to the company's long-term success. Importantly, we
continued to invest in the design and testing of a marketing program that is
expected to further strengthen our brands by enhancing consumer awareness of
shelf-stable seafood as an important component of a healthy lifestyle. We
estimate the incremental marketing expenses for the 2008 full-year to be about
$7 million, a 60% increase versus the prior year, and we believe that this
will support longer term business growth. With respect to the meats business,
we are close to finalizing our strategic review and expect to deliver a
recommended plan of action to our Board of Trustees during the third quarter.
While we had hoped to have completed the evaluation by this time, we want to
consider all options, including divestiture of all or a part of the meats
business, before determining the best course of action. In summary, we
continue to project full year 2008 EBITDA to be down about 5% versus 2007
adjusted EBITDA of $91.2 million due to the previously announced increased
marketing spend and we are on target to sustain the current distribution level
of C$0.80 per unit."

    Second Quarter Operational and Financial Summary:

    Revenue for the second quarter of 2008 was $250.5 million as compared to
revenue excluding Recall charges of $231.8 million for the second quarter of
2007, an increase of $18.7 million or 8.1%. Revenue increased primarily as a
result of higher case-equivalent volumes of U.S. albacore products, increased
pricing of U.S. light-meat tuna products, higher pricing and volumes in U.S.
ready-to-eat products, and increased volumes of Canadian and international
seafood products, offset by lower volume in red-meat products. Case-equivalent
volumes decreased by 2.9% for the second quarter of 2008 as compared to the
second quarter of 2007 as a result of lower shipments of red-meat products
following the Recall, offset by increased volumes in U.S. and Canadian seafood
products. For the second quarter of 2008 as compared to the second quarter of
2007, seafood product volumes for the U.S. business increased 3.1%, reflecting
increased volume in the albacore and ready-to-eat categories, partially offset
by lower volumes for light-meat and pouched tuna products. Volumes for the
Canadian business were also higher for the second quarter of 2008 as compared
to the second quarter of 2007.
    Net earnings for the second quarter of 2008 were $9.9 million, or
$0.19 per unit (diluted), or $1.7 million higher than net earnings excluding
Recall charges of $8.3 million for the second quarter of 2007, or $0.16 per
unit (diluted). The improved net earnings were a result of higher gross
profits, lower depreciation expense and lower income tax expense, offset by
increased marketing expenses and the gain on sale of brands in the second
quarter of 2007.
    EBITDA for the second quarter of 2008 of $19.7 million was $1.1 million,
or 5.0%, lower than EBITDA, as adjusted to eliminate the impact of the Recall,
of $20.8 million for the second quarter of 2007 as a result of the increased
marketing investment.

    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 was C$30.9 million or Cdn$0.60 per unit
(diluted) for the twelve months ended June 28, 2008, resulting in a
Standardized distributable cash payout ratio of 74.3%, and was negatively
impacted by the costs and lost business related to the Recall and the
investment in a new ERP system (implemented in July 2008) but was benefited by
a reduction in working capital. Cash distributions during the twelve months
ended June 28, 2008 were financed from operating cash flows.
    We have defined "Distributable Cash" as EBITDA less maintenance capital
expenditures, interest paid and cash taxes. Distributable Cash for the second
quarter of 2008 was C$14.6 million, or Cdn$0.28 per unit (diluted), as
compared to the distributable cash deficit of C$25.5 million, or a deficit of
Cdn$0.50 per unit (diluted) for the second quarter of 2007. The Distributable
Cash payout ratio for the second quarter of 2008 was 70.4%. The payout ratio
for the second quarter of 2007 was not relevant due to the distributable cash
deficit. Distributable cash for the second quarter of 2007 was negatively
impacted by the Recall.
    Distributable Cash for the twelve months ended June 28, 2008 was
negatively impacted by $78.4 million in non-cash asset impairment charges and
$3.8 million in Recall charges, while benefiting from $3.1 million in gains on
insurance claims. Adjusted distributable cash, which excludes non-cash asset
impairment charges related to the Recall and a gain on insurance claims for
the twelve months ended June 28, 2008 was C$67.4 million, or C$1.31 per unit
(diluted). The adjusted distributable cash payout ratio for the twelve months
ended June 28, 2008 was 34.1%, and reflected the suspension of the declaration
of distributions from August 2007 through January 2008.

    Other Financial Highlights

    As of June 28, 2008, consolidated debt was $256.2 million, resulting in a
twelve-month leverage ratio of 2.9x, which is in compliance with the Fund's
senior debt facilities credit agreement.
    During the three and six months ended June 28, 2008, the Operating
Companies invested, in cash, $6.9 million and $12.4 million, respectively, in
property, plant, equipment, and intangible assets. These investments were
financed from cash from operations and borrowings under the revolving credit
facility and other debt.
    Inventory balances decreased $24.0 million to $231.0 million at June 28,
2008 from $255.0 million at March 29, 2008 as a result of increased demand for
seafood products and a sell-through of inventory during the Lenten season. Net
working capital decreased $14.4 million to June 28, 2008 from March 29, 2008.


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                          CONNORS BROS. INCOME FUND
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             EBITDA and Adjusted EBITDA (see Non-GAAP Measures)
    -------------------------------------------------------------------------
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                                                                      Twelve
                             Three months ended   Six months ended    months
                             ------------------  ------------------    ended
    (in thousands
     except for per  Jun. 28,    Jun. 30,    Jun. 28,    Jun. 30,    Jun. 28,
     unit data)         2008        2007        2008        2007        2008
                    --------    --------    --------    --------    --------

    Net earnings
     (loss)         $  9,931    $(26,094)   $ 19,423    $(16,367)   $(37,372)

    Add interest
     expense, net      4,487       4,297       8,915       8,586      18,668
    Add (less)
     income taxes
     (benefit)         1,791      (1,126)      3,612         222      11,352
    Depreciation       2,486       4,364       5,383       8,741      13,076
    Amortization of
     intangibles       1,044       1,040       2,088       2,078       4,176
                    --------    --------------------    --------------------
      EBITDA          19,739     (17,519)     39,421       3,260       9,900
    Adjustments:
    Add impact of
     product recall        -      34,806           -      34,806       3,751
    Trademark
     intangibles
     impairment
     charge                -       3,500           -       3,500      78,446
    Gain on
     insurance
     claims                -           -           -           -      (3,076)
                    --------    --------    --------    --------    --------
      Adjusted
       EBITDA       $ 19,739    $ 20,787    $ 39,421    $ 41,566    $ 89,021
                    --------    --------    --------    --------    --------
                    --------    --------    --------    --------    --------

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                          CONNORS BROS. INCOME FUND
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                       Results of Operations - Quarter
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                                         Three months ended
                          ---------------------------------------------------
                                                    June 30, 2007
                                          -----------------------------------
    (in thousands, except     June 28,   Excluding       Recall    Including
     earnings per unit)          2008     Recall(1)   Charges(2)      Recall
                          ---------------------------------------------------

    Volume - equivalent
     cases                      7,268        7,485            -            -

    Revenue               $   250,498  $   231,769  $   (13,475) $   218,294
    Gross profit               39,319       34,916      (25,292)       9,624
    Selling, general
    and administrative
     expenses                  22,919       23,260            -       23,260
    Non-cash asset
     impairment charges             -            -        3,500        3,500
    Product recall
     expenses                       -            -        9,514        9,514
    Net interest
     expense                    4,487        4,297            -        4,297
    Other (income)
     expense, net                 191       (3,727)           -       (3,727)
    Net earnings (loss)   $     9,931  $     8,251  $   (34,345) $   (26,094)
    Net earnings (loss)
     per unit - basic     $      0.20  $      0.16  $     (0.68) $     (0.52)
    Net earnings (loss)
     per unit - diluted   $      0.19  $      0.16  $     (0.68) $     (0.52)

    (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 - Year-to-Date
    -------------------------------------------------------------------------
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                                            Six months ended
                          ---------------------------------------------------
                                                    June 30, 2007
                                          -----------------------------------
    (in thousands, except     June 28,   Excluding       Recall    Including
     earnings per unit)          2008    Recall (1)  Charges (2)      Recall
                          ---------------------------------------------------

    Volume - equivalent
     cases                     14,678       16,332            -            -

    Revenue               $   493,043  $   481,856  $   (13,475) $   468,381
    Gross profit               80,675       72,273      (25,292)      46,981
    Selling, general and
    administrative
     expenses                  48,644       45,076            -       45,076
    Non-cash asset
     impairment charges             -            -        3,500        3,500

    Product recall
     expenses                       -            -        9,514        9,514
    Net interest expense        8,915        8,586            -        8,586
    Other income, net              81       (3,550)           -       (3,550)
    Net earnings (loss)   $    19,423  $    17,978  $   (34,345) $   (16,367)
    Net earnings (loss)
     per unit - basic     $      0.39  $      0.35  $     (0.68) $     (0.32)
    Net earnings (loss)
     per unit - diluted   $      0.38  $      0.35  $     (0.68) $     (0.32)
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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


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                          CONNORS BROS. INCOME FUND
    -------------------------------------------------------------------------
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           Standardized Distributable Cash (see Non-GAAP Measures)
    -------------------------------------------------------------------------
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                                                                      Twelve
                             Three months ended   Six months ended    months
                             ------------------  ------------------    ended
    (in thousands
     except for per  Jun. 28,    Jun. 30,    Jun. 28,    Jun. 30,    Jun. 28,
     unit data)         2008        2007        2008        2007        2008
                    --------    --------    --------    --------    --------

    Cash provided
     by operating
     activities     $ 30,813    $ 25,567    $ 46,868    $ 51,850    $ 53,141
      Less capital
       expenditures    6,911       4,976      12,442      11,172      22,537
                    --------    --------    --------    --------    --------
      Standardized
       Distri-
       butable
       Cash - USD     23,902      20,591      34,426      40,678      30,604
    Average exchange
     rate for the
     period           1.0100      1.1010      1.0080      1.1370      1.0100
                    --------    --------    --------    --------    --------
      Standardized
       Distri-
       butable
       Cash -
       CDN (C$)  C$ $ 24,141 C$ $ 22,671 C$ $ 34,701 C$ $ 46,251 C$ $ 30,910
                    --------    --------    --------    --------    --------
                    --------    --------    --------    --------    --------

    Cash
     distri-
     butions
     declared    C$ $ 10,299 C$ $ 17,371 C$ $ 17,165 C$ $ 34,742 C$ $ 22,955
    Standardized
     Distri-
     butable
     Cash payout
     ratio              42.7%       76.6%       49.5%       75.1%       74.3%

    Standardized
     Distributable
     Cash per
     trust unit
    Weighted
     average units
     outstanding -
     basic            50,190      50,619      50,339      50,781      50,351
      Basic      C$ $   0.48 C$ $   0.45 C$ $   0.69 C$ $   0.91 C$ $   0.61
    Weighted
     average
     units
     outstanding
     - diluted        51,470      51,470      51,470      51,470      51,470
      Diluted    C$ $   0.47 C$ $   0.44 C$ $   0.67 C$ $   0.90 C$ $   0.60
    Cash Distri-
     butions per
     unit -
     basic       C$ $   0.21 C$ $   0.34 C$ $   0.34 C$ $   0.68 C$ $   0.46
    Cash Distri-
     butions per
     unit -
     diluted     C$ $   0.20 C$ $   0.34 C$ $   0.33 C$ $   0.67 C$ $   0.45

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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, August 13, 2008, at 8:30 a.m. Eastern Time. Please call
416-644-3419 or 1-800-731-5774 to access the call. The call will be webcast
live and archived on the Fund's web site at www.connors.ca. 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 August 20, 2008, at 11:59 p.m. Eastern Time. To access the rebroadcast,
please dial 416-640-1917 or 1-877-289-8525 and quote passcode 21278246#.

    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 six months ended
June 28, 2008, 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 particula r, 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.
    
    %SEDAR: 00016892E




For further information:

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

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