E.D. Smith Income Fund reports financial results for fiscal 2006



    - Strategic acquisitions and restaged E.D. Smith jams drive growth -

    WINONA, ON, March 9 /CNW/ - E.D. Smith Income Fund (TSX: JAM.UN) today
reported its financial results for the fourth quarter and fiscal year-ended
December 31, 2006. Comparative figures for the fiscal year-ended December 31,
2005 include results from the predecessor company, EDS Holdings Inc. All
figures are reported in Canadian dollars.

    Financial and operational highlights for the fourth quarter include:

    
    -   Revenue increased 50% to $72.0 million compared to $47.9 million for
        the fourth quarter of 2005;
    -   Revenue from E.D. Smith brand jam products increased 46% compared to
        the fourth quarter of 2005, following the launch of new packaging
        design in May 2006;
    -   Revenue from U.S. retail products increased 121% compared to the
        fourth quarter of 2005, primarily due to the acquisition of Seaforth
        Creamery ("Seaforth") in June 2006;
    -   When excluding restructuring costs of approximately $2.8 million,
        EBITDA(i) increased 8% to $4.6 million.

    Financial and operational highlights for the fiscal year include:

    -   Revenue increased 30% to $245.4 million compared to $189.0 million in
        2005;
    -   Revenue from E.D. Smith brand jam products increased 26% compared to
        2005, following the launch of new packaging design in May 2006;
    -   Revenue from U.S. retail products increased 72% compared to 2005,
        driven by the acquisition of Seaforth in June 2006 and organic
        revenue growth of 17%;
    -   EBITDA increased 37% to $18.7 million from $13.6 million in 2005.
    

    "2006 was a year marked by solid growth in revenue and EBITDA," said
Martin Thrasher, Interim Chief Executive Officer, E.D. Smith. "As a result of
our acquisitions of North Coast in 2005 and Seaforth in 2006, E.D. Smith is a
much stronger business. We have expanded beyond our Canadian foundation in
jams and condiments to build a leading North American position in private
label salad dressings. While we are pleased with our progress, the business
was impacted with significant challenges in the fourth quarter. Growth in
salad dressings was dampened by the fresh spinach E. coli scare, and margins
across the Fund were under pressure from higher input costs. Additionally, we
incurred restructuring costs of $2.8 million during the quarter, as we
accelerated the integration of our acquired businesses and positioned the
combined business for future success."

    Financial Results for the Quarter

    Revenue for the fourth quarter increased 50% to $72.0 million from
$47.9 million for the fourth quarter of 2005. The increase was primarily
attributable to the acquisitions of Seaforth and Golden Valley during the
second quarter of 2006, and exchange adjusted organic growth of 8% in U.S.
retail products, partially offset by the termination of the HP Foods agreement
on January 1, 2006.
    Direct margin for the quarter increased 48% to $12.3 million, or 17.1% of
revenue, from $8.4 million, or 17.5% of revenue in the fourth quarter of 2005.
The decrease as a rate to sales was due to higher input costs, including soya
oil and tomato paste, as well as the cost of supporting certain categories to
defend against U.S. competitors.
    Excluding restructuring costs of approximately $2.8 million, EBITDA for
the quarter increased 8% to $4.6 million compared with $4.3 million for the
same quarter in 2005. Restructuring costs included expenses related to
integrating the acquired businesses, and employee-related expenses associated
with reducing headcount. Net loss for the quarter was $3.9 million compared to
net earnings of $2.1 million for the fourth quarter of 2005. The loss was
mainly attributable to restructuring costs and increased selling, general and
administrative costs ("SG&A"). SG&A costs were higher primarily due to the
inclusion of the SG&A costs of the acquired businesses, higher professional
fees and integration costs.
    During the quarter, the Fund had negative distributable cash(ii) of
$170 thousand and declared distributions totaling $5.2 million. Excluding
restructuring costs, the Fund's payout ratio for the quarter was 202%. In
December 2006, the Fund announced a reduction in its monthly distributions
from $0.0854 to $0.05 per unit.

    Distributable Cash Flow ($000's except per unit amounts)
    

                                                  Three months  Three months
                                                         ended         ended
                                                   December 31,  December 31,
                                                          2006          2006
    -------------------------------------------------------------------------
    Cash provided by (used) operating activities         7,769        11,951
    Distributable cash flow has been adjusted
     by the following:
    Change in working capital balances                  (8,158)        1,531
    Non-cash current income tax expense                     89           323
    Cash income taxes paid (net of recovery)               244            42
    Maintenance capital expenditures                      (114)         (859)
    -------------------------------------------------------------------------
    Distributable cash flow                               -170        12,988
    -------------------------------------------------------------------------
    Per unit on weighted average outstanding units
    and Exchangeable LP Units                      $   (-.0072)        .6564
    -------------------------------------------------------------------------
    Distributions declared                               5,244        19,568
    -------------------------------------------------------------------------
    Per unit on weighted average outstanding units
    And Exchangeable LP units                      $    0.2209        0.9890
    Payout Ratio                                           N/A        150.7%
    Weighted Average Outstanding Units and
     Exchangeable LP Units                          23,743,902    19,785,569
    

    Financial Results for Fiscal 2006

    Revenue for the year increased 30% to $245.4 million from $189.0 million
for fiscal 2005. The increase is primarily attributable to the acquisitions of
Seaforth and Golden Valley, offset partially by the termination of the HP
Foods agreement.
    Direct margin for the year increased 51% to $47.2 million, or 19.2% of
revenue, compared with $31.3 million, or 16.5% of revenue for fiscal 2005. The
improvement in comparable direct margin rates was attributable to lower
branded jam restage costs, higher direct margin rates achieved on the acquired
Seaforth business, and price increases implemented with select U.S. customers
during the first quarter of 2006.
    EBITDA for the year increased 37% to $18.7 million from $13.6 million for
fiscal 2005. Net earnings for the year was $5.3 million. Net earnings
comparisons for the year are not available due to the differences in corporate
structure prior to the public offering of the Fund on June 3, 2005.
    During fiscal 2006, the Fund generated distributable cash of
$13.0 million and declared distributions totaling $19.6 million, resulting in
a payout ratio of 151%. Excluding restructuring costs of $4.0 million and fair
market value adjustments to the inventories of Seaforth and Golden Valley
earlier in the year, the Fund's fiscal 2006 payout ratio was 111%.
    As at December 31, 2006, the Fund had working capital of $28.4 million,
compared to working capital of $28.6 million as at December 31, 2005. The
Fund's revolving term credit facility had an outstanding balance of
$75.5 million as at December 31, 2006, with approximately $9.5 million
available for possible acquisitions and general working capital purposes.
    A payment of $18.5 million has been accrued in satisfaction of the final
installment of the purchase price for the Seaforth acquisition subject to
final verification by the vendor. Proceeds for the payment will be provided
from a $20.0 million letter of credit that has been arranged for the specific
purpose of making this final installment.

    Operational Highlights

    Canadian retail products revenue for the fourth quarter was
$38.0 million, a 52% or $13.0 million increase from the same period in 2005,
excluding the impact of the HP Foods agreement. The increase was mainly
attributable to the acquisition of Seaforth, which accounted for $11.0 million
in Canadian retail private label revenue for the quarter. Overall private
label revenue was impacted by retailers' continued support of national brands
at the expense of their private label programs and increased competition from
U.S. manufacturers taking advantage of the stronger Canadian dollar. Revenue
from private label salad dressings was impacted by an E. coli contamination of
fresh spinach, which weakened demand for salads and complementary products in
the U.S. and Canada. Management believes that the impact of the E. coli
concern is temporary and it is not expected to impact significantly 2007
revenues. E.D. Smith brand jam products featuring new packaging designs
launched earlier in the year, achieved strong growth of 46% compared to the
fourth quarter of 2005. However, lower revenue from other branded jam
categories and branded pie fillings offset the growth in the restaged
E.D. Smith jam.
    U.S. retail products revenue for the quarter was $27.2 million, a 121% or
$14.9 million increase over the corresponding period last year. The acquired
business of Seaforth contributed $14.3 million in U.S. private label revenue
and E.D. Smith USA achieved organic growth of 8% when excluding the impact of
foreign currency.
    Foodservice products revenue for the quarter was $6.3 million, an
increase of 7% compared to the same period last year, excluding the revenue
from the HP Foods Agreement.

    Subsequent Events

    The Fund also announced that, to take full advantage of the productivity
and capacity of its manufacturing plant in Winona, Ontario, it intends to
consolidate production from its Abbotsford, British Columbia plant into
Winona. The Fund took ownership of the Abbotsford plant through the
acquisition of Golden Valley in May 2006. This will result in the closure of
the Abbotsford plant at a cost of approximately $1.0 million. The strategic
decision is expected to result in ongoing cost savings of approximately
$0.5 million per annum.

    Outlook

    "We are very excited about the prospects for our business," said Mr.
Thrasher. "Fully leveraging our new scale and capabilities is key to driving
future growth in revenue and distributable cash. We remain confident in our
ability to maintain monthly distributions at the rate of $0.05 per unit. As a
result of seasonality, we expect our first quarter to be the only quarter with
a payout ratio in excess of 100%, and we continue to target a payout ratio
between 75% to 85% for 2007."

    Notice of Conference Call

    E.D. Smith Income Fund will host a conference call on Friday, March 9,
2007 at 8:30 a.m. (ET) to discuss its fourth quarter and fiscal year 2006
financial results. To access the conference call by telephone, dial
416-644-3421 or 800-595-8550. Please connect approximately fifteen minutes
prior to the beginning of the call to ensure participation. The conference
call will be archived for replay until Friday, March 16, 2007 at midnight. To
access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and
enter the reservation number 21221621 followed by the number sign.
    A live audio webcast of the conference call will be available at
www.edsmith.com. 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. The webcast will be archived at the above web site for
30 days.

    Financial Statements

    For convenience, this press release includes the Fund's Fiscal 2006
Consolidated Balance Sheet, Consolidated Statement of Earnings and
Consolidated Statement of Cash Flows.



    
                           E. D. SMITH INCOME FUND
                         CONSOLIDATED BALANCE SHEETS

                                                         As at         As at
                                                   December 31,  December 31,
    (stated in thousands of dollars)                      2006          2005
    --------------------------------------------- ------------- -------------
                                                         $             $
    ASSETS
    Current assets
    Cash and cash equivalents                            1,334         2,066
    Accounts receivable - trade                         23,718        17,440
    Inventories                                         42,872        24,572
    Prepaid expenses                                     1,133           650
    Income taxes recoverable                               339         2,437
    Future income taxes                                    976           535
    --------------------------------------------- ------------- -------------
    Total current assets                                70,372        47,700

    Capital assets, net                                 50,754        34,915
    Deferred costs, net                                    954           496
    Intangible assets                                   96,681        48,437
    Goodwill                                            85,875        58,805
    --------------------------------------------- ------------- -------------
                                                       304,636       190,353
    --------------------------------------------- ------------- -------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current liabilities
    Accounts payable and accrued liabilities            22,293        17,861
    Purchase price payable                              18,494             -
    Distributions payable to unitholders                 1,073         1,179
    Distributions payable to exchangeable LP
     unitholders                                           115            37
    --------------------------------------------- ------------- -------------
    Total current liabilities                           41,975        19,077

    Bank credit facility                                75,466        36,717
    Future income taxes                                 11,079        16,207
    --------------------------------------------- ------------- -------------
    Total liabilities                                  128,520        72,001
    --------------------------------------------- ------------- -------------
    Non-controlling interest                            17,101         3,851
    --------------------------------------------- ------------- -------------
    Commitments and contingency
    Unitholders' equity
    Trust units issued                                 178,580       121,047
    Deficit                                            (16,993)       (4,173)
    Cumulative translation adjustment                   (2,572)       (2,373)
    --------------------------------------------- ------------- -------------
    Total unitholders' equity                          159,015       114,501
    --------------------------------------------- ------------- -------------
                                                       304,636       190,353
    --------------------------------------------- ------------- -------------



                           E. D. SMITH INCOME FUND
               CONSOLIDATED STATEMENT OF EARNINGS AND DEFICIT

    (stated in thousands of dollars except
     per unit and unit amounts)
                                                    Year ended     June 3 to
                                                   December 31,  December 31,
                                                          2006          2005
    --------------------------------------------- ------------- -------------
                                                         $             $
    Revenue                                            245,351       109,642
    --------------------------------------------- ------------- -------------
    Direct margin                                       47,152        17,809
    Selling, general and administrative costs           24,447         9,611
    Restructuring costs                                  3,991             -
    --------------------------------------------- ------------- -------------
    Earnings before interest, income taxes,
     amortization, non-controlling interest,
     and dilution gain                                  18,714         8,198
    Amortization of capital assets, intangibles
     and deferred costs                                 14,860         5,120
    Interest                                             4,283         1,237
    --------------------------------------------- ------------- -------------
    Earnings (loss) before income taxes, non-
     controlling interest, and dilution gain              (429)        1,841
    --------------------------------------------- ------------- -------------
    Income tax provision
    Current                                                323        (2,178)
    Future                                              (3,442)          (55)
    --------------------------------------------- ------------- -------------
                                                        (3,119)       (2,233)
    --------------------------------------------- ------------- -------------
    Earnings before non-controlling interest,
     and dilution gain                                   2,690         4,074
    Non-controlling interest                               167           150
    Dilution gain                                        2,786             -
    --------------------------------------------- ------------- -------------
    Net earnings for the period                          5,309         3,924
    Deficit, beginning of period                        (4,173)            -
    Distributions declared to unitholders               18,129         8,097
    --------------------------------------------- ------------- -------------
    Deficit, end of period                             (16,993)       (4,173)
    --------------------------------------------- ------------- -------------
    Earnings per unit - basic                      $      0.30   $      0.29
    --------------------------------------------- ------------- -------------
    Earnings per unit - diluted                    $      0.28   $      0.29
    --------------------------------------------- ------------- -------------

    Weighted average number of units outstanding -
     basic                                          17,973,567    13,342,489
    --------------------------------------------- ------------- -------------

    Weighted average number of units outstanding -
     diluted                                        19,439,380    13,973,560
    --------------------------------------------- ------------- -------------



                           E. D. SMITH INCOME FUND
                     CONSOLIDATED STATEMENT OF CASH FLOWS

                                                    Year Ended     June 3 to
                                                   December 31,  December 31,
    (stated in thousands of dollars)                      2006          2005
    --------------------------------------------- ------------- -------------
                                                         $             $
    OPERATING ACTIVITIES
    Net earnings for the period                          5,309         3,924
    Add (deduct) items not involving cash
      Non-controlling interest                             167           150
      Dilution gain                                     (2,786)            -
      Amortization                                      14,860         5,120
      Exchange gain on settlement of debt                 (626)            -
      Future income taxes                               (3,442)          (55)
    --------------------------------------------- ------------- -------------
                                                        13,482         9,139
    Net change in non-cash operating working
     capital balances                                   (1,531)       (3,705)
    --------------------------------------------- ------------- -------------
    Cash provided by  operating activities              11,951         5,434
    --------------------------------------------- ------------- -------------
    INVESTING ACTIVITIES
    Business acquisitions and acquisition costs        (81,644)      (69,423)
    Purchase of capital assets                          (3,959)       (2,195)
    Increase in deferred costs                          (1,378)         (406)
    --------------------------------------------- ------------- -------------
    Cash used in investing activities                  (86,981)      (72,024)
    --------------------------------------------- ------------- -------------
    FINANCING ACTIVITIES
    Issuance of trust units                             60,000       110,500
    Issuance of over-allotment units                         -        16,575
    Expenses related to issuance of trust and
     exchangeable LP units                              (4,595)      (11,624)
    Redemption of units from previous unitholders            -       (15,579)
    Increase in bank credit facility                    38,798        32,739
    Payments to previous shareholder                         -        (4,000)
    Payments on bank term loan                               -       (52,733)
    Distributions to unitholders                       (18,235)       (6,918)
    Distributions to  exchangeable LP unitholders       (1,362)         (298)
    --------------------------------------------- ------------- -------------
    Cash provided by financing activities               74,606        68,662
    --------------------------------------------- ------------- -------------
    Effect of exchange rate changes on cash and
     cash equivalents                                     (308)           (6)
    --------------------------------------------- ------------- -------------
    Net increase (decrease) in cash and cash
     equivalents during the period                        (732)        2,066
    Cash and cash equivalents, beginning of period       2,066             -
    --------------------------------------------- ------------- -------------
    Cash and cash equivalents, end of period             1,334         2,066
    --------------------------------------------- ------------- -------------

    Supplemental cash flow information
    Interest paid                                        4,898         1,105
    Income taxes paid                                       42            60
    


    About E.D. Smith Income Fund

    E.D. Smith Income Fund is an unincorporated, open-ended, limited purpose
trust that owns E.D. Smith & Sons, Limited and its subsidiaries. E.D. Smith is
a leading manufacturer of a broadly diverse portfolio of high quality branded
and private label food products. E.D. Smith, founded in 1882, markets and
distributes its products to the food retail and foodservice markets in Canada
and the U.S. The Company's products range from fruit-based products, which
include jams (including preserves, jellies, marmalades and spreads), pie
fillings, and ketchup, to sauces, which include pasta sauces, salsa, barbeque
sauces, specialty sauces and syrups, to pourable and spoonable salad dressings
and marinades.
    For further information about the Company, please visit our Internet site
at www.edsmith.com.

    Forward Looking Statements

    This press release contains "forward-looking information".
Forward-looking information includes, but is not limited to, statements with
respect to the products offered by E.D. Smith, Seaforth Creamery Inc. and the
combined business, their respective business strengths and relations with
suppliers and expected future EBITDA(i) and Adjusted EBITDA(i). In certain
cases, forward-looking information can be identified by the use of words such
as "plans", "expects" or "does not expect", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases or state
that certain actions, events or results "may", "could", "would", "might" or
"will be taken", "occur" or "be achieved". Forward-looking information
involves known and unknown risks, uncertainties and other factors that may
cause actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by
the forward-looking information. Such factors include, among others, the
successful integration of acquisitions, the financial performance of the
combined business, competitive forces, the absence or non-renewal of long-term
customer contacts, the absence of guaranteed supply agreements, factors
affecting the supply and price of raw materials, changes to its product
offerings and the market in which they are sold, government regulation, and
other operating hazards. Although the Fund has attempted to identify important
factors that could cause actual actions, events or results to differ
materially from those described in forward-looking information, 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
information will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
Accordingly, investors should not place undue reliance on forward-looking
information. Forward-looking information is provided as of the date of this
press release, and the Fund assumes no obligation to update or revise them to
reflect new events or circumstances.

    
    (i)  Earnings before interest, taxes, depreciation and amortization, non-
         controlling interest and dilution gain as disclosed on the
         consolidated statements of income. EBITDA is not a recognized
         measure under Canadian generally accepted accounting principles
         ("GAAP"), however, management believes that it is a useful
         performance measure as it approximates cash generated from
         operations, before capital expenditures and changes in working
         capital and excludes unusual items. EBITDA also assists comparison
         among companies as it eliminates the differences in earnings due to
         how a company is financed.

    (ii) Distributable Cash is not a recognized measure under Canadian GAAP;
         however, the Fund believes that distributable cash is a useful
         measure as it provides investors with an indication of cash
         available for distribution. The Fund's method of calculating
         distributable cash may differ from that of other issuers and,
         accordingly, distributable cash may not be comparable to measures
         used by other issuers. Investors are cautioned that distributable
         cash should not be construed as an alternative to the statement of
         cash flows as a measure of liquidity and cash flows of the Fund.
    
    %SEDAR: 00022102E




For further information:

For further information: Bruce Smith, Executive Vice President & CFO, E.
D. Smith Income Fund, Tel: (905) 643-1211 ext. 5220, bsmith@edsmith.com;
Trevor Heisler, Investor Relations, The Equicom Group Inc., Tel: (416)
815-0700 ext. 270, theisler@equicomgroup.com

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E.D. SMITH INCOME FUND

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