TORONTO, May 4 /CNW/ - Richards Packaging Income Fund (TSX: RPI.UN) (the "Fund") announced today results for the quarter ended March 31, 2011.
First quarter performance continued to reflect the weakness that began during the fourth quarter of 2010. Total revenue was down 0.9% with organic revenue growth at 1.6% being fully offset by the U.S./Cdn. 5¢ appreciation of the dollar. EBITDA(1) was down $0.8 million, or 13.4%, due to price erosion in selected larger accounts and higher freight costs. Gross profit and EBITDA as a percent of sales continued to run at weaker levels of 16.4% and 11.1% respectively. We expect that this trend will continue into the second quarter. Net income was down $1.1 million, or 11¢ per Unit, reflecting lower EBITDA and higher deferred income taxes.
Richards Packaging deployed the $1.1 million of cash on hand at year end to pay 2010 bonuses and invest in working capital, mainly in receivables (flat on a days' sales basis). The $1.4 million of free cash flow generated in the first quarter was utilized to pay down $0.5 million of debt and to top up working capital. Over the next six months we expect to lower our investment in inventories and make further payments on our debt.
With the distributions no longer eligible for interest deductibility the Fund utilized loss carry forwards to fully shield Canadian taxes and paid out distributions as a full return of capital. Loss carry forwards should fully shield Canadian taxes until approximately the second quarter of 2012.
The Fund paid monthly distributions of 6.55¢ per Unit during the first quarter, which represented an annualized yield of 8.5% on the March 31st closing price of $9.20 per Unit. The payout ratio(3) for the first quarter was 62%, up from 60% for 2010.
Details of the Fund's results are currently available on Richards Packaging's website at www.richardspackaging.com and on May 5th on SEDAR at www.sedar.com.
About Richards Packaging Income Fund
The Fund owns 91% of Richards Packaging Inc. ("Richards Packaging"), the leading packaging distributor in Canada, and third largest in North America. Richards Packaging is a full-service packaging distributor targeting small- and medium-sized North American businesses. Richards Packaging has operated for over 99 years and currently serves over 11,000 regional food, wine and spirits, cosmetic, specialty chemical, pharmaceutical and other companies from 20 locations throughout North America.
1 Management defines EBITDA as earnings before amortization, interest,
losses (gains) on financial instruments and taxes. EBITDA is the same
as profit from operations as outlined in the annual financial
statements after adding back amortization and patent defense costs.
Management believes that in addition to net income, EBITDA is a
useful supplemental measure for investors of earnings available for
distribution prior to debt service, capital expenditures and taxes.
Management uses this measure as a starting point in the determination
of earnings available for distribution to unitholders and
exchangeable shareholders. In addition, EBITDA is intended to provide
additional information on the operating performance. This earnings
measure should not be construed as an alternative to net income or as
an alternative to cash flows from operating, investing and financing
activities as a measure of liquidity and cash flows. EBITDA does not
have a standardized meaning prescribed by GAAP and therefore method
of calculating EBITDA may not be comparable to similar measures
presented by other companies or income trusts.
2 Management defines distributable cash flow, in accordance with
Richards Packaging's credit agreement, as EBITDA less interest, cash
income tax expense, maintenance capital expenditures and loan
payments. Free cash flow is distributable cash flow less
distributions. The objective of presenting these measures is to
calculate the amount which is available for distribution to
unitholders or exchangeable shareholders and to determine the amount
available to fund increases in working capital or expansion capital.
Investors are cautioned that distributable cash flow should not be
construed as an alternative to cash flow from operating, investing
and financing activities as a measure of the liquidity and cash
flows. Distributable cash flow does not have a standardized meaning
prescribed by GAAP and therefore the method of calculating
distributable cash flow may not be comparable to similar measures
presented by other income trusts.
3 Management defines payout ratio as distributions and dividends
declared over distributable cash flow(2). The objective of presenting
this measure is to calculate the percentage of actual distributions
in comparison to the amount available for distribution. Payout ratio
does not have a standardized meaning prescribed by GAAP. The Fund's
method of calculating the payout ratio may not be comparable to
similar measures presented by other income trusts.
4 This release contains certain forward looking information and
statements within the meaning of applicable securities laws
(collectively "Statements") regarding future growth potential,
results of operations, performance and business prospects and
opportunities of the Fund. The Statements are frequently identified
by the use of such words as "will", "may", "could", "expect", "plan",
"anticipate", "believe" and other similar terminology. Specifically
this release contains Statements with respect to compliance with
certain financial covenants and the recommencement of distributions.
These Statements reflect management's current beliefs and are based
on information currently available to the management of Richards
Packaging. A number of factors could cause actual events or results
to differ materially from those predicted, expressed or implied in
the Statements. Factors that could cause such differences include,
among other things, changes in customer and supplier relationships,
the extent and duration of the worldwide recession and the impact on
order volumes and pricing, competition in the industry, inventory
obsolescence, trade risks in respect to foreign suppliers and
fluctuations in foreign exchange and interest rates. Although the
Statements contained in this release are based upon what management
believes to be reasonable assumptions, there can be no assurance that
actual results will be consistent with these Statements. These
Statements are made as of the date of this release and the Fund
assumes no obligation to update or revise them to reflect new events
SOURCE Richards Packaging Income Fund
For further information: Gerry Glynn, Chief Executive Officer, Richards Packaging Inc., (905) 670-7760, firstname.lastname@example.org; Enzio Di Gennaro, Chief Financial Officer, Richards Packaging Inc., (905) 670-7760, email@example.com