Specialty Foods Group Income Fund Announces Financial Results for the First Quarter of 2009



    TORONTO, May 22 /CNW/ - Specialty Foods Group Income Fund (the "Fund")
(NEX: HAM.UN.H) today announced financial results for the quarter ended March
28, 2009. The Fund indirectly holds an interest in Specialty Foods Group, Inc.
("SFG" or the "Company").
    EBITDA from Continuing Operations for the first quarter of 2009 was $7.4
million compared with $4.9 million in the first quarter of 2008.
    Operating income from Continuing Operations for the first quarter of 2009
was $5.7 million compared with $3.5 million for the first quarter of 2008. Net
sales from continuing operations for the first quarter of 2009 were $61.4
million compared with $57.0 million in the first quarter of 2008. This
increase was due to both a $0.08 per pound increase in average selling price,
and an increase in sales volume of 0.9 million pounds compared with the first
quarter of 2008.
    On April 24, 2009, the Company entered into a $15.0 million revolving
credit agreement with Harris N.A., replacing its previous revolving credit and
term loan agreement with The CIT Group/Business Credit, Inc. The new credit
line will allow the Company improved access to borrowing and flexibility over
the prior facility.
    The Board of Directors of the Company has approved payment of accrued and
unpaid interest of approximately $6,974,135 of Convertible Subordinated
Debentures (CSDs) issued by the Company and Specialty Foods Group Canada
Holdings Inc. ("SFG Canada"). Payment will be made to noteholders of record on
June 15, 2009 and will be payable on or before June 30, 2009. The Fund will
not resume distributions to its unitholders at this time.
    Nathan's and SMG are still operating under the agreement and Order of the
Court, which prevented Nathan's termination from taking effect on July 31,
2008. SFG continues to abide by the existing contract with Nathan's Famous
Systems Inc. ("NFSI"). We have been taking all appropriate steps to protect
our rights under the existing License Agreement and intend to continue to do
so.
    A recap of the selected financial and operating information follows.

    Results of Continuing Operations for the quarters Ended March 28, 2009
and March 29, 2008.

    
    Consolidated Statement of Operations
                                               Quarter Ended   Quarter Ended
    (in thousands of U.S. dollars)            March 28, 2009  March 29, 2008
    -------------------------------------------------------------------------
    Net Sales                                  $      61,365   $      56,987
    Cost of Goods Sold                                47,535          45,789
    -------------------------------------------------------------------------
      Gross Profit                                    13,830          11,198
    Selling, General and Administrative Expenses       6,393           6,343
    Amortization                                       1,682           1,201
    Restructuring                                         29             161
    -------------------------------------------------------------------------
      Operating Income                                 5,726           3,493
    Loss on Sale of Fixed Assets                           -             (41)
    Gain on Foreign Currency Translation
     & Transactions                                      920           4,158
    Amortization of Deferred Financing Fees
     and Debt Discount                                  (127)           (731)
    Interest Expense                                  (3,180)         (3,090)
    -------------------------------------------------------------------------
      Income from Continuing Operations
       before Income Taxes                             3,339           3,789
    Income Taxes                                         245               -
    -------------------------------------------------------------------------
      Income from Continuing Operations before
       Non-Controlling Interest                        3,094           3,789
    Non-Controlling Interest in Continuing
     Operations                                        1,081             658
    -------------------------------------------------------------------------
    Income from Continuing Operations          $       2,013   $       3,131
      Income from Discontinued Operations
       before Non-Controlling Interest                     -          11,602
    Non-Controlling Interest in
     Discontinued Operations                               -           3,146
    -------------------------------------------------------------------------
    Income from Discontinued Operations                    -           8,456
    -------------------------------------------------------------------------
      Net Income                               $       2,013   $      11,587
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Calculation of EBITDA from Continuing
    -------------------------------------
     Operations:
     -----------

    Net Income from Continuing Operations      $       2,013   $       3,131
    Non-Controlling Interest in Continuing
     Operations                                        1,081             658
    Amortization                                       1,682           1,201
    Loss on Sale of Fixed Assets                           -              41
    Gain on Foreign Currency Translation
     & Transactions                                     (920)         (4,158)
    Restructuring                                         29             161
    Amortization of Deferred Financing Fees
     and Debt Discount                                   127             731
    Income Taxes                                         245               -
    Interest Expense                                   3,180           3,090
    -------------------------------------------------------------------------
    EBITDA from Continuing Operations
     - U.S. $                                  $       7,437   $       4,855
    EBITDA from Continuing Operations - Cdn $  $       9,235   $       4,872
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    An Annual And Special Meeting of Unitholders will be held at 3:00 PM EST
on June 12, 2009 at Torys LLP, 79 Wellington St. W., Toronto, Ontario M5K 1N2
Canada in room 33 South 1, 33rd Floor. A Special Resolution will be considered
to approve an amendment to the Fund's Declaration of Trust to provide for the
appointment of a corporate trustee of the Fund, as detailed below, and in the
Management Information Circular, mailed today to Unitholders of record on
April 20, 2009.
    The Fund relies on advances from the Company, which is a subsidiary of
the Fund, or subsidiaries of the Company to fund its expenses and has no other
sources of funding available to it.
    The Company has issued approximately US$58 million of convertible secured
debentures which mature December 14, 2011 (the "Debentures").
    Pursuant to a shareholder agreement, the holders of the Debentures have
the right to appoint (and have appointed) four of the possible six directors
of SFG Parent, Inc., the result being that none of the Trustees serves as a
director of SFG Parent, Inc.
    As a result of the desire to conserve cash, the Company and its
subsidiaries have advised the Fund that they are considering ceasing to
advance further funds to the Fund. Furthermore, should this occur the Trustees
do not believe it is likely that the Fund will be able to access other funding
necessary for the Fund to continue paying Trustees' fees or to continue to
function as a reporting issuer in good standing under applicable Canadian
securities legislation. Accordingly, the Fund will likely be unable to
maintain itself as a reporting issuer in good standing with the result likely
to be that Canadian securities regulators will issue an order or orders
cease-trading the Units. If such an order is issued, it will no longer be
possible to trade units of the Fund until the Fund is brought back into good
standing.
    Given that the Company has indicated that it will no longer fund the
Trustee fees, the existing Trustees of the Fund do not wish to stand for
re-election. The Fund is not aware of any other individual that is willing to
serve as a Trustee. In order to replace the existing Trustees, the Board of
Directors of the Company is proposing that the Declaration of Trust be amended
to allow a corporation to serve as a Trustee of the Fund. The Declaration of
Trust of the Fund currently provides that any person that is not an individual
is disqualified from being a Trustee of the Fund. 644580 N.B. Inc. is the sole
nominee for Trustee, and if the proposed amendment of the Declaration of Trust
is approved, it will serve as a Trustee of the Fund without remuneration. This
will allow the existing Trustees to be replaced, and save the Fund the cost of
Trustees' fees. The corporate Trustee would be a subsidiary of SFG and
Unitholders have no rights with respect to the election of directors of SFG.
    If the amendment to the Declaration of Trust is not approved, 644580 N.B.
Inc. cannot be elected as Trustee and one of the existing Trustees will be
compelled under the terms of the Declaration of Trust to remain as Trustee
until a successor Trustee is appointed. If one of the existing Trustees is so
compelled to remain as a Trustee, the Fund understands that the intention of
such Trustee will be, through court order or other appropriate steps, to seek
approval to withdraw as a Trustee, in which event the Fund will be without
Trustees and will have incurred substantial costs.
    The special resolution must be passed, with or without variation, by the
affirmative votes of the holders of more than 66 2/3% of the Units represented
at the Meeting in person or by proxy and voted on a poll upon such special
resolution.
    The full report for the Fund and the Management Information Circular have
been filed with the Canadian securities regulatory authorities and are
available on the internet at the System for Electronic Document Analysis and
Retrieval (SEDAR) website (www.sedar.com) and may be downloaded from the
company's website (www.sfgtrust.com).

    Specialty Foods Group Income Fund is an open-ended, limited purpose trust
established under the laws of the Province of Ontario, which indirectly holds
an interest in SFG. SFG is a leading independent U.S. producer and marketer of
premium branded and private-label processed meat products. SFG sells a wide
variety of products such as franks, hams, bacon, luncheon meats, and
delicatessen meats. These products are sold to a diverse customer base in the
retail (e.g. supermarkets) and foodservice (e.g., restaurants) sectors. SFG
sells products under a number of leading national and regional brands, such as
Nathan's, Field, Fischer's, Mickelberry's, and Scott Petersen as well as on a
private-label basis.

    This news release contains forward-looking statements. Such statements
involve known and unknown risks, uncertainties and other factors outside of
management's control. The Fund does not assume responsibility for the accuracy
and completeness of those forward-looking statements and does not undertake
the obligation to publicly revise these forward-looking statements to reflect
subsequent events or circumstances.

    
    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.
    

    %SEDAR: 00018733E




For further information:

For further information: Steve Wright, Chief Financial Officer, Tel:
(757) 952-1200, Email: investorrelations@sfgtrust.com, Website:
www.sfgtrust.com

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SPECIALTY FOODS GROUP INCOME FUND

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