Village Farms Income Fund Announces First Quarter 2009 Results



    
    TRADING SYMBOL: The Toronto Stock Exchange:
                    Village Farms Income Fund - VFF.UN
    

    VANCOUVER, May 15 /CNW/ - Village  Farms  Income  Fund  (the  "Fund") 
(TSX: VFF.UN) announced its results for the quarter ended March 31, 2009.

    
    First Quarter 2009 Operating Results Summary:

      -  Revenues of US$21.4 million versus first quarter 2008 sales of US$
         28.5 million;
      -  EBITDA of US$3.6 million versus US$10.0 million in the first quarter
         2008;
      -  Net income of US$640 thousand versus $3.3 million in the first
         quarter 2008;
    

    Michael DeGiglio, Chief Executive Officer of the Fund's operating
subsidiaries, stated, "We faced both market challenges and some internal
production issues in the first quarter of 2009 especially when compared to the
first quarter of 2008 which was the company's best quarterly results since
inception. The market challenges came in form of decreased consumer
consumption for fresh produce compared to 2008 resulting in an increased
supply of hydroponic tomatoes as well as some competitors facing serious
financial distress actively trying to raise cash to sustain their businesses
through lower pricing. As a result we saw a year on year decrease in our
average selling price of nearly 19%.
    Internal production issues were a result of our Texas facilities
underperforming. Production volumes were lower in the first quarter of 2009
versus 2008 due to a new variety not yielding the same pounds as our 2008
variety as well as some biological issues. The biological issues have been
addressed and we have replanted with our 2008 varieties which will have us
back on track with our 2009 fall production. We did offset some of our
internal production shortfall with additional third party produce, which
resulted in an increase of 32% in our third party business on a year on year
basis. This income stream generates a much lower margin to the Fund, but is an
integral part of our business strategy."
    DeGiglio added, "We continue to experience pricing pressure and believe
that 2009 will remain a challenging year, but are focused on creating long
term value for our shareholders through a disciplined operational and
strategic approach to our business."

    Operational Summary for the Period:

    Revenue

    Revenue for the quarter ended March 31, 2009 decreased $7,076 or 25%, to
$21,443 from $28,519 for the quarter ended March 31, 2008. The decrease in
revenue is due to both decreased produce pricing and lower winter production
in 2009 versus 2008. The decreased pricing is a result of lower consumer
consumption, an increased supply of hydroponic tomatoes from sources such as
Mexico, as well as competitive pressure as a result of some of our direct US
competitors suffering severe financial hardship.

    Gross Profit

    Gross profit for the quarter ended March 31, 2009 decreased $6,845 or
58%, to $4,871 from $11,716 for the quarter ended March 31, 2008. The decrease
in gross profit is directly due to our lower revenues. Cost of goods are in
line with the 2008 costs.

    Selling, General and Administrative

    Selling, general and administrative expenses for the quarter ended March
31, 2009 decreased $1,044 or 26% to $2,971 from $4,015 for the quarter ended
March 31, 2008. The decrease is primarily due to the first quarter of 2008
impacted by a non-cash charge of $813 from a one-time stock grant by the
majority owners of the Fund to some of its employees. Excluding this one-time
charge, first quarter 2009 administration expenses were down $231 or 7.2% from
the first quarter of 2008.

    Interest, Net

    Interest, net for the quarter ended March 31, 2009 decreased $144 to $816
from $960 for the quarter ended March 31, 2008. The decrease is due to the
continued reductions in debt levels throughout 2009 and 2008.

    Other Income (Cost)

    Other income for the quarter ended March 31, 2009 increased $1,142 to
$246 from other costs of ($896) for the quarter ended March 31, 2008. The
increase was primarily due to the recognition of a small non-cash gain on an
interest rate swaps in the first quarter of 2009 versus a large non-cash loss
on the same interest rate swaps in the first quarter of 2008, of ($863).
Additionally, the Fund recognized a gain on the sale of its former
Pennsylvania 10-acre facility in February 2009 of $156.

    Net Income

    Net income for the quarter ended March 31, 2009 decreased $2,636 to $640
from $3,276 for the quarter ended March 31, 2008. The decrease was primarily
due to a decrease in gross profit caused by lower revenues.

    EBITDA

    EDITDA for the quarter ended March 31, 2009 decreased $6,460 or 64% to
$3,573 from $10,033 for the quarter ended March 31, 2008 solely due to lower
revenues as result of increased market pressure on product pricing and lower
internal production.

    Distributions to Unitholders

    The Fund's policy is to distribute annually to unitholders available cash
provided by operations after cash required for capital expenditures, working
capital reserves, growth capital reserves and other reserves considered
advisable by the Trustees of the Fund. In light of the ongoing market
uncertainties and challenging economic times, as well as to create a reserve
for the anticipated conversion cost and Village Farms' plans to accelerate its
growth initiatives, the Trustees of the Fund believe it is prudent to conserve
cash and as such, have reduced the monthly distribution to CAD $0.005 per Unit
effective March 2009.

    Non-GAAP Measures

    EBITDA is not a recognized measure and does not have standardized meaning
under the Canadian generally accepted accounting principles. Accordingly, this
measure may not be comparable to similar measures presented by other issuers.
Please refer to the Fund's Management's Discussion and Analysis for the
quarter ended March 31, 2009, which is available at www.sedar.com, for
additional information concerning this measure and a reconciliation of this
measure to net earnings and operating cash flows, for the periods presented.

    About  Village Farms

    Village Farms is one of the largest producers, marketers and distributors
of premium-quality, greenhouse grown tomatoes, bell peppers, and cucumbers in
North America. This premium product as well as product produced under
exclusive arrangements with other greenhouse producers is grown in
sophisticated, highly efficient and intensive agricultural greenhouse
facilities located in British Columbia and Texas. Product is marketed and
distributed under the Village Farms(R) brand primarily to retail grocers and
dedicated fresh food distributors throughout the United States, Canada and
Japan. Village Farms currently operates distribution centers located in key
markets in the United States and Canada. Since its inception, Village Farms
has been guided by sustainable agricultural principles which integrate three
main goals; environmental health, economic profitability, and social &
economic equality.

    Forward Looking Statements

    This press release contains certain "forward looking statements". These
statements relate to future events or future performance and reflect our
expectations regarding our growth, results of operations, performance,
business prospects, opportunities or industry performance and trends. These
forward looking statements reflect our current internal projections,
expectations or beliefs and are based on information currently available to
us. In some cases, forward looking statements can be identified by terminology
such as "may", "will", "should", "expect", "plan", "anticipate", "believe",
"estimate", "predict", "potential", "continue" or the negative of these terms
or other comparable terminology. A number of factors could cause actual events
or results to differ materially from the results discussed in the forward
looking statements. In evaluating these statements, you should specifically
consider various factors, including, but not limited to, such risks and
uncertainties as availability of resource, competitive pressures and changes
in market activity, risks associated with U.S. and international sales and
foreign exchange, regulatory requirements and all of the other "Risk Factors"
set out in the Fund's current quarterly information form and management's
discussion and analysis for the quarter March 31, 2009, which is available
electronically at www.sedar.com. Actual results may differ materially from any
forward looking statement. Although we believe that the forward looking
statements contained in this press release are based upon reasonable
assumptions, you cannot be assured that actual results will be consistent with
these forward looking statements. These forward looking statements are made as
of the date of this press release, and other than as specifically required by
applicable law, we assume no obligation to update or revise them to reflect
new events or circumstances.



    
                          Village Farms Income Fund
                         Consolidated Balance Sheets
                   (In thousands of United States dollars)

                                          March 31, 2009   December 31, 2008
    Assets                             ------------------  ------------------
                                            (unaudited)
    Current assets:
      Cash and cash equivalents                   $1,703              $4,101
      Accounts receivable                          6,608               9,357
      Other receivables                            1,278                 567
      Inventories                                 17,264              11,438
      Assets held for sale                             -                 344
      Prepaids and deposits                          813                 544
                                       ------------------  ------------------
                                                  27,666              26,351

    Property, plant and equipment                 69,909              70,489
    Intangible assets                              1,482               1,508
    Other assets                                   1,086                 821
                                       ------------------  ------------------
      Total assets                              $100,143             $99,169
                                       ------------------  ------------------
                                       ------------------  ------------------

    Liabilities and unitholders' equity

    Current liabilities:
      Accounts payable and accrued
       liabilities                                $7,074              $9,388
      Distributions payable                          155                 317
      Operating line of credit                     4,259                   -
      Current maturities of long-term
       debt                                        3,227               3,227
      Current obligations under capital
       leases                                        223                 227
                                       ------------------  ------------------
        Total current liabilities                 14,938              13,159

      Long-term debt                              53,925              54,732
      Derivatives                                  2,717               2,801
      Obligations under capital leases               398                 472
      Future income taxes                          5,226               4,881
                                       ------------------  ------------------
        Total liabilities                         77,204              76,045
                                       ------------------  ------------------

    Unitholders' equity:

      Trust units                                 24,850              24,850
      Accumulated distributions                   (8,993)             (8,168)
      Accumulated earnings                         7,027               6,387
      Cumulative translation adjustment               55                  55
                                       ------------------  ------------------
        Total unitholders' equity                 22,939              23,124
                                       ------------------  ------------------
        Total liabilities and
         unitholders' equity                    $100,143             $99,169
                                       ------------------  ------------------
                                       ------------------  ------------------


                          Village Farms Income Fund
       Consolidated Statements of Earnings and Comprehensive Earnings
                         For the Three Months Ended
           (In thousands of United States dollars, except for units
             outstanding and per unit/share amounts, unaudtied)

                                          March 31, 2009      March 31, 2008
                                       ------------------  ------------------

    Net sales                                    $21,443             $28,519
    Cost of sales                                 16,572              16,803
                                       ------------------  ------------------
    Gross profit                                   4,871              11,716

    Selling, general and administrative
     expenses                                      2,971               4,015
                                       ------------------  ------------------
    Income from Operations                         1,900               7,701

    Interest expense, net                            816                 960
    Foreign exchange loss (gain)                     132                (141)
    Amortization of intangible assets                 26                 348
    (Gain) loss on derivatives                       (83)                863
    Other (income), net                             (165)               (174)
    (Gain) on sale of asset                         (156)                  -
                                       ------------------  ------------------
    Earnings before income taxes                   1,330               5,845

    Provision for income taxes                       690               2,569
                                       ------------------  ------------------

    Net earnings and comprehensive
     earnings                                        640               3,276
                                       ------------------  ------------------

    Net income per Unit/share-basic                $0.02               $0.09
                                       ------------------  ------------------
                                       ------------------  ------------------

    Weighted average number of
     units/shares outstanding - basic         38,707,345          36,349,305
                                       ------------------  ------------------
                                       ------------------  ------------------

    Net income per Unit/share-diluted              $0.02               $0.08
                                       ------------------  ------------------
                                       ------------------  ------------------

    Weighted average number of
     units/shares outstanding
     - diluted                                38,707,345          38,707,345
                                       ------------------  ------------------
                                       ------------------  ------------------


                          Village Farms Income Fund
                    Consolidated Statements of Cash Flows
                         For the Three Months Ended
             (In thousands of United States dollars, unaudited)

                                          March 31, 2009      March 31, 2008
                                       ------------------  ------------------

    Cash flows from operating activities:
      Net earnings                                  $640              $3,276
        Adjustments to reconcile net
         earnings to net cash provided
         by operating activities:
          Depreciation and amortization            1,378               1,693
          Loss (gain) on sale of property           (156)                  -
          Loss on derivatives                        (84)                863
          Foreign exchange loss (gain)                 -                   -
          Share based compensation                     -                 813
          Future income taxes                        345                 165
          Changes in non-cash working
           capital                                (6,146)             (2,062)
                                       ------------------  ------------------
            Net cash provided by
             operating activities                 (4,023)              4,748
                                       ------------------  ------------------

    Cash flows from investing activities:
      Purchases of property, plant
       and equipment                                (772)               (566)
      Proceeds from sale of property,
       plant and equipment                            50                   -
                                       ------------------  ------------------
        Net cash provided by (used in)
         investing activities                       (722)               (566)
                                       ------------------  ------------------

    Cash flows from financing activities:
      Proceeds (Payments on) from
       operating line of credit                    4,259                 (65)
      Payments on long-term debt                    (807)               (768)
      Payments on obligations under
       capital leases                                (78)               (103)
      Dividend payments to Unitholders
       and PPS holders                              (987)             (1,094)
      Other                                          (40)               (534)
                                       ------------------  ------------------
        Net cash provided by (used in)
         financing activities                      2,347              (2,564)
                                       ------------------  ------------------

      Foreign exchange loss (gain)                     -                   -
                                       ------------------  ------------------

    Net increase (decrease) in cash and
     cash equivalents                             (2,398)              1,618
    Cash and cash equivalents beginning
     of year                                       4,101               1,620
                                       ------------------  ------------------
    Cash and cash equivalents end of
     year                                         $1,703              $3,238
                                       ------------------  ------------------
                                       ------------------  ------------------

    Supplemental cash flow information:
      Interest paid                                 $839              $1,224
                                       ------------------  ------------------
                                       ------------------  ------------------
      Income taxes paid                               $0                 $18
                                       ------------------  ------------------
    

    %SEDAR: 00020068E




For further information:

For further information: Stephen C. Ruffini, Senior Vice President and
Chief Financial Officer, Village Farms Canada Limited Partnership, (732)
676-3008

Organization Profile

VILLAGE FARMS INCOME FUND

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