E.D. Smith Income Fund reports financial results for second quarter fiscal 2007



    
           - Solid top line momentum continued in second quarter -

    (All figures are reported in Canadian dollars)

    Second quarter highlights:
    -  Revenue increased 42% to $79.8 million
    -  Achieved organic revenue growth of 4%
    -  Canadian retail branded revenue increased 17%
    -  Foodservice division achieved revenue growth of 8%
    -  U.S. private label revenue increased 4%, while Canadian private label
       revenue decreased 8%
    -  Completed the closure of the Abbotsford, B.C. plant and integration
       into Winona
    -  Distributable cash(i) increased 13% to $3.9 million
    

    WINONA, ON, Aug. 10 /CNW/ - E.D. Smith Income Fund (TSX: JAM.UN) today
reported revenue growth of 42% for the second quarter of 2007, driven mainly
by the contributions of Seaforth Creamery (acquired in June 2006), and organic
growth of 4%. Impacted by higher commodity costs and costs attributable to
supporting private label categories in Canada, direct margin for the quarter
was 16% compared to 19% for the second quarter of 2006. Selling, general and
administrative expenses for the quarter were 8% of revenue, down from 10% of
revenue in the second quarter of 2006. The improvement in selling, general and
administrative expenses as a percent of revenue was attributable to the
benefits relating to the integration of Seaforth in 2006 and restructurings in
both 2006 and earlier this year. While EBITDA(ii) for the quarter increased
31% to $6.2 million, the growth did not keep pace with revenue growth, as
lower gross margin resulting from input cost increases offset the improvements
in selling, general and administrative expenses as a percent of revenue.
    "Our top line momentum continued in the second quarter and contributed to
a growth rate of 7% for the first half of the year on a normalized, comparable
week basis," said Martin Thrasher, Interim Chief Executive Officer, E.D.
Smith. "E.D. Smith branded jams continue to resonate with consumers and were a
driving force behind revenue growth of 17% in Canadian retail branded products
for the quarter. Growth in the U.S. remains strong and we believe that the
softness in the Canadian private label market will correct over time. During
the quarter, higher commodity costs continued to pressure our operating
margins. We remain focused on protecting and restoring our margins.
Significant cost improvement initiatives are underway and selling price
increases are being implemented in the back half of the year."
    Distributable cash flow for the second quarter increased 13% to
$3.9 million compared to $3.4 million for the second quarter of 2006. Total
distributions of approximately $3.6 million resulted in a payout ratio of 91%
for the quarter.

    
                                Three months ended          Six months ended
                              June 30,      July 1,     June 30,      July 1,
                              2007 (1)     2006 (1)     2007 (1)     2006 (1)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                 3,932       (1,013)      11,380          539
    Distributable cash
     flow has been adjusted
     by the following:
    Change in working
     capital balances             228        4,199       (4,320)       6,179
    Non-cash current income
     tax expense                  204          716          204          100
    Cash income taxes paid
     (net of recovery)            110         (367)         194         (313)
    Maintenance capital
     expenditures                (576)        (114)        (853)        (343)
    -------------------------------------------------------------------------
    Distributable cash flow     3,898        3,421        6,605        6,162
    -------------------------------------------------------------------------
    Per unit
    on weighted average
     outstanding units and
     Exchangeable LP Units   $ 0.1642     $ 0.1965     $ 0.2782     $ 0.3893
    -------------------------------------------------------------------------
    Distributions declared      3,561        4,460        7,123        8,240
    -------------------------------------------------------------------------
    Per unit
    on weighted average
     outstanding units and
     Exchangeable LP Units   $ 0.1500     $ 0.2562     $ 0.3000     $ 0.5206
    Payout Ratio                 91.4%       130.4%       107.8%       133.7%
    Weighted Average
     Outstanding Units
     and Exchangeable
     LP Units              23,743,902   17,410,569   23,743,902   15,827,235
    -------------------------------------------------------------------------
    (1) These amounts are derived from the unaudited consolidated financial
    statements of the Fund.
    

    Revenue from Canadian retail branded products increased 17% for the
quarter, largely due to the continued strength in branded jams following the
re-launch of E.D. Smith branded jams last year.
    Excluding the contributions from last year's acquisitions of Seaforth and
Golden Valley, Canadian retail private label revenue decreased 8% for the
quarter. The Canadian retail private label segment continued to be impacted by
national branded competitors' use of promotional incentives, which have caused
Canadian grocery retailers to support national brands at the expense of their
private label programs.
    Revenue from U.S. private label products increased 58% for the quarter.
Contributions from Seaforth contributed more than two-thirds of the growth.
Excluding the impact of foreign currency and contributions from Seaforth,
revenue from U.S. private label products increased 4% for the quarter.
    The Fund's foodservice operations achieved revenue growth of 8% for the
quarter.
    During the quarter, the Fund completed the integration and closure of its
plant in Abbotsford B.C. There were no additional restructuring charges during
the quarter in relation to the integration and closure. As previously
announced, the plant rationalization is expected to result in ongoing cost
savings of approximately $0.5 million per annum.

    Other Developments

    On June 25, 2007, the Fund announced that it had entered into a
definitive agreement whereby TreeHouse Foods, Inc. will acquire substantially
all of the operating assets of the Fund. For further information about the
definitive agreement with TreeHouse Foods, investors are referred to the
Company's press releases of June 25, 2007 and August 2, 2007.

    Outlook

    Mr. Thrasher commented "We believe that the proposed transaction with
TreeHouse Foods provides E.D. Smith with the best platform for future growth,
and provides unitholders with an attractive price for the business.
Consequently, our Board of Trustees unanimously recommends that the proposed
transaction be accepted and approved by our unitholders."

    Notice of Conference Call

    E.D. Smith Income Fund will host a conference call on Friday, August 10,
2007 at 1:00 p.m. (ET) to discuss its second quarter fiscal 2007 financial
results. To access the conference call by telephone, dial 416-644-3425 or
1-800-594-3790. 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, August 17, 2007 at midnight. To access the
archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the
reservation number 21243086 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 2007
Second Quarter Consolidated Balance Sheet, Consolidated Statement of Earnings
and Consolidated Statement of Cash Flows.



    
                           E. D. SMITH INCOME FUND
                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)


                                                          As at        As at
                                                        June 30, December 31,
    (stated in thousands of dollars)                       2007         2006
    ----------------------------------------------- ------------ ------------
                                                              $            $
    ASSETS
    Current assets
    Cash and cash equivalents                             2,280        1,334
    Accounts receivable - trade                          22,089       23,718
    Inventories                                          43,200       42,872
    Prepaid expenses                                      1,979        1,133
    Derivative financial instruments                        253            -
    Income taxes recoverable                                 47          339
    Future income taxes                                     762          976
    ----------------------------------------------- ------------ ------------
    Total current assets                                 70,610       70,372

    Capital assets, net                                  50,195       50,754
    Deferred costs, net                                     373          954
    Derivative financial instruments                        264            -
    Intangible assets                                    91,351       96,681
    Goodwill                                             91,529       85,875
    ----------------------------------------------- ------------ ------------
                                                        304,322      304,636
    ----------------------------------------------- ------------ ------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current liabilities
    Accounts payable and accrued liabilities             26,009       22,293
    Deferred income                                         438            -
    Purchase price payable                                    -       18,494
    Distributions payable to unitholders                  1,073        1,073
    Distributions payable to exchangeable LP
     unitholders                                            114          115
    Derivative financial instruments                        820            -
    ----------------------------------------------- ------------ ------------
    Total current liabilities                            28,454       41,975

    Bank credit facility                                 97,803       75,466
    Deferred income                                       1,870            -
    Future income taxes                                  17,165       11,079
    ----------------------------------------------- ------------ ------------
    Total liabilities                                   145,292      128,520
    ----------------------------------------------- ------------ ------------
    Non-controlling interest                             16,199       17,101
    ----------------------------------------------- ------------ ------------
    Commitments and contingency
    Unitholders' equity
    Trust units issued                                  179,172      178,580
    Deficit                                             (31,280)     (16,993)
    Accumulated other comprehensive loss                 (5,061)      (2,572)
    ----------------------------------------------- ------------ ------------
    Total unitholders' equity                           142,831      159,015
    ----------------------------------------------- ------------ ------------
                                                        304,322      304,636
    ----------------------------------------------- ------------ ------------




                           E. D. SMITH INCOME FUND
               CONSOLIDATED STATEMENTS OF EARNINGS AND DEFICIT
                                 (Unaudited)

    (stated in thousands of dollars except per unit and unit amounts)

                                   Three       Three         Six         Six
                                  months      months      months      months
                                   ended       ended       ended       ended
                                 June 30,     July 1,    June 30,     July 1,
                                    2007        2006        2007        2006
    ------------------------- ----------- ----------- ----------- -----------
                                       $           $           $           $

    Revenue                       79,832      56,191     155,318      97,546
    ------------------------- ----------- ----------- ----------- -----------
    Direct margin                 12,752      10,575      24,562      19,418
    Selling, general and
     administrative costs          6,511       5,384      13,400      10,009
    Restructuring costs                -         438         600       1,228
    ------------------------- ----------- ----------- ----------- -----------
    Earnings before interest,
     income taxes, amortization,
     and non-controlling
     interest                      6,241       4,753      10,562       8,181
    Amortization of capital
     assets, intangibles and
     deferred costs                4,028       2,815       8,175       4,956
    Interest                       1,956         851       3,477       1,363
    ------------------------- ----------- ----------- ----------- -----------
    Earnings (loss) before
     income taxes, and non-
     controlling interest            257       1,087      (1,090)      1,862
    ------------------------- ----------- ----------- ----------- -----------
    Income tax provision
    Current                          204         716         204         100
    Future                         7,964      (1,616)      6,419      (1,750)
    ------------------------- ----------- ----------- ----------- -----------
                                   8,168        (900)      6,623      (1,650)
    ------------------------- ----------- ----------- ----------- -----------
    Earnings (loss) before
     non-controlling interest     (7,911)      1,987      (7,713)      3,512
    Non-controlling interest         116         159         135         201
    Dilution gain                      -       2,786           -       2,786
    ------------------------- ----------- ----------- ----------- -----------
    Net earnings (loss) for
     the period                   (8,027)      4,614      (7,848)      6,097
    Deficit, beginning of
     period                      (20,034)     (6,367)    (16,993)     (4,173)
    Distributions declared
     to unitholders                3,219       4,214       6,439       7,891
    ------------------------- ----------- ----------- ----------- -----------
    Deficit, end of period       (31,280)     (5,967)    (31,280)     (5,967)
    ------------------------- ----------- ----------- ----------- -----------
    Earnings per unit
     - basic                      $(0.38)      $0.29      $(0.37)      $0.41
    ------------------------- ----------- ----------- ----------- -----------
    Earnings per unit
     - diluted                    $(0.38)      $0.29      $(0.37)      $0.41
    ------------------------- ----------- ----------- ----------- -----------
    Weighted average
     number of units
     outstanding - basic      21,250,169  15,820,468  21,222,757  14,701,224
    ------------------------- ----------- ----------- ----------- -----------
    Weighted average
     number of units
     outstanding
     - diluted                21,250,169  16,256,319  21,222,757  15,541,155
    ------------------------- ----------- ----------- ----------- -----------


                           E. D. SMITH INCOME FUND
               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (Unaudited)

    (stated in thousands
     of dollars)

                                   Three       Three         Six         Six
                                  months      months      months      months
                                   ended       ended       ended       ended
                                 June 30,     July 1,    June 30,     July 1,
                                    2007        2006        2007        2006
    ------------------------- ----------- ----------- ----------- -----------
                                       $           $           $           $
    Net earnings (loss)
     for the period               (8,027)      4,614      (7,848)      6,097

    Change in foreign
     exchange contracts,
     net of income taxes            (241)          -        (243)          -
    Change in interest
     rate swaps, net of
     income taxes                    351           -         392           -
    Allocation to
     minority interest               (11)          -          19           -
    Change in cumulative
     translation adjustment       (2,104)          -      (2,308)          -
    ------------------------- ----------- ----------- ----------- -----------
    Comprehensive income
     (loss) for the period       (10,032)      4,614      (9,988)      6,097
    ------------------------- ----------- ----------- ----------- -----------


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

                                 (Unaudited)

                                   Three       Three         Six         Six
                                  months      months      months      months
    (stated in thousands           ended       ended       ended       ended
    of dollars)                  June 30,     July 1,    June 30,     July 1,
                                    2007        2006        2007        2006
    ------------------------- ----------- ----------- ----------- -----------
                                       $           $           $
    OPERATING ACTIVITIES
    Net earnings (loss) for
     the period                   (8,028)      4,614      (7,849)      6,097
    Add (deduct) items not
     involving cash
      Non-controlling interest       117         159         136         201
      Dilution gain                    -      (2,786)          -      (2,786)
      Amortization                 4,028       2,726       8,175       4,862
      Deferred financing fees         79          89         179          94
      Future income taxes          7,964      (1,616)      6,419      (1,750)
    ------------------------- ----------- ----------- ----------- -----------
                                   4,160       3,186       7,060       6,718
    Net change in non-cash
     operating working capital
     balances                       (228)     (4,199)      4,320      (6,179)
    ------------------------- ----------- ----------- ----------- -----------
    Cash provided (used in)
     by operating activities       3,932      (1,013)     11,380         539
    ------------------------- ----------- ----------- ----------- -----------
    INVESTING ACTIVITIES
    Business acquisitions
     and acquisition costs       (24,731)    (79,312)    (24,731)    (79,846)
    Purchase of capital assets    (1,836)       (702)     (3,400)     (1,406)
    Increase in deferred costs         -        (501)          -        (657)
    ------------------------- ----------- ----------- ----------- -----------
    Cash used in
     investing activities        (26,567)    (80,515)    (28,131)    (81,909)
    ------------------------- ----------- ----------- ----------- -----------
    FINANCING ACTIVITIES
    Issuance of trust units            -      60,000           -      60,000
    Expenses related to
     issuance of trust and
     exchangeable LP units             -      (3,419)          -      (3,419)
    Increase (decrease) in
     deferred income                (108)          -       1,870           -
    Increase in bank credit
     facility                     24,877      29,101      22,641      31,118
    Distributions to
     unitholders                  (3,219)     (3,693)     (6,439)     (7,241)
    Distributions to
     exchangeable LP
     unitholders                    (342)        (87)       (684)       (190)
    ------------------------- ----------- ----------- ----------- -----------
    Cash provided by financing
     activities                   21,208      81,902      17,388      80,268
    ------------------------- ----------- ----------- ----------- -----------
    Effect of exchange rate
     changes on cash and cash
     equivalents                     141         147         309          95
    ------------------------- ----------- ----------- ----------- -----------
    Net increase (decrease)
     in cash and cash
     equivalents during the
     period                       (1,286)        521         946      (1,007)
    Cash and cash equivalents,
     beginning of period           3,566         538       1,334       2,066
    ------------------------- ----------- ----------- ----------- -----------
    Cash and cash equivalents,
     end of period                 2,280       1,059       2,280       1,059
    ------------------------- ----------- ----------- ----------- -----------

    Supplemental cash flow
     information
    Interest paid                  1,821         804       3,313       1,346
    Income taxes paid                110         367         194         563
    

    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.

    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 EBITDAii. 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) 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.

    (ii) 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.

    %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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