OFI Income Fund Reports 2007 Second-Quarter Results



    
    -   Continued downturn in U.S. residential construction, as well as
        pricing pressures across North America adversely affecting Fund's
        financial results
    -   Fund maintains sales at the Q1 2007 level
    -   Fund remains profitable and is taking measures to manage through
        markets' downturn
    -   Conference call Friday, August 10 at 8:30 a.m. Eastern
    

    OTTAWA, Aug. 9 /CNW/ - OFI Income Fund (TSX: OFB.UN), a producer of
fibreglass insulation products, today announced its 2007 second-quarter
financial results for the period ended June 30, 2007.
    "OFI's sales for the second quarter remained fairly constant with the
first quarter of this year but declined by 23.5% compared with the 2006 second
quarter, when market conditions were, of course, much stronger than they have
been through the first half of this year," said Joseph Skarzenski, President
and Chief Executive Officer.
    "As anyone following the news knows, the sharp downturn in residential
construction in the United States that first began to affect OFI's results at
the end of 2006 has continued into the current period. While Canadian markets
have remained fairly stable, the downturn in the United States has been longer
and more severe than many expected, including our customers and ourselves, and
is being accompanied by pricing pressures. Consequently OFI's U.S. residential
construction sales declined more than 38 percent in the 2007 second quarter
compared with the 2006 period, while our Canadian business was maintained at
the level of a year ago. To offset these developments, our team has been
working diligently on growing OFI's market share in North America. We are also
putting more effort into developing overseas business and are beginning to
make some progress both in Asia and Europe," he said.

    
    Financial Highlights

    -   Second-quarter 2007 sales were $18.8 million, down 23.5 percent from
        $24.6 million in the 2006 period mainly reflecting decreased
        insulation sales in the U.S. market, as well as the effects of lower
        prices.
    -   Canadian sales in the 2007 second quarter were flat with the same
        period last year.
    -   Gross profit margin declined in the 2007 second quarter to
        23.7 percent of sales ($4.5 million), compared with 36.4 percent of
        sales ($9.0 million) in the 2006 quarter reflecting the impact of
        lower sales and prices, as well as appreciation in the Canadian
        dollar compared with the U.S. dollar.
    -   Selling, general, and administrative (SG&A) expenses were
        $3.4 million in the 2007 second quarter, down from $3.5 million in
        the 2006 period.
    -   Net income was $0.4 million in the 2007 second quarter, down from
        $3.7 million in the prior-year period.
    -   Normalized earnings before interest, taxes, depreciation, and
        amortization (EBITDA(*)) were $3.7 million in the 2007 second quarter
        (including a normalizing entry of $0.1 million for restructuring
        costs), a 54.1 percent decrease from $8.1 million in the 2006 period.
    -   OFI generated $3.3 million and $6.8 million in distributable cash in
        the 2007 second-quarter and six-month periods, respectively.
    -   The Fund declared payouts on its publicly traded units of
        $3.5 million and $7.6 million for those respective 2007 periods. No
        distributions were declared to the holders of the Class B
        Subordinated Exchangeable units.
    

    "It is currently uncertain when demand in the U.S. residential
construction markets will improve or when product pricing will strengthen in
North America. The weak market conditions are clearly more profound and
protracted than we had anticipated at the beginning of the year," Mr.
Skarzenski said.
    "We have had some success in adding new North American and international
customers, including in Eastern Europe and Asia however, this requires time to
accomplish and thus far has only modestly offset the effects of the sharp
decline in U.S. residential construction markets. Further, we expected to
replace some of that residential business with increased commercial sales, but
continued to see softness in demand in that sector as well," he said.
    "Pending improvement in the markets for OFI's products and further
success from our efforts to serve new customers, we have initiated various
measures to manage our way through this period. In addition to tightly
managing our costs, we announced on April 25 that we have delayed the start-up
of our new Tillsonburg fibreglass manufacturing plant until we see clear signs
of recovery in our markets and demand and pricing warrant adding this
capacity. We can start up manufacturing at the plant within two to three
months of determining that it is timely.
    "On June 14," Mr. Skarzenski continued, "we announced that the Fund's
trustees had approved a temporary reduction in OFI's monthly distributions to
our unitholders to $0.065 per Fund unit from the previous level of $0.104167
per unit. It should be noted that when OFI's financial performance improves
sufficiently that distributable cash levels justify it, the trustees of the
Fund may, in addition to raising distributions back to their base level, vote
to pay back the shortfall currently being experienced by our unitholders. This
catch-up provision was described in our August 22, 2005 initial public
offering prospectus."

    Consolidated Financial Statements

    The Fund's 2007 second-quarter and six-month Financial Statements and
Management's Discussion and Analysis have been filed with SEDAR and are also
available at the Fund's website at www.ofigroup.com.

    
                                      Three month period   Six month period
                                      ------------------   ----------------
                                         ended June 30       ended June 30
                                         -------------       -------------
                                        2007      2006      2007      2006
                                        ----      ----      ----      ----
                                                  (in thousands)
                                                    (unaudited)

    Sales                              $18,841   $24,637   $37,897   $48,962
    Cost of sales                       14,368    15,670    27,726    31,839
                                     ----------------------------------------
    Gross profit                         4,473     8,967    10,171    17,123

    Selling, general and
     administrative expenses             3,391     3,520     6,527     6,942
    Income before taxes and
     non-controlling interest            3,538     6,702     6,186    11,267
                                     ----------------------------------------
    Net income                            $422    $3,744    $1,901    $6,295
                                     ----------------------------------------
    Normalized EBITDA(*)                $3,726    $8,125    $8,416   $15,459
                                     ----------------------------------------

    Distributable Cash(*)               $3,336              $6,835

    Distributions declared on
     Fund Units                          3,543               7,594
    Distributions declared on Class B
     Subordinated Exchangeable LP
     Units of OFI LP                         -                   -
                                     ----------          ----------
    Total Distributions declared        $3,543              $7,594
                                     ----------          ----------
    Payout Ratio                        106.2%              111.1%
                                     ----------          ----------
    

    Conference Call

    OFI will hold a conference call for analysts and investors to discuss its
financial results on Friday, August 10, 2007 at 8:30 a.m. (Eastern).
    Joseph Skarzenski, President and Chief Executive Officer, and Catherine
Skarzenski, Executive Vice President and Chief Financial Officer, will be
available to answer questions during the call.
    To participate in the conference call, please dial 613-594-9391 or
416-641-6129 or 1-866-862-3907 about five minutes prior to the start of the
call.
    A live audio webcast of the conference call will be available at
www.newswire.ca.
    An archived recording of the call will be available at 416-695-5800 or
1-800-408-3053 (Passcode 3231156 followed by the number sign) from 10:30 a.m.
on August 10 to midnight on August 17. An archived recording of the webcast
will also be available at OFI's website.

    ((*)) Non-GAAP Measures

    References to EBITDA are to earnings before interest, taxes,
depreciation, amortization, unrealized gain/loss on derivative instruments,
non-controlling interest and unrealized foreign exchange (gain)/loss on cash
and cash equivalents. Because the Fund will distribute all of its cash on an
ongoing basis (after providing for certain amounts), management believes that
in addition to net income or loss, EBITDA is a useful supplemental measure of
cash available for distribution prior to debt service, changes in working
capital and capital expenditures. However, EBITDA is not a recognized measure
and does not have a standardized meaning under generally accepted accounting
principles (GAAP). Investors are cautioned that EBITDA should not be construed
as an alternative to net income (as determined in accordance with GAAP) as an
indicator of the Fund's performance, or as an alternative to cash flows from
operating, investing and financing activities as a measure of the Fund's
liquidity and cash flows. The Fund's method of calculating EBITDA may differ
from the methods used by other issuers and, accordingly, the Fund's EBITDA may
not be comparable to similar measures used by other issuers.
    Management views Distributable Cash as an operating performance measure.
It is a non-GAAP measure generally used by Canadian income funds as an
indicator of financial performance. As the Fund will distribute its available
cash to the maximum extent possible on an on-going basis (after providing for
certain amounts) and since EBITDA and Normalized EBITDA are metrics used by
many investors to compare issuers (and hence may be a factor for prospective
investors) on the basis of the ability to generate cash from operations,
management believes that, in addition to net income or loss, EBITDA and
Normalized EBITDA are useful supplemental measures from which to make
adjustments to determine Distributable Cash. Consequently, management believes
that Distributable Cash is a useful supplemental measure that may assist
prospective investors in assessing an investment in Fund units. Investors are
cautioned that Distributable Cash should not be construed as an alternative to
net income or loss determined in accordance with GAAP as an indicator of the
Fund's performance or to cash flows from operating, investing and financing
activities as a measure of liquidity and cash flows. The method of calculating
the Fund's Distributable Cash may differ from similar computations, as
reported by other issuers and, accordingly, may not be comparable to
Distributable Cash as reported by other issuers.

    Forward-Looking Statements

    Certain statements contained in this news release constitute forward-
looking information within the meaning of securities laws. Forward-looking
information may relate to the Fund's future outlook and anticipated events,
the Fund's business, its operations, its financial performance, its financial
condition or its results. Particularly, statements regarding the Fund's future
operating results and economic performance, the Fund's objectives and
strategies to achieve those objectives, are forward-looking statements. While
these statements are based on certain factors and assumptions that management
considers to be reasonable based on information currently available to it,
they may prove to be incorrect. Forward looking-information is also subject to
certain factors, including risks and uncertainties described in our Annual
Information Form, many of which are beyond management's control, that could
cause actual results to differ materially from what management currently
expects. Therefore, future events and results may vary significantly from what
management currently foresees. You should not place undue importance on
forward-looking information and should not rely upon this information as of
any other date. While the Fund may elect to, it is under no obligation (and
expressly disclaims any such obligation) and does not undertake to update or
alter this information at any particular time.

    About OFI Income Fund

    Since 1980, OFI has been manufacturing and distributing a broad range of
fibreglass insulation products, including fibreglass ceiling tiles, designed
for thermal and acoustical applications and destined for the Canadian, U.S.,
and international residential and non-residential/industrial markets. OFI
operates under a low-cost structure and has been profitable for the past 23
years. Additional information is available at www.sedar.com or the company's
website at www.ofigroup.com.


    
    OFI Income Fund

                     CONSOLIDATED INTERIM BALANCE SHEETS
                     (in thousands of Canadian dollars)
                                 (unaudited)

                                                       June 30,  December 31,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                            3,139         9,188
    Restricted cash                                          -            82
    Accounts receivable                                  8,517         9,769
    Inventories                                          9,839         7,975
    Prepaid expenses                                       628           425
    Other assets                                         1,809             -
    -------------------------------------------------------------------------
    Total current assets                                23,932        27,439
    -------------------------------------------------------------------------
    Long-term
    Property, plant and equipment                       58,969        54,748
    Intangible assets                                   59,462        62,944
    Goodwill                                            96,580        96,580
    -------------------------------------------------------------------------
    Total long-term assets                             215,011       214,272
    -------------------------------------------------------------------------
    Total assets                                       238,943       241,711
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current
    Accounts payable                                     3,301         3,548
    Accrued liabilities                                  4,461         5,464
    Distributions payable to Fund unitholders              843         1,350
    Distributions payable to Class B unitholders             -         3,200
    Other accrued liabilities                                -         1,502
    -------------------------------------------------------------------------
    Total current liabilities                            8,605        15,064
    -------------------------------------------------------------------------

    Long-term debt                                      39,542        34,443
    Future income taxes                                  1,555             -
    -------------------------------------------------------------------------
    Total long-term liabilities                         41,097        34,443
    -------------------------------------------------------------------------

    Non-controlling interest                            80,065        77,335
    -------------------------------------------------------------------------

    Commitments and contingencies

    UNITHOLDERS' EQUITY
    Fund units                                         123,370       123,370
    Deficit                                            (14,194)       (8,501)
    -------------------------------------------------------------------------
    Total unitholders' equity                          109,176       114,869
    -------------------------------------------------------------------------
    Total liabilities and unitholders' equity          238,943       241,711
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    OFI Income Fund

                CONSOLIDATED INTERIM STATEMENTS OF INCOME AND
                             COMPREHENSIVE INCOME
    (in thousands of Canadian dollars and units, except per unit amounts)
                                 (unaudited)

                                    For the three months  For the six months
                                           ended June 30       ended June 30
                                          2007      2006      2007      2006
                                             $         $         $         $
    -------------------------------------------------------------------------

    Sales                               18,841    24,637    37,897    48,962
    Cost of sales                       14,368    15,670    27,726    31,839
    -------------------------------------------------------------------------
    Gross profit                         4,473     8,967    10,171    17,123
    -------------------------------------------------------------------------

    OTHER INCOME & EXPENSES
    Selling, general and
     administrative                      3,391     3,520     6,527     6,942
    Research and development                22        28        48        96
    Foreign exchange loss (gain)           (27)        8       342       (76)
    Amortization of deferred
     financing charges                      43        43        87        87
    Interest on long-term debt             245       170       446       339
    Unrealized gain on derivative
     financial instruments              (2,683)   (1,391)   (3,312)   (1,339)
    Interest income                        (56)     (113)     (153)     (193)
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest            3,538     6,702     6,186    11,267
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Future income taxes                  1,555         -     1,555         -
    Income before non-controlling
     interest                            1,983     6,702     4,631    11,267
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Non-controlling interest             1,561     2,958     2,730     4,972
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income and comprehensive
     income for the period                 422     3,744     1,901     6,295
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income per unit
    Basic                                0.033     0.289     0.147     0.486
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted                              0.033     0.289     0.147     0.486
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number of units
     outstanding
    Basic                               12,963    12,963    12,963    12,963
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted                             23,202    23,202    23,202    23,202
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    OFI Income Fund

                 CONSOLIDATED INTERIM STATEMENT OF CHANGES IN
                             UNITHOLDERS' EQUITY
                 (in thousands of Canadian dollars and units)
                                 (unaudited)

                                      Units     Amount    Deficit      Total
                                         No.         $          $          $
    -------------------------------------------------------------------------
    Unitholders' Equity
     December 31, 2005               12,963    123,370     (2,402)   120,968
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income attributable
     to Fund units                                          9,726      9,726
    Distributions declared
     on Fund units                                        (15,825)   (15,825)
    -------------------------------------------------------------------------
    Unitholders' Equity
     December 31, 2006               12,963    123,370     (8,501)   114,869
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income attributable
     to Fund units                                          1,901      1,901
    Distributions declared
     on Fund units                                         (7,594)    (7,594)
    -------------------------------------------------------------------------
    Unitholders' Equity
     June 30, 2007                   12,963    123,370    (14,194)   109,176
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    OFI Income Fund

                CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
                     (in thousands of Canadian dollars)
                                 (unaudited)

                                    For the three months  For the six months
                                           ended June 30       ended June 30
                                          2007      2006      2007      2006
                                             $         $         $         $
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income for the period              422     3,744     1,901     6,295
    Add (deduct) items not
     involving cash:
    Non-controlling interest share
     of income                           1,561     2,958     2,730     4,972
    Amortization of property,
     plant and equipment                   836       873     1,638     1,717
    Amortization of deferred
     financing costs                        43        43        87        87
    Amortization of intangible assets    1,741     1,741     3,483     3,482
    Loss on disposal of asset              166         -       166         -
    Future income taxes                  1,555         -     1,555         -
    Unrealized gain on derivative
     financial instruments              (2,683)   (1,391)   (3,312)   (1,339)
    Unrealized foreign exchange
     loss (gain) on cash and cash
     equivalents                           (29)      101       (50)       99
    -------------------------------------------------------------------------
                                         3,612     8,069     8,198    15,313
    Net change in non-cash working
     capital balances related to
     operations                            132       (48)     (223)   (1,371)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                          3,744     8,021     7,975    13,942
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Purchase of property, plant and
     equipment                          (1,436)   (3,384)   (7,864)   (7,871)
    Change in cash restricted for
     payment on interest on
     non-revolving construction loan         -       187        82       331
    -------------------------------------------------------------------------
    Cash used in investing activities   (1,436)   (3,197)   (7,782)   (7,540)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Issuance of debt                         -     3,740     5,010     7,391
    Cash distributions paid to Fund
     and Class B units                  (4,051)   (4,862)  (11,302)   (9,723)
    -------------------------------------------------------------------------
    Cash used in financing activities   (4,051)   (1,122)   (6,292)   (2,332)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Unrealized foreign exchange loss
     on cash and cash equivalents           29      (101)       50       (99)

    Net increase (decrease) in cash
     and cash equivalents               (1,714)    3,601    (6,049)    3,971
    Cash and cash equivalents,
     beginning of period                 4,853     7,138     9,188     6,768
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                       3,139    10,739     3,139    10,739
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental disclosures of
     cash flow information:
      Interest paid                        613       352     1,166       647
      Interest received                     56       113       153       193
    -------------------------------------------------------------------------
    

    %SEDAR: 00022462E




For further information:

For further information: Catherine Skarzenski, Executive Vice President
and Chief Financial Officer, Tel. (613) 247-7116, Fax (613) 736-7281, e-mail
investors@ofiincomefund.com

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OFI INCOME FUND

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