TORONTO, Oct. 30, 2014 /CNW/ - Richards Packaging Income Fund (TSX: RPI.UN) (the "Fund") announced today results for the quarter ended September 30, 2014.
Third quarter performance was disappointing with organic revenue shrinkage of 0.9% due to large customer churn. Total revenue was up 1.7% mainly from a U.S./Cdn.5¢ weakening of the dollar. EBITDA1 was down $0.1 million, or 0.9%, due to the foreign currency loss on Richards Canada U.S. denominated working capital. Net income was up $1.8 million to $2.7 million, or 25.2¢ per Unit, mainly due to lower intangible amortization and mark-to-market loss on the exchangeable shares and the absence of patent defense legal costs.
The $1.0 million of free cash flow2 generated in the third quarter was utilized to pay down $0.5 million of debt and invest in working capital. Inventory was up $2.8 million in the third quarter on our expectation for higher revenue growth in the third and fourth quarter. As this did not materialize, our focus will turn to reducing inventory levels. Cash on hand of $0.8 million is set aside to pay $0.7 million of income tax payable.
The Fund paid monthly distributions of 7.35¢ per Unit during the third quarter, which represented an annualized yield of 6.6% on the September 30th closing price of $13.33 per Unit. The payout ratio3 for the third quarter was 73%.
About Richards Packaging Income Fund
The Fund owns 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 since 1912 and currently serves over 11,500 regional food, wine and spirits, cosmetic, specialty chemical, pharmaceutical and other companies from 18 locations throughout North America.
Management defines EBITDA as earnings before amortization, financial expenses, exceptional items (disputed duties and patent defense costs), unrealized losses and dividends on exchangeable shares, share of income - Vision 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 IFRS and therefore the method of calculating EBITDA may not be comparable to similar measures presented by other companies.
Management defines distributable cash flow, in accordance with Richards Packaging's credit agreement, as EBITDA less extraordinary items, interest, cash income tax expense and maintenance capital expenditures. 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 IFRS and therefore the method of calculating distributable cash flow may not be comparable to similar measures presented by other companies.
Management defines payout ratio as distributions and dividends declared over distributable cash flow2. 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 IFRS. The method of calculating the payout ratio may not be comparable to similar measures presented by other companies.
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. 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, 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 or circumstances.
SOURCE: Richards Packaging Income Fund
For further information: Gerry Glynn, Chief Executive Officer, Richards Packaging Inc., (905) 670-7760, [email protected]; Enzio Di Gennaro, Chief Financial Officer, Richards Packaging Inc., (905) 670-7760, [email protected]