As expected, third quarter performance reflects a reversion to the long term exchange rates, as total revenue increased 2.4%, 3.8% organic growth offset by a U.S./Cdn. 3.2¢ strengthening of the dollar to 80¢, up 6¢ from the second quarter. Organic growth was above our outlook but in line with GDP growth in both Canada and the United States. Gross profit and EBITDA1 as a percent of sales were similar to the first half at 17.8% and 13.5% respectively. EBITDA was up $0.4 million, or 4.7%, due to higher sales. Net income was up $1.0 million, or 2.6¢ per Unit, with higher EBITDA and no repeat of contingent consideration revaluation for the Healthmark acquisition and a higher mark-to-market gain on exchangeable shares offset by increased income taxes.
The $0.9 million of free cash flow2 generated in the third quarter was deployed to pay down the debt by $1.0 million. We have set aside $1.3 million of cash to fund the taxes associated with the refinancing of the US dollar denominated intercompany notes. The Fund's leverage remained at 0.9x as it was at June 30, 2017.
The Fund paid monthly distributions of 11¢ per Unit during the third quarter, which represented an annualized yield of 4.6% on the September 30th closing price of $28.49 per Unit. The payout ratio3 for the third quarter was 81%. The impact of the tax accrual for refinancing the intercompany debt was 17%.
Details of the Fund's results are currently available on Richards Packaging's website at www.richardspackaging.com and on SEDAR at www.sedar.com.
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 14,000 regional food, wine and spirits, cosmetic, specialty chemical, pharmaceutical and other companies from 18 locations throughout North America.
| 1 |
Management defines EBITDA as earnings before amortization, contingent consideration revaluation, financial
expenses, 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
contingent consideration revaluation. 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 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. |
| 2 |
Management defines distributable cash flow, in accordance with Richards Packaging's credit agreement, as EBITDA
less extraordinary items, interest, current 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 liquidity
and cash flows. Distributable cash flow does not have a standardized meaning prescribed by IFRS therefore the
method of calculating distributable cash flow may not be comparable to similar measures presented by other
companies. |
| 3 |
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. |
| 4 |
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, gglynn@richardspackaging.com; Enzio Di Gennaro, Chief Financial Officer, Richards Packaging Inc., (905) 670-7760, edigennaro@richardspackaging.com
Related Links
http://www.richardspackaging.com
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