Specialty Foods Group Income Fund Announces Financial Results for 2006

    TORONTO, March 30 /CNW/ - Specialty Foods Group Income Fund (the "Fund")
(TSX: HAM.UN) today announced financial results for the year ended
December 30, 2006. The Fund indirectly holds an interest in Specialty Foods
Group, Inc. ("SFG" or the "Company").

    Results of Continuing Operations

    In accordance with Generally Accepted Accounting Principles in Canada,
operating results presented for 2006 and 2005 reflect continuing operations
subsequent to the Company's decision to offer the Owensboro Business Unit and
its related brands for sale.
    Net sales in 2006 totaled $160.9 million compared with $161.1 million for
2005, a decline of 0.1%. Sales unit volume decreased by 3.5% or 3.4 million
pounds reflecting continued product portfolio management with a focus on
higher margin products.
    Gross profit in 2006 amounted to $29.6 million versus $25.2 million for
2005, an increase of 17.5%. Gross margin rates per unit improved due primarily
to lower cost of raw material and product portfolio management efforts.
    Selling, general, and administrative expenses totaled $21.7 million in
2006 or an increase of $2.4 million compared with prior year. The primary
contributors to the increase were higher royalties, brokerage fees, and
medical costs.
    Restructuring charges in 2006 totaled $6.1 million representing (1)
$4.1 million of expenses related to the closure of the Williamston, North
Carolina plant, (2) $1.1 million for severance of Corporate employees, and (3)
$0.9 million for professional services related primarily to Company
restructuring activities. There were no restructuring charges in 2005.
    Amortization for 2006 of $2.9 million versus $2.7 million in 2005 was
attributable to capital spending in support of the Company's operations.
    2006 EBITDA was $7.8 million compared with $5.9 million in 2005, an
increase of 32.2%, reflecting primarily the increase in gross profit offset
partially by higher selling, general and administrative expenses.

    Non-recurring Adjustments to Income

    The debt forgiveness income in 2006 ($17.7 million) related to the
issuance of Convertible Secured Debentures ("CSDs" - $6.9 million) on June 14,
2006 in full consideration of Exchangeable Subordinated Debentures ("ESDs" -
$24.6 million) sold in a private placement transaction on February 26, 2004.
    Impairment loss of goodwill and intangible assets ($19.6 million)
reflected the difference between implied goodwill for the Company and that
recorded as of year-end 2005. The carrying amount for goodwill and intangibles
as of December 30, 2006 and December 31, 2005 was $31.0 million and
$49.6 million, respectively.
    Amortization of deferred financing fees and debt discount in 2006 totaled
$3.6 million and represented primarily transaction costs related to Company
refinancing activities completed in 2006 and prior years. Costs are amortized
over the lives of the financing agreements.
    Interest expenses in 2006 were $8.7 million compared with $7.0 million in
2005. Interest costs include interest incurred on bank related debt, CSDs,
ESDs, and other debt of the Company. The increase in 2006 interest expense
compared with the prior year reflected primarily interest on CSDs issued on
June 14, 2006.

    Management Actions

    Fiscal Year 2006 was a difficult year for the Company. Although the
businesses that comprise continuing operations are quite healthy, operating
income in 2006 for the consolidated Company declined to a loss of
$10.5 million. Several actions have been taken to position SFG for improved
profitability for 2007 and beyond:

    1.  The decision was made to offer the Owensboro Business Unit and its
        related brands (Field, William Fischer, Fischer's, Kentucky Legend,
        and Mickelberry's) for sale. An Offering Memorandum was issued in
        January 2007, and the sale process is ongoing. It is expected that
        SFG will be a more profitable, focused enterprise; however, there is
        no guarantee the business will be sold. The decision to sell the
        Owensboro Business Unit requires that its results for 2006 and 2005
        be presented as discontinued operations.

    2.  The Williamston, North Carolina hotdog manufacturing facility was
        closed as of December 15, 2006 to align production capacity with
        sales requirements. All production needs of Company branded hotdogs
        were transferred to the Chicago, Illinois facility which should
        reduce annual plant operating expenses by approximately $6 million.
        The Williamston plant is currently for sale.

    3.  The Mosey's brand was sold during the fourth quarter of 2006.
        Profitability had been steadily declining, and management believed
        that the brand represented limited growth opportunities.

    4.  Company leadership was changed in December 2006 to provide greater
        focus on improving business results. Bonita Then, a Trustee of the
        Fund and a member of the Board of SFG, agreed to serve as interim
        President and Chief Executive Officer. Joseph McCloskey, a former
        Chief Executive Officer of the Company subsidiary, SMG Inc. was
        appointed special advisor to the Company.

    5.  The bank lending group and the lead administrative agent of the
        Company's bank credit agreement were replaced during February 2007.
        The amended and restated credit agreement is with The CIT
        Group/Business Credit, Inc., a lender experienced in turnaround
        situations. The new credit agreement provides the Company greater
        flexibility during this transitional phase.

    6.  In March 2007, the Company implemented a significant reduction in
        staff that should reduce annual overhead expenses by more than
        $3 million. While this was a difficult decision, it will help ensure
        the Company returns to acceptable profitability and meet the needs of
        all stakeholders.

    In summary, 2006 was a year of transition and positioning for the future.
Difficult decisions were made that were necessary for SFG to return to
acceptable profit levels. As usual, despite the difficult operating
environment, the people at SFG continue to produce the highest quality
products for which we are famous and to give the best service to our

     A recap of the selected financial and operating information follows.

        Results of Continuing Operations for the Years Ended December 30,
              2006 and December 31, 2005 (Dollars in thousands)

                                                    Year Ended    Year Ended
                                                   December 30,  December 31,
    (in thousands of U.S. dollars)                        2006          2005
    Net Sales                                       $  160,902    $  161,075
    Cost of Goods Sold                                 131,342       135,925
      Gross Profit                                      29,560        25,150
    Selling, General and Administrative Expenses        21,731        19,298
    Amortization                                         2,871         2,701
    Restructuring                                        6,126             -
      Operating Income/(Loss)                           (1,168)        3,151
    Loss on Foreign Currency Translation &
     Transactions                                         (899)       (3,046)
    Debt Forgiveness                                    17,670             -
    Impairment Loss from Goodwill / Intangible Assets  (19,569)     (120,839)
    Impairment Loss from Fixed Assets                        -             -
    Amortization of Deferred Financing Fees             (3,629)       (1,935)
    Interest Expense                                    (8,656)       (6,993)
      Income/(Loss) from Continuing Operations
       before Income Taxes                             (16,251)     (129,662)
    Income Taxes                                             -             -
      Income/(Loss) from Continuing Operations
       before Non-Controlling Interest                 (16,251)     (129,662)
    Non-Controlling Interest from Continuing
     Operations                                         (7,260)      (13,348)
    Income/(Loss) from Continuing Operations        $   (8,991)   $ (116,314)
      Income/(Loss) from Discontinued Operations
       before Income Taxes                             (44,373)      (17,008)
    Non-Controlling Interest from Discontinued
     Operations                                        (11,200)       (3,906)
    Income/(Loss) from Discontinued Operations      $  (33,173)   $  (13,102)

      Net Income/(Loss)                             $  (42,164)   $ (129,416)

    The full report for the Fund has been filed with the Canadian securities
regulatory authorities and is available on the internet at the System for
Electronic Document Analysis and Retrieval (SEDAR) website (www.sedar.com) and
may be downloaded from the Company's website (www.sfgtrust.com).

    Specialty Foods Group Income Fund is an open-ended, limited purpose trust
established under the laws of the Province of Ontario, which indirectly holds
an interest in Specialty Foods Group, Inc. ("SFG"). SFG is a leading
independent U.S. producer and marketer of premium branded and private-label
processed meat products. SFG produces a wide variety of products such as
franks, hams, bacon, luncheon meats, dry sausage and delicatessen meats. These
products are sold to a diverse customer base in the retail (e.g. supermarkets)
and foodservice (e.g., restaurants) sectors. SFG sells products under a number
of leading national and regional brands, such as Nathan's, Swift Premium,
Field, Fischer's, Liguria, and Scott Petersen as well as on a private-label

    This news release contains forward-looking statements. Such statements
involve known and unknown risks, uncertainties and other factors outside of
management's control that could cause actual results to differ materially from
those described in the forward-looking statements. The Fund does not assume
responsibility for the accuracy and completeness of those forward-looking
statements and does not undertake the obligation to publicly revise these
forward-looking statements to reflect subsequent events or circumstances.

    %SEDAR: 00018733E

For further information:

For further information: David Shapland, Executive Vice President and
CFO, Tel: (757) 952-1210, Email: investorrelations@sfgtrust.com, Website:

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