Swiss Water Decaffeinated Coffee Income Fund Reports 2009 Third Quarter and
Nine-Month Results

TRADING SYMBOL: The Toronto Stock Exchange - SWS.UN

VANCOUVER, Nov. 6 /CNW/ - Swiss Water Decaffeinated Coffee Income Fund ("the Fund") today reported financial results for the three and nine months ended September 30, 2009. The three-month period represents the third quarter of its 2009 fiscal year. The Fund holds all of the outstanding securities of Swiss Water Decaffeinated Coffee Company, Inc. ("SWDCC" or "the company") and its results are dependent on the operating results of SWDCC.

Operating Results

    In $000s except per-unit amounts
                                     3 Months Ended         9 Months Ended
                                      September 30           September 30
                                      2009       2008        2009       2008

    Sales                         $  7,529   $  7,677    $ 22,525   $ 23,611
    Gross profit                     1,282      1,350       4,319      5,236
    EBITDA(1)                        1,026      1,354       2,598      5,016
    Net income                       1,206      1,843       2,344      3,623
    Adjusted distributable cash(1)     372        934       1,830      5,157
    Distributions paid                 601      1,502       3,605      4,506
    Per-unit amounts:
    Net income per unit              0.181      0.276       0.351      0.543
    Adjusted distributable cash
     generated per unit(1)           0.056      0.140       0.274      0.773
    Distributions paid per unit(1)   0.090      0.225       0.540      0.675

    (1) EBITDA, adjusted distributable cash and adjusted distributable cash
        per unit are non-GAAP financial measures that are defined in the
        Management's Discussion and Analysis to be posted on SEDAR on or
        before November 7, 2009.

SWDCC's processing volumes decreased during the three and nine months ended September 30, 2009, falling by 9% and 18%, respectively. In both cases, the declines were driven by a much weaker economic environment, which has resulted in some lost business and reduced ordering activity from many customers. In addition, the year-to-date processing volumes were affected by sharp increases in commodity coffee prices during the first half of 2009, which resulted in a delay in sales orders as SWDCC's customers worked to reduce their exposure to the higher cost coffees. At the same time, supply constraints from certain coffee origins reduced SWDCC's toll processing volumes, as customers experienced delays in receiving coffee from exporting countries.

While SWDCC's nine-month processing volumes are down from the same period last year, the company has seen a gradual improvement in its business over the year-to-date. Processing volumes were down by 25% in the first quarter, 19% in the second quarter and 9% in the third quarter.

Third quarter revenues totaled $7.5 million, a decrease of $0.2 million, or 2%, from the same period last year. Revenues for the year-to-date totaled $22.5 million, a decline of $1.1 million, or 5%, from the first three quarters of 2008. While the decreases are primarily related to lower processing volumes, SWDCC's revenues did not decline at the same rate as its volumes due to more favourable foreign exchange rates. During the first three quarters of 2009, approximately 72% of the company's sales were generated in US dollars. As the US dollar was significantly stronger during the first nine months of 2009 than in the same period last year, SWDCC realized higher foreign exchange on its US sales. This had a positive impact on the company's revenue.

At the same time, 2009 nine-month sales orders from a key regional market were up by 36% compared to the same period last year, following the targeted advertising and promotional campaign SWDCC conducted in that market in mid-2008. The radio, newspaper and online campaign was created to better inform consumers about their ability to choose 100% chemical free SWISS WATER(R) Process decaffeinated coffees, as opposed to coffees decaffeinated with chemical solvents, including methylene chloride and ethyl acetate. This strategy has proven successful, as evidenced by the significant rise in demand for SWISS WATER(R) Process decaffeinated coffees within the initial target market.

Gross profit for the third quarter and year-to-date declined by 5% and 18%, respectively. In both cases, the decrease was related to SWDCC's lower sales volumes, partially offset by a decrease in its cost of goods sold.

Third quarter net income of $1.2 million was down from $1.8 million in 2008, due mainly to foreign exchange losses on translation of US dollar denominated assets and liabilities (compared to gains in Q3 2008). For the year-to-date, net income totaled $2.3 million, compared to $3.6 million in the first nine months of 2008. SWDCC's nine-month net income was affected positively by a $2.2 million net gain on derivative instruments (compared to a $0.8 million net gain for the same period last year), as well as a $0.5 million future income tax recovery (compared to a $0.6 million recovery last year). However, these items were not enough to offset the lower gross profit and higher consumer promotion and advertising expenditures.

Based on the success of its 2008 campaign, SWDCC expanded its marketing program into new and larger geographic markets during Q1 2009. As a significant amount of the current campaign's annual costs were recorded during the first quarter launch period, consumer promotion and advertising expenditures of $1.8 million for the first three quarters of 2009 were up substantially from the $0.8 million recorded for the same period of 2008.

During the third quarter, the Fund generated adjusted distributable cash of $0.4 million, and paid $0.6 million in distributions to unitholders. In the first nine months of 2009, adjusted distributable cash of $1.8 million was generated and $3.6 million was paid to unitholders. This resulted in payout ratios of 162% for the third quarter and 197% for the first three quarters. The difference between adjusted distributable cashed generated and distributions paid to unitholders was funded by working capital and borrowings against the Fund's credit facility.

As announced on June 9, 2009, the Fund's monthly distributions were reduced from $0.075 per unit to $0.030 per unit, effective with the distribution paid on July 15, 2009. The decision to reduce distributions was based on three key factors: a significant slowdown in the global economy; a temporary decrease in customer orders due to shipping delays and rising prices in certain coffee producing regions; and SWDCC's considerable investment in its brand-building programs. Together, these factors negatively influenced SWDCC's sales volumes and adjusted distributable cash, necessitating the reduction of monthly distributions to a more sustainable level. Looking ahead, the company expects its investment in building consumer awareness will generate increased sales volumes in 2010 and beyond, resulting in increased adjusted distributable cash in future years.

"This year has brought a number of significant market challenges, which have affected our processing volumes over the past three quarters," said Frank Dennis, President and CEO of SWDCC and a Trustee of the Fund. "Nevertheless, we are pleased by the volume and revenue growth generated by our investment in focused regional advertising programs. We expect to build on the success of last year's initial campaign in a larger market over the coming quarters, with returns on our investment beginning to materialize in 2010."

A more detailed discussion of the Fund's financial results can be found in its third quarter Management's Discussion and Analysis, which is to be posted with the Fund's unaudited interim financial statements on SEDAR ( on or before November 7, 2009.

Company Profile

The Fund owns Swiss Water Decaffeinated Coffee Company Inc. (SWDCC), a premium green coffee decaffeinator located in Burnaby, British Columbia, Canada. SWDCC decaffeinates customer-owned coffees, including organically certified coffees, for a fee - its "toll" business; and also purchases high-quality green coffees, decaffeinates them and markets them to the green coffee trade - its "non-toll" business. The SWISS WATER(R) Process is a proprietary 100% chemical free decaffeination process that does not use methylene chloride or ethyl acetate. The SWISS WATER(R) Process is the world's only consumer branded decaffeination process and the company supports the brand through ongoing consumer research and focused consumer advertising.

%SEDAR: 00017658E


For further information: For further information: Sherry Tryssenaar, Chief Financial Officer, Swiss Water Decaffeinated Coffee Company Inc., Phone: (604) 444-8780, Fax: (604) 420-8711, Email:, Website:

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