Village Farms Income Fund Announces Unitholder Meeting for Conversion from an
Income Trust Structure to a Corporation and its Third Quarter 2009 Results
TRADING SYMBOL: The Toronto Stock Exchange: Village Farms Income Fund - VFF.UN
The Conversion is expected to be completed on or around
In conjunction with their review of the Conversion, the board of trustees retained RSM Richter, Inc. ("RSM Richter") to act as its financial advisor. RSM Richter has provided the board of trustees with an opinion that, as at the date thereof and subject to the particular assumptions and considerations summarized therein, the consideration to be received by unitholders pursuant to the Conversion is fair, from a financial point of view, to such unitholders. The full text of the RSM Richter fairness opinion will be included with the management information circular.
Rationale and Benefits of the Conversion - Greater access to equity capital markets and widening of potential investor base in light of the pending limited life of the public income trust market; - Enhanced structure to pursue opportunities for growth and expansion; - Simplified capital structure; - Effective and efficient method of converting from an income trust to a corporation under existing legislation.
Details of the Conversion
As a result of the Conversion, ordinary unitholders of the Fund will receive one common share for every ordinary trust Unit ("Unit") of the Fund held on the effective date of the Conversion. The Conversion entity, Village Farm of
Following the Conversion, the board of directors and executive officers of VF
Village Farms anticipates that 13,440,435 shares of VF
The Conversion is subject to the customary commercial conditions, including the receipt of regulatory approvals such as the
At the meeting, unitholders will also be asked to consider a resolution to implement a Stock Compensation Plan for VF
Third Quarter 2009 Operating Results Summary: - Revenues of US$32.7 million versus third quarter 2008 sales of US$ 30.1 million; - EBITDA of US$(292) thousand versus US$679 thousand in the third quarter 2008; - Net loss of US$(2.8) million versus a $(1.7) million loss in the third quarter 2008;
Michael DeGiglio, Chief Executive Officer of the Fund's operating subsidiaries, stated, "We continued to face market challenges through the summer of 2009 which is historically the weakest pricing period for our products during the course of a calendar year and this year was no exception. The market challenges came from decreased consumer consumption for fresh produce as compared to 2008 and increased supply of competitive products as well as some competitors facing serious financial distress. As a result we saw a year on year decrease in our average selling price of 14.7%. During the later part of the third quarter we did experience better market pricing than we did during the same period in 2008, so we are hopeful that our fourth quarter results will be more in line with our prior year fourth quarter performance rather than the first three quarters of calendar year 2009, in which we have experienced some of the weakest pricing in the last five years.
DeGiglio added, "We continue to believe that 2009 will remain a challenging year, we are steadfast on improving our results in 2010 as a result of more efficient operations, marketing and customer mix as well as enhanced production. We remain committed to creating long term value for our unitholders through a disciplined operational and strategic approach to our business. The Conversion is an integral part of executing our growth strategy and will enhance our growth opportunities in the future."
Operational Summary for the Quarter:
Revenue
Revenue for the quarter ended
Gross Profit
Gross profit for the quarter ended
Selling, General and Administrative
Selling, general and administrative expenses for the quarter ended
Interest, Net
Net Interest expense, for the quarter ended
Other Costs
Other costs for the quarter ended
Net (Loss)
Net (loss) for the quarter ended
EBITDA
EDITDA for the quarter ended
Distributions to Unitholders
The Fund's policy has been to distribute annually to Unitholders available cash provided by operations after cash required for capital expenditures, working capital reserves, growth capital reserves and other reserves considered advisable by the Trustees of the Fund. In light of the ongoing uncertainties and challenging economic times, as well as to create a reserve for the cost of converting the Fund's Income Trust structure by the end of calendar year 2009 into a regular public Canadian corporation and our intent to accelerate our growth initiatives, the Trustees believe it is prudent to conserve cash for these reasons and as such suspended monthly distributions beginning in
Non-GAAP Measures
EBITDA is not a recognized measure and does not have standardized meaning under the Canadian generally accepted accounting principles. Accordingly, this measure may not be comparable to similar measures presented by other issuers. Please refer to the Fund's Management's Discussion and Analysis for the quarter ended
About Village Farms
Village Farms is one of the largest producer, marketer and distributor of premium-quality, greenhouse grown tomatoes, bell peppers, and cucumbers in
Forward Looking Statements
This press release contains certain "forward looking statements". These statements relate to future events or future performance and reflect our expectations regarding our growth, results of operations, performance, business prospects, opportunities or industry performance and trends. These forward looking statements reflect our current internal projections, expectations or beliefs and are based on information currently available to us. In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, you should specifically consider various factors, including, but not limited to, such risks and uncertainties as availability of resource, competitive pressures and changes in market activity, risks associated with U.S. and international sales and foreign exchange, regulatory requirements and all of the other "Risk Factors" set out in the Fund's current quarterly information form and management's discussion and analysis for the quarter
Village Farms Income Fund Consolidated Balance Sheets (In thousands of United States dollars) September 30, December 31, 2009 2008 ------------- ------------ Assets (unaudited) Current assets: Cash and cash equivalents $2,725 $4,101 Accounts receivable 7,958 9,357 Assets held for sale - 344 Inventories 11,867 11,438 Other receivables 694 567 Prepaids and deposits 240 544 ------------- ------------ 23,484 26,351 Property, plant and equipment 67,543 70,489 Intangible assets 1,430 1,508 Other assets 945 821 ------------- ------------ Total assets $93,402 $99,169 ------------- ------------ ------------- ------------ Liabilities and unitholders' equity Current liabilities: Accounts payable and accrued liabilities $8,637 $9,388 Operating line of credit 1,691 - Current portion of long-term debt 3,227 3,227 Current portion of obligations under capital leases 272 227 Distributions payable - 317 ------------- ------------ Total current liabilities 13,827 13,159 Long-term debt 52,311 54,732 Derivatives 2,366 2,801 Obligations under capital leases 330 472 Future income taxes 5,186 4,881 ------------- ------------ Total liabilities 74,020 76,045 ------------- ------------ Unitholders' equity: Trust units 24,850 24,850 Accumulated distributions (9,400) (8,168) Accumulated earnings 3,877 6,387 Cumulative translation adjustment 55 55 ------------- ------------ Total unitholders' equity 19,382 23,124 ------------- ------------ Total liabilities and unitholders' equity $93,402 $99,169 ------------- ------------ ------------- ------------ Village Farms Income Fund Consolidated Statements of Earnings and Comprehensive Earnings For the Three and Nine Months Ended (In thousands of United States dollars, except for units outstanding and per unit/share amounts, unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Net sales $32,711 $30,105 $96,927 $102,677 Cost of sales 31,776 27,382 89,568 82,777 ----------- ----------- ----------- ----------- Gross profit 935 2,723 7,359 19,900 Selling, general and administrative expenses 2,675 3,366 8,489 10,585 ----------- ----------- ----------- ----------- (Loss) income from Operations (1,740) (643) (1,130) 9,315 Interest expense, net 817 893 2,419 2,770 Foreign exchange loss 829 194 409 206 Amortization of intangible assets 26 341 78 1,047 Loss (gain) on derivatives 485 379 (435) (427) Other (income), net (52) (3) (234) (1,059) Gain on sale of asset - - (37) - ----------- ----------- ----------- ----------- Loss/earnings before income taxes (3,845) (2,447) (3,330) 6,778 (Recovery of) provision for income taxes (1,068) (743) (820) 1,147 ----------- ----------- ----------- ----------- Net (loss) earnings and comprehensive (loss) earnings (2,777) (1,704) (2,510) 5,631 ----------- ----------- ----------- ----------- Net (loss) income per Unit/share-basic ($0.07) ($0.05) ($0.06) $0.15 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average number of units/shares outstanding-basic 38,707,345 36,349,305 38,707,345 36,349,305 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net (loss) income per Unit/share-diluted ($0.07) ($0.04) ($0.06) $0.15 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average number of units/shares outstanding-diluted 38,707,345 38,707,345 38,707,345 38,707,345 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Village Farms Income Fund Consolidated Statements of Cash Flows For the Three and Nine Months Ended (In thousands of United States dollars, unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Cash flows from operating activities: Net earnings ($2,777) ($1,704) ($2,510) $5,634 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,422 1,660 4,333 5,028 Loss (gain) on sale of property - 50 (42) 50 Loss (gain) on derivatives 485 379 (435) (428) Foreign exchange loss (gain) 44 - 77 - Share based compensation - - - 813 Future income taxes (139) (5) 305 164 Changes in non-cash working capital 5,216 7,300 622 2,756 ----------- ----------- ----------- ----------- Net cash provided by operating activities 4,251 7,680 2,350 14,017 ----------- ----------- ----------- ----------- Cash flows from investing activities: Purchases of property, plant and equipment (410) (1,659) (1,423) (2,706) Proceeds from sale of property, plant and equipment 140 - 222 - ----------- ----------- ----------- ----------- Net cash used in investing activities (270) (1,659) (1,201) (2,706) ----------- ----------- ----------- ----------- Cash flows from financing activities: Proceeds (Payments on) from operating line of credit (3,865) (5,031) 1,691 (3,313) Payments on long-term debt (807) (795) (2,421) (2,358) Payments on obligations under capital leases (13) (92) (97) (261) Dividend payments to Unitholders and PPS holders - (1,047) (1,550) (3,221) Other 53 - (71) (529) ----------- ----------- ----------- ----------- Net cash used in financing activities (4,632) (6,965) (2,448) (9,682) ----------- ----------- ----------- ----------- Foreign exchange loss (44) - (77) - ----------- ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents (695) (944) (1,376) 1,629 Cash and cash equivalents beginning of period 3,420 4,193 4,101 1,620 ----------- ----------- ----------- ----------- Cash and cash equivalents end of period $2,725 $3,249 $2,725 $3,249 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Supplemental cash flow information: Interest paid $831 $1,321 $2,363 $3,050 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Income taxes paid $1 $16 $24 $1,965 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
%SEDAR: 00020068E
For further information: Stephen C. Ruffini, Senior Vice President and Chief Financial Officer, Village Farms Canada Limited Partnership, (732) 676-3008
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