Connors Bros. Income Fund (TSX: CBF.UN), whose subsidiaries market consumer food products under brands such as Bumble Bee, Clover Leaf, Brunswick, Snows and Sweet Sue, today announced its results for the quarter ended September 27, 2008.
- The Fund reported net earnings for the third quarter of 2008 of $11.6 million, or $0.22 per unit (diluted), as compared to $14.3 million for the third quarter of 2007, or $0.28 per unit (diluted).
- Revenues increased by $40.5 million or 18.4% to $260.5 million as compared to revenues of $220.1 million for the third quarter of 2007 due to the impact on prior year sales of the Recall, and as a result of higher volume and pricing in both the U.S. and Canada.
- Adjusted EBITDA for the third quarter of 2008 decreased 1.3% reflecting increased marketing spending. Excluding the incremental marketing expense in 2008, adjusted EBITDA for the third quarter of 2008 would have increased 1.9%.
- Standardized distributable cash for the third quarter of 2008 was C$17.6 million or C$0.34 per unit (diluted) as compared to C$3.6 million or C$0.07 per unit (diluted) for the third quarter of 2007.
- Standardized distributable cash and the payout ratio for the twelve months ended September 27, 2008 were C$44.5 million and 61.8%, respectively.
- Net earnings decreased $1.3 million to $31.0 million, or $0.60 per unit (diluted) for the first nine months of 2008 from net earnings excluding Recall charges of $32.3 million, or $0.63 per unit (diluted) for the first nine months of 2007 as a result of $4.2 million in losses related to the sale of red-meat assets and the planned closure of the Augusta meat packing plant as well as higher income taxes.
"On November 10th, the unitholders of Connors voted to accept the offer of Centre Partners to purchase the operating companies of Connors, which would lead to the redemption of all of the units of the Fund upon the closure of the transaction which is expected to occur on November 17th," said Chris Lischewski, president and chief executive officer of the Fund's operating subsidiaries.
"As we approach the closing of the transaction, the business continues to perform well. The results for the third quarter of 2008 reflected the strength of our seafood business as we faced a number of challenges, including weakening economies, a transition of our production lines to accommodate a can size change from six ounce to five ounce cans for the core tuna products in the U.S. market, the implementation of a new ERP platform and the sale of the red-meats brands," continued Lischewski.
"While seafood volumes were flat in the U.S., we were able to recover raw material cost inflation through price increases which held gross margins at levels comparable to prior quarters, despite weak margins in the red-meats business. During the past quarter, we made progress on a number of fronts which are critical to the company's long-term success. These include the sale of the red-meat brands which have been under strategic review prior to this quarter, the establishment of strategic relationships with poultry co-packers to produce our poultry products, the introduction of a national advertising program in Canada and the preparation of a test advertising program in the U.S. that will commence in the first quarter of 2009.
From a financial standpoint, our Canadian business is being negatively impacted by the weakening Canadian dollar but our U.S. seafood business is performing, well and we continue to project full year 2008 EBITDA to be down about 5% from 2007 adjusted EBITDA of $91.2 million primarily due to the previously announced increased marketing spending. Based on these projections, the business continues to sustain the current distribution level of C$0.80 per unit."
Third Quarter Operational and Financial Summary:
Revenue for the third quarter of 2008 was $260.5 million as compared to revenue of $220.1 million for the third quarter of 2007, an increase of $40.5 million or 18.4%. Revenue for the third quarter of 2008 increased as compared to the third quarter of 2007 primarily as a result of higher case-equivalent volumes of U.S. meat and poultry products, increased prices for most U.S. products to cover raw material cost increases, and increased volumes for seafood sold in Canada. Case-equivalent volumes were essentially unchanged for U.S. seafood products for the third quarter of 2008 as compared to the third quarter of 2007, while meat and poultry volume for the U.S. increased by 96.8% (as a result of a substantial decline in volume during the third quarter of 2007 following the Recall), and volume for the Canadian business increased 6.3% due to strong sales in tuna, salmon and international exports.
Net earnings for the third quarter of 2008 decreased $2.7 million to $11.6 million, or $0.22 per unit (diluted) as compared to net earnings of $14.3 million for the third quarter of 2007, or $0.28 per unit (diluted). The decrease in earnings for the third quarter of 2008 was a result of the $4.2 million total loss on sale of red-meat assets and the meat packing plant closure, higher marketing expense, and an increase in the income tax provision of $0.7 million, partially offset by improved operating performance.
EBITDA for the third quarter of 2008, as adjusted to eliminate the $4.2 million pre-tax loss related to the red-meat assets sale and plant closure, of $24.1 million was $0.3 million, or 1.3% lower than EBITDA of $24.4 million for the third quarter of 2007. The decrease in EBITDA, as adjusted, was primarily a result of the increased marketing investment in the third quarter of 2008 and lower management incentive expense in the third quarter of 2007 due to the reversal of management incentives as a result of the Recall. -- www.cnxmarketlink.com
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