Menu Foods Income Fund
TSX : MEW.UN

Menu Foods Income Fund

October 10, 2007 08:00 ET

Menu Foods Income Fund Concludes Sale of Plant, Restructures Operations and Updates on Status of Recall

TORONTO, ONTARIO--(Marketwire - Oct. 10, 2007) -

NOT FOR RELEASE OVER US NEWSWIRE SERVICES

Menu Foods Income Fund (TSX:MEW.UN) (the "Fund" or "Menu") today announced the completion of the previously disclosed sale of its production facility in North Sioux City, South Dakota to Mars, Incorporated. The proceeds of sale will be used by the Fund to reduce outstanding indebtedness in favour of its secured lenders. Menu believes that the sale of the facility will enables the Fund to better match its production capacity to its customer base on a go-forward basis. In 2006, the North Sioux City facility accounted for approximately 16% of the Fund's production and 14% of its total work force.

As previously reported, the Fund has been advised that customers who represented approximately 37% of sales volume in 2006 will no longer be purchasing those products from Menu. The sale of the North Sioux City facility, the previously announced settlement of certain contractual obligations and the sale of certain other assets, which together generated US$26.3 million, are the initial steps in "right-sizing" the Fund's business.

As a further step to right-sizing its business, the Fund also announced today a restructuring of its operations. The costs associated with this restructuring principally include severance arrangements resulting from a 10% to 15% reduction in its workforce, the write-off of certain pre-recall packaging and finished goods inventory, the write-off of a previously capitalized customer relationship, the write-off of certain take-or-pay receivables and the write-down of idle assets. In accounting terms, these actions will aggregate to an accounting charge against operations of just over $25 million, but will only cost the Fund approximately $6.2 million in cash. These initiatives are expected to reduce operating costs on a go-forward basis. In this same vein, with the objective of "sharing the pain", the CEO has reduced his compensation by approximately 22%, the senior executives' compensation by approximately 17% and the board of director's compensation by approximately 20%.

In addition, the Fund is revising its estimate of recall costs from $45 million to $55 million. This adjustment arises principally because the volume of customer returns and associated costs are now estimated to be greater than originally anticipated.

Amendments to Menu's lending agreements resulting from the matters noted above are expected to be executed shortly.

Contact Information

  • Investor Inquiries
    Menu Foods GenPar Limited
    Mark Wiens - Chief Financial Officer
    (905) 826-3870
    or
    Media Inquiries
    Hill & Knowlton Canada
    Chris Winsor
    (416) 413-4747