Associated Brands Income Fund

Associated Brands Income Fund

March 21, 2005 08:20 ET

Associated Brands Announces 2004 Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: ASSOCIATED BRANDS INCOME FUND

TSX SYMBOL: ABF.UN

MARCH 21, 2005 - 08:20 ET

Associated Brands Announces 2004 Results

TORONTO, ONTARIO--(CCNMatthews - March 21, 2005) - Associated Brands
Income Fund (TSX:ABF.UN) announced today its results for the year ended
December 31, 2004.

Sales in 2004 were $156.1 million compared to $158.6 in 2003. While
sales growth was strong through the first two quarters of 2004, declines
occurred in the third quarter due to unseasonable weather in eastern
Canada which negatively impacted the Fund's sales of cold beverages,
drink mixes and ice teas, and in the fourth quarter due to a general
softness across all major product categories in Canada and inventory
adjustments by the Fund's largest U.S. customer. The appreciation of the
Canadian dollar compared to the U.S. dollar reduced reported sales by
$6.8 million for the year ended December 31, 2004.

Earnings before interest, taxes, depreciation and amortization (EBITDA)
in 2004 were $14.9 million compared to $16.9 million last year. EBITDA
was impacted by the reduced sales and a change in the product mix in the
United States that reduced gross profit margins through the last half of
the year. Packaging development expenses were also higher in 2004 due to
mandatory new nutritional labeling regulations in Canada and the United
States. Partially offsetting these negative factors was the positive
impact of the stronger Canadian dollar on materials and ingredients
consumed in Canada but purchased in U.S. dollars. As a percentage of
sales, gross profit was 19.3% of sales in 2004 compared to 19.1% in
2003. Net earnings were $7.8 million or $0.596 per unit (diluted) in
2004 compared to $7.7 million or $0.588 per unit (diluted) in 2003.

For the year ended December 31, 2004, distributable cash was $10.5
million or $0.893 per Fund unit compared to $11.8 million or $0.999 per
Fund unit in 2003. Distributions in 2004 were $1.036 per unit compared
to $1.075 per unit in 2003. Effective with the November 2004
distribution payment, monthly cash distributions were adjusted to $0.07
per unit from $0.0896 per unit.

For the three months ended December 31, 2004, sales were $40.3 million
compared to $46.1 million for the same period last year. EBITDA was $3.6
million compared to $4.9 million last year. Gross profit in the quarter
was 18.8% of sales compared to 19.5% last year. Net earnings were $1.9
million or $0.145 per unit (diluted) compared to $2.8 million or $0.213
per unit (diluted) in the fourth quarter of 2003. Distributable cash for
the fourth quarter of 2004 was $2.5 million or $0.215 per Fund unit
compared to $3.9 million or $0.334 per Fund unit in the fourth quarter
of last year. The Fund declared distributions of $0.229 per Fund unit in
the fourth quarter of 2004 compared to $0.269 in the fourth quarter of
2003.

"While 2004 was a challenging year, we continued to build on our
considerable strengths as one of North America's leading providers of
private label dry blend food products and household products," stated
John Currie, Executive Chairman. "With our strong customer
relationships, high quality offering and extensive industry experience,
we are confident we will work through the challenges in our business and
resume our pattern of growth and performance improvement over the long
term."

"Our objective is to become our customers' Partner of Choice for private
label product development, sourcing, manufacturing and support," added
Rob Dougans, President and Chief Executive Officer. "To achieve this
goal, and to drive sales growth and margin improvement, we are
implementing a number of initiatives aimed at operating our business
more effectively and more efficiently."

Mr. Dougans continued: "We are increasing our sales force and targeting
specific vertical markets in grocery retail, industrial and food service
sectors where we have a strong presence. We intend to grow our contract
manufacturing business and leverage our proven ability to deliver high
quality products that meet the needs of brand manufacturers looking to
outsource their production. New products and private label solutions are
increasingly positioning us as our customers' preferred sole source
supplier. We are reducing our costs in a number of areas, improving
manufacturing yields, and enhancing purchasing efficiencies. We also
continue to evaluate acquisition opportunities that could strengthen our
product lines, enhance our customer penetration and generate cost
synergies."



Financial Highlights (complete statements attached):

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Three Months Year
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Period Ended December 31,
($000, except unit and per unit
amounts and percentages) 2004 2003 2004 2003
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Sales 40,327 46,148 156,096 158,601
EBITDA 3,621 4,885 14,919 16,908
Net Earnings 1,897 2,784 7,785 7,680
Net Earnings per Unit
(diluted) $0.145 $0.213 $0.596 $0.588
Distributable Cash 2,526 3,934 10,500 11,756
Distributable Cash
per Fund Unit $0.215 $0.334 $0.893 $0.999
Distributions Declared
per Fund Unit $0.229 $0.269 $1.036 $1.075
Weighted Average Fund
Units Outstanding 11,762,800 11,762,800 11,762,800 11,762,800
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Associated Brands Income Fund (TSX: ABF.UN), through its operating
subsidiaries, is a leading North American manufacturer and supplier of
private-label dry blend food products and household products. Since
beginning operations in 1985, Associated Brands has grown to become one
of the three largest suppliers of a diverse range of private-label
dry-blend food products in North America, producing over eleven million
cases annually across multiple product categories currently sold to 44
of the 50 largest North American food retailers. Associated Brands plans
to build unitholder value by leveraging its solid presence in the U.S.
private-label market, expanding its product offerings to current and new
customers and adding additional contract manufacturing business, and
through accretive acquisitions that meet its strict operating and
strategic criteria. More information can be obtained at
www.associatedbrands.com.

Certain statements in this press release may include "forward-looking"
statements which involve known and unknown risks, uncertainties and
other factors which may cause actual results, performance or
achievements of Associated Brands Income Fund to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. When used in this press
release, such statements use such words as "may", "will", "expect",
"anticipate", "project", "believe", "plan", and other similar
terminology. The risks and uncertainties are detailed from time to time
in reports filed by the Fund with the securities regulatory authorities
in all of the provinces and territories of Canada. New risk factors may
arise from time to time and it is not possible for management to predict
all of those risk factors or the extent to which any factor or
combination of factors may cause actual results, performance and
achievements of the Fund to be materially different from those contained
in forward-looking statements. Given these risks and uncertainties,
investors should not place undue reliance on forward-looking statements
as a prediction of actual results.

As used herein, "EBITDA" means earnings before interest, income taxes,
depreciation, amortization, management fees and translation gains and
losses arising on all monetary assets and liabilities of the Fund
denominated in a foreign currency. EBITDA is not a recognized measure
under Canadian generally accepted accounting principles ("GAAP").
Management believes that EBITDA is a useful supplemental measure to net
earnings (loss), as it provides investors with an indication of cash
available for distribution prior to debt service, capital expenditures
and income taxes.

Distributable cash is also not a defined term under GAAP. Distributable
cash is equal to net earnings before amortization, future income taxes
and translation gains and losses arising on monetary assets and
liabilities of the Fund denominated in a foreign currency, less capital
expenditures and debt repayments and reserves that the trustees may
consider appropriate. Management believes distributable cash is a useful
supplemental measure of operating performance, as it provides investors
with an indication of cash available for distribution.

Investors should be cautioned that neither EBITDA nor distributable cash
should be construed as an alternative to net earnings (loss) determined
in accordance with GAAP as an indicator of the Fund's performance or to
cash flows from operating, investing and financing activities as a
measure of liquidity and cash flows. The Fund's method of calculating
EBITDA and distributable cash may differ from the methods by which other
issuers calculate EBITDA and distributable cash and, accordingly, EBITDA
and distributable cash may not be comparable to measures used by other
issuers.

The following is a summarized version of the Consolidated Financial
Statements



Associated Brands Income Fund
Consolidated Statement of Earnings and Deficit
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For the Year Ended For the Year Ended
December 31, 2004 December 31, 2003

Sales $ 156,095,759 $ 158,600,779

Cost of sales 125,967,444 128,286,366
------------------ ------------------
30,128,315 30,314,413
------------------ ------------------

Expenses
General and administrative,
including foreign exchange 9,384,745 9,803,917
Selling and marketing 5,705,547 5,145,178
Amortization 3,583,819 3,578,437
------------------ ------------------
18,674,111 18,527,532
------------------ ------------------

11,454,204 11,786,881

Interest expense 1,930,944 1,704,791
------------------ ------------------

Earnings before income taxes 9,523,260 10,082,090

Income taxes 1,738,364 2,402,168
------------------ ------------------

Net earnings 7,784,896 $ 7,679,922
------------------ ------------------
------------------ ------------------

Net earnings per unit
Basic $ 0.66 $ 0.65
------------------ ------------------
------------------ ------------------
Diluted $ 0.60 $ 0.59
------------------ ------------------
------------------ ------------------

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Retained earnings (deficit),
beginning of period $ (4,816,761) $ 150,681
Net earnings 7,784,896 7,679,922
Distributions declared to
Fund unitholders (12,186,262) (12,647,364)
Distributions declared on
Class B exchangeable units - -
------------------ ------------------

Deficit, end of period $ (9,218,127) $ (4,816,761)
------------------ ------------------
------------------ ------------------

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Associated Brands Income Fund
Consolidated Balance Sheet
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December 31, 2004 December 31, 2003

Assets
Current
Receivables $ 12,644,937 $ 13,616,267
Income taxes receivable 99,596 -
Inventories 22,406,391 21,374,511
Prepaids 1,389,197 1,669,857
Future income taxes 251,968 309,262
------------------ ------------------
36,792,089 36,969,897

Property, plant and equipment 23,723,222 26,347,025
Trademarks 15,315,000 15,315,000
Goodwill 84,263,592 84,263,592
Other assets 443,240 619,817
Future income taxes 339,946 212,127
------------------ ------------------

$ 160,877,089 $ 163,727,458
------------------ ------------------
------------------ ------------------

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Liabilities
Current
Bank indebtedness $ 7,238,681 $ 5,047,439
Payables and accruals 9,947,126 10,134,239
Cash distributions payable 823,396 1,053,947
Payable to former owners 2,302,137 -
Income taxes payable - 1,696,398
------------------ ------------------
20,311,340 17,932,023
------------------ ------------------

Long-term debt 29,543,880 30,372,200
------------------ ------------------

Class B exchangeable units 12,023,908 12,023,908
------------------ ------------------

Unitholders' Equity
Fund units 108,216,088 108,216,088
Deficit (9,218,127) (4,816,761)
------------------ ------------------
98,997,961 103,399,327
------------------ ------------------

$ 160,877,089 $ 163,727,458
------------------ ------------------
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Associated Brands Income Fund
Consolidated Statement of Cash Flows
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For the Year For the Year
Increase (decrease) in cash Ended December Ended December
and cash equivalents 31, 2004 31, 2003

Operating
Net earnings $ 7,784,896 $ 7,679,922
Amortization 3,583,819 3,578,437
Future income taxes (70,525) 166,014
Translation gain on long-term debt (828,320) (734,500)
Change in non-cash operating
working capital 539,135 (3,671,567)
------------------ ------------------
11,009,005 7,018,306
------------------ ------------------

Financing
Proceeds/(repayment) of bank
indebtedness 2,191,242 4,771,027
Payment of distributions
to unitholders (12,416,813) (13,349,682)
Repayment of payable
to former owners - (8,180,795)
------------------ ------------------
(10,225,571) (16,759,450)
------------------ ------------------

Investing
Purchase of property,
plant and equipment (678,929) (1,211,762)
Purchase of other assets (104,505) (6,939)
------------------ ------------------
(783,434) (1,218,701)
------------------ ------------------


Net decrease in cash and
cash equivalents - (10,959,845)

Cash and cash equivalents,
beginning of year - 10,959,845
------------------ ------------------
Cash and cash equivalents,
end of year $ - $ -
------------------ ------------------
------------------ ------------------

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Associated Brands 2004 Consolidated Financial Statements and
Management's Discussion and Analysis are available on the investor
relations page at www.associatedbrands.com and on SEDAR at www.sedar.com.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Associated Brands Income Fund
    John Currie
    Executive Chairman
    (416) 503-7001