COLABOR INCOME FUND
TSX : CLB.UN

COLABOR INCOME FUND

February 27, 2008 20:24 ET

Colabor Income Fund: Excellent Results, Successful Summit Integration and Synergies Achieved, Always Ready for New Acquisitions

BOUCHERVILLE, QUEBEC--(Marketwire - Feb. 27, 2008) - For distribution in Canada only. Not for distribution to U.S. newswire services or for dissemination in the United States.

Colabor Income Fund (TSX:CLB.UN) reports its fourth quarter results for the year ended December 31, 2007.

Highlights of the fourth quarter ended December 31, 2007 compared with the 2006 fourth quarter

- Sales up approximately $142.6 million, an increase of 104%;

- Organic growth of sales of 7.9%;

- Earnings before financial expenses and amortization (EBITDA) increase by $7 million, an increase of 120%;

Highlights of year ended December 31, 2007 compared with year ended December 31, 2006

- Sales up approximately $437.7 million, an increase of 109%;

- Organic growth of sales of 6,6%;

- Earnings before financial expenses and amortization (EBITDA) increase by $16.5 million, an increase of 117%;



Results of Operations

Consolidated Earnings (in thousands of dollars)

2007-12-31 2006-12-31
(114 days - (114 days -
4th quarter) 4th quarter)
(unaudited) (unaudited) Variance
--------------------------------------------------------------------------
$ $ $ %
Sales 279,703 100.00% 137,119 100.00% 142,584 104%
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Earnings before
the following
items 12,776 4.57% 5,799 4.23% 6,977 120%
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Financial expenses 2,019 0.72% 269 0.20% 1,750 651%
Amortization of
property, plant
and equipment 1,053 0,38% 291 0.21% 762 262%
Amortization of
intangible assets 2,179 0.78% 993 0.72% 1,186 119%
--------------------------------------------------------------------------
5,251 1.88% 1,553 1.13% 3,698 238%
--------------------------------------------------------------------------
Earnings before
income taxes and
non-controlling
interest 7,525 2.69% 4,246 3.10% 3,279 77%
--------------------------------------------------------------------------
Income taxes
Current 2,715 0.97% 2,715
Future 6,290 2.25% 6,290
--------------------------------------------------------------------------
9,005 3.22% 9,005
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Earnings (loss)
before non-
controlling
interest (1,480) -0.53% 4,246 3.10% (5,726) -135%
Non-controlling
interest 2,510 0.90% 1,989 1.45% 521 26%
--------------------------------------------------------------------------
Net earnings (loss) (3,990) -1.43% 2,257 1.65% (6,247) -277%
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Sales (in thousands of dollars)

2007-12-31 2006-12-31
(365 days) (365 days) Variance
--------------------------------------------------------------------------
$ $ $ %
Sales 838,068 100.00% 400,398 100.00% 437,670 109%
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Earnings before
the following
items 30,548 3.65% 14,061 3.51% 16,487 117%
--------------------------------------------------------------------------
Financial expenses 6,731 0.80% 843 0.21% 5,888 698%
Amortization of
property, plant
and equipment 3,354 0.40% 927 0.23% 2,427 262%
Amortization of
intangible assets 6,993 0.84% 3,225 0.81% 3,768 117%
--------------------------------------------------------------------------
17,078 2.04% 4,995 1.25% 12,083 242%
--------------------------------------------------------------------------
Earnings before
income taxes and
non-controlling
interest 13,470 1.61% 9,066 2.26% 4,404 49%
--------------------------------------------------------------------------
Income taxes
Current 2,715 0.32% 0.00% 2,715
Future 6,290 0.75% 0.00% 6,290
--------------------------------------------------------------------------
9,005 1.07% 0.00% 9,005
--------------------------------------------------------------------------
Earnings before
non-controlling
interest 4,465 0,54% 9,066 2.26% (4,601) -51%
Non-controlling
interest 4,650 0.55% 4,255 1.06% 395 9%
--------------------------------------------------------------------------
Net earnings (loss) (185) -0.01% 4,811 1.20% (4,996) -104%
--------------------------------------------------------------------------
--------------------------------------------------------------------------



2007-12-31 2006-12-31
(114 days - (114 days -
4th quarter) 4th quarter)
(unaudited) (unaudited) Variance
--------------------------------------------------------------------------
$ % $ % $ %
Boucherville
Division
Retail 48,690 17.4% 47,226 34.4% 1,464 3.1%
Foodservice 99,302 35.5% 89,893 65.6% 9,409 10.5%
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147,992 52.9% 137,119 100.0% 10,873 7.9%
Summit Division
Foodservice 131,711 47.1% 0 0.0% 131,711 N/A
--------------------------------------------------------------------------
279,703 100.0% 137,119 100.0% 142,584 104.0%
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--------------------------------------------------------------------------



2007-12-31 2006-12-31
(365 days) (365 days) Variance
--------------------------------------------------------------------------
$ % $ % $ %
Boucherville
Division
Retail 130,633 15.6% 127,210 31.8% 3,423 2.7%
Foodservice 296,035 35.3% 273,188 68.2% 22,847 8.4%
--------------------------------------------------------------------------
426,668 50.9% 400,398 100.0% 26,270 6.6%
Summit Division
Foodservice 411,400 49.1% 0.0% 411,400 N/A
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838,068 100.0% 400,398 100.0% 437,670 109.3%
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Boucherville Division

Historically, the 4th quarter has always been the best quarter of the year, since it comes on the heels of the Colabor Exhibition held at the end of September each year for the past 20 years. This year, sales related to this event improved by over 30% to more than $60 million.

Retail

Sales of products for the retail market increased by 3.1% during the quarter, compared to the previous-year quarter, primarily as a result of the recruitment of two new major customers by one of the affiliated wholesalers during the third quarter. As a result of the addition of these new customers, in 2008, sales should increase significantly in this sector, which had experienced no growth in prior years. Sales in this sector are mainly to convenience stores and small-sized grocery stores, located mostly outside the greater Montreal area.

Foodservice

Organic growth in the affiliated wholesalers' foodservice sales continues to outpace industry levels, which is an indication that affiliated wholesalers are continuing to increase their market share compared with their competitors.

The 10.5% increase in sales for the quarter and 8.4% for the 365-day period ended December 31, 2007, compared with previous periods is higher than the 4.1% (including inflation) growth over 2006 anticipated by the Canadian Restaurant and Foodservices Association.

Summit Division

The acquisition of Summit has made it possible to double the Fund's overall sales and has met management expectations.

Synergies

As mentioned in the December 21, 2006 short form prospectus, the Fund's management has expected that synergies from the acquisition of Summit would be about $2.2 million (before certain integration costs). These synergies were primarily to result from streamlining and negotiating new supply agreements with suppliers and combining certain programs, such as property insurance, group insurance and others.

The Fund's management is proud to announce that these synergies have been achieved. It has successfully integrated Summit and is ready to consider other acquisitions.

Income taxes

The acquisition of the assets of Summit Food Service Distributors Inc. was finalized and carried out on January 8, 2007. Under the new tax regime for "specified investment flowthrough" ("SIFT") entities, also called listed income trusts and partnerships, SIFTs are now subject to a similar tax treatment as corporations. This new tax treatment is applicable in the fiscal year 2007. However, existing SIFTs on October 31, 2006 could benefit from certain transitional rules and would not be taxable under the new rules until 2011, provided they had not undergone an "undue expansion". As indicated in its decision rendered at the end of 2007, the Department of Finance considered the Summit acquisition transaction as an undue expansion. Accordingly, the Fund does not benefit from the transitional rules and is therefore subject to the new SIFT tax regime as of the 2007 taxation year.

The financial statements presented above include current income taxes of $2.7 million at the combined federal-provincial rate of 34% and future income taxes of $6.3 million.

The Fund recognized the taxes as soon as the Finance Department rendered its decision.



Cash Flow
Consolidated Cash Flows (in thousands of dollars)

2007-12-31 2006-12-31 2007-12-31 2006-12-31
(114 days - (114 days - (365 days) (365 days)
4th quarter 4th quarter)
(unaudited) (unaudited)
--------------------------------------------------------------------------
$ $ $ $
OPERATING ACTIVITIES
Net earnings (loss) (3,990) 2,257 (185) 4,811
Non-cash items
Amortization of
property, plant
and equipment 1,053 291 3,354 927
Amortization of
intangible assets 2,179 993 6,993 3,225
Amortization of
deferred financing
costs 24 81
Non-controlling
interest 2,510 1,989 4,650 4,255
Future income taxes 6,290 6,290
Compensation cost
from long-term
incentive plan 67 47 211 128
Amortization of
debenture transaction
cost 262 835
--------------------------------------------------------------------------
8,395 5,577 22,229 13,346
--------------------------------------------------------------------------
Changes in operating
assets and liabilities
Accounts receivable 4,525 963 5,041 (2,585)
Withholding taxes
recoverable 1,917 (23) 1,620 (1,620)
Inventory (4,324) (92) 1,869 (1,545)
Prepaid expenses 1,096 (296) 910 (311)
Accounts payable and
accrued liabilities (8,838) (419) (2,984) 6,872
Income taxes payable 605 605
Rebates payable 4,433 3,903 448 6,689
Deferred revenue (806) (828) (280) 476
Accrued benefit
liability for employee
benefits (53) (53)
--------------------------------------------------------------------------
(1,445) 3,208 7,176 7,976
--------------------------------------------------------------------------
Cash flows from operating
activities 6,950 8,785 29,405 21,322
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INVESTING ACTIVITIES
Business acquisition (109,048)
Property, plant and
equipment (885) (281) (1,469) (744)
--------------------------------------------------------------------------
Cash flows from
investing activities (885) (281) (110,517) (744)
--------------------------------------------------------------------------
FINANCING ACTIVITIES
Bank loan (6,920) (6,424) 19,999 (4,623)
Financing expenses (245) (245)
Distributions paid to
unitholders (3,550) (2,072) (10,265) (6,042)
Distributions paid on
exchangeable Colabor
LP units 1,825 1,825 (5,476) (5,419)
Repayment of notes
payable (6,195)
Repayment of long-term
debt (156) (156) (468) (468)
Repayment of security
deposits (468)
Purchase of units held by
the Fund for long-term
incentive plan (238) (448)
Disposal of units held by
the Fund for long-term
incentive plan 12 12
Issue of debentures 48,000
Issue of units 24,761
Unit and debenture issue
costs (1,404)
--------------------------------------------------------------------------
Cash flows from financing
activities (12,684) (10,477) 74,676 (23,663)
--------------------------------------------------------------------------
Net change in bank
overdraft (6,619) (1,973) (6,436) (3,085)
Bank overdraft,
beginning of period (3,154) (1,364) (3,337) (252)
--------------------------------------------------------------------------
Bank overdraft, end of
period (9,773) (3,337) (9,773) (3,337)
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Standardized distributable cash

Standardized Distributable Cash (in thousands of dollars)

2007-12-31 2006-12-31 2007-12-31 2006-12-31 Since the
(114 days - (114 days - (365 days) (365 days) creation of
4th quarter 4th quarter) the Fund
(unaudited) (unaudited) 2005-06-28
--------------------------------------------------------------------------
$ $ $ $ $
Cash flows
from
operating
activities 6,950 8,785 29,405 21,322 71,121
Acquisition
of property,
plant and
equipment: (885) (281) (1,469) (744) (2,535)
--------------------------------------------------------------------------
Standardized
Distributable
cash 6,065 8,504 27,936 20,578 68,586
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Distributions
paid on units 3,550 2,072 10,265 6,042 18,821
Distributions
paid on
exchangeable
Colabor LP
units 1,825 1,825 5,476 5,419 13,109
--------------------------------------------------------------------------
Distributed
cash 5,375 3,897 15,741 11,461 31,930
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--------------------------------------------------------------------------
Weighted
Average
number of
units
Units 9,848,537 5,775,000 9,747,732 5,775,000 7,349,697
Exchan-
geable
Colabor
LP
units 5,087,439 5,087,439 5,087,439 5,087,439 5,087,439
--------------------------------------------------------------------------
14,935,976 10,862,439 14,835,171 10,862,439 12,437,136
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Standardized
distributable
cash per unit $0.41 $0.78 $1.88 $1.89 $5.51
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cash
Distributed
per unit $0.36 $0.36 $1.06 $1.06 $2.56
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Ratio of
distributed
cash to
standardized
distributable
cash 88.6% 45.8% 56.3% 55.7% 46.6%
--------------------------------------------------------------------------
--------------------------------------------------------------------------



The Fund declares monthly distributions to unitholders of record on the last day of each month and pays the distributions on or around the 15th of the following month. The annual distribution per unit is $1.076.

Development Strategies and Outlook

The Fund's management is firmly convinced that there are major channels which could be used to increase its penetration of the food services market in Canada.

Affiliated wholesalers network in Quebec and in the Atlantic Provinces:

In light of the Boucherville Division's organic growth in sales, as described under Results of Operations, it is clear that these loyal, entrepreneurial, customer-service-driven affiliated wholesalers will continue to grow their market share in their respective regions.

Consolidation of food distribution services:

The Summit acquisition has made it possible for the Fund to gain a foothold in Ontario, one of the most important food services market in Canada.

The Funds could acquire other distributors operating in Ontario, and use its business model to integrate any new acquisitions.

Geographic expansion:

At this time, the Fund is not present in Western Canada. Since this region is experiencing the fastest economic growth in the country, there is no doubt that expansion into this region could be beneficial, although it must be considered carefully in light of the availability-of-labour issues. Additionally, a prerequisite to expansion in this region is developing a solid customer base before investing in new infrastructure.

Related sectors:

The Fund's mission is to provide its customers with one-stop shopping in the food distribution services market.

In the future, the Fund could add a meat, fruit and vegetables and packaged goods distribution network.

Convenience stores and small-sized grocery stores:

The Fund believes that, in the medium term, there will be opportunities to acquire convenience store networks currently owned by major food chains wishing to return to their original niche, serving medium- and large-sized grocery stores.

Each of these opportunities and prospects would make it possible for the Fund to significantly increase its purchasing power and ability to generate cost savings in order to increase its distributable cash per unit through the growth of its operating revenue.

Additional Information

The Fund's MD&A, financial statements and Annual Information Form will also be available on SEDAR (www.sedar.com) following publication of this News Release. Additional information about Colabor Income Fund may also be found on SEDAR as well as on the Income Fund's Internet site at www.colaborincomefund.com.

Colabor Overview

Colabor is a wholesaler and distributor of food and non-food products serving the retail (grocery stores, convenience stores, etc.) and foodservice (cafeterias, restaurants, hotels, restaurant chains, etc.) markets.

Caution

This News Release may contain forward-looking statements reflecting the opinions or present expectations of Colabor Income Fund or Colabor Limited Partnership concerning their performance as well as their respective business activities and future events. These statements are subject to a number of risks, uncertainties and assumptions. Actual results or events may differ.

Contact Information

  • Colabor Income Fund
    Gilles C. Lachance
    President and Chief Executive Officer
    450-449-0026 extension 265
    450-449-2098 (FAX)
    glachance@colabor.com
    or
    Colabor Income Fund
    Michel Loignon CA
    Vice-President, Finance and Administration
    450-449-0026 extension 235
    450-449-2098 (FAX)
    mloignon@colabor.com