COLABOR INCOME FUND
TSX : CLB.UN

COLABOR INCOME FUND

April 24, 2008 10:25 ET

Colabor Income Fund: Excellent Results Sustained by Strong Organic Growth

BOUCHERVILLE, QUEBEC--(Marketwire - April 24, 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) reports its first quarter results for the year ending December 31, 2008.

Highlights of the first quarter ended March 22, 2008 compared with the first quarter of 2007

- SALES UP APPROXIMATELY $17.4 MILLION OR 10.7%

- EARNINGS BEFORE FINANCIAL EXPENSES AND AMORTIZATION (EBITDA) INCREASE FROM $4.7 MILLION TO $5.4 MILLION, A 15.2% INCREASE


Recent developments

During the first quarter, the Fund acquired Bruce Edmeades Foodservice Distribution through Colabor Limited Partnership.

On March 3, 2008, Colabor completed the acquisition from Martin-Brower of substantially all of the assets of Bruce Edmeades Foodservice Distribution, one of the leading foodservice distributors in the Canadian industry with annual revenues exceeding $230 million for the year ended December 31, 2007.

Bruce Edmeades offers about 9,000 products and operates mainly out of an approximately 130,000 square-foot HACCP certified warehouse in Cambridge, Ontario. It distributes to customers primarily in Southern Ontario, but also across Canada servicing several large and well-known customers, including Wendy's, Mr. Sub and Zehrs and other customers operating in the restaurant, healthcare and education industries.

This transaction was concluded as at March 17, 2008 and Bruce Edmeades will be integrated within the Summit Division. Accordingly, its results of operations will only account for one full week of the first quarter, which has minimal impact on the quarterly results.




Results of Operations

Consolidated Earnings (in thousands of dollars,except per unit amounts)

2008-03-22 2007-03-24
(82 days) (83 days)
(unaudited) (unaudited) Variance
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$ $ $ %
Sales 180,029 100.00% 162,667 100.00% 17,362 10.67%
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Earnings before financial
expenses and amortization 5,355 2.97% 4,647 2.86% 708 15.24%
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Financial expenses 1,423 0.79% 1,538 0.95% (115) -7.48%
Amortization of property,
plant and equipment 646 0.36% 645 0.40% 1 0.16%
Amortization of intangible
assets 1,633 0.91% 1,525 0.94% 108 7.08%
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3,702 2.06% 3,708 2.29% (6) -0.16%
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Earnings before income taxes
and non controlling interest 1,653 0.91% 939 0.57% 714 76.04%
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Income taxes Current 205 0.11% 0.00% 205 N/A
Future 259 0.14% 0.00% 259 N/A
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464 0.25% 0.00% 464 N/A
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Earnings before
non-controlling interest 1,189 0.66% 939 0,57% 250 26.62%
Non-controlling interest 598 0.33% 393 0.24% 205 52.16%
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Net earnings 591 0.33% 546 0.33% 45 8.24%
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Basic and diluted earnings
per unit $0.06 $0.06
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Sales consist of:

For the Boucherville Division: Gross sales to customers from the Boucherville warehouse and direct sales to affiliated wholesalers, less rebates of about 3% of the affiliated wholesalers' sales, as provided in the agreement between Colabor LP and the affiliated-wholesalers.

For the Summit Division: Gross sales to customers from the London, Mississauga, Ottawa and Cambridge warehouses less rebates, as provided in individual agreements with these customers. Results include one week of sales following the Bruce Edmeades acquisition.




Sales (in thousands of dollars)

2008-03-22 2007-03-24
(82 days) (83 days)
(unaudited) (unaudited) Variance
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$ % $ % $ %
Boucherville Division
Retail 25,478 14.2% 22,496 13.8% 2,982 13.3%
Foodservice 58,364 32.4% 54,000 33.2% 4,364 8.1%
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83,842 46.6% 76,496 47.0% 7,346 9.6%
Summit Division
Foodservice 96,187 53.4% 86,171 53.0% 10,016 11.6%
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180,029 100.0% 162,667 100.0% 17,362 10.7%
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Boucherville Division

The Boucherville Division continues to experience significant sustained organic growth in both its segments, at a faster pace than in the 2007 fiscal period, which was about 6.6% .

Retail

Sales of products for the retail market increased by 13.3% 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 of 2007 and the acquisition of a competitor by an affiliated-wholesaler in the Maritimes. Sales in this sector are mainly to convenience stores and small-sized grocery stores, located mostly outside the greater Montreal area.

Foodservice

For several quarters, organic growth in the affiliated wholesalers' foodservice sales has outpaced industry levels, anticipated to be 3.3% in 2008 according to the Canadian Restaurant and Foodservices Association (CRFA), an indication that affiliated wholesalers are continuing to increase their market share compared with their competitors.

Summit Division

As previously mentioned, Summit was acquired on January 8, 2007, which means there is one week of sales missing for a comparison with 2007. In the last week of the quarter, we added the sales of Bruce Edmeades following its acquisition on March 17, 2008.

Taking these two items into consideration, sales in 2008 would be about 1.5% lower than those of the previous year. The difference is primarily attributable to the difficult financial situation in Ontario as well as a particularly harsh winter in that province with numerous snow storms, which cut back on consumers' restaurant outings.

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 as of 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 $205,000 at the combined federal-provincial rate of 34% and future income taxes of $259,000 in 2008. Since the total amount these taxes for the entire the year was recognized only in the fourth quarter of 2007, there is no comparative amount with the first quarter of 2007.



Cash Flow
Consolidated Cash Flows (in thousands of dollars)
2008-03-22 2007-03-24
(82 days) (83 days)
(unaudited) (unaudited)
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$ $
OPERATING ACTIVITIES
Net earnings 591 546
Non-cash items
Amortization of property, plant and equipment 646 645
Amortization of intangible assets 1,633 1,525
Amortization of deferred financing costs 19 19
Non-controlling interest 598 393
Future income taxes 259
Compensation cost from long-term incentive plan 66 38
Amortization of debenture transaction costs 206 187
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4,018 3,353
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Change in operating assets and liabilities
Accounts receivable (1,590) (6,394)
Withholding taxes recoverable (125)
Inventory 2,215 9,559
Prepaid expenses (841) (309)
Accounts payable and accrued liabilities 8,109 (2,806)
Income taxes payable 87
Rebates payable 1,088 1,858
Deferred revenue (28) (35)
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9,040 1,748
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Cash flows from operating activities 13,058 5,101
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INVESTING ACTIVITIES
Business acquisition (12,784) (109,048)
Property, plant and equipment (142) (350)
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Cash flows from investing activities (12,926) (109,398)
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FINANCING ACTIVITIES
Bank loans 9,693 38,542
Distributions paid to unitholders (2,663) (2,285)
Distributions paid on exchangeable Colabor LP units (1,369) (1,369)
Repayment of long-term debt (117) (117)
Purchase of units held by the Fund for long-term
incentive plan (575) (238)
Issue of debentures 48,000
Issue of units 24,761
Unit and debenture issue costs (1,404)
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Cash flows from financing activities 4,969 105,890
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Net change in bank overdraft 5,101 1,593
Bank overdraft, beginning of period (9,773) (3,337)
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Bank overdraft, end of period (4,672) (1,744)
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Standardized Distributable Cash

Standardized Distributable Cash (in thousands of dollars)
Since the
2008-03-22 2007-03-24 creation of
(82 days) (83 days) the Fund
(unaudited) (unaudited) 2005-06-28
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$ $ $
Cash flows from operating activities 13,058 5 101 84,179
Acquisition of property, plant and
equipment (142) (350) (2,677)
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Standardized distributable cash 12,916 4,751 81,502
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Distributions paid on units 2,663 2,285 21,484
Distributions paid on exchangeable
Colabor LP units 1,369 1,369 14,478
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Distributed cash 4,032 3,654 35,962
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Weighted average number of units
Units 9,839,079 9,447,410 7,554,031
Exchangeable Colabor LP units 5,087,439 5,087,439 5,087,439
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14,926,518 14,534,849 12,641,470
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Standardized distributable cash per
unit $0.87 $0.33 $6.45
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Cash distributed per unit $0.27 $0.25 $2.84
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Ratio of distributed cash to
Standardized distributable cash 31.2% 76.9% 44.1%
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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.

Subsequent Event

On April 7, 2008, Colabor entered into a final agreement to acquire all the outstanding shares of Gestion Bertrand & Freres Inc. ("Bertrand"), a leading independent food product distributor in Eastern Quebec and one of Colabor's most important affiliated-wholesalers.

Bertrand, whose sales totalled $159 million for the 12-month period ended December 21, 2007, is a major distributor to foodservice and retail customers in the Quebec City and Saguenay regions. It employs approximately 400 people, distributes over 12,000 products from its two strategically located 231,000 and 133,000 square-foot warehouses in Quebec City and Chicoutimi respectively. Bertrand's customers consist primarily of food service operators, specialty food stores, institutional accounts such as healthcare institutions, schools and universities, certain other retail customers, in all reaching approximately 4,000 customers. With a complete product offering, including frozen products, dry staples, dairy products, fresh meat, fresh fish and seafood, poultry, fresh fruits and vegetables, disposables and sanitation products as well as meat transformation and preparation services, Bertrand therefore offers a "one-stop-shop" solution to its customers.

The transaction closing is expected to take place on or about April 28, 2008. Accordingly, this transaction will not impact earnings until the second quarter.

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. This strategy has proven beneficial, for example, with the Bruce Edmeades acquisition.

The Fund could also acquire affiliated wholesalers network in Quebec and in the Atlantic Provinces, as illustrated with the Bertrand acquisition. This would allow it to complete its distribution network in Eastern Canada.

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.

These acquisition opportunities 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 and Chief Financial Officer
    450-449-0026 extension 235
    450-449-2098 (FAX)
    mloignon@colabor.com