Dominion Citrus Income Fund (TSX:DOM.UN): Fiscal 2010 Report to Unitholders

TORONTO, ONTARIO--(Marketwire - March 25, 2011) - Dominion Citrus Income Fund ("Dominion", the "Fund") (TSX:DOM.UN) reports a net loss of $1,540,000 or $0.08 per unit for the year ended December 31, 2010 compared to net earnings of $92,000 or $0.01 per unit for the same period in 2009 inclusive of a $2,403,000 one-time gain on sale in 2009. Loss before other income and expense was $1,396,000 for 2010 versus $811,000 in 2009.

Fiscal 2010 revenue from continuing operations of $67,453,000 was lower by 13.5% versus fiscal 2009 due largely to lower sales in the Distribution Division given the September 2009 downsizing to two selling stalls at the Ontario Food Terminal. This division was stabilized during the year and is focusing on business development and maximizing revenue in its existing customer base. Revenue reductions were also experienced in certain packaging lines. The Fund's Quebec operations realized increased revenue for the year 2010, somewhat offsetting the aforementioned reductions.

Gross margin for 2010 was $12,315,000 representing a decrease of $3,047,000 from 2009. The decrease was mainly due to reduced volume and some difficulties in purchasing experienced through the downsizing. Gross margin percentage was 18.3% in 2010 versus 19.7% in the previous year. The gross margin percentage has improved considerably over the latter part of 2010 in the distribution business, and moves into 2011 with a positive trend.

Total expenses for fiscal 2010 were $13,711,000 versus $16,173,000 in 2009, inclusive of one-time restructuring and related costs of $499,000 and $1,464,000 respectively.

Earnings before other income and expense was a loss of $1,396,000 in fiscal 2010 versus a loss of $811,000 in 2009, both including restructuring expenses as aforementioned.

Other income and expense for fiscal 2010 includes normal course interest expenses and a $132,000 one-time write-down of property, plant and equipment related to certain redundant packaging equipment. Fiscal 2009 included a goodwill impairment of $88,000 associated with Dominion's Quebec subsidiary, an $881,000 non-cash write-down of certain operating assets at the Fund's Kelfield location, a net gain on sale of $2,383,000 which is mainly attributable to a $2,403,000 gain for the sale of two Type "A" selling stalls at the Ontario Food Terminal formerly used by Dominion Citrus Distribution.

The net loss from continuing operations for the fourth quarter of 2010 was $224,000, compared to a loss of $675,000 for same period in 2009. The 2010 and 2009 fourth quarter results respectively are inclusive of one-time costs of $302,000 and $969,000 related to various restructuring and related initiatives. Loss per unit from continuing operations was $0.01 in the fourth quarter of 2010 compared to a loss of $0.02 reported in 2009. The net loss from discontinued operations for the fourth quarter of 2010 was $12,000 compared with a loss of $357,000 in the same period in 2009 and loss per unit from discontinued operations of $(0.01) compared to the $(0.02) reported in 2009.

The year 2010 marked a transition point for Dominion Citrus in its efforts to improve the operating efficiency and profitability of the business. The Fund had a full year operating out of two selling stalls at the Ontario Food Terminal and was focused for the entire year on its core operations after the sales of Delta Foods and Apple Valley Juice in previous years. A philosophical shift took place in late 2010 from operational restructuring and downsizing to maximizing the output and capacity utilization of the remaining operations.

A brief summary of 2010 highlights is as follows.

• On July 12, 2010, the Fund entered into a Food Storage Agreement for use of space at its 51 Kelfield Street facility in Toronto, Ontario. The Agreement is with an Ontario based food company for an initial term of 1 year.

• On July 7, 2010, the Fund received an extension of its banking facility and a waiver of covenant breaches existing on December 31, 2009, March 27, 2010 and June 26, 2010. The demand credit facility was reduced to $1.5 million from $3.0 million and the tangible net worth ("TNW") covenant was revised to reflect the current size of the business. The TNW covenant was altered to vary by quarter to reflect the seasonal nature of the Fund's business. A quarterly "clean down" is required on the facility whereby the balance must be brought to zero each quarter. Interest is still charged at the Bank's prime rate of interest plus 1.50%.

• On November 4, 2010, the Fund and the Corporation jointly announced the appointment of Jason Fielden as President and Chief Executive Officer of Dominion Citrus Limited, replacing Winston Ash, effective December 31, 2010. Mr. Fielden will continue his duties as Vice President of Finance, Chief Financial Officer and Secretary until a replacement is named.

• Food storage was provided during the year to several companies as the Fund continues to seek more optimal use of its 51 Kelfield Street facility.

• The bulk of cost cutting and operational rationalization initiatives were completed in 2009. Further decreases were realized in the full year 2010 results as improvements made during the year will continue to flow through on an annualized basis.

The fourth quarter and year to date results of the continuing operations are summarized below (all figures in $000's except per unit):

	Three months ended						Twelve months ended
	Dec 31			Dec 31			Dec 31			Dec 31
	2010			2009			2010			2009
Revenue	$	18,293		$	20,264		$	67,453		$	77,971
Net earnings (loss)		($224	)		($675	)		($1,423	)	$	744
Fully diluted earnings (loss) per unit		($0.01	)		($0.02	)		($0.07	)	$	0.04
EBITDA	$	136		$	894			($916	)		($214	)
Distributable cash	$	17		$	479			($1,490	)	$	1,315
Note: Fiscal 2009 included a $2,403,000 one-time gain on sale

Fiscal 2011 Outlook

Going into 2011 the Fund has a full year behind it since divesting of its non-core businesses and assets. These changes have been substantial. They nonetheless leave Dominion Citrus with its key competitive advantages:

• an integrated product/service platform;
• a strong history and brand which yield an extensive supply and customer channel; and
• an experienced team of professionals giving the ability to deliver consistent quality of product and service.

Culturally, Dominion Citrus is getting back to the roots of who it is and is demanding the level of excellence that has marked the company for many decades.

Strategically, the fresh produce wholesale, distribution and packaging industry continues to be a competitive one. The business changes at an increasingly rapid pace and Dominion is focusing on leading rather than following in this regard. Some of the continuing challenges and risks in the industry include the consolidation of large scale retailers yielding greater buying power, intense competition within the wholesale arena, low switching costs for customers, increasing specialization of competitors, and rapid foreign exchange fluctuations. Dominion will meet the challenges in the industry by leveraging its competencies and concentrating on a philosophy characterized as follows:

• Obsessive about cost control and operational efficiency – always seeking ways to deliver at lower cost;
• Efficient allocation of resources;
• A focus on increasing the integration of its business units; and
• An ardent belief that Dominion must continually seek growth and lead change through quality, service, and entrepreneurialism.

Operationally, the Fund has a highly proactive sales development plan in place that was started in late 2010. This initiative led to positive trends in the Fund's key distribution business in December 2010 versus the previous year. The initiative will be perpetuated company wide and will seek new customers, new channels, and augmentation of existing customers and channels. Business development and innovation are key drivers going forward especially as it relates to cross-divisional opportunities. Cost efficiency and resource allocation will be improved through continual testing and evaluation of specific opportunities that will yield better financial results. This will include continual evaluation of processes and people. Finally, margin management is a never ending requirement throughout the organization.

The Fund is continuing to seek cost reduction alternatives for its remaining real estate obligations, including the remaining Brockville building formerly used by Delta Foods, the Dominion Citrus Juice facility in Clarksburg and the 51 Kelfield Street warehouse in Toronto. These efforts include (i) the continued marketing of space for sublease at the Dominion Citrus Juice facility; and (ii) the provision of storage in a portion of its Kelfield Street facility under a Food Storage Agreement as announced on July 12, 2010.

Subsequent to the year end, the following positive developments occurred in respect of the Fund's real estate obligations:

• On January 21, 2011, the Fund completed the sale of the last remaining Brockville building formerly used by Delta Foods for gross proceeds of $390,000, less transactional costs. This sale marks the last remaining assets of the Delta Foods division.

• The Fund announced on March 16, 2011 the execution of a Lease Surrender Agreement ("Lease Surrender") with the landlord of Dominion's 51 Kelfield Street warehousing facility. The lease surrender will require (i) a $750,000 payment from Dominion Citrus Limited to the Landlord in six payments between closing and August 15, 2011 which is partially funded by a letter of credit; and (ii) the sale to the Landlord (at no expense to the Landlord) of all existing racking and refrigeration equipment at the facility. Dominion's existing lease to 2020 will be substantially amended. The Fund will lease back certain processing and storage space on a 3-year lease but will be subject to a termination clause should the Landlord find a more suitable tenant(s). The Lease Surrender will have no negative effect on Dominion's existing businesses. The Fund will use extra third party storage when required to augment the leased storage space and will continue to lease the processing space it requires. The Lease Surrender will reduce yearly lease expense by approximately $760,000.

• This reduction in combination with overhead cuts taken in late 2010 and the sale of the remaining Brockville building have reduced costs by over $1 million.

Several ongoing risks and uncertainties exist in the Fund's core businesses including, amongst others, the highly competitive nature of the segments of the food industry in which the Fund participates resulting in volume and margin pressures, continuing fluctuation and volatility of the Canadian dollar as against the US dollar which impact revenue and product margin, and ongoing weather anomalies that affect produce availability and quality. The Fund has the Participating Notes owing from Dominion Citrus Limited and there are no assurances that Dominion Citrus Limited can meet its obligations.

The Fund did not declare any distributions on its units or dividends on the Series A Preference Shares during 2010. As previously announced the Fund will not be reinstating regular distributions or dividends until further notice. The Fund is continuing to move towards the rights offering as previously announced on November 29, 2010. A further announcement will be made in due course. The Fund will become a taxable entity in 2011 along with the reporting changes to IFRS.

Caution Regarding Forward-Looking Statements

This Management Discussion & Analysis ("MD&A") contains statements, which, to the extent that they are not a recitation of historical fact, may constitute "forward-looking statements". Forward-looking statements may include financial and other projections, as well as statements regarding our future plans, objectives or performance, or our underlying assumptions. The words "estimate", "anticipate", "believe", "expect", "intend" or other similar expressions of future or conditional verbs such as "will", "should", "would" and "could" are intended to identify forward-looking statements. Persons reading this MD&A are cautioned that such statements are only expectations, and that our actual results or performance may be materially different.

Forward-looking information involves certain risks, assumptions, uncertainties and other factors, which may cause actual future results to differ materially from those expressed or implied in any forward-looking statements.

Readers should not place undue reliance on these forward-looking statements when making decisions, and should consider the date onto which the statements were made. Except as required by applicable security law, management disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Dominion has introduced certain non-GAAP measures to assess performance. Securities regulators require that companies caution readers that earnings and other measures adjusted to a basis other than GAAP do not have standardized meanings under GAAP and are unlikely to be comparable to similar measures used by other companies. In addition to providing income measures in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the Fund presents earnings before interest, income taxes, amortization and certain other items (EBITDA) as a supplementary income measure. EBITDA does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other companies. EBITDA is provided to assist investors in determining the Fund's ability to generate cash from operations. The Fund also presents a uniform comparability of earnings arising from its operating activities and from those extraneous to its operating activities, although they include non-GAAP measurements. Lastly, the Fund presents distributable cash flow generated as a supplemental measure of operating performance as it provides an indication of cash available for distribution.

About Dominion

The Fund is a publicly traded, unincorporated, open-ended limited purpose income trust. On January 1, 2006, all of the common shares of Dominion Citrus Limited ("DCL") were exchanged for trust units of the Fund. The trust units are listed on the TSX under the symbol DOM.UN. The Series A preference shares of DCL continue to be listed on the TSX under the symbol DMN.PR.A.

Dominion is a diversified food company supplying fresh produce to a wide variety of customers in retail, foodservice and food distribution businesses. The Fund provides procurement, processing, repacking, sorting, grading, warehousing and distribution services to its major domestic markets being Ontario and Québec. The Fund also supplies products to customers in the United States and Europe. The website may be accessed at www.dominioncitrus.com.