Premium Brands Income Fund
TSX : PBI.UN

Premium Brands Income Fund

August 09, 2006 09:00 ET

Premium Brands Income Fund Announces Record Second Quarter Sales 'Up 8.4%' and EBITDA 'Up 26.2%'

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 9, 2006) - Premium Brands Income Fund (TSX:PBI.UN), a leading producer, marketer and distributor of specialty branded consumer food products, announced today its second quarter and year-to-date results for the 13 week and 26 week periods ended July 1, 2006.

HIGHLIGHTS FOR THE QUARTER

- The Fund's results for the second quarter of 2006 represent its sixth consecutive quarter of record sales and EBITDA from continuing operations.

- The Fund generated $6.2 million or $0.4148 per unit in distributable cash in the second quarter of 2006 and declared $4.4 million or $0.2940 per unit in cash distributions representing a payout ratio of 71%. For the 49 week period from July 27, 2005, the date on which Premium Brands converted to an income trust, to the end of the second quarter of 2006 the Fund generated distributable cash $17.3 million or $1.1512 per unit and declared $16.4 million or $1.0938 per unit in cash distributions representing a payout ratio of 95%.

- The Fund posted earnings from continuing operations for the second quarter of $5.1 million or $0.34 per unit versus $2.2 million or $0.20 per share in 2005. On a year-to-date basis earnings from continuing operations increased to $7.2 million or $0.48 per unit as compared to $2.3 million or $0.21 per share for 2005.

- Sales from continuing operations for the quarter increased by 8.4% to $57.5 million as compared to the second quarter of 2005. On a year-to-date basis sales were up 11.0% to $104.7 million from $94.3 million in 2005.

- EBITDA from continuing operations for the quarter increased by 26.2% to $7.3 million from $5.8 million in 2005. On a year-to-date basis EBITDA from continuing operations was up 36.2% to $11.3 million from $8.3 million in 2005.

- The Fund's EBITDA as a percentage of sales ("EBITDA margin") reached a record 12.7% for the second quarter as compared to 10.9% in the second quarter of 2005 while its EBITDA margin for the first two quarters of 2006 averaged 10.8% versus 8.8% in the comparable 2005 period.

- The Fund completed the acquisitions of Pop's E-Z Popcorn & Supply, a distributor of concessionary equipment and related products to the western Washington region; and Gloria's Catering, a leading fresh sandwich manufacturer servicing the B.C. south coast. Each of these transactions strengthened the competitive position of one or more of the Fund's existing specialty food or distribution businesses.

- The Fund is reaffirming its guidance for 2006 including projected EBITDA of $22 million to $23 million.

QUARTER SUMMARY



(in thousands of dollars except
per share/unit amounts) 13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
Sales from continuing
operations 57,538 53,066 104,658 94,270
EBITDA from continuing
operations 7,286 5,772 11,304 8,297
Earnings from continuing
operations before non-
controlling interest 5,192 2,217 7,297 2,399
Loss from discontinued
operations 368 354 661 793
Net earnings:
Total 4,722 1,805 6,526 1,520
Per unit/share 0.31 0.17 0.44 0.14
Distributable cash:
Total 6,222 (i) 9,352 (i)
Per unit/share 0.4148 (i) 0.6235 (i)
Cash distributions:
Total 4,410 (i) 8,820 (i)
Per unit/share 0.2940 (i) 0.5880 (i)
Payout ratio 70.9% (i) 94.3% (i)

(i) Not applicable as the Fund converted to an income trust on
July 27, 2005.


"The continuing solid improvement in our sales, EBITDA and EBITDA margin is the direct result of the successful implementation of two core business strategies:

The acquisition and development of branded specialty food businesses that have a leading position in a niche market segment; and

The diversification of our customer base through the acquisition and development of unique distribution and wholesale networks that provide our specialty food businesses with proprietary access to a large and diversified customer base including niche retailers, convenience stores, delicatessens, restaurant chains, concession stands and small grocery chains.

"Looking forward we remain very confident on the future prospects for our businesses and are maintaining our guidance for 2006, including projected EBITDA of $22 million to $23 million," stated Mr. George Paleologou, President of Premium Brands.

"Although we are pleased with the progress made during the second quarter in growing our sales, profitability and distributable cash we still have considerable room for improvement," stated Mr. Fred Knoedler, CEO of Premium Brands. "Some of the areas where we expect to see significant increases in the future are as follows:

- "Our Hempler's operation, whose new plant came into production late in the first quarter, was dealing with a variety of anticipated start up issues throughout the second quarter and is not expected to begin making a significant contribution to our EBITDA and distributable cash until the fourth quarter of this year.

- "Towards the end of the second quarter we completed the acquisitions of Pop's E-Z Popcorn & Supply and Gloria's Catering. Each of these transactions strengthened the competitive position of one or more of our existing specialty food businesses; however, due to integration related costs we do not expect them to make a significant contribution to our earnings and distributable cash until 2007.

- "During the quarter we experienced capacity limitation issues on several key product lines including meat snacks and sandwiches. We are addressing these issues through a variety of initiatives including a new joint venture with one of our key meat snack suppliers which will more than double our jerky capacity."

Premium Brands owns a broad range of leading branded specialty food businesses with manufacturing and distribution facilities located in British Columbia, Alberta, Saskatchewan, Manitoba and Washington. In addition, the Fund owns proprietary food distribution and wholesale networks through which it sells both its own products and those of third parties to approximately 20,000 customers. The Fund's family of brands includes Grimm's, Harvest, McSweeney's, Quality Fresh Foods, Hempler's, Hygaard and Harlan's.

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

Premium Brands owns a broad range of leading branded specialty food businesses with manufacturing and distribution facilities located in British Columbia, Alberta, Saskatchewan, Manitoba and Washington. In addition, the Fund owns proprietary food distribution and wholesale networks through which it sells both its own products and those of third parties to approximately 20,000 customers. The Fund's family of brands includes Grimm's, Harvest, McSweeney's, Quality Fresh Foods, Hempler's, Hygaard and Harlan's.

The following discussion should be read in conjunction with the Fund's 2005 audited consolidated financial statements and the notes thereto, which are prepared in accordance with Canadian generally accepted accounting principles ("GAAP"), the related Management's Discussion and Analysis, and the Fund's 2005 Annual Information Form. These documents, as well as additional information on the Fund, are filed electronically through the System for Electronic Document Analysis and Retrieval ("SEDAR") and are available online at www.sedar.com.

All amounts are expressed in Canadian dollars except as noted otherwise. The information presented is current to August 8, 2006.

FORWARD-LOOKING STATEMENTS

This discussion and analysis includes forward-looking statements with respect to the Fund, including its business operations strategy and financial performance and condition. These statements generally can be identified by the use of forward-looking words such as "may", "could", "should", "would", "will", "expect", "intend", "plan", "estimate", "project", "anticipate", "believe" or "continue", or the negative thereof or similar variations. Although management believes that the expectations reflected in such forward-looking statements are reasonable and represent the Fund's internal expectations and belief at this time, such statements involve unknown risks and uncertainties which may cause the Fund's actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the Fund's expectations include, among other things: (i) seasonal fluctuations in the Fund's sales; (ii) changes in the cost of raw materials used for the Fund's products; (iii) changes in consumer preferences for food products; (iv) competition from other food manufacturers and distributors; and (v) new government regulations affecting the Fund's business and operations.

The Fund disclaims any intention or obligations to revise forward-looking statements whether as a result of new information, future developments, or otherwise.

SUPPLEMENTAL DISCLOSURE

EBITDA and distributable cash are not terms defined under GAAP. As a result, these terms as defined by the Fund may not be comparable to similarly titled measures presented by other publicly traded entities, nor should they be construed as alternatives to other earnings measures determined in accordance with GAAP. The Fund believes that EBITDA is a useful indicator of the amount of cash generated by the Fund's operating businesses and that distributable cash is a useful indicator of the amount of cash available for distribution to unitholders.

EBITDA and distributable cash are calculated as follows:



--------------------------------------------------------------------
(in thousands of dollars) 13 weeks 13 weeks 26 weeks 26 weeks
Ended Ended Ended Ended
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
--------------------------------------------------------------------

Earnings from continuing
operations before non-
controlling interest 5,192 2,217 7,297 2,399
Depreciation of capital
assets 1,367 1,290 2,636 2,528
Interest and other
financing costs 601 822 1,116 1,564
Amortization of intangible
and other assets 116 225 235 423
(Gain) loss on sale of assets - (6) - 10
Income taxes 10 1,224 20 1,373
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EBITDA 7,286 5,772 11,304 8,297
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--------------------------------------------------------------------
(in thousands of dollars) 13 weeks 26 weeks 49 weeks from
ended ended date of the income
July 1, July 1, trust conversion to
2006 2006 July 1, 2006
--------------------------------------------------------------------

EBITDA 7,286 11,304 20,403
Payments on notes receivable 218 294 406
Interest and other
financing costs (569) (1,060) (1,818)
Maintenance capital
expenditures (621) (1,000) (1,413)
Principal debt repayments (31) (63) (105)
Non-controlling interest (102) (110) (110)
Net cash income tax expense 41 (13) (95)
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Distributable cash 6,222 9,352 17,268
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RESULTS OF OPERATIONS

Second Quarter of 2006 as Compared to the Second Quarter of 2005

Sales from continuing operations for the quarter were up $4.5 million or 8.4% to $57.5 million as compared to $53.1 million in the second quarter of 2005. The increase was due to a combination of a $5.5 million or 11.1% rise in sales of the Fund's core specialty food products; and acquisitions, which accounted for $3.0 million of the increase. These increases were partially offset by a $4.6 million decrease in sales of mainstream processed meats due to the Fund's decision to exit from certain lower margin business. The 11.1% increase in sales of the Fund's core specialty food products was driven by a variety of factors including favourable weather conditions and a strong economy in Western Canada.

As a percentage of sales, gross profit from continuing operations ("gross margin") for the quarter improved to 34.8% from 30.2% in 2005 due primarily to a favourable sales mix shift resulting from the Fund's exit from certain lower margin mainstream processed meats business; lower raw material input costs; and production efficiencies associated with increased sales of internally manufactured specialty food products. The impact of each of these three factors on the Fund's improved gross margin for the quarter was approximately equal.

As a percentage of sales, selling, general and administrative expenses ("SG&A") for the quarter increased to 22.2% from 19.3% in 2005 due primarily to a shift in the Fund's sales mix to higher margin products that have higher selling costs associated with them; increased commission and bonus costs associated with the Fund's increased sales and profitability; and, to a lesser extent, higher fuel and freight costs resulting from rising oil prices. These factors were partially offset by the relatively fixed nature of certain administration and selling costs.

The Fund's EBITDA and EBITDA margin for the quarter were $7.3 million and 12.7%, respectively, as compared to $5.8 million and 10.9%, respectively, in 2005. The significant improvement in both the Fund's EBITDA and EBITDA margin was due primarily to the successful implementation of the Fund's core specialty food products and distribution strategies and to a lesser extent lower raw material input costs.

Net earnings from continuing operations for the quarter were $5.1 million or $0.34 per unit as compared to $2.2 million or $0.20 per share in 2005. $1.2 million of the increase in net earnings was due to lower income tax costs resulting from Premium Brands' conversion to an income trust structure on July 27, 2005.

The Fund's net earnings for the quarter, after a $0.4 million loss from its discontinued operations, were $4.7 million or $0.31 per unit as compared to $1.8 million or $0.17 per share in 2005.

Year-To-Date Second Quarter of 2006 as Compared to the Year-To-Date Second Quarter of 2005

The year-to-date trends in sales, gross margin, SG&A as a percentage of sales, earnings from continuing operations, and net earnings in general terms mirror those of the second quarter. For 2006 year-to-date sales were up 11.0% to $104.7 million, gross margin rose to 33.8% versus 28.2% in 2005, SG&A as a percentage of sales increased to 22.9% from 19.4% in 2005, EBITDA increased 36.2% to $11.3 million, earnings from continuing operations were up 211% to $7.2 million and net earnings increased by 329% to $6.5 million.

The extent of the increases, on a percentage basis, is generally higher in the 2006 year-to-date results as compared to the 2006 second quarter results due primarily to the following factors:

- The acquisition of Harlan Fairbanks which occurred in the second quarter of 2005 and as a result had a more significant incremental impact in the first quarter of 2006 than on the second quarter of 2006.

- The Fund's gross margin in the first quarter of 2005 was abnormally low due to a variety of record high commodity input prices. This resulted in a favourable comparison in the first quarter of 2006 due to certain commodity prices being lower in 2006. In the second quarter commodity conditions in 2006 and 2005 were much more similar.

Segmented Information

Sales and earnings for each of the Fund's reporting segments are as follows:



--------------------------------------------------------------------
(in thousands of dollars) 13 weeks 13 weeks 26 weeks 26 weeks
Ended Ended Ended Ended
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
--------------------------------------------------------------------

Sales:
Defined Specialty Foods 45,700 44,832 85,550 83,389
Other 11,838 8,234 19,108 10,881
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57,538 53,066 104,658 94,270
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Segment earnings (loss):
Defined Specialty Foods 6,027 4,895 9,833 7,266
Other 1,565 823 1,826 860
Corporate costs (1,789) (1,461) (3,226) (2,780)
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5,803 4,257 8,433 5,346
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The Defined Specialty Foods segment's 2006 sales for the second quarter and year-to-date periods were both up due to the continued growth of the Fund's specialty food products partially offset by a decrease in sales of mainstream processed meats. Sales of the Fund's Other segment for the second quarter of 2006 and for the year-to-date period were up primarily due to the acquisition of Harlan Fairbanks, partially offset by a decrease in exports of mainstream processed meats.

The Defined Specialty Foods segment's 2006 segment earnings for the second quarter and year-to-date periods were both up primarily due to the successful implementation of the Fund's core specialty food products and distribution strategies and to a lesser extent lower raw material input costs. Segment earnings of the Fund's Other segment for the second quarter of 2006 and for the year-to-date period increased due to the acquisition of Harlan Fairbanks partially offset by costs associated with the shut down of the Fund's Lake Oswego, Oregon operation and the subsequent transfer of these operations to a new production facility.

DISTRIBUTIONS

Distributable cash for the 13 week period ended on July 1, 2006 was $6.2 million or $0.4148 per unit as compared to declared distributions of $4.4 million or $0.2940 representing a payout ratio of 71%. Distributable cash for the 49 week period starting on July 27, 2005, the date of the income trust conversion, and ending on July 1, 2006 was $17.3 million or $1.1512 per unit as compared to declared distributions of $16.4 million or $1.0938 per unit representing a payout ratio of 95%.

The Fund's low payout ratio for the second quarter of 2006 was due in part to the seasonality of its business combined with the fact that its current estimated monthly cash distribution of $0.098 per unit is based on an annual estimated amount averaged over twelve months. The Fund's second and third quarters, which correspond to the spring and summer seasons, are historically its strongest due to increased outdoor activities by consumers which result in increased consumption of the Fund's products. Correspondingly, the Fund's first and fourth quarters are its weakest due to generally poor weather conditions.

The Fund's payout ratio of 95% for the 49 week period ending July 1, 2006 is above the Fund's projected payout ratio of 93% to 94% for 2006 due mainly to the continued growth in 2006 of the Fund's core specialty food and distribution businesses. Longer term, the Fund's targeted payout ratio is 85% to 90% of its distributable cash.

LIQUIDITY AND CAPITAL RESOURCES

The Fund's primary uses of cash and how they are funded are as follows:

- Cash distributions to unitholders. Cash distributions are financed primarily through operations, however as an income trust, a key objective of the Fund is to maintain a steady cash distribution to its unit holders, which is achieved by basing its monthly cash distributions on an annual rate divided into twelve equal monthly payments. As a result, it is possible that in some months its cash distribution to unit holders may exceed the distributable cash generated by its operations due to the seasonality of its business, or unexpected short term shocks to one or more of its operations. Under these circumstances the Fund's revolving credit facility can be used to balance its cash needs. Longer term, the Fund's targeted payout ratio is 85% to 90% of its distributable cash.

- Acquisition of small-to-medium sized businesses that complement the Fund's specialty food and distribution based strategies. The source of financing for an acquisition depends primarily on the size of the transaction. Smaller acquisitions are generally financed through the Fund's existing credit facilities while larger acquisitions can be financed through a variety of financing sources including existing credit facilities, the issuance of new debt and/or new equity.

- Capital expenditures. The Fund's capital expenditures can be categorized into two types: project capital expenditures and maintenance capital expenditures. Project capital expenditures are capital expenditures that are expected to generate a minimum return on investment of 15% through increased production capacity and/or improved operating efficiencies. Maintenance capital expenditures include all capital expenditures that do not qualify as a project capital expenditure and consist mainly of expenditures necessary for maintaining the Fund's existing level of production capacity and operating efficiency.

Maintenance capital expenditures are financed primarily through operations as the cost of these expenditures is deducted from the Fund's EBITDA in the calculation of distributable cash. Project capital expenditures are generally funded through the Fund's unutilized credit facilities, however, larger expenditures, such as the building of a new plant or a major expansion of an existing plant may also be funded through the issuance of new debt and/or equity.

- Maintenance of the Fund's truck fleet. The Fund currently operates a fleet of approximately 125 trucks which service customers across western Canada. Primarily all of the trucks utilized in this fleet are leased under a full maintenance operating lease program. As a result the full cost of maintaining the Fund's fleet is funded through operations and is expensed in the calculation of EBITDA and distributable cash flow.

- Working capital. In general terms the Fund's accounts receivable and inventories turn over rapidly and are financed through its revolving credit facility and terms on its trade purchases. The Fund's working capital needs generally peak in the spring and summer months and around festive holiday seasons, e.g. Easter, Thanksgiving and Christmas, as inventories and accounts receivable are built up due to increased consumer demand.

At the end of the second quarter of 2006 the Fund had the following unutilized credit capacity:



--------------------------------------------------------------------
(in thousands of dollars) Unutilized
Credit Credit
Facilities Draws Capacity
--------------------------------------------------------------------

Revolving credit facilities 25,000 10,500 14,500
Non-revolving credit facilities 7,000 - 7,000
--------------------------------------------------------------------
32,000 10,500 21,500
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Subsequent to the second quarter the Fund's subsidiary, Hempler Foods Group LLC ("Hempler's") raised US$6.1 million through the issuance of an Industrial Development Revenue Bond ("IRB"). IRBs are a financing instrument available in the U.S. for U.S. based capital projects that meet certain conditions. Interest rates associated with IRBs tend to be very favourable as interest earned by the holder of the IRB is, subject to meeting certain conditions, not taxable while interest paid by the borrower is deductible for tax purposes.

Proceeds from the IRB were used by Hempler's to acquire the new 28,000 square foot production facility located in Ferndale, Washington that it has been operating in since March 2006. Corresponding with Hempler's purchase of the Ferndale production facility, the Fund was repaid $3.2 million in advances that had been provided to the previous owner to help finance the construction of the facility. The Fund used this cash to reduce the balance outstanding on its revolving credit facilities, hence increasing its unutilized credit capacity by $3.2 million.

Also subsequent to the second quarter, Hempler's put into place a US$1.5 million revolving credit facility.

Cash Flows from Operating Activities

For the second quarter of 2006, the Fund generated $6.7 million in cash from operations and used $0.9 million in cash for additional working capital. The Fund's increased working capital needs were due to a combination of seasonal factors as well as its growing sales. On a year-to-date basis the Fund generated $10.2 million in cash from operations and used $2.2 million in cash for additional working capital.

The Fund's discontinued operation generated a small amount of cash in the second quarter of 2006 as proceeds from the sale of its assets exceeded a $0.4 million loss from operations. On a year-to-date basis the discontinued operation has used $0.3 million in cash, however, for fiscal 2006 the discontinued operation is expected to be a net generator of cash as the loss incurred by its operations is expected to be less than cash generated from the sale of its assets.

Cash Flows from Financing Activities

During the second quarter of 2006, financing activities used $0.1 million in cash as the $4.4 million in cash distributed to unitholders was largely offset by $4.3 million in cash generated from draws on the Fund's revolving credit facility. On a year-to-date basis the Fund's financing activities have generated $0.6 million in cash consisting primarily of $9.5 million in draws on its revolving credit facility partially offset by $8.8 million in distributions to unitholders.

Cash Flows from Investing Activities

For the second quarter of 2006 investing activities used $2.0 million for capital expenditures, $0.6 million of which was for maintenance capital expenditures; $3.0 million for acquisitions and $0.3 million for advances for the construction of Hempler's new Ferndale, Washington production facility.

The $3.0 million used for acquisitions related to the following four transactions:

- The acquisition of an additional 10% interest in Hempler's thereby increasing its total interest in Hempler's to 60%.

- The acquisition of 100% of Gloria's Catering, a leading fresh sandwich manufacturer servicing the B.C. south coast.

- The acquisition of 100% of Pop's E-Z Popcorn & Supply ("Pop's EZ"), a U.S. based distributor of concessionary equipment and related products to the western Washington region.

- The acquisition of a 50% interest in Made-Rite Meat Products LP ("Made-Rite"), a supplier to the Fund of meat snack products.

Each of these transactions strengthened the competitive position of one or more of the Fund's existing specialty food or distribution businesses.

On a year-to-date basis the Fund's investing activities used $3.1 million in cash for capital expenditures; $1.0 million of which were for maintenance capital expenditures; $3.0 million for acquisitions, all of which was incurred in the second quarter; and $1.7 million for advances for the construction of Hempler's new Ferndale, Washington production facility. As outlined above, all of the Ferndale plant advances, including $1.1 million advanced in 2005, were repaid in the third quarter of 2006.

During the first quarter of 2006 the Fund acquired its initial 50% interest in Hempler's, a Washington based manufacturer of premium, organic and natural processed meat products, as part of a 50/50 merger of Hempler's with the Fund's Oregon based meat snack operation. The transaction involved the merger of two equivalent businesses and therefore there was no cash component to it other than professional and advisory fees. Concurrent with the merger, the Fund shut down its Lake Oswego plant and moved its operations to the new Ferndale plant.

The Fund has accounted for these acquisitions using the purchase method and has consolidated their assets and liabilities and recorded preliminary estimates for goodwill and, where appropriate, intangible assets and non-controlling interest.

Financial Position

The Fund's July 1, 2006 current assets increased by $8.5 million to $47.5 million as compared to December 31, 2005 due mostly to seasonal working capital related factors and $1.7 million in advances for the construction of Hempler's new Ferndale production facility.

Capital assets as at July 1, 2006 increased by $2.1 million to $46.9 million as compared to December 31, 2005 due to $3.0 million in capital expenditures and $1.7 million in capital assets obtained as a result of acquisitions partially offset by $2.6 million in depreciation.

Goodwill as at July 1, 2006 increased by $2.6 million to $64.0 million as compared to December 31, 2006 due to acquisitions.

The Fund's accounts payable as at July 1, 2006 increased by $2.9 million to $19.7 million as compared to December 31, 2005 due to a combination of the Fund's increased working capital levels and the timing of supplier payments.



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Premium Brands Income Fund
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CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)

--------------------------------------------------------------------
Jul 1, Dec 31, Jun 25,
2006 2005 2005
--------------------------------------------------------------------


Current assets:
Cash and cash equivalents $ 853 $ 455 $ 383
Accounts receivable 19,307 16,894 18,031
Current portion of notes receivable 3,580 1,501 782
Inventories 21,374 17,568 21,116
Prepaid expenses 1,710 1,419 2,511
Future income taxes 304 304 3,000
Current assets of discontinued
operations 387 907 3,746
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47,515 39,048 49,569

Future income taxes 524 524 11,183
Capital assets 46,901 44,821 45,493
Goodwill 63,963 61,330 61,512
Intangible assets 4,551 5,345 3,834
Other assets 2,610 3,083 3,760
Non-current assets of discontinued
operations 989 1,532 6,100
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$ 167,053 $ 155,683 $ 181,451
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Current liabilities:
Cheques outstanding $ 1,624 $ 1,501 $ 2,732
Bank indebtedness 9,357 - 6,589
Distributions payable 1,470 1,470 -
Accounts payable and accrued
liabilities 19,693 16,840 21,361
Current portion of long-term debt 202 112 6,115
Current liabilities of
discontinued operations 910 1,604 1,248
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33,256 21,527 38,045

Long-term debt 22,749 22,296 36,075
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56,005 43,823 74,120

Non-controlling interest 2,171 - 321

Unitholders' equity:
Unitholders' capital 127,779 127,810 -
Share capital - - 135,379
Contributed surplus - - 21
Accumulated earnings (deficit) 748 (5,778) (26,221)
Accumulated distributions declared (16,407) (7,588) -
Cumulative translation adjustment (3,243) (2,584) (2,169)
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108,877 111,860 107,010
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$ 167,053 $ 155,683 $ 181,451
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Premium Brands Income Fund
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CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands except per unit/share amounts)

--------------------------------------------------------------------
13 weeks 13 weeks 26 weeks 26 weeks
Ended Ended Ended Ended
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
--------------------------------------------------------------------

Sales $ 57,538 $ 53,066 $ 104,658 $ 94,270
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Gross profit 20,031 16,001 35,323 26,554
Selling, general and
administrative expenses 12,745 10,229 24,019 18,257
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7,286 5,772 11,304 8,297
Depreciation of capital
assets 1,367 1,290 2,636 2,528
Interest and other
financing costs 601 822 1,116 1,564
Amortization of
intangible and other
assets 116 225 235 423
(Loss) gain on sale of assets - (6) - 10
--------------------------------------------------------------------

5,202 3,441 7,317 3,772
Income tax provision 10 1,224 20 1,373
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Earnings from continuing
operations before non-
controlling interest 5,192 2,217 7,297 2,399
Non-controlling interest -
net of income taxes 102 58 110 86
Loss from discontinued
operations - net of
income taxes 368 354 661 793
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Net earnings $ 4,722 $ 1,805 $ 6,526 $ 1,520
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Earnings per unit/share
from continuing
operations after non-
controlling interest:
Basic and diluted $ 0.34 $ 0.20 $ 0.48 $ 0.21

Loss per unit/share from
discontinued operations:
Basic and diluted $ (0.03) $ (0.03) $ (0.04) $ (0.07)

Net earnings per unit/share
Basic and diluted $ 0.31 $ 0.17 $ 0.44 $ 0.14

Weighted average units/
shares outstanding 15,000 11,090 15,000 10,761


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Premium Brands Income Fund
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)

--------------------------------------------------------------------
13 weeks 13 weeks 26 weeks 26 weeks
Ended Ended Ended Ended
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
--------------------------------------------------------------------

Cash flows from operating
activities:
Earnings from continuing
operations before non-
controlling interest $ 5,192 $ 2,217 $ 7,297 $ 2,399
Items not involving cash:
Depreciation of capital
assets 1,367 1,290 2,636 2,528
Amortization of
intangible and other
assets 116 225 235 423
Stock-based compensation - 6 - 11
Loss (gain) on sale of
assets - (6) - 10
Future income taxes - 1,203 - 1,322
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6,675 4,935 10,168 6,693
Change in continuing non-
cash working capital (858) 1,220 (2,223) (1,411)
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Funds from continuing
operations 5,817 6,155 7,945 5,282
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Discontinued operations 6 1,105 (289) (77)
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5,823 7,260 7,656 5,205
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Cash flows from financing
activities:
Long-term debt - net (19) 6,733 (51) 7,331
Bank indebtedness and
cheques outstanding 4,285 (151) 9,460 542
Distributions paid to
unitholders (4,409) - (8,819) -
Other - (388) (30) (371)
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(143) 6,194 560 7,502
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Cash flows from investing
activities:
Change in notes
receivable - net (293) 191 (1,714) 2,365
Proceeds from sales of
assets - net 11 7 11 21
Capital asset additions (2,048) (737) (3,076) (1,831)
Acquisitions (3,035) (12,903) (3,035) (12,903)
Other 131 - (4) (100)
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(5,234) (13,442) (7,818) (12,448)
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Change in cash and cash
equivalents 446 12 398 259
Cash and cash equivalents,
beginning of period 407 371 455 124
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Cash and cash equivalents,
end of period $ 853 $ 383 $ 853 $ 383
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Interest and other
financing costs paid $ 569 $ 902 $ 1,060 $ 1,702

Net income taxes paid
(received) $ (41) $ 115 $ 13 $ 174



Contact Information

  • Premium Brands Income Fund
    George Paleologou
    President
    (604) 656-3100
    or
    Premium Brands Income Fund
    Will Kalutycz
    CFO
    (604) 656-3100