Rogers Sugar Income Fund
TSX : RSI.UN

Rogers Sugar Income Fund

January 30, 2008 14:00 ET

Rogers Sugar Income Fund: Interim Report for the 1st Quarter 2008 Results

Increase In Adjusted Ebitda Of $1.6 Million From Comparable Quarter Of Last Year Adjusted Distributable Cash Increased by $3.0 Million From Comparable Quarter of Last Year

MONTREAL, QUEBEC--(Marketwire - Jan. 30, 2008) - Message to Unitholders:

On behalf of the Board of Trustees, I am pleased to present the unaudited consolidated financial results of Rogers Sugar Income Fund (TSX:RSI.UN) (the "Fund") for the three months ended December 31, 2007.

Volume for the first quarter was 173,045 metric tonnes, as opposed to 178,680 metric tonnes in the comparable quarter of last year, a decrease of approximately 5,600 metric tonnes. The decrease is due mainly to lower industrial and liquid volume partially offset by higher consumer and export volume. Industrial volume was lower by 6,500 metric tonnes due in part to timing in deliveries and lower volume from existing customers. Consumer volume was 2,400 metric tonnes higher due in large part to strong promotion by certain retailers during the quarter.

With the adoption of new accounting policies October 1, 2006 for derivative financial instruments, the Fund's operating results may now be subject to significant fluctuations. These fluctuations are due to the mark-to-market of all derivative financial instruments and embedded derivatives in non-financial instruments at the end of the reporting period. This accounting income does not reflect the economic performance of the Fund. We therefore prepared adjusted gross margin and adjusted earnings results to reflect the economic performance of the Fund during the reporting period. This economic performance is comparable to the earnings reported in previous periods. All these non-GAAP adjustments are explained in detail in the Management's Discussion and Analysis prepared for the quarter ended December 31, 2007. In this press release, and future press releases, we will discuss adjusted gross margins, which reflect the operating income without the impact of the mark-to-market of derivative financial instruments and embedded derivatives in non-financial instruments.

For the quarter, on lower volume, adjusted gross margin increased by $1.2 million, when compared to the same quarter of last year. On a per metric tonne basis, adjusted gross margin was $179.22 compared to $166.80 for the comparable quarter of last year. The increase in both the adjusted gross margin and the margin rate is due to a better sales mix, with higher consumer volume, and improved selling margins.

For the quarter, adjusted distributable cash was $18.4 million, as compared to $15.4 million in fiscal 2007. The increase was due to better operational performance and no repurchase of trust units as compared to a repurchase of $1.8 million in the first quarter of fiscal 2007. During the first quarter, the Fund distributed $9.8 million compared to $9.3 million in fiscal 2007.

As announced previously, monthly distributions increased by 4.5% or 2 cents per unit, effective December 1, 2007. This was the third increase in distributions since August 2006. The Trustees will continue to raise monthly distributions when future results of the operating companies demonstrate the capacity to sustain such increases.

In Taber, the beet harvest was completed in early November, and again an excellent yield per acre was achieved for this crop. Based on the total harvest, the Taber plant is expected to produce approximately 118,000 metric tonnes of sugar. This is approximately 15,000 metric tonnes higher than expected for which additional warehousing costs will be incurred.

FOR THE BOARD OF TRUSTEES,

(signed)

Edward Y. Baker,

Toronto, Ontario - January 30, 2008

MANAGEMENTS' DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") should be read in conjunction with the unaudited financial statements and notes thereto in this quarterly report. The quarterly consolidated financial statements and any amounts shown in this MD&A were not reviewed or audited by our external auditors.

In analyzing our results, we supplement our use of financial measures that are calculated and presented in accordance with generally accepted accounting principles (GAAP), with a number of non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's historical performance, financial position or cash flow that excludes (includes) amounts, or is subject to adjustments that have the effect of excluding (including) amounts, that are included (excluded) in most directly comparable measures calculated and presented in accordance with GAAP. Non-GAAP financial measures are not standardized; therefore, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar businesses. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

We use these non-GAAP financial measures in addition to, and in conjunction with, results presented in accordance with GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting our business.

In the MD&A, we discuss the non-GAAP financial measures, including the reasons that we believe that these measures provide useful information regarding our financial condition, results of operations, cash flows and financial position, as applicable and, to the extent material, the additional purposes, if any, for which these measures are used. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in the MD&A.

This report contains certain forward-looking statements, which reflect the current expectations of the Fund, Lantic Sugar Limited ("Lantic") and Rogers Sugar Ltd. ("Rogers") (collectively the "Company") with respect to future events and performance. Wherever used, the words "may," "will," "anticipate," "intend," "expect," "plan," "believe," and similar expressions identify forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at which, such performance or results will be achieved. Forward-looking statements are based on information available at the time they are made, assumptions made by management, and management's good faith belief with respect to future events, and are subject to the risks and uncertainties outlined in this report that could cause actual performance or results to differ materially from those reflected in the forward-looking statements, historical results or current expectations.

Additional information relating to the Fund, Lantic and Rogers, including the Annual Information Form, Quarterly and Annual reports and supplementary information is available on SEDAR at www.sedar.com.

This Management's Discussion and Analysis is dated January 23, 2008.

Internal disclosure controls

In accordance with Regulation 52-109 respecting certification of disclosure in issuers' interim filings, the Chief Executive Officer and Chief Financial Officer have designed or caused it to be designed under their supervision, disclosure controls and procedures to provide reasonable assurance that (i) information required to be disclosed by the Company in its quarterly filings or other reports filed or submitted by it under applicable securities legislation is recorded, processed, summarized and reported within the prescribed time periods, and (ii) material information regarding the Company is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer in a timely manner.

In addition, the Chief Executive Officer and Chief Financial Officer have designed or caused it to be designed under their supervision internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. There have been no changes in internal controls during the quarter that have had a material effect on the Company's internal controls.



Results of operations

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Consolidated Results For the three months
ended December 31,
(In thousands of dollars, except for
volume and per trust unit information) 2007 2006
(unaudited) (unaudited)
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Volume (metric tonne) 173,045 178,680
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Revenues $115,116 $134,880
Gross margin 34,395 40,214
Administration and selling 4,501 4,519
Distribution 2,541 2,925
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Earnings before interest, provision for income
taxes, depreciation and amortization (EBITDA) 27,353 32,770
Depreciation and amortization 3,191 3,157
Interest, net of interest income and other charges 3,656 3,967
Provision for income taxes 3,386 5,969
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Net earnings $17,120 $19,677
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Net earnings - per trust unit - basic $0.20 $0.22
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In the normal course of business, the Fund uses derivative financial instruments consisting of sugar futures, foreign exchange forward contracts and natural gas futures. The Fund's operating companies sell refined sugar to some clients in US dollars. These sales contracts are viewed as having an embedded derivative if the functional currency of the customer is not US dollars, the embedded derivative being the source currency of the transaction, U.S. dollars. Derivative financial instruments and embedded derivatives are marked-to-market at each reporting date, with the unrealized gain/loss charged to the consolidated statement of operations with a corresponding offsetting amount charged to the balance sheet.

Management believes that the Fund's financial results are more meaningful to management, investors, analysts and any other interested parties when financial results are adjusted by the gains/losses from financial derivative instruments and from embedded derivatives which would then represent the economic results of the Fund versus the accounting results. This measurement is a non-GAAP measurement. Management uses the non-GAAP economic adjusted results of the operating companies to measure and evaluate the performance of the business through its adjusted gross margin and adjusted EBITDA. In addition, management believes that these measures are important to our investors and parties evaluating our performance and comparing such performances to our past results. Management also uses adjusted gross margin and adjusted EBITDA when discussing results with the operating Board of Directors, the Fund's Board of Trustees, analysts, investors, banks and other interested parties.

The results of operations would therefore need to be adjusted by the following:



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Income (loss) 2007 2006
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Mark-to-market adjustment $107 $2,104
Timing in recognition of liquidation income for
sugar inventories, sales and purchase contracts,
natural gas futures swaps and options and foreign
exchange futures 3,275 8,307
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Total $3,382 $10,411
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Adjusted financial information (non-GAAP reconciliation):

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Consolidated Results For the three months ended December 31,
2007 2006
(unaudited) (unaudited)
---------------------------------------------------------------------------
Gross margin as per financial statements $34,395 $40,214
Adjustment as per above (3,382) (10,411)
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Adjusted gross margin 31,013 29,803
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EBITDA as per financial statements 27,353 32,770
Adjustment as per above (3,382) (10,411)
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Adjusted EBITDA 23,971 22,359
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Net earnings as per financial statements 17,120 19,677
Adjustment as per above (3,382) (10,411)
Deferred taxes on above 1,104 3,064
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Adjusted net earnings $14,842 $12,330
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Net earnings per trust unit basic, as per
financial statements $0.20 $0.22
Adjustment for the above (0.03) (0.08)
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Adjusted net earnings per trust unit basic $0.17 $0.14
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First quarter volume decreased by 5,600 metric tonnes from the comparable quarter in fiscal 2007. Industrial volume was down by 6,500 metric tonnes due in part to timing in deliveries and reduced volume by certain customers. Liquid volume was down 2,600 metric tonnes due to lower HFCS substitutable business. This was partially offset with higher consumer volume of 2,400 metric tonnes due in large part to strong promotions by certain retailers during the quarter and by an increase of 1,000 metric tonnes in export volume to the U.S. Rogers, in addition to the regular Canada specific quota, was able to enter 3,600 metric tonnes against the U.S. global quota, which opened and was totally filled on October 1, 2007.

Revenues for the quarter were $19.8 million lower than the previous year's comparable quarter due to the lower price of world raw sugar in fiscal 2008, than in the comparable quarter of fiscal 2007.

As previously mentioned, gross margin of $34.4 million does not reflect the economic margin of the Fund, as it includes a gain of $3.4 million for the mark-to-market of derivative financial instruments. We will therefore comment on adjusted gross margin results.

For the quarter, adjusted gross margin increased by $1.2 million, when compared to the same quarter of last year, even though volume was down. On a per metric tonne basis, adjusted gross margins were $179.22 compared to $166.80 for the comparable quarter of last year. Favourable sales mix due to higher consumer volume and improved selling margins were the major reasons for the improved gross margin results.

Administration costs were in line with the comparable quarter of fiscal 2007. The lower distribution cost of $0.4 million is due mainly to the change to FOB pricing at Rogers, effective January 1, 2007.

Interest expense for the quarter was lower by approximately $0.3 million due mainly to short-term interest income on the current cash balance.

Statement of quarterly results

The following is a summary of selected financial information of the consolidated financial statements and non-GAAP measures of the Fund for the last eight quarters.



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(In thousands except
for volume and per
trust unit information) 2008 2007
1-Q 4-Q 3-Q 2-Q 1-Q
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Volume (MT) 173,045 177,382 172,947 160,733 178,680

Total revenues $115,116 $117,369 $117,900 $115,448 $134,880
Gross margin 34,395 19,542 20,012 27,296 40,214
EBITDA 27,353 11,309 12,596 20,796 32,770
Net earnings $17,120 $7,568 $6,545 $11,337 $19,677
Gross margin rate
per MT 198.76 $110.17 $115.71 $169.82 $225.06

Per trust unit
Net earnings
Basic $0.20 $0.09 $0.07 $0.13 $0.22
Diluted $0.17 $0.09 $0.07 $0.12 $0.19

Non-GAAP Measures
Adjusted gross margin $31,013 $28,408 $27,452 $22,177 $29,803
Adjusted EBITDA $23,971 20,175 20,036 15,677 22,359
Adjusted net earnings $14,842 $13,591 $11,171 $8,515 $12,330
Adjusted gross margin
rate per MT $179.22 $160.15 $158.73 $137.97 $166.80

Adjusted net earnings
per trust unit
Basic $0.17 $0.15 $0.13 $0.10 $0.14
Diluted $0.15 $0.14 $0.12 $0.09 $0.13
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(In thousands except
for volume and per
trust unit information) 2006
4-Q 3-Q 2-Q
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Volume (MT) 199,316 182,267 190,384

Total revenues $150,994 $134,863 $128,842
Gross margin 38,458 25,274 19,810
EBITDA 27,975 16,802 10,310
Net earnings $16,634 $9,704 $3,424
Gross margin rate
per MT $192.95 $138.66 $104.05

Net earnings
Basic $0.19 $0.11 $0.02
Diluted $0.16 $0.10 $0.02

Non-GAAP Measures
Adjusted gross margin $32,091 $25,274 $19,810
Adjusted EBITDA 21,608 16,802 10,310
Adjusted net earnings $12,342 $9,704 $3,424
Adjusted gross margin
rate per MT $161.00 $138.66 $104.05

Adjusted net earnings
per trust unit
Basic $0.14 $0.11 $0.02
Diluted $0.13 $0.10 $0.02
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Liquidity

The distributable cash generated by the operating companies, Lantic and Rogers, is paid to the Fund by way of dividends and return of capital on the common shares of Lantic and Rogers, and by the payment of interest on the subordinated notes of Lantic and Rogers held by the Fund, after having taken reasonable reserve for capital expenditures and working capital. The cash received by the Fund is used to pay distributions to its Unitholders.

The Canadian Securities Administrators (the "CSA") issued National Policy 41-201, to address the disclosure of distributable cash. This was also supported by an Interpretive Release issued in July 2007 by the Canadian Institute of Chartered Accountants (the "CICA"). This Interpretive Release is to provide a transparent measure of cash available for distribution to Unitholders that would be comparable between entities and consistent over time. This will now be labeled as Standardized Distributable Cash.

Standardized Distributable Cash is defined as the GAAP measure of cash from operating activities after adjusting for capital expenditures, restrictions on distributions arising from compliance with financial covenants, restrictive at the time of reporting, and minority interests.

Standardized distributable cash is as follows:



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Cumulative amounts for
Three months ended last 5 fiscal years,
(In thousands of dollars) December 31, ended September 30,
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2007 2006 2007
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Cash flow from operating
activities $(5,581) $25,552 $279,289
Capital expenditures (2,064) (1,415) (35,962)
Financing restrictions - - -
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Standardized
distributable cash $(7,645) $24,137 $243,327
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There were no restrictions on distributions arising from the compliance of financial covenants for the periods shown above.

Cash flow from operations was negative ($5.6) million in the first quarter of 2008, as opposed to $25.6 million in the comparable quarter of fiscal 2007. In the first quarter of each year, Taber receives all sugar beets from harvest which significantly increases inventory values at the end of the first quarter. This is the major reason for the negative cash flow from operating activities at the end of the quarter. Exceptionally in the first quarter of last year, inventory increase was minimal due to a combination of higher raw cane inventory and higher raw sugar values at September 30, 2006, thus having no negative impact on cash flow from operating activities.

Maintenance capital expenditures were higher than the previous year, due mainly to timing in projects when compared to fiscal 2007.

Standardized Distributable Cash does not constitute available cash for distribution due mainly to timing factors in the movement of non-cash working capital items, to mark-to-market derivative timing adjustment, to non-cash financial instruments, and to other financing items.

In order to provide additional information that the Fund's administrators believe is appropriate for the determination of levels of cash distribution, the Interpretive Release also allows a measure that includes additional items beyond those included in Standardized Distributable Cash. These additional measures may affect the Fund's distributions and are therefore forming a basis for the actual amount of cash available for distribution. All of these additional measures are separately identified and explained and result in Adjusted Distributable Cash.

Adjusted distributable cash is as follows:



---------------------------------------------------------------------------
---------------------------------------------------------------------------
Cumulative amounts for
Three months ended last 5 fiscal years,
(In thousands of dollars) December 31, ended September 30,
---------------------------------------------------------------------------
2007 2006 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Standardized
distributable cash
as per above $(7,645) $24,137 $243,327
Adjustments:
Changes in non-cash
working capital 27,721 8,660 3,271
Mark-to-market and
derivative timing
adjustment (3,382) (10,411) (5,591)
Financial instruments
non-cash amount 1,581 (5,202) (1,460)
Investment capital
expenditures - 52 7,040
Issuance (repurchase)
of trust units 173 (1,822) 42,599
Interest expense on
equity portion of
convertible unsecured
debentures - - (20,669)
Net long-term debt
repayment - - (48,135)
Deferred financing
charges - - (8,760)
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Adjusted distributable
cash $18,448 $15,414 $211,622
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Declared distributions $9,789 $9,305 $185,968
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Available cash $8,659 $6,109 $25,654
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Net adjusted distributable cash was $3.0 million higher than the comparable quarter in fiscal 2007. This was mainly due to the higher profitability at the operational level and no repurchase of trust units during the quarter as compared to the first quarter of fiscal 2007.

Changes in non-cash operating working capital represents quarter-over-quarter movement in current assets such as accounts receivables and inventories, and current liabilities like accounts payable. Movements in these accounts are due mainly to timing in the collection of receivables, receipts of raw sugar and payment of liabilities. Increases or decreases in such accounts are due to timing issues and therefore do not constitute available cash for distribution. Such increases or decreases are financed from available cash or from the Company's available credit facilities of $90.0 million. Increases or decreases in short-term bank indebtedness are also due to timing issues from the above, and therefore do not constitute available cash for distribution.

Mark-to-market and financial instruments adjustments are due mainly to unrealized gain or loss on financial derivative instruments and are therefore non-cash amounts.

In the first quarter of fiscal 2008, some units were issued as one executive exercised some options under the stock option plan. In fiscal 2007, the Fund, in the first quarter repurchased and cancelled a total of 500,000 units for a total value of $1.8 million under its Normal Course Issuer Bid.

Excess cash flow and net income on distributions paid

Cash flow from operating activities includes year-over-year movement in current assets such as inventories and accounts receivable, and current liabilities, like accounts payable. Movements in these accounts are due to, in large part, timing and therefore do not constitute available cash for distribution.

The following table presents excess cash flows from operating activities and net income on distributions paid for the last three years ended September 30, and for the first quarter ended December 31, 2007 and 2006:



---------------------------------------------------------------------------
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Quarters ended Years ended
December 31, September 30,
---------------------------------------------------------------------------
(In thousands of dollars) 2007 2006 2007 2006 2005
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Cash flow (deficiency)
from operating activities $(5,581) $25,552 $88,607 $30,833 $35,491
Net earnings (loss) 17,120 19,677 45,127 40,922 (57,249)
Distributions paid 9,789 9,305 37,728 35,869 35,583
(Shortfall) excess of cash
flows from operating
activities over cash
distributions paid (15,370) 16,247 50,879 (5,036) (92)
Excess (shortfall) of net
earnings (loss) over cash
distributions paid $7,331 $10,372 $7,399 $5,053 $(92,832)
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In the first quarter of fiscal 2008, inventories increased by $32.6 million due to the receipt of the Taber beets. This was financed from available cash balances. Last year's excess from cash flow was a result of higher year-end closing inventories.

In fiscal 2005, the Fund recorded a goodwill write-off of $95.0 million, not a cash flow item, hence the reason for the shortfall of net earnings over cash distributions in that year.

Contractual obligations

There are no material changes in the contractual obligations table disclosed in the Management's Discussion and Analysis of the September 30, 2007 Annual Report.

At December 31, 2007, the operating companies had commitments to purchase a total of 603,500 metric tonnes of raw sugar, of which only 232,700 metric tonnes had been priced, for a total dollar commitment of $69.8 million.

Capital resources

Lantic and Rogers each have respectively $50.0 million and $40.0 million as authorized lines of credit available to finance their operations. At quarter's end, no amount was drawn from either of the working capital facilities and Lantic and Rogers had respectively $32.6 and $3.5 million of cash available.

At quarter's end, inventories are high compared to the balance at September 30, 2007, as a result of the Taber beet crop which has been harvested and received at the Taber factory.

Cash requirements for working capital and other capital expenditures are expected to be paid from available cash resources and from funds generated from operations.

Changes in accounting policies and critical accounting estimates

Our accounting policies and critical accounting estimates remain substantially unchanged from those that were disclosed in our Management's Discussion and Analysis of the Annual Report for the year ended September 30, 2007.

Risk factors

Risk factors in Lantic's and Rogers' businesses and operations are discussed in the Management's Discussion and Analysis of our Annual Report for the year ended September 30, 2007. This document is available on SEDAR at www.sedar.com or on one of our websites at www.lantic.ca or www.rogerssugar.com.

OUTLOOK

With the decline of raw sugar prices in 2007, Rogers was able to reacquire some of the HFCS substitutable liquid business which had been lost in calendar 2006. Approximately half of this lost business has now been contracted for delivery in calendar 2008.

In fiscal 2007, Rogers shipped, for the first time, approximately 12,000 metric tonnes to Mexico. These shipments are estimated to be higher in fiscal 2008.

Effective October 31, 2007, Lantic acquired additional dry blending capacity in addition to 2,000 metric tonnes of U.S. sugar-containing products quota. The intent is to engage in additional volumes of sugar blending products, and therefore improve revenues through value-added activities.

In Taber, the beet harvest was completed in November 2007, and again an excellent yield per acre harvested was achieved this year. It is now estimated that Taber will produce in excess of 118,000 metric tonnes of beet sugar. This is approximately 15,000 metric tonnes more than was expected. As the Western market is limited, some sugar will be warehoused again this year. This will add additional warehousing and distribution costs, to be charged against this year's results.

Taber's current harvest is the last that is covered by the expiring three-year contract with the Growers. We have started to negotiate a new agreement with the Taber Beet Growers. We hope to negotiate another multi-year agreement, on terms and conditions to be competitive in Western Canada.

Most of the natural gas forecast use for winter 2008 (to March 2008) has been hedged at average prices lower than the previous year. The stronger Canadian dollar will also help reduce energy costs. In addition, some futures positions for fiscal 2009 to 2011 have been taken, at levels better than what was achieved in fiscal 2007. We will continue to monitor natural gas market dynamics in order to minimize our natural gas costs.

The labour contracts for Lantic's Montreal facility will expire at the end of February 2008. Negotiations will soon be underway, and management expects these collective agreements to be renewed at competitive market rates.

Lantic's private debenture of $65.0 million and Rogers' term debt of $50.0 million come due in June 2008 and August 2008 respectively. Depending on the cash positions at that time, these term debts may be partially repaid, or refinanced in their entirety, for a long-term period. We expect to refinance these debts at similar interest rates to those currently being paid.



Rogers Sugar Income Fund
Consolidated Balance Sheet
December 31, 2007 and 2006
(In thousands of dollars - except per trust unit amounts)
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December 31, September 30, December 31,
2007 2007 2006
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ASSETS

Current assets:
Cash and cash equivalents $36,557 $53,818 $27,559
Accounts receivable 40,026 41,342 42,446
Inventories 81,475 48,868 81,249
Prepaid expenses 1,493 2,483 1,449
Future income taxes 771 - -
Derivative financial instruments
(Note 2) 2,449 1,626 438
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162,771 148,137 153,141

Capital Assets 199,250 200,328 204,636
Derivative financial instruments
(Note 2) 1,461 668 78
Other assets 184 225 413
Goodwill 229,952 229,952 223,043
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$593,618 $579,310 $581,311
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LIABILITIES AND UNITHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued
liabilities $43,294 $40,665 $46,543
Future income taxes - 867 6,726
Derivative financial instruments
(Note 2) 3,452 3,647 648
Current portion of long-term debt 114,601 114,402 -
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161,347 159,581 53,917
Employee future benefits 15,017 15,453 16,974
Derivative financial instruments
(Note 2) 337 107 37
Long-term debt - - 113,587
Convertible unsecured subordinated
debentures 130,580 130,360 129,697
Future income taxes 23,142 18,124 6,951
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330,423 323,625 321,163

UNITHOLDERS' EQUITY

Trust units (Note 3) 562,144 561,966 566,494
Contributed surplus 3,163 3,162 1,458
Accumulated other comprehensive
income - - (1,334)
Deficit (302,112) (309,443) (306,470)
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263,195 255,685 260,148
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$593,618 $579,310 $581,311
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Rogers Sugar Income Fund
Unaudited Consolidated Statements of Operations
For the three months ended December 31, 2007 and 2006
(In thousands of dollars - except per trust unit amounts)
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2007 2006
---------------------------------------------------------------------------

Revenues $115,116 $134,880
Cost of sales 80,721 94,666
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Gross margin 34,395 40,214

Expenses:
Administration and selling 4,501 4,519
Distribution 2,541 2,925
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7,042 7,444
Earnings before interest, provision for income
taxes and depreciation and amortization 27,353 32,770
Depreciation and amortization 3,191 3,157
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Earnings before interest and provision for
income taxes 24,162 29,613
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Interest on long-term debt and convertible
debentures 3,861 3,824
Amortization of deferred financing costs 296 380
Short-term interest (income) (501) (237)
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3,656 3,967
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Earnings before provision for income taxes 20,506 25,646

Provision for (recovery of) income taxes:
Current 6 (443)
Future 3,380 6,412
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3,386 5,969
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Net earnings $17,120 $19,677
Other comprehensive income - 1,948
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Comprehensive income $17,120 $21,625
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Net earnings per trust unit:
Basic $0.20 $0.22
Diluted $0.17 $0.19
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Supplemental disclosure:
Employee future benefits expense $424 $714
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Rogers Sugar Income Fund
Unaudited Consolidated Statements of Unitholders' Equity
For the three months ended December 31, 2007 and 2006
(In thousands of dollars - except per trust unit amounts)
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2007
Number of
Trust Trust Contributed
Units Units Surplus Deficit Total
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Balance, beginning
of period 87,582,791 $561,966 $3,162 $(309,443) $255,685
Distributions - - - (9,789) (9,789)
Stock-based
compensation - - 6 - 6
Issue of trust
units (Note 3) 40,000 178 (5) - 173
Net earnings - - - 17,120 17,120
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Balance, end of
period 87,622,791 $562,144 $3,163 $(302,112) $263,195
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2006
Accumulated
Number of Other
Trust Trust Contributed Comprehensive
Units Units Surplus Income Deficit Total
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Balance,
beginning
of period 88,788,391 $571,034 $52 $- $(318,202)$252,884
Distribu-
tions - (1,324) - - (7,981) (9,305)
Stock-based
compensa-
tion - - 12 - - 12
Repurchase
of trust
units (500,000) (3,216) 1,394 - - (1,822)
Adjustment
for change
in
accounting
policies,
effective
October 1,
2006 - - - (3,282) 36 (3,246)
Reversal
to cost
of sales of
accumulated
other
comprehen-
sive
income - - - 1,948 - 1,948
Net earnings - - - - 19,677 19,677
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Balance,
end of
period 88,288,391 $566,494 $1,458 $(1,334)$(306,470)$260,148
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Rogers Sugar Income Fund
Unaudited Consolidated Statements of Cash Flows
For the three months ended December 31, 2007 and 2006
(In thousands of dollars - except per trust unit amounts)
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For the three months ended December 31,
2007 2006
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Cash flows from operating activities:
Net earnings $17,120 $19,677
Adjustments for items not involving cash:
Depreciation and amortization 3,191 3,157
Amortization of deferred financing costs 296 380
Future income taxes 3,380 6,412
Employee future benefits (436) (435)
Change in derivative financial instruments (1,581) 6,536
Stock based compensation expenses 6 12
Reversal of accumulated other comprehensive
income - (1,334)
Other 164 (193)
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22,140 34,212
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Changes in non-cash working capital:
Accounts receivable 1,316 6,024
Inventories (32,607) (4,365)
Prepaid expense 990 1,557
Accounts payable and accrued liabilities 2,580 (11,876)
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(27,721) (8,660)
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(5,581) 25,552
Cash flows from financing activities:
Distributions to Unitholders (9,789) (9,305)
Issue (repurchase) of trust units 173 (1,822)
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(9,616) (11,127)
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Cash flows from investing activities:
Additions to capital assets (2,064) (1,415)
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Net change in cash and cash equivalents (17,261) 13,010
Cash and cash equivalents, beginning of period 53,818 14,549
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Cash and cash equivalents, end of period $36,557 $27,559
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Supplemental disclosure:
Interest paid on the debt and equity components
of convertible debentures 5,211 5,442
Income taxes paid 17 177
Capital assets included in accounts payable and
accrued liabilities 710 989
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Rogers Sugar Income Fund
Notes to Interim Unaudited Consolidated Financial Statements
For the three months ended December 31, 2007 and 2006
(In thousands of dollars - except per trust unit amounts)
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Rogers Sugar Income Fund (the "Fund") is an open-ended, limited purpose trust created under the laws of Ontario by an amended and restated declaration of trust dated February 3, 2005 (the "Declaration of Trust"). An unlimited number of trust units may be issued pursuant to the Declaration of Trust.

Note 1: Basis of presentation

These interim unaudited consolidated financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles. The same accounting policies as disclosed in the consolidated financial statements of the Fund included in our latest annual report have been used. Accordingly, these interim unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2007 annual report. These quarterly consolidated financial statements were not reviewed or audited by our external auditors.

Note 2: Derivative financial assets/Derivative financial liabilities

Details of recorded gains/losses for the quarter, in marking-to-market all derivative financial instruments and embedded derivatives, as well as the reversal of the transitional balances are noted below. For sugar and natural gas futures contracts (derivative financial instruments), the amounts noted below are netted with the variation margins paid or received to/from these brokers at the end of the reporting period. Natural gas forwards and sugar futures have been marked-to-market using published quoted values for these commodities, while foreign exchange forward contracts have been marked-to-market using rates published by the financial institution which is counter-party to these contracts.



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Financial Financial Gain/(Loss)
Instrument Instrument Statement of
Assets Liabilities Operations Cost
MARK-TO-MARKET Short-term Long-term Short-term Long-term of sales
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For the
three month
period ended
December 31,
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2007 2006
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Sugar futures
contracts $96 $2 $- $1 $232 $3,975

Natural gas
futures contracts 919 1,388 - - 1,008 (1,156)
Foreign exchange
forward contracts 1,434 71 3,250 336 (133) (766)
Embedded derivatives - - 202 - (1,000) (399)
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Total $2,449 $1,461 $3,452 $337 $107 $1,654
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Cost of sales
impact of
transitional
balances - 450
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Total $107 $2,104
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Note 3: Trust units

During the first quarter, the Fund issued 40,000 trust units after one of the executive's exercised some of the stock options that were exercisable.

Note 4: Segmented information

The Fund, through its operating companies, operates in the sugar industry. Management organizes the results into two principal operating segments for making operating decisions and assessing performance: Eastern Canada and Western Canada. These segments are managed separately, since they require specific market strategies. The Fund assesses the performance of each segment based on operating income. Accounting policies relating to each segment are identical to those used for the purposes of the consolidated financial statements.



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For the three months ended December 31,
2007
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Eastern Western Intersegment
Canada Canada and other Total
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Revenues $70,080 $46,408 $(1,372) $115,116
Earnings before
interest, provision
for income taxes
and depreciation
and amortization 20,620 6,786 (53) 27,353
Depreciation and
amortization 1,851 1,028 312 3,191
Interest expense, net 8,225 5,453 (10,022) 3,656
Net earnings $7,178 $207 $9,735 $17,120
Additions to property,
plant and equipment 1,211 853 - 2,064
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For the three months ended December 31,
2006
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Eastern Western Intersegment
Canada Canada and other Total
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Revenues $85,448 $50,989 $(1,557) $134,880
Earnings before
interest, provision
for income taxes
and depreciation
and amortization 18,798 14,135 (163) 32,770
Depreciation and
amortization 1,845 1,000 312 3,157
Interest expense, net 7,065 5,362 (8,460) 3,967
Net earnings $7,594 $4,098 $7,985 $19,677
Additions to property,
plant and equipment 881 534 - 1,415
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Revenues were derived from customers in the following geographic areas:

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For the three months ended December 31,
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2007 2006
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Canada $106,370 $125,473
United States and Other 8,746 9,407
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$115,116 $134,880
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