Rogers Sugar Income Fund
TSX : RSI.UN

Rogers Sugar Income Fund

April 30, 2008 16:00 ET

Rogers Sugar Income Fund: Interim Report for the 2nd Quarter 2008 Results

Increase in Adjusted Gross Margin Rate From Comparable Quarter and Year to Date Period. Year to Date Adjusted Distributable Cash Higher by $1.2 Million From Last Year.

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 30, 2008) - Rogers Sugar Income Fund (TSX:RSI.UN) -

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 (the "Fund") for the three months ended March 31, 2008.

Volume for the second quarter was 153,507 metric tonnes, as opposed to 160,733 metric tonnes in the comparable quarter of last year, a decrease of approximately 7,200 metric tonnes. The decrease is due mainly to lower industrial and consumer volumes partially offset by higher liquid and export volumes. Industrial volume was lower by 7,300 metric tonnes due in part to timing in deliveries and a loss of a large industrial account. Consumer volume was 3,100 metric tonnes lower due in large part to timing which offset the increase achieved in the first quarter. Liquid volume increased by 2,300 metric tonnes as one of the major high fructose corn syrup substitutable accounts was recovered for which shipments started in the last week of February. Year to date volume is lower by 12,900 metric tonnes, mostly due to lower industrial volume.

With the adoption of new accounting policies on 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 March 31, 2008. 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 decreased by $0.4 million, when compared to the same quarter of last year. On a per metric tonne basis, adjusted gross margin was $142.13 compared to $137.97 for the comparable quarter of last year. The increase in the adjusted gross margin rate is due to improved selling margins. A profit of $1.8 million was generated on Taber's pre-hedge program during the quarter, the same amount as the comparable quarter of last year. Year to date adjusted gross margin rate per metric tonne was $161.78 compared to $153.15 in fiscal 2007, again due in large part to improved selling margins and sales mix.

For the quarter, adjusted distributable cash was $7.4 million, as compared to $9.1 million in fiscal 2007. The decrease was due mainly to a one-time gain of $1.0 million recorded in the second quarter of fiscal 2007 for the sale of a Seat on the Commodity Exchange, and to lower margins as a result of lower volume in fiscal 2008. During the second quarter, the Fund distributed $10.0 million compared to $9.2 million in fiscal 2007. Year to date adjusted distributable cash is $25.8 million as compared to $24.6 million in fiscal 2007, an increase of $1.2 million.

In Taber, the beet slicing campaign was completed in February 2008. Combined with the beet juice campaign to be processed in late Spring, total beet sugar production is estimated at 119,000 metric tonnes for this year. This is approximately 16,000 metric tonnes higher than expected. As a result, most of this increase will be warehoused and sold next fiscal year. For fiscal 2009, we have concluded a one year contract with the Alberta Sugar Beet Growers for sugar beets; higher prices of other agricultural commodities made it difficult to agree to a longer term contract. To date, we estimate getting approximately 80% of the required acreage. Any potential shortfall, next year, in beet sugar volume will be produced in Vancouver, which will improve the overall efficiency of the plant.

Towards the end of the campaign there was a small fire at the Taber plant. The fire was in an area where dried beet pulp is conveyed to the beet pulp warehouse. The fire was contained immediately. Damages are expected to be less than $1.0 million, and will be entirely repaired by the start of the next slicing campaign in the Fall of 2008. Except for the insurance deductible of $250,000, which was recorded this quarter, no other costs are expected for this incident.

FOR THE BOARD OF TRUSTEES,

(Signed)

Edward Y. Baker,

Vancouver, British Columbia - April 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 April 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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For the three months For the six months
Consolidated Results ended March 31 ended March 31
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(In thousands of dollars,
except for volume and
per trust unit 2008 2007 2008 2007
information) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Volume (metric tonnes) 153,507 160,733 326,552 339,413
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Revenues $101,834 $115,448 $216,950 $250,328

Gross margin 23,039 27,296 57,434 67,510
Administration
and selling 4,845 4,075 9,346 8,594
Distribution 3,348 2,425 5,889 5,350
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Earnings before interest,
provision for income
taxes, depreciation and
amortization (EBITDA) $14,846 $20,796 $42,199 $53,566

Depreciation and
amortization 3,190 3,127 6,381 6,284

Interest, net of interest
income and other charges 3,793 3,911 7,449 7,878

(Recovery of) provision
for income taxes (1,105) 2,421 2,281 8,390
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Net earnings $8,968 $11,337 $26,088 $31,014
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Net earnings per trust
unit - basic $0.10 $0.13 $0.30 $0.35
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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.



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The results of operations would therefore need to be adjusted by the
following:
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For the three months For the six months
Income (loss) ended March 31 ended March 31
2008 2007 2008 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Mark-to-market
adjustment $2,467 $2,659 $2,574 $4,763
Timing in recognition of
liquidation income for
sugar inventories, sales
and purchase contracts,
natural gas futures swaps
and options and foreign
exchange futures (1,244) 2,460 2,031 10,767
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Total $1,223 $5,119 $4,605 $15,530
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Adjusted financial information (non-GAAP reconciliation):
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For the three months For the six months
Consolidated Results ended March 31 ended March 31
2008 2007 2008 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Gross margin as per
financial statements $23,039 $27,296 $57,434 $67,510
Adjustment as per above (1,223) (5,119) (4,605) (15,530)
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Adjusted gross margin 21,816 22,177 52,829 51,980
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EBITDA as per financial
statements 14,846 20,796 42,199 53,566
Adjustment as per above (1,223) (5,119) (4,605) (15,530)
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Adjusted EBITDA 13,623 15,677 37,594 38,036
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Net earnings as per
financial statements 8,968 11,337 26,088 31,014
Adjustment as per above (1,223) (5,119) (4,605) (15,530)
Deferred taxes on above 412 2,297 1,516 5,361
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Adjusted net earnings $8,157 $8,515 $22,999 $20,845
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Net earnings per trust
unit basic, as per
financial statements $0.10 $0.13 $0.30 $0.35
Adjustment for the above (0.01) (0.03) (0.04) (0.11)
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Adjusted net earnings per
trust unit basic $0.09 $0.10 $0.26 $0.24
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Second quarter volume decreased by 7,200 metric tonnes from the comparable quarter in fiscal 2007. Industrial volume was down by 7,300 metric tonnes due in part to timing in deliveries and loss of a large account for calendar 2008. Liquid volume was up 2,300 metric tonnes due to the recapture of one HFCS substitutable business for which deliveries started at the end of February. Consumer volume decreased by 3,100 metric tonnes due in large part to timing in deliveries in the first quarter, which were up by 2,400 metric tonnes, which negatively impacted second quarter volume. Export volume was up 900 metric tonnes due to increased sales to Mexico. Year to date volume decreased by 12,900 metric tonnes from the prior year. Industrial volume decreased by 13,800 metric tonnes due to timing in deliveries and loss of one large account, while consumer volume was lower by 700 metric tonnes. This is partially offset by an increase of 1,900 metric tonnes in export volume due in part to increased sales under the U.S. global quota.

Revenues for the quarter were $13.6 million lower than the previous year's comparable quarter due to the lower volume and lower price of world raw sugar in fiscal 2008, than in the comparable quarter of fiscal 2007.

As previously mentioned, gross margin of $23.0 million does not reflect the economic margin of the Fund, as it includes a gain of $1.2 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 decreased by $0.4 million, when compared to the same quarter of last year. On a per metric tonne basis, adjusted gross margins were $142.13 compared to $137.97 for the comparable quarter of last year. Improved selling margins were the major reason for the improved gross margin result. Taber's pre-hedge program contributed $1.8 million during the quarter, the same amount as the comparable quarter of fiscal 2007. This represents a contribution of $11.72 per metric tonne as compared to $11.20 per metric tonne in fiscal 2007. In addition, a one-time cost of $250,000 was recorded in the current quarter as a result of fire damage near the end of the slicing campaign in Taber, Alberta. The fire was limited to an area where dried beet pulp is conveyed to the beet pulp warehouse. The fire was contained immediately. Damages, which are covered by insurance, are estimated to be less than $1.0 million, and will be entirely repaired by the start of the next slicing campaign, in the Fall of 2008. Except for the insurance deductible of $250,000, no other costs are expected from this incident. Year to date adjusted gross margin is $0.8 million higher than fiscal 2007. On a per metric tonne basis, adjusted gross margins were $161.78 in 2008 compared to $153.15 in fiscal 2007. Taber's pre-hedge program income was $1.8 million in fiscal 2008 as compared to $2.5 million in fiscal 2007. The increase in adjusted margin rate is due mainly to improved sales mix and selling margins.

Administration and selling costs were $0.7 million higher than the comparable quarter of fiscal 2007. This was due to the recognition of a one-time gain of $1.0 million in fiscal 2007 from the sale of a Seat on the Commodity Exchange. This also accounts for the increase of $0.7 million year to date.

Distribution expenses are $0.9 million higher for the quarter due mainly to storage costs incurred in Taber for the larger beet crop. Again, this also accounts for the year to date increase of $0.5 million.

Interest expense for the quarter and year to date was lower by approximately $0.1 and $0.4 million respectively due mainly to short-term interest income earned on current cash balances.



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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2008
(Unaudited)
(In thousands except for volume
and per trust unit information) 2-Q 1-Q
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Volume (MT) 153,507 173,045
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Total revenues $101,834 $115,116
Gross margin 23,039 34,395
EBITDA 14,846 27,353
Net earnings $8,968 $17,120
Gross margin rate per MT 150.09 198.76
Per trust unit
Net earnings
Basic $0.10 $0.20
Diluted $0.10 $0.17
Non-GAAP Measures
Adjusted gross margin $21,816 $31,013
Adjusted EBITDA $13,623 $23,971
Adjusted net earnings $8,157 $14,842
Adjusted gross margin rate per MT $142.13 $179.22
Adjusted net earnings per trust unit
Basic $0.09 $0.17
Diluted $0.09 $0.15
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QUARTERS
2007
(Unaudited)
(In thousands except for volume
and per trust unit information) 4-Q 3-Q 2-Q 1-Q
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Volume (MT) 177,382 172,947 160,733 178,680
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Total revenues $117,369 $117,900 $115,448 $134,880
Gross margin 19,542 20,012 27,296 40,214
EBITDA 11,309 12,596 20,796 32,770
Net earnings $7,568 $6,545 $11,337 $19,677
Gross margin rate per MT $110.17 $115.71 $169.82 $225.06
Per trust unit
Net earnings
Basic $0.09 $0.07 $0.13 $0.22
Diluted $0.09 $0.07 $0.12 $0.19
Non-GAAP Measures
Adjusted gross margin $28,408 $27,452 $22,177 $29,803
Adjusted EBITDA 20,175 20,036 15,677 22,359
Adjusted net earnings $13,591 $11,171 $8,515 $12,330
Adjusted gross margin
rate per MT $160.15 $158.73 $137.97 $166.80
Adjusted net earnings per
trust unit
Basic $0.15 $0.13 $0.10 $0.14
Diluted $0.14 $0.12 $0.09 $0.13
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2006
(Unaudited)
(In thousands except for volume
and per trust unit information) 4-Q 3-Q
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Volume (MT) 199,316 182,267
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Total revenues $150,994 $134,863
Gross margin 38,458 25,274
EBITDA 27,975 16,802
Net earnings $16,634 $9,704
Gross margin rate per MT $192.95 $138.66
Per trust unit
Net earnings
Basic $0.19 $0.11
Diluted $0.16 $0.10
Non-GAAP Measures
Adjusted gross margin $32,091 $25,274
Adjusted EBITDA 21,608 16,802
Adjusted net earnings $12,342 $9,704
Adjusted gross margin rate per MT $161.00 $138.66
Adjusted net earnings per trust unit
Basic $0.14 $0.11
Diluted $0.13 $0.10
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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 aims 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
last 5 fiscal
years, ended
For the three months For the six months September
ended March 31 ended March 31 30
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(In thousands 2008 2007 2008 2007 2007
of dollars) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Cash flow from
operating
activities $(220) $9,796 $(5,801) $35,348 $279,289
Capital
expenditures (1,734) (1,873) (3,798) (3,288) (35,962)
Financing
restrictions - - - - -
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Standardized
distributable
cash $(1,954) $7,923 $(9,599) $32,060 $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 ($0.2) million in the second quarter of 2008, as opposed to $9.8 million in the comparable quarter of fiscal 2007. Timing in payments of cane raw sugar and beet sugar is the major reason for the variance, as accounts payable is $6.0 million lower than last year. The year to date decrease in cash flow is due mainly to the large increase in inventories caused by two successive years of record beet crops, and timing in cane raw sugar receipts, and mark to market of derivative financial instruments.

Maintenance capital expenditures for the current quarter were lower 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 and 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.



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Adjusted distributable cash is as follows:
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--------------------------------------------------------------------------
Cumulative
amounts for
last 5 fiscal
years, ended
For the three months For the six months September
ended March 31 ended March 31 30
--------------------------------------------------------------------------
(In thousands 2008 2007 2008 2007 2007
of dollars) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------
Standardized
distributable
cash as per above $(1,954) $7,923 $(9,599) $32,060 $243,327
Adjustments:
Changes in
non-cash working
capital 6,468 3,754 34,189 12,414 3,271
Mark-to-market
and derivative
timing adjustment (1,223) (5,119) (4,605) (15,530) (5,591)
Financial
instruments non
cash amount 3,456 3,465 5,037 (1,737) (1,460)
Investment capital
expenditures - 423 - 475 7,040
Issuance
(repurchase) of
trust units 627 (1,300) 800 (3,122) 42,599
Interest expense
on equity portion
of convertible
unsecured debentures - - - - (20,669)
Net long-term debt
repayment (20) - (20) - (48,135)
Deferred financing
charges - - - - (8,760)
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Adjusted
distributable
cash $7,354 $9,146 $25,802 $24,560 $211,622
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Declared
distributions $10,086 $9,239 $19,875 $18,544 $185,968
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Available cash $(2,732) $(93) $5,927 $6,016 $25,654
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Adjusted distributable cash was $1.8 million lower than the comparable quarter in fiscal 2007. This was mainly due to the lower profitability at the operational level, partially offset with funds collected on the issue of trust units and $1.3 million disbursement in 2007 on the repurchase of units.

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 second quarter of fiscal 2008, some units were issued as two executives exercised some options under the stock option plan. In fiscal 2007, the Fund, in the second quarter repurchased and cancelled a total of 500,000 units for a total value of $1.3 million under its Normal Course Issuer Bid.

Year to date adjusted distributable cash is $1.2 million higher than the prior year. In fiscal 2007, $3.1 million was invested in trust units repurchase, while $0.8 million was collected in fiscal 2008 in trust units issue for a net positive cash of $3.9 million year-over-year. This was partially offset by higher maintenance capital expenditures of $0.9 million in fiscal 2008 (net of investment capital), timing in cash outlay for pension benefits of $1.2 million and lower adjusted EBITDA of $0.4 million.

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 three and six months ended March 31, 2008 and 2007:



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For the three months For the six months
ended March 31 ended March 31
--------------------------------------------------------------------------
(In thousands 2008 2007 2008 2007
of dollars) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Cash flow (deficiency)
from operating activities $(220) $9,796 $(5,801) $35,348
Net earnings (loss) 8,325 11,337 25,445 31,014
Distributions paid 10,086 9,239 19,875 18,544
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Years ended
September 30
--------------------------------------------------------------------------
2007 2006 2005
(In thousands of dollars) (Audited) (Audited) (Audited)
--------------------------------------------------------------------------
Cash flow (deficiency) from
operating activities $88,607 $30,833 $35,491
Net earnings (loss) 45,127 40,922 (57,249)
Distributions paid 37,728 35,869 35,583
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For the three months For the six months
ended March 31 ended March 31
--------------------------------------------------------------------------
(In thousands 2008 2007 2008 2007
of dollars) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------
(Shortfall) excess of
cash flows from operating
activities over cash
distributions paid (10,306) 557 (25,676) 16,804
(Shortfall) excess of net
earnings (loss) over cash
distributions paid $(1,761) $2,098 $5,570 $12,500
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--------------------------------------------------------------------------
Years ended
September 30
--------------------------------------------------------------------------
2007 2006 2005
(In thousands of dollars) (Audited) (Audited) (Audited)
--------------------------------------------------------------------------
(Shortfall) excess of cash flows
from operating activities over
cash distributions paid 50,879 (5,036) (92)
(Shortfall) excess of net
earnings (loss) over cash
distributions paid $7,399 $5,053 $(92,832)
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The current quarter shortfall from cash flow from operating activities is due mainly to timing in the payments of cane raw sugar receipts and beet sugar. Year to date shortfall is due mainly to the larger increase in inventories in fiscal 2008 from the year end level as compared to the same increase in fiscal 2007, even though total inventory values are comparable at $85.0 million for each period ended March 31. The September 30, 2007 inventories were at a level of $48.9 million as compared to $76.9 million as at September 30, 2006. The higher value at September 2006 was due mainly to the higher raw sugar value at that time, and timing of cane raw sugar vessel receipts.

The shortfall in net earnings over distributions for the quarter is normal, as this is the weakest quarter of the fiscal year. Last year's results included a mark to market gain of $5.1 million related to derivative financial instruments.

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 March 31, 2008, the operating companies had commitments to purchase a total of 1,710,500 metric tonnes of raw sugar, of which only 142,100 metric tonnes had been priced, for a total dollar commitment of $43.5 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 $19.8 and $4.3 million of cash available.

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 been contracted for delivery in calendar 2008. Deliveries started at the end of February 2008.

Rogers' export volume will be slightly higher than last year, as additional volume was shipped against the U.S. global quota in the first quarter, and sales volumes to Mexico should be slightly higher than the previous year.

Lantic's volume for fiscal 2008 is estimated to be about 3 to 4% lower than fiscal 2007, as one large industrial account was not re-signed in fiscal 2008. As most other large accounts are currently under contract for 2008, we forecast not being able to offset this volume shortfall in 2008, unless additional export opportunities arise.

In Taber, a one year contract was negotiated with the Alberta Sugar Beet Growers. Higher prices of other agricultural commodities made it difficult to agree to a longer term contract. Beet acreage will be approximately 80% of the total acreage requested. Any shortfall in sugar beet production will be supplied by the Vancouver refinery.

Approximately 40% of the natural gas forecast use for Spring/Summer 2008 has been hedged at average prices comparable to 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 expired at the end of February 2008. Negotiations are 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. The intent is to merge the two operating companies, Lantic and Rogers, as one and negotiate a new debt structure for the merged entity. We expect to refinance these debts at similar interest rates to those currently being paid.



Rogers Sugar Income Fund
Consolidated Balance Sheet
March 31, 2008 and 2007
(In thousands of dollars - except per trust unit amounts)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
March 31 September 30 March 31
2008 2007 2007
--------------------------------------------------------------------------
(Unaudited) (Audited) (Unaudited)
ASSETS

Current assets:
Cash and cash equivalents $25,124 $53,818 $24,943
Accounts receivable 35,898 41,342 37,287
Inventories 85,385 48,868 85,589
Prepaid expenses 2,022 2,483 2,861
Future income taxes 2,595 - -
Derivative financial
instruments (Note 2) 4,069 1,626 3,899
--------------------------------------------------------------------------
--------------------------------------------------------------------------
155,093 148,137 154,579

Capital Assets 197,551 200,328 202,975
Derivative financial
instruments (Note 2) 1,864 668 888
Other assets 470 225 396
Goodwill 229,952 229,952 223,043
--------------------------------------------------------------------------
$584,930 $579,310 $581,881
--------------------------------------------------------------------------

LIABILITIES AND
UNITHOLDERS' EQUITY

Current liabilities:
Accounts payable and
accrued liabilities $36,894 $40,665 $42,975
Future income taxes - 867 9,443
Derivative financial
instruments (Note 2) 2,356 3,647 152
Current portion of
long-term debt 114,801 114,402 -
--------------------------------------------------------------------------
154,051 159,581 52,570

Employee future benefits 13,529 15,453 16,662
Derivative financial
instruments (Note 2) - 107 5
Long-term debt - - 113,872
Convertible unsecured
subordinated debentures
(Note 3) 130,781 130,360 129,918
Future income taxes 23,861 18,124 6,562
--------------------------------------------------------------------------
322,222 323,625 319,589
UNITHOLDERS' EQUITY

Trust units (Note 3) 562,790 561,966 564,295
Contributed surplus 3,148 3,162 2,369
Deficit (303,230) (309,443) (304,372)
--------------------------------------------------------------------------
262,708 255,685 262,292
--------------------------------------------------------------------------
$584,930 $579,310 $581,881
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Rogers Sugar Income Fund
Unaudited Consolidated Statements of Operations
For the periods ended March 31, 2008 and 2007
(In thousands of dollars - except per trust unit amounts)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three months For the six months
ended March 31 ended March 31
--------------------------------------------------------------------------
2008 2007 2008 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)


Revenues $101,834 $115,448 $216,950 $250,328
Cost of sales 78,795 88,152 159,516 182,818
--------------------------------------------------------------------------
Gross margin 23,039 27,296 57,434 67,510

Expenses:
Administration and selling 4,845 4,075 9,346 8,594
Distribution 3,348 2,425 5,889 5,350
--------------------------------------------------------------------------
8,193 6,500 15,235 13,944
Earnings before interest,
provision for income
taxes and depreciation
and amortization 14,846 20,796 42,199 53,566
Depreciation and
amortization 3,190 3,127 6,381 6,284
--------------------------------------------------------------------------

Earnings before interest and
provision for income taxes 11,656 17,669 35,818 47,282
--------------------------------------------------------------------------

Interest on long-term debt
and convertible debentures 3,752 3,730 7,613 7,554
Amortization of deferred
financing costs 296 381 592 761
Short-term interest (income) (255) (200) (756) (437)
--------------------------------------------------------------------------
3,793 3,911 7,449 7,878
--------------------------------------------------------------------------

Earnings before provision
for income taxes 7,863 13,758 28,369 39,404

Provision for (recovery of)
income taxes:
Current - 93 6 (350)
Future (1,105) 2,328 2,275 8,740
--------------------------------------------------------------------------
(1,105) 2,421 2,281 8,390
--------------------------------------------------------------------------
Net earnings $8,968 $11,337 $26,088 $31,014

Other comprehensive income - 1,334 - 3,282
--------------------------------------------------------------------------
Comprehensive income 8,968 12,671 26,088 34,296
--------------------------------------------------------------------------

Net earnings per
trust unit:
Basic $0.10 $0.13 $0.30 $0.35
Diluted $0.10 $0.12 $0.27 $0.31
--------------------------------------------------------------------------

Supplemental disclosure:
Employee future benefits
expense $429 $726 $853 $1,440
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Rogers Sugar Income Fund
Unaudited Consolidated Statements of Unitholders' Equity
For the periods ended March 31, 2008 and 2007
(In thousands of dollars - except per trust unit amounts)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three months
(Unaudited) ended March 31, 2008
--------------------------------------------------------------------------
Number of Trust Contri-
Trust Units Units buted
Surplus Deficit Total
--------------------------------------------------------------------------
Balance,
beginning
of period 87,622,791 $562,144 $3,163 $(302,112) $263,195

Distributions - - - (10,086) (10,086)
Stock-based
compensation - - 4 - 4
Issue of trust
units (Note 3) 160,000 626 (19) - 607
Conversion of
convertible
debentures into
trust units 3,921 20 - - 20
Net earnings - - - 8,968 8,968
--------------------------------------------------------------------------
Balance, end
of period 87,786,712 $562,790 $3,148 $(303,230) $262,708
--------------------------------------------------------------------------
--------------------------------------------------------------------------



--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the six months
(Unaudited) ended March 31, 2008
--------------------------------------------------------------------------
Number of Trust Contri-
Trust Units Units buted
Surplus Deficit Total
--------------------------------------------------------------------------
Balance,
beginning
of period 87,582,791 $561,966 $3,162 $(309,443) $255,685

Distributions - - - (19,875) (19,875)
Stock-based
compensation - - 10 - 10
Issue of trust
units (Note 3) 200,000 804 (24) - 780
Conversion of
convertible
debentures into
trust units 3,921 20 - - 20
Net earnings - - - 26,088 26,088
--------------------------------------------------------------------------
Balance, end
of period 87,786,712 $562,790 $3,148 $(303,230) $262,708
--------------------------------------------------------------------------
--------------------------------------------------------------------------



--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the six months
(Unaudited) ended March 31, 2008
--------------------------------------------------------------------------
Accu-
mula-
ted
Other
Compre-
Number of Trust Contri- hen-
Trust Units Units buted sive
Surplus Income deficit Total
--------------------------------------------------------------------------
Balance,
beginning
of period 88,788,391 $571,034 $52 $- $(318,202) $252,884

Distributions - (1,324) - - (17,220) (18,544)
Stock-based
compensation - - 24 - - 24
Issue (repurchase)
of trust units (842,700) (5,415) 2,293 - - (3,122)
Adjustment for
change in
accounting
policies,
effective
October 1, 2006 - - - (3,282) 36 (3,246)
Reversal to cost
of sales of
accumulated
other
comprehensive
income - - - 3,282 - 3,282
Net earnings - - - - 31,014 31,014
--------------------------------------------------------------------------
Balance, end
of period 87,945,691 $564,295 $2,369 $- $(304,372) 262,292
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Rogers Sugar Income Fund
Unaudited Consolidated Statements of Cash Flows
For the periods ended March 31, 2008 and 2007
(In thousands of dollars - except per trust unit amounts)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three months For the six months
ended March 31 ended March 31
--------------------------------------------------------------------------
2008 2007 2008 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------

Cash flows from
operating activities:
Net earnings $8,968 $11,337 $26,088 $31,014
Adjustments for items
not involving cash:
Depreciation and
amortization 3,190 3,127 6,381 6,284
Amortization of
Deferred
financing costs 296 381 592 761
Future income taxes (1,105) 2,328 2,275 8,740
Employee future benefits (1,488) (312) (1,924) (747)
Change in derivative
financial instruments (3,456) (4,799) (5,037) 1,737
Stock based
compensation expenses 4 12 10 24
Reversal of accumulated
other comprehensive
income - 1,334 - -
Other (161) 142 3 (51)
--------------------------------------------------------------------------
6,248 13,550 28,388 47,762
--------------------------------------------------------------------------
Changes in non-cash
working capital:
Accounts receivable 4,128 5,159 5,444 11,183
Inventories (3,910) (4,340) (36,517) (8,705)
Prepaid expense (529) (1,412) 461 145
Accounts payable and
accrued liabilities (6,157) (3,161) (3,577) (15,037)
--------------------------------------------------------------------------
(6,468) (3,754) (34,189) (12,414)
--------------------------------------------------------------------------
(220) 9,796 (5,801) 35,348
Cash flows from
financing activities:
Distributions to
Unitholders (10,086) (9,239) (19,875) (18,544)
Issue (repurchase) of
trust units (Note 3) 627 (1,300) 800 (3,122)
Conversion of
convertible debt (Note 3) (20) - (20) -
--------------------------------------------------------------------------
(9,479) (10,539) (19,095) (21,666)
--------------------------------------------------------------------------

Cash flows from
investing activities:
Additions to
capital assets (1,734) (1,873) (3,798) (3,288)
--------------------------------------------------------------------------

Net change in cash and
cash equivalents (11,433) (2,616) (28,694) 10,394

Cash and cash equivalents,
beginning of period $36,557 $27,559 $53,818 $14,549
--------------------------------------------------------------------------
Cash and cash equivalents,
end of period $25,124 $24,943 $25,124 $24,943
--------------------------------------------------------------------------

Supplemental disclosure:
Interest paid on the debt 1,379 1,184 6,590 6,626
Income taxes paid 17 23 34 200
Capital assets included
in accounts payable and
accrued liabilities 407 114 407 114
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Rogers Sugar Income Fund
Notes to Interim Unaudited Consolidated Financial Statements
For the periods ended March 31, 2008 and 2007
(In thousands of dollars - except per trust unit amounts)


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.



--------------------------------------------------------------------------
--------------------------------------------------------------------------
Financial Instrument Financial Instrument
Assets Liabilities

MARK-TO-MARKET Short-term Long-term Short-term Long-term
--------------------------------------------------------------------------

Sugar futures contracts $- $563 $1,009 $-
Natural gas futures contracts 2,990 1,159 - -
Foreign exchange forward
contracts 1,079 142 982 -
Embedded derivatives - - 365 -
--------------------------------------------------------------------------
Total $4,069 $1,864 $2,356 $-
--------------------------------------------------------------------------
--------------------------------------------------------------------------



--------------------------------------------------------------------------
--------------------------------------------------------------------------
Gain / (Loss)
Statement of Operations
Cost of Sales
--------------------------------------------------------------------------
Three months ended Six months ended
MARK-TO-MARKET March 31 March 31
--------------------------------------------------------------------------
2008 2007 2008 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Sugar futures contracts $(2,379) $2,510 $(2,147) $6,485
Natural gas futures contracts 3,687 2,100 4,695 944
Foreign exchange forward
contracts 1,323 (98) 1,190 (864)
Embedded derivatives (164) 237 (1,164) (162)
--------------------------------------------------------------------------
Total $2,467 $4,749 $2,574 $6,403
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cost of sales impact
of transitional balances - (2,090) - (1,640)
--------------------------------------------------------------------------
Total $2,467 $2,659 $2,574 $4,763
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Note 3: Trust units

During the second quarter, the Fund issued 160,000 trust units after two executives exercised some of the stock options that were exercisable as at that date. Year to date, a total of 200,000 trust units were exercised under the Stock Option Plan. In addition, during the quarter, $20 of the Third Series convertible unsecured subordinated debentures was converted by a holder of the securities, for a total number of 3,921 trust units.

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.



--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three months ended March 31 2008
(Unaudited)
--------------------------------------------------------------------------
Eastern Western Intersegment
Canada Canada and other Total
--------------------------------------------------------------------------

Revenues $64,372 $38,894 $(1,432) $101,834
Earnings before interest,
provision for income
taxes and depreciation
and amortization 12,329 2,748 (231) 14,846
Depreciation and
amortization 1,850 1,027 313 3,190
Interest expense, net 8,211 5,538 (9,956) 3,793
Net earnings $1,494 $(2,659) $10,133 $8,968
Additions to property,
plant and equipment 1,197 537 - 1,734
--------------------------------------------------------------------------
--------------------------------------------------------------------------



--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three months ended March 31 2007
(Unaudited)
--------------------------------------------------------------------------
Eastern Western Intersegment
Canada Canada and other Total
--------------------------------------------------------------------------

Revenues $74,952 $41,515 $(1,019) $115,448
Earnings before interest,
provision for income
taxes and depreciation
and amortization 11,752 9,284 (240) 20,796
Depreciation and
amortization 1,845 969 313 3,127
Interest expense, net 7,813 5,415 (9,317) 3,911
Net earnings $1,446 $1,126 $8,765 $11,337
Additions to property,
plant and equipment 534 1,339 - 1,873
--------------------------------------------------------------------------
--------------------------------------------------------------------------



--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the six months ended March 31 2008
(Unaudited)
--------------------------------------------------------------------------
Eastern Western Intersegment
Canada Canada and other Total
--------------------------------------------------------------------------

Revenues $134,452 $85,302 $(2,804) $216,950
Earnings before interest,
provision for income
taxes and depreciation
and amortization 32,949 9,534 (284) 42,199
Depreciation and
amortization 3,701 2,055 625 6,381
Interest expense, net 16,436 10,991 (19,978) 7,449
Net earnings $8,672 $(2,451) $19,867 $ 26,088
Additions to property,
plant and equipment 2,408 1,390 - 3,798
--------------------------------------------------------------------------
--------------------------------------------------------------------------



--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the six months ended March 31 2007
(Unaudited)
--------------------------------------------------------------------------
Eastern Western Intersegment
Canada Canada and other Total
--------------------------------------------------------------------------

Revenues $160,400 $92,504 $(2,576) $250,328
Earnings before interest,
provision for income
taxes and depreciation
and amortization 30,550 23,419 (403) 53,566
Depreciation and
amortization 3,690 1,969 625 6,284
Interest expense, net 14,878 10,777 (17,777) 7,878
Net earnings $9,040 $5,224 $16,750 $31,014
Additions to property,
plant and equipment 1,415 1,873 - 3,288
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Revenues were derived from customers in the following geographic areas:

--------------------------------------------------------------------------
--------------------------------------------------------------------------
Three months ended Six months ended
March 31 March 31
--------------------------------------------------------------------------
2008 2007 2008 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------
Canada $96,785 $110,271 $203,155 $235,744
United States and Other 5,049 5,177 13,795 14,584
--------------------------------------------------------------------------
$101,834 $115,448 $216,950 $250,328
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Contact Information