Rogers Sugar Income Fund
TSX : RSI.UN

Rogers Sugar Income Fund

April 28, 2009 07:14 ET

Rogers Sugar Income Fund: Interim Report for the 2nd Quarter 2009 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 28, 2009) - Rogers Sugar Income Fund (TSX:RSI.UN) -

STRONG VOLUME OF SALES FOR THE QUARTER AND YEAR-TO-DATE.

CANADA U.S. SPECIFIC QUOTA OF 10,300 METRIC TONNES TO BE SOLD IN FUTURE QUARTERS.

NEW THREE-YEAR AGREEMENT SIGNED WITH THE ALBERTA SUGAR BEET GROWERS.

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, 2009.

Volume for the second quarter was 159,700 metric tonnes, as opposed to 153,507 metric tonnes in the comparable quarter of last year, an increase of approximately 6,200 metric tonnes. Year-to-date volume of 345,432 metric tonnes is approximately 18,900 metric tonnes above last year. The increase is due mainly to higher liquid and export volume partially offset by lower industrial and consumer volume. Liquid volume increased by approximately 3,400 metric tonnes for the quarter, 15,800 metric tonnes year-to-date, due to the recovery of HFCS substitutable liquid accounts. The increase in export volume of approximately 7,400 metric tonnes occurred as a result of the inventories that were warehoused in the U.S. at December 31, 2008. The United States Department of Agriculture (the "USDA") announced special increases in the U.S. refined sugar quota in August and October 2008, due to a potential shortage of refined sugar following severe damages to a major U.S. cane refinery. As a result, Lantic was able to enter approximately 34,000 metric tonnes against the special U.S. quotas by December 31, 2008, of which 19,500 metric tonnes were sold by December 31, 2008, while the remaining 14,500 metric tonnes were sold in the second quarter. Year-to-date export volume is 13,100 metric tonnes higher. None of the 10,300 metric tonnes regular Canada Specific U.S. quota has been entered to date. In addition, there are no export sales to Mexico in 2009, while fiscal 2008 had approximately 6,000 metric tonnes after two quarters. Consumer volume was down by approximately 1,100 metric tonnes in the quarter and by 6,700 metric tonnes year-to-date, due mainly to competitive market activities. Industrial volume was lower by approximately 3,500 metric tonnes during the quarter due mainly to timing in deliveries.

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 represent a complete understanding of factors and trends affecting the business. We therefore prepared adjusted gross margin and adjusted earnings results to reflect the performance of the Fund during the reporting period. These adjusted results are 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, 2009. 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. The Fund enters into long-term natural gas contracts and interest swap agreements to protect itself from the wide fluctuations that may occur in the marketplace, and to ensure adjusted financial results are more stable. At the end of the second quarter, a mark-to-market charge of $7.1 million before income taxes was recorded, thus reducing earnings before income taxes by that amount. Year-to-date, a mark-to-market charge of $25.9 million was recorded before income taxes. Most of this charge related to natural gas (a charge of $9.4 million for the quarter and $21.1 million year-to-date) as a result of the overall decrease in energy prices and to the mark-to-market of the interest swap (a charge of $0.4 million for the quarter and $5.9 million year-to-date), as a result of lower interest rates. In addition, these mark-to-market charges are mostly non-cash amounts and have therefore no impact on distributable cash.

For the quarter, adjusted gross margin decreased by approximately $3.1 million, when compared to the same quarter of last year. On a per metric tonne basis, adjusted gross margin was $102.05 compared to $126.67 for the comparable quarter of last year. The decrease in both the adjusted gross margin and the adjusted gross margin rate is due to an unfavourable sales mix, with lower consumer volume and higher liquid volume, and a decrease of by-products revenue of approximately $1.4 million, due to Taber's lower beet crop. Year-to-date adjusted gross margin rate was $129.24 compared to $152.35 in fiscal 2008, the decrease due again mainly to unfavourable sales mix and lower by-products revenue.

Distribution costs were $1.0 million higher than last year due mainly to the high level of volume sold to the U.S. during the quarter and to additional costs incurred in shipping sugar from Vancouver to Taber as a result of the lower Taber beet crop.

With the adoption of the new accounting policy for inventory, the earnings before interest, income taxes, and depreciation and amortization ("EBITDA") is no longer representative as most of the depreciation is now charged to cost of sales. As such, we will now be discussing adjusted results on our earnings before interest and income taxes ("EBIT") to be more consistent with prior years' presentation.

Adjusted EBIT of $6.5 million was $4.3 million lower when compared to the same quarter last year, due mainly to lower gross margin and higher distribution costs in fiscal 2009.

For the quarter, adjusted distributable cash was $4.5 million, as compared to $7.6 million in fiscal 2008. The decrease was due to lower profitability at the operational level. During the second quarter, the Fund distributed $10.1 million, the same as the comparable quarter last year.

In Taber, the beet thick juice campaign was completed during the second quarter. Due to the low acreage and resulting harvest, total beet sugar production was slightly less than 57,000 metric tonnes. As a result, both the Vancouver and Montreal cane refineries will ship refined sugar to the prairie market to replace the shortfall of Taber's beet crop in the following quarters.

A new three-year beet contract was signed with the Alberta Sugar Beet Growers. This new agreement will bring stability in the level of production of beet sugar over the next three years. A total of 30,000 acres is targeted for planting this Spring, which should derive approximately 100,000 metric tonnes of beet sugar under normal growing and processing conditions.

In addition, a new three-year labour agreement was reached with the unionized employees of the Taber Factory, replacing the contract that expired in March 2009. The new agreement was signed at competitive market rates.

During the quarter, the Fund repurchased and cancelled 200,000 Units under its Normal Course Issuer Bid. The Fund will continue to repurchase units assuming capital resources are available and should the price trade in a range that does not reflect the fair value of the units,

FOR THE BOARD OF TRUSTEES,

(Signed)

Edward Y. Baker,

Vancouver, British Columbia - April 27, 2009



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.

With the adoption of the new accounting policy for inventory, the earnings before interest, income taxes, depreciation and amortization ("EBITDA") is no longer representative as most of the depreciation is now charged to cost of sales. As such, we will now be discussing adjusted results on our earnings before interest and income taxes ("EBIT") to be more consistent with prior years' presentation.

This report contains certain forward-looking statements which reflect the current expectations of the Fund and Lantic Inc., (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 and Lantic Inc., 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 22, 2009.

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 ("ICFR") to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. The control framework the Chief Executive Officer and the Chief Financial Officer used to design the Company's ICFR is recognized by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The Chief Executive Officer and the Chief Financial Officer have evaluated whether or not there were changes to its ICFR during the three-month period ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect the Company's ICFR. No such changes were identified through their evaluation.



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 2009 (i)2008 (ii)2009 (i)2008
trust unit information) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Volume (metric tonnes) 159,700 153,507 345,432 326,552
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Revenues $121,849 $101,834 $260,246 $216,950

Gross margin 9,642 20,668 24,623 54,354

Administration and selling 5,011 4,845 9,494 9,346

Distribution 4,337 3,348 8,531 5,889

Depreciation and amortization 410 431 823 861
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Earnings before interest
and provision for
income taxes (EBIT) $(116) $12,044 $5,775 $38,258

Interest, net of interest
income and other charges 3,768 3,793 12,568 7,449

(Recovery of) provision
for income taxes (4,611) (984) (8,374) 3,032
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Net earnings $727 $9,235 $1,581 $ 27,777
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Net earnings per trust
unit - basic $0.01 $0.11 $0.02 $0.32
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(i) Results were restated to reflect the adoption of new inventory
standard. See Accounting Policies and Critical Accounting Estimates.
(ii) Results were restated to reflect the adoption of new fair value
standard. See Accounting Policies and Critical Accounting Estimates.


With the recent decline in the Fund's trust unit value, a goodwill impairment calculation was performed at the end of the quarter, to ensure that the fair value of the operating entity was more than its respective carrying value. There was no impairment to be recorded.

In the normal course of business, the Fund uses derivative financial instruments consisting of sugar futures, foreign exchange forward contracts, natural gas futures and interest rate swaps. The Fund's operating company sells 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 for which adjusted financial results provide a more complete understanding of factors and trends affecting our business. This measurement is a non-GAAP measurement.

Management uses the non-GAAP adjusted results of the operating company to measure and evaluate the performance of the business through its adjusted gross margin, adjusted EBIT and adjusted net earnings. 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, adjusted EBIT and adjusted net earnings 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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For the three months For the six months
Income (loss) ended March 31 ended March 31
(In thousands) 2009 2008 2009 2008
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Mark-to-market adjustment $(10,568) $2,467 $(22,547) $2,574
Timing in recognition of
liquidation income (loss)
for sugar inventories, sales
and purchase contracts,
natural gas futures swaps
and options and foreign
exchange futures 3,912 (1,244) 2,525 2,031
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Total $(6,656) $1,223 $(20,022) $4,605
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A significant part of the above mark-to-market adjustment relates to natural gas. The Fund has hedged a substantial portion of its natural gas needs for fiscal 2009, as well as for fiscals 2010 to 2013, following the decline in natural gas prices in the last 6 months of calendar 2008. As a result of further continued decline in that commodity, a mark-to-market loss of $9.4 and of $21.1 was recorded for the second quarter and year-to-date respectively. These natural gas contracts will be used in our day to day operations over the next several quarters.

In addition, the Fund recorded a mark-to-market loss of $0.4 million for the quarter, and of $5.9 year-to-date, on the mark-to-market of an interest swap under short-term interest expense, as a result of a decrease in overall interest rates.

Therefore the total adjustment to net earnings before income taxes and distributable cash for the quarter is $7.1 million and $25.9 year-to-date.



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Adjusted financial information (non-GAAP reconciliation):
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For the three months For the six months
ended March 31 ended March 31
Consolidated Results 2009 (i)2008 (ii)2009 (i)2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Gross margin as per
financial statements $9,642 $20,668 $24,623 $54,354
Adjustment as per above 6,656 (1,223) 20,022 (4,605)
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Adjusted gross margin 16,298 19,445 44,645 49,749
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EBIT (loss) as per
financial statements (116) 12,044 5,775 38,258
Adjustment as per above 6,656 (1,223) 20,022 (4,605)
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Adjusted EBIT 6,540 10,821 25,797 33,653
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Net earnings as per
financial statements 727 9,235 1,581 27,777
Adjustment as per above 6,656 (1,223) 20,022 (4,605)
Adjustment for mark-to-market
of interest swap 394 - 5,865 -
Future taxes on above (2,045) 412 (7,385) 1,516
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Adjusted net earnings $5,732 $8,424 $20,083 $24,688
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Net earnings per trust unit
basic, as per financial
statements $0.01 $0.11 $0.02 $0.32
Adjustment for the above 0.06 (0.01) 0.21 (0.04)
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Adjusted net earnings per
trust unit basic $0.07 $0.10 $0.23 $0.28
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(i) Results were restated to reflect the adoption of new inventory
standard. See Accounting Policies and Critical Accounting Estimates.
(ii) Results were restated to reflect the adoption of new fair value
standard. See Accounting Policies and Critical Accounting Estimates.


Second quarter volume increased by approximately 6,200 metric tonnes from the comparable quarter in fiscal 2008. The increase is due mainly to higher liquid and export volume partially offset by lower industrial and consumer volume. Liquid volume increased by approximately 3,400 metric tonnes due to the recovery of a large HFCS substitutable account in calendar 2008. The increase in export volume of approximately 7,400 metric tonnes occurred as a result of a special increase in the U.S. refined sugar quota. In August 2008, due to a potential shortage of refined sugar following severe damages to a major U.S. cane refinery, the United States Department of Agriculture ("USDA") announced an increase of 272,155 metric tonnes in its refined sugar quota. Of that amount, 40,000 metric tonnes was allocated specifically to Canada, which can only be supplied by beet sugar from Taber, 68,278 metric tonnes to Mexico, and the remaining 163,877 metric tonnes to a global quota to be filled on a first come first served basis. This initial quota was opened August 14, 2008 and filled by mid-October 2008.

On October 27, 2008, the USDA announced that the Government of Mexico had informed the USDA that Mexico would continue to export sugar to the U.S. under the duty-free access provided by the North American Free Trade Agreement ("NAFTA") and therefore the portion allocated to Mexico will not be used and was available for re-allocation by the USDA. As a result, the 68,278 metric tonnes which were initially allocated to Mexico were re-allocated by the USDA to a global refined sugar quota to be supplied on a first-come-first-served basis. The USDA reallocated this global quota under five tranches, the first being of 28,278 metric tonnes which opened October 30, 2008, and four other tranches of 10,000 metric tonnes opening every two weeks thereafter, the last one being opened on December 29, 2008. As a result, Lantic was able to enter approximately 34,000 metric tonnes against the Canada Specific and Global quotas by December 31, 2008, of which 19,500 metric tonnes were sold by that date. The remaining 14,500 metric tonnes, which were warehoused in the U.S. at the end of the first quarter, were sold in the second quarter, while last year's volume of approximately 8,300 metric tonnes were sales to Mexico and on the annual U.S. Canada Specific quota. Industrial volume was lower by 3,500 metric tonnes due mainly to timing in deliveries. Consumer volume decreased by approximately 1,100 metric tonnes due to the loss of volume to non-traditional retail accounts and to competitive activity.

Year-to-date volume increased by approximately 18,900 metric tonnes due mainly to higher export and liquid volume of 13,100 metric tonnes and 15,800 metric tonnes respectively, for the reasons mentioned above. This is partially offset by lower consumer volume of 6,700 metric tonnes and lower industrial volume of 3,300 metric tonnes.

Revenues for the quarter were $20.0 million higher than the previous year's comparable quarter due to the higher volume sold during the quarter, and due to the higher price of world raw sugar in fiscal 2009 than in the comparable quarter of fiscal 2008.

As previously mentioned, gross margin of $9.6 million for the quarter does not reflect the economic margin of the Fund, as it includes a loss of $6.7 million for the mark-to-market of derivative financial instruments explained earlier. We will therefore comment on adjusted gross margin results.

For the quarter, adjusted gross margin decreased by $3.1 million, when compared to the same quarter of last year. On a per metric tonne basis, adjusted gross margins were $102.05 compared to $126.67 for the comparable quarter of last year. Unfavourable sales mix due to higher liquid volume and lower consumer volume, combined with lower by-products revenue of approximately $1.4 million due to the lower beet crop in Taber are the major reasons for the decrease in the adjusted gross margin rate.

Administration and selling costs were slightly higher than the comparable quarter of fiscal 2008 due to timing. The higher distribution cost of $1.0 million for the quarter and of $2.6 million year-to-date, is due mainly to the large volume of sugar shipped and entered in the U.S. against the U.S. Canada Specific and Global quotas and to refined sugar shipped from Vancouver to Taber as a result of the lower beet crop and U.S. sales opportunities for Taber beet sugar.

Interest expense for the quarter and year-to-date includes a mark-to-market expense of $0.4 million and $5.9 million respectively, applied on the 5-year, $70.0 million interest swap entered into in July 2008. Without this mark-to-market adjustment, interest expense for the quarter was lower by approximately $0.4 million and by $0.7 million year-to-date, as a result of the refinancing of the debt in June 2008, following the merger of Lantic Sugar Limited and Rogers Sugar Ltd., and to lower overall short-term interest rates.

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 of dollars,
except for volume, QUARTERS
margin rate 2009 2008
and per trust (Unaudited) (Unaudited)
unit information) 2-Q (ii)1-Q (i)4-Q (i)3-Q (i)2-Q (i)1-Q
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Volume (MT) 159,700 185,732 190,516 176,062 153,507 173,045
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Total revenues 121,849 138,397 130,472 115,686 101,834 115,116
Gross margin 9,642 14,981 19,985 21,961 20,668 33,686
EBIT (loss) (116) 5,891 11,494 13,433 12,044 26,214
Net earnings 727 854 10,743 9,614 9,235 18,542
Gross margin
rate per MT 60.38 80.66 104.90 124.73 134.64 194.67

Per trust unit
Net earnings
Basic 0.01 0.01 0.12 0.11 0.11 0.21
Diluted 0.01 0.01 0.11 0.10 0.10 0.18

Non-GAAP Measures
Adjusted
gross margin 16,298 28,347 26,061 21,306 19,445 30,304
Adjusted EBIT 6,540 19,257 17,570 12,778 10,821 22,832
Adjusted
net earnings 5,732 14,351 15,857 9,236 8,424 16,264
Adjusted gross
margin rate
per MT 102.05 152.62 136.79 121.01 126.67 175.12

Adjusted net
earnings per
trust unit
Basic 0.07 0.16 0.18 0.11 0.10 0.19
Diluted 0.07 0.15 0.16 0.10 0.09 0.16
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(In thousands of dollars, except for volume, 2007
margin rate and per trust unit information) (Unaudited)
4-Q 3-Q
--------------------------------------------------------------------------
Volume (MT) 177,382 172,947
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Total revenues 117,669 117,900
Gross margin 19,542 20,012
EBIT (loss) 8,127 9,456
Net earnings 7,568 6,545
Gross margin rate per MT 110.17 115.71

Per trust unit
Net earnings
Basic 0.09 0.07
Diluted 0.09 0.07

Non-GAAP Measures
Adjusted gross margin 28,408 27,452
Adjusted EBIT 16,993 16,896
Adjusted net earnings 13,591 11,171
Adjusted gross margin rate per MT 160.15 158.73
Adjusted net earnings per trust unit
Basic 0.15 0.13
Diluted 0.14 0.12
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(i) Results were restated to reflect the adoption of new Inventory
standard. See Accounting Policies and Critical Accounting Estimates.
(ii) Results were restated to reflect the adoption of new fair value
standard. See Accounting Policies and Critical Accounting Estimates.


Historically the first quarter (October to December) of the fiscal year is the best quarter for adjusted gross margins and adjusted net earnings due to the favourable sales mix of products sold. This is due to the increased sales of baked goods during that period of the year. At the same time, the second quarter (January to March) is historically the lowest volume quarter, resulting in lower revenues, adjusted gross margins and adjusted net earnings.

Liquidity

The distributable cash generated by the operating company, Lantic, is paid to the Fund by way of dividends and return of capital on the common shares of Lantic, and by the payment of interest on the subordinated notes of Lantic 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.

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
--------------------------------------------------------------------------
(In thousands 2009 2008 (ii)2009 2008 (i)2008
of dollars) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Cash flow from
operating
activities $30,315 $(220) $9,932 $(5,801) $261,976
Capital
expenditures
net of sales
proceeds (1,584) (1,734) (2,486) (3,798) (38,791)
Financing
restrictions - - - - -
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Standardized
distributable
cash $28,731 $(1,954) $7,446 $(9,599) $223,185
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(i) Results were restated to reflect the adoption of new Inventory
standard. See Accounting Policies and Critical Accounting Estimates.
(ii) Results were restated to reflect the adoption of new fair value
standard. See Accounting Policies and Critical Accounting Estimates.


There were no restrictions on distributions arising from the compliance of financial covenants for the periods shown above.

Cash flow from operations was $30.3 million in the second quarter of 2009, as opposed to negative $0.2 million in the comparable quarter of fiscal 2008. The major reason for the positive cash flow balance is the reduction of inventories of $18.2 with the sale and delivery of inventories warehoused in the U.S. at the end of the last quarter, to the reduction of Taber beet sugar, and to timing in receipt of raw sugar vessels. In addition, there was a large positive non-cash adjustment for the mark-to-market of financial derivatives of $12.3 million in the quarter, while the adjustment was negative $3.5 million in the comparable quarter last year.

Total capital expenditures were lower than the previous year, due mainly to timing in projects when compared to fiscal 2008.

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.



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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 2009 (i)2008 (ii)2009 (i)2008 (i)2008
of dollars) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------
Standardized
distributable
cash as per above $28,731 $(1,954) $7,446 $(9,599) $223,185

Adjustments:
Changes in
non-cash
working capital (18,451) 6,742 8,648 36,523 28,479

Mark-to-market
and derivative
timing adjustment 7,050 (1,223) 25,887 (4,605) $(3,381)

Financial
instruments
non-cash amount (12,308) 3,456 (18,901) 5,037 265

Investment capital
expenditures 39 - 39 - 7,637

Net (repurchase)
issuance of
trust units (585) 607 (690) 780 (5,430)

Interest expense on
equity portion of
convertible
unsecured
debentures - - - - (15,286)

Deferred financing
charges - - - - (8,191)
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Adjusted
distributable cash $4,476 $7,628 $22,429 $28,136 $227,278
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Declared
distributions $10,065 $10,065 $20,130 $19,875 $184,845
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(i) Results were restated to reflect the adoption of new Inventory
standard. See Accounting Policies and Critical Accounting Estimates.
(ii) Results were restated to reflect the adoption of new fair value
standard. See Accounting Policies and Critical Accounting Estimates.


Adjusted distributable cash was $3.2 million lower than the comparable quarter in fiscal 2008, and $5.7 million lower year-to-date. This was mainly due to the lower profitability at the operational level.

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 do not therefore constitute available cash for distribution. Such increases or decreases are financed from available cash or from the Company's available credit facilities of $200.0 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 except for margin calls on net sugar positions and natural gas contracts.

Investment capital expenditures are added back to standardized distributable cash as these capital projects are not necessary for the operation of the plants, but are undertaken due to their substantial operational savings to be realized once these projects are completed.

In the second quarter of fiscal 2009, some trust units were repurchased and cancelled under the Normal Course Issuer Bid in place, while in the second quarter of fiscal 2008 some trust units were issued as two executives exercised some options under the Stock Option Plan.

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 quarters and six months ended March 31, 2009 and 2008:



--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three months For the six months
ended March 31 ended March 31
--------------------------------------------------------------------------
(In thousands of 2009 (i)2008 (ii)2009 (i)2008
dollars) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------
Cash flow (deficiency)
from operating activities $30,315 $(220) $9,932 $(5,801)
Net earnings 727 9,235 1,581 27,777
Distributions paid 10,065 10,086 20,130 19,875
Excess (shortfall) of cash
flows from operating
activities over cash
distributions paid 20,250 (10,306) (10,198) (25,676)
(Shortfall) excess of net
earnings (loss) over
cash distributions paid $(9,338) $(851) $(18,549) $7,902
--------------------------------------------------------------------------
--------------------------------------------------------------------------



--------------------------------------------------------------------------
--------------------------------------------------------------------------
Years ended
September 30
--------------------------------------------------------------------------
(i)2008 2007 2006
(In thousands of dollars) (Audited) (Audited) (Audited)
--------------------------------------------------------------------------
Cash flow (deficiency) from
operating activities $23,372 $88,607 $30,833
Net earnings 48,134 45,127 40,922
Distributions paid 40,082 37,728 35,869
Excess (shortfall) of cash
flows from operating activities
over cash distributions paid (16,710) 50,879 (5,036)
(Shortfall) excess of net
earnings (loss) over
cash distributions paid $8,052 $7,399 $5,053
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(i) Results were restated to reflect the adoption of new Inventory
standard. See Accounting Policies and Critical Accounting Estimates.
(ii) Results were restated to reflect the adoption of new fair value
standard. See Accounting Policies and Critical Accounting Estimates.


In the second quarter of fiscal 2009, inventories decreased by $18.2 million due to the sale of large volume of refined products warehoused in the U.S. at the end of the first quarter and to the timing in receipts of raw sugar vessels. The year-to-date shortfall was financed from available cash balances and short-term borrowings. In addition, a mark-to-market loss before taxes of $7.1 million for the quarter and of $25.9 year-to-date was recorded, which explains the shortfall of the net earnings over cash distributions paid. This is a non-cash item.

Contractual obligations

There are no material changes in the contractual obligations table disclosed in the Management's Discussion and Analysis of the September 30, 2008 Annual Report.

At March 31, 2009, the operating companies had commitments to purchase a total of 1,221,000 metric tonnes of raw sugar, of which only 48,000 metric tonnes had been priced, for a total dollar commitment of $20.1 million.

Capital resources

The current worldwide economic crisis has resulted in disruptions in the availability of credit on commercially acceptable terms. In light of this situation, we have undertaken a thorough review of our liquidity and capital sources, as well as our exposure to counterparties and have concluded that our capital resources are sufficient to meet our ongoing short, medium and long-term commitments. Specifically, we believe that our internally generated cash flow from operations, augmented by our hedging program and existing credit facilities, will provide sufficient liquidity to sustain our operations in the short, medium and long-term. Further, we believe that our counterparties currently have the financial capacities to honour outstanding obligations to us in the normal course of business.

Lantic has $200.0 million as authorized lines of credit available to finance its operation. At quarter's end, $105.0 million had been drawn from the working capital facility.

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

Outstanding securities

During the second quarter, the Fund repurchased and cancelled 200,000 Trust units under its Normal Course Issuer Bid. Year-to-date, the Fund purchased and cancelled 225,100 trust units under its Normal Course Issuer Bid. As at April 22, 2009, there were 87,327,887 trust units outstanding.

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, 2008, except for the following:

i) Inventories:

Effective October 1, 2008, the Company implemented, on a retrospective basis with restatement, the new Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3031, Inventories.

The new standard introduced significant changes to the measurement and disclosure of inventories. For the Fund, the measurement changes include:

- The allocation of additional factory overhead to inventory, based on normal capacity;

- The allocation of depreciation of factory buildings and equipment to inventory, which resulted in the related depreciation expenses forming part of cost of sales; and

- The recognition of certain spare parts and stand-by equipment as capital assets rather than inventories.

As a result of the retrospective implementation of this new standard, the impact on previously reported financial information is as follows:



--------------------------------------------------------------------------
--------------------------------------------------------------------------
(In thousands, except per trust unit
amounts or per metric tonne amounts) For the periods ended March 31, 2008
--------------------------------------------------------------------------
Quarter Year-to-date Quarter Year-to-date
--------------------------------------------------------------------------
Restated Amount Previously Reported

Opening deficit $n/a $ 307,829 $n/a $309,443
Closing deficit 299,927 299,927 303,230 303,230
Inventories 89,723 89,723 85,385 85,385
Capital assets 199,990 199,990 197,551 197,551
Current future income
taxes asset 1,242 1,242 2,595 2,595

Cost of sales 81,166 162,596 78,795 159,516
Gross margin 20,668 54,354 23,039 57,434
EBIT 12,044 38,258 11,656 35,818
Depreciation and
amortization 431 861 3,190 6,381
Current income tax expense 121 127 - 6
Future income tax expense
(income) (1,105) 2,905 (1,105) 2,275
Net earnings 9,235 27,777 8,968 26,088

Net earnings per trust
unit (basic) 0.11 0.32 0.10 0.30

Adjusted gross margin 19,445 49,749 21,816 52,829
Adjusted EBIT 10,821 33,653 10,433 31,213
Adjusted net earnings 8,424 24,688 8,157 22,999
Adjusted gross margin
rate per metric tonne 126.67 152.35 142.13 161.78

Adjusted net earnings per
trust unit (basic) 0.10 0.28 0.09 0.26
--------------------------------------------------------------------------
--------------------------------------------------------------------------



(In thousands, except per trust unit Year ended September 30
amounts or per metric tonne amounts) 2008
--------------------------------------------------------------------------
Restated Previously
Amount Reported

Opening deficit $307,829 $309,443
Closing deficit 299,777 301,710
Inventories 70,649 68,679
Capital assets 195,123 194,332
Current future income taxes asset 746 1,574

Cost of sales 366,808 355,998
Gross margin 96,300 107,110
EBIT 63,185 62,761
Depreciation and amortization 1,695 12,929
Current income tax expense - -
Future income tax expense (income) (2,204) (2,309)
Net earnings 48,134 47,815

Net earnings per trust unit (basic) 0.55 0.54

Adjusted gross margin 97,116 107,926
Adjusted EBIT 64,001 63,577
Adjusted net earnings 49,781 49,462
Adjusted gross margin rate
per metric tonne 140.11 155.71

Adjusted net earnings per trust
unit (basic) 0.57 0.56
--------------------------------------------------------------------------
--------------------------------------------------------------------------


ii) Goodwill and intangible assets:

Effective October 1, 2008, the Fund implemented the new CICA Handbook, Section 3064 "Goodwill and Intangible Assets". This section establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. The adoption of Section 3064 did not have any impact on the Funds financial statements or results of operations.

iii) Credit risk and the fair value of financial assets and financial liabilities:

On January 20, 2009, the Emerging Issues Committee (EIC) of the Canadian Accounting Standards Board (AcSB) issued EIC Abstract 173, Credit Risk and Fair Value of Financial Assets and Financial Liabilities, which establishes that an entity's own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities, including derivative instruments. EIC 173 should be applied retrospectively without restatement of prior years to all financial assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009. During the second quarter, the Fund implemented EIC 173 without restatement of prior years. The impact of EIC 173 was not material as of October 1, 2008. For the period ended December 31, 2008, the Fund recorded a decrease to cost of sales of $0.7 million and a decrease in short-term interest of $0.4 million, for a net adjustment before income taxes of $1.1 million. This adjustment is reflected in the year-to-date results.

Risk factors

Risk factors in the Fund's business and operations are discussed in the Management's Discussion and Analysis of our Annual Report for the year ended September 30, 2008. 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

In the second quarter, a total of 14,500 metric tonnes were sold against the U.S. quotas from the goods that had been warehoused in the U.S. at the end of the first quarter. In addition, Lantic still has access to its annual U.S. Canada specific quota of 10,300 metric tonnes, which will be shipped and sold over the next two quarters.

Over the last several quarters, the Fund experienced some losses in volume and market share due mainly to increased competition, specifically in the consumer segment. As a consequence, a more aggressive marketing plan was put in place, allowing the Fund to re-establish its historical market share and volume, starting in fiscal 2010. As a result, adjusted gross margin rate per metric tonne will be negatively impacted over the next few quarters.

In Taber, the thick juice campaign was completed in February 2009, and total sugar production for this year's beet crop was almost 57,000 metric tonnes. As a result, the Vancouver and Montreal cane refineries will ship refined sugar to the prairie markets to replace the shortfall of Taber's beet sugar, and as a consequence distribution costs will increase accordingly.

A new three-year beet contract was signed with the Alberta Sugar Beet Growers of southern Alberta. This new agreement should bring stability in the acreage of sugar beets over the next three years.

A total of 30,000 acres is expected to be planted this Spring for fiscal 2010, which should derive approximately 100,000 metric tonnes of beet sugar under normal growing and processing conditions.

A new three-year labour agreement was recently signed for with the Taber Factory's unionized employees, replacing the labour agreement that expired March 31, 2009. The new agreement was signed at competitive market rates.

Most of the natural gas forecast for fiscal 2009 has been hedged at average prices lower than the previous year. In addition, substantial futures positions for fiscal 2010 to 2013 have been taken. These positions are at prices higher than the current market values but are at the same or at better levels than what was achieved in fiscal 2008, which will ensure more stability in our financial results. We will continue to monitor natural gas market dynamics in order to minimize our natural gas costs.

In the current volatile financial environment, return on pension plan assets may vary from historical plan performance. This, combined with the discount rate used in assessing the plan liabilities, may impact the pension plan expenses in future years. The next actuarial valuations of our pension plans are not required to be completed until December 2009 and December 2010, and therefore the Fund's cash contribution levels are not expected to change materially until then. However, in the event that an extended period of depressed capital markets and low interest rates were to continue, the Fund could be required to make contributions to these plans in excess of those currently done.



Rogers Sugar Income Fund
Consolidated Balance Sheet
March 31, 2009 and 2008
(In thousands of dollars)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
March 31 September 30 March 31
2009 2008 2008
--------------------------------------------------------------------------
(restated-see (restated-see
Note 2) Note 2)
ASSETS

Current assets:
Cash and cash equivalents $4,383 $5,757 $25,124
Accounts receivable 48,437 54,783 35,898
Inventories (Notes 2 and 3) 79,244 70,649 89,723
Prepaid expenses 2,230 2,074 2,022
Future income taxes 4,126 746 1,242
Derivative financial
instruments (Note 4) 3,100 1,433 4,069
--------------------------------------------------------------------------
141,520 135,442 158,078

Capital assets (Note 2) 191,292 195,123 197,990
Defined benefits
pension plan assets 19,898 16,204 14,298
Derivative financial
instruments (Note 4) 455 1,068 1,864
Other assets 1,064 1,251 470
Goodwill 229,952 229,952 229,952
--------------------------------------------------------------------------
$584,181 $579,040 $602,652
--------------------------------------------------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY

Current liabilities:
Short-term borrowings $105,000 $93,000 $-
Accounts payable and
accrued liabilities 35,330 41,517 37,015
Derivative financial
instruments (Note 4) 6,673 497 2,356
Current portion of
long-term debt - - 114,801
--------------------------------------------------------------------------
147,003 135,014 154,172

Employee future benefits 31,409 28,250 27,827
Derivative financial
instruments (Note 4) 15,518 1,739 -
Convertible unsecured
subordinated debentures 130,945 130,503 130,781
Future income taxes 13,262 18,256 23,861
--------------------------------------------------------------------------
338,137 313,762 336,641

UNITHOLDERS' EQUITY

Trust units (Note 5) 559,662 561,105 562,790
Contributed surplus 4,708 3,950 3,148
Deficit (Note 2) (318,326) (299,777) (299,927)
--------------------------------------------------------------------------
246,044 265,278 266,011
--------------------------------------------------------------------------
$584,181 $579,040 $602,652
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Rogers Sugar Income Fund
Unaudited Consolidated Statements of Operations
For the periods ended March 31, 2009 and 2008
(In thousands of dollars - except per trust unit amounts)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three months For the six months
ended March 31 ended March 31
--------------------------------------------------------------------------
2009 2008 2009 2008
(restated-see (restated-see
Note 2) Note 2)

Revenues $121,849 $101,834 $260,246 $216,950
Cost of sales 112,207 81,166 235,623 162,596
--------------------------------------------------------------------------
Gross margin 9,642 20,668 24,623 54,354

Expenses:
Administration and selling 5,011 4,845 9,494 9,346
Distribution 4,337 3,348 8,531 5,889
Depreciation and amortization 410 431 823 861
--------------------------------------------------------------------------
9,758 8,624 18,848 16,096
--------------------------------------------------------------------------
(Loss) earnings before interest
and provision for income taxes (116) 12,044 5,775 38,258

Interest on long-term debt and
convertible debentures 1,993 3,752 3,986 7,613

Amortization of deferred
financing costs 267 296 534 592

Short-term interest (income) 1,508 (255) 8,048 (756)
--------------------------------------------------------------------------
3,768 3,793 12,568 7,449
--------------------------------------------------------------------------

(Loss) earnings before
provision for income taxes (3,884) 8,251 (6,793) 30,809

(Recovery of) provision
for income taxes:
Current - 121 - 127
Future (4,611) (1,105) (8,374) 2,905
--------------------------------------------------------------------------
(4,611) (984) (8,374) 3,032
--------------------------------------------------------------------------
Net earnings and other
comprehensive income $727 $9,235 $1,581 $27,777
--------------------------------------------------------------------------

Net earnings per trust unit:
Basic $0.01 $0.11 $0.02 $0.32
Diluted $0.01 $0.10 $0.02 $0.28
--------------------------------------------------------------------------

Supplemental disclosure:
Employee future
benefits expense $914 $429 $1,750 $853
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Rogers Sugar Income Fund
Unaudited Consolidated Statements of Unitholders' Equity
For the periods ended March 31, 2009 and 2008
(In thousands of dollars - except trust unit amounts)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the six months ended
(Unaudited) March 31, 2009
--------------------------------------------------------------------------
Number of Trust Contributed
Trust Units Units Surplus Deficit Total
--------------------------------------------------------------------------
Balance,
beginning
of period 87,552,987 $561,105 $3,950 $(299,777) $265,278
Distributions - - - (20,130) (20,130)
Stock-based
compensation - - 5 - 5
Repurchase
of trust
units (Note 5) (225,100) (1,443) 753 - (690)
Net earnings - - - 1,581 1,581
--------------------------------------------------------------------------
Balance, end
of period 87,327,887 $559,662 $4,708 $(318,326) $246,044
--------------------------------------------------------------------------
--------------------------------------------------------------------------



--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the six months ended
(Unaudited) March 31, 2009
--------------------------------------------------------------------------
Number of Trust Contributed
Trust Units Units Surplus Deficit Total
--------------------------------------------------------------------------
Balance,
beginning
of period 87,582,791 $561,966 $3,162 $(309,443) $255,685
Impact,
adoption of
new
accounting
standards
(Note 2) - - - 1,614 1,614
--------------------------------------------------------------------------
Restated
balance,
beginning
of period 87,582,791 561,966 3,162 (307,829) 257,299
Distributions - - - (19,875) (19,875)
Stock-based
compensation - - 10 - 10
Issue of trust
units (Note 5) 200,000 804 (24) - 780
Conversion of
convertible
debentures into
trust units 3,921 20 - - 20
Net earnings - - - 27,777 27,777
--------------------------------------------------------------------------
Balance, end
of period 87,786,712 $562,790 $3,148 $(299,927) $266,011
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Rogers Sugar Income Fund
Unaudited Consolidated Statements of Cash Flows
For the periods ended March 31, 2009 and 2008
(In thousands of dollars)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three months For the six months
ended March 31 ended March 31
2009 2008 2009 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------
Cash flows from
operating activities:
Net earnings $727 $9,235 $1,581 $27,777
Adjustments for items
not involving cash:
Depreciation and
amortization 3,325 3,197 6,651 6,396
Amortization of deferred
financing costs 267 296 534 592
Future income taxes (4,611) (1,105) (8,374) 2,905
Employee future benefits (193) (1,488) (535) (1,924)
Change in derivative
financial instruments 12,308 (3,456) 18,901 (5,037)
Stock based compensation
expenses 2 4 5 10
Gain on sale of capital
assets - - (278) -
Other 39 (161) 95 3
--------------------------------------------------------------------------
11,864 6,522 18,580 30,722
--------------------------------------------------------------------------
Changes in non-cash
working capital:
Accounts receivable 4,646 4,128 6,346 5,444
Inventories 18,159 (4,305) (8,595) (38,972)
Prepaid expense 80 (529) (156) 461
Accounts payable and
accrued liabilities (4,434) (6,036) (6,243) (3,456)
--------------------------------------------------------------------------
18,451 (6,742) (8,648) (36,523)
--------------------------------------------------------------------------
30,315 (220) 9,932 (5,801)
Cash flows from
financing activities:
Short-term (repayments)
borrowings (16,000) - 12,000 -
Distributions to
Unitholders (10,065) (10,086) (20,130) (19,875)
(Repurchase) issue of
trust units (Note 5) (585) 607 (690) 780
--------------------------------------------------------------------------
(26,650) (9,479) (8,820) (19,095)
--------------------------------------------------------------------------

Cash flows from
investing activities:
Additions to capital
assets net of proceeds on
sale of capital assets (1,584) (1,734) (2,486) (3,798)
--------------------------------------------------------------------------

Net change in cash and
cash equivalents 2,081 (11,433) (1,374) (28,694)

Cash and cash equivalents,
beginning of period $2,302 $36,557 $5,757 $53,818
--------------------------------------------------------------------------
Cash and cash equivalents,
end of period $4,383 $25,124 $4,383 $25,124
--------------------------------------------------------------------------

Supplemental disclosure:
Interest paid on the debt 733 1,379 5,730 6,590
Income taxes paid 1,389 17 1,555 34
Capital assets included in
accounts payable and
accrued liabilities 335 407 335 407
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Rogers Sugar Income Fund
Notes to Interim Unaudited Consolidated Financial Statements
For the periods ended March 31, 2009 and 2008
(In thousands of dollars unless otherwise noted)


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 ("GAAP"). These interim unaudited consolidated financial statements do not include all disclosures required by the Canadian GAAP and therefore should be read in conjunction with the consolidated financial statements and the notes thereto for the most recently prepared annual financial statements for the year ended September 30, 2008. These quarterly consolidated financial statements were not reviewed or audited by our external auditors.

Note 2: Change in accounting policies

These financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements for the year ended September 30, 2008, except for the following:

i) Inventories:

Effective October 1, 2008, the Fund implemented, on a retrospective basis, with restatement, the new Canadian Institute of Chartered Accountants (the "CICA") Handbook Section 3031 "Inventories", which is effective for interim and annual financial statements for fiscal years beginning on or after January 1, 2008.

This new standard provides guidance on the determination of costs to inventories which will include the allocation of additional factory overhead and the allocation of depreciation of factory buildings and equipment to inventory and cost of sales. It also provides guidance on classification of certain major spare parts and standby equipment from inventory to capital assets.

The application of this new standard on a retrospective basis resulted in the following adjustments:

- Decrease of the opening deficit of October 1, 2008 of $1.6 million;

- Increase in the September 30, 2008 and December 31, 2007 inventories of approximately $2.0 and $3.9 million respectively;

- Increase in the September 30, 2008 and December 31, 2007 capital assets of approximately $0.8 and $0.9 million respectively; and

- Increase of $0.01 for both the basic and diluted earnings per share results at December 31, 2007.

ii) Goodwill and intangible assets:

Effective October 1, 2008, the Fund implemented the new CICA Handbook Section 3064 "Goodwill and Intangible Assets". This Section establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. The adoption of Section 3064 did not have any impact on the Fund's financial statements or results of operations.

iii) Risks and the fair value of financial assets and financial liabilities:

The Emerging Issues Committee (the "EIC") of the CICA issued on January 20, 2009, the EIC-173, "Risks and the Fair Value of Financial Assets and Financial Liabilities", which states that the credit risk of the counterparties should be taken into account in determining the fair value of derivative financial instruments. The accounting treatment of this new release was applied retrospectively to October 1, 2008. No adjustment was required to the opening retained earnings, as the adjustment that would have been required at October 1, 2008 was not material.

The impact of the first quarter results, an increase of $1.1 million to net earnings before income taxes being a reduction of $0.7 million in cost of sales, and of $0.4 million in short-term interest, was adjusted in the year-to-date results.



Note 3: Inventories
--------------------------------------------------------------
--------------------------------------------------------------
March 31 September 30 March 31
2009 2008 2008
--------------------------------------------------------------
Raw sugar $31,309 $28,691 $21,551
Work-in-process 6,673 4,300 26,104
Refined sugar 30,148 26,051 31,230
--------------------------------------------------------------
Sugar inventories 68,130 59,042 78,885
Packaging supplies 3,425 3,037 2,841
Other 7,689 8,570 7,997
--------------------------------------------------------------
$79,244 $70,649 $89,723
--------------------------------------------------------------
--------------------------------------------------------------


All cost of sales expensed during the period were all inventoriable items.

Note 4: Financial Instruments

Details of recorded gains/losses for the quarter, in marking-to-market all derivative financial instruments and embedded derivatives 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 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 $- $- $348 $42
Natural gas futures contracts - - 4,314 10,229
Foreign exchange
forward contracts 2,111 455 - -
Embedded derivatives 989 - - -
Interest swap - - 2,011 5,247
--------------------------------------------------------------------------
Total $3,100 $455 $6,673 $15,518
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Charged to:
Cost of sales
Interest expense
--------------------------------------------------------------------------
Total
--------------------------------------------------------------------------
--------------------------------------------------------------------------



--------------------------------------------------------------------------
--------------------------------------------------------------------------
Gain / (Loss)
--------------------------------------------------------------------------
Three months Three months Six months Six months
ended ended ended ended
MARK-TO-MARKET March 31 March 31 March 31 March 31
--------------------------------------------------------------------------
2009 2008 2009 2008

Sugar futures contracts $(2,037) $(2,379) $(8,008) $(2,147)
Natural gas
futures contracts (9,423) 3,687 (21,080) 4,695
Foreign exchange
forward contracts 963 1,323 5,334 1,190
Embedded derivatives (71) (164) 1,207 (1,164)
Interest swap (394) - (5,865) -
--------------------------------------------------------------------------
Total (10,962) $2,467 $(28,412) $2,574
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Charged to:
Cost of sales (10,568) 2,467 (22,547) 2,574
Interest expense (394) - (5,865) -
--------------------------------------------------------------------------
Total (10,962) $2,467 $(28,412) $2,574
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Note 5: Trust units

During the second quarter of 2009, the Fund repurchased and cancelled 200,000 trust units under its Normal Course Issuer Bid at an average price of $2.9234 per trust unit. Year-to-date total of 225,100 trust units were purchased and cancelled under the Normal Course Issuer Bid. The capital amount of the trust unit was credited at the average value of the trust units at the start of the year. At March 31, 2009, 87,327,887 trust units were issued and outstanding.

During the second quarter of 2008, the Fund issued 160,000 trust units after some executives exercised some of the Stock Options that were exercisable. Year-to-date in fiscal 2008, a total of 200,000 trust units were exercised under the Stock Option Plan. Also, during the second quarter of 2008, $20 of the Third Series Convertible Unsecured Debentures was converted by a holder of the securities, for a total number of 3,921 trust units.

Note 6: Segmented information

Revenues were derived from customers in the following geographic areas:



--------------------------------------------------------------------------
--------------------------------------------------------------------------
For the three months For the six months
ended March 31 ended March 31
--------------------------------------------------------------------------
2009 2008 2009 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------
Canada $98,193 $96,785 $221,712 $203,155
United States and Other 23,656 5,049 38,534 13,795
--------------------------------------------------------------------------
$121,849 $101,834 $260,246 $216,950
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Note 7: Comparative figures

Certain of the 2008 comparative figures have been reclassified to conform with the presentation adopted for the current quarter.

Contact Information