RW Packaging Ltd.
TSX VENTURE : RWP

RW Packaging Ltd.

August 24, 2007 12:00 ET

RW Packaging-2007, 2nd Quarter Results

FOR THE THREE (3) AND SIX (6) MONTHS ENDED JUNE 30, 2007

WINNIPEG, MANITOBA--(Marketwire - Aug. 24, 2007) - RW Packaging Ltd. (TSX VENTURE:RWP) -

The Board of Directors announced today the Company's unaudited financial results for the three (3) and six (6) months ended June 30, 2007.

OVERALL PERFORMANCE

The Company reported net earnings for the three months ended June 30, 2007 of $32,903 (or 0.5 cent per share) on sales of $2,742,775 compared to a net loss of $31,537 (or 0.5 cent per share) on sales of $2,910,322 for the same period in 2006.

The principal factor for the 5.8 per cent decrease in comparative sales for the quarter was due primarily to; a reduction in U.S. sales resulting from a shift in order patterns from one of the Company's U.S. customers.

- Domestic sales - increased 2.9 per cent to $2,134,394 (2006 - $2,074,991).

- U.S. sales - decreased 27.2 per cent to $608,381 (2006 - $835,331). Prior to conversion into Canadian dollars, the Company's reporting currency; sales to the U.S. decreased 27.6 per cent.

The principal factors for the increase in comparative net earnings for the quarter were:

- An improvement in comparable gross profit of 22.9 per cent (2006 - 19.4 per cent), a 3.5 percentage point increase; and

- A decrease in amortization expense of 17.7 per cent compared to the prior year; and

- A decrease in bank charges and interest expense of 47.5 per cent compared to the prior year due to lower borrowing costs from mortgage(s) financed June 30, 2006.

The Company reported net earnings for the six months ended June 30, 2007 of $180,431 (or 2.7 cents per share) on sales of $5,856,272 compared to a net loss of $24,896 (or 0.4 cent per share) on sales of $5,605,621 for the same period in 2006.

The principal factors for the 4.5 per cent increase in overall comparative sales for the six months year-to-date were due primarily to; an 11.2 per cent increase in sales of the Company's Over-the-Counter ("OTC") pharmaceutical and natural health products, which more than offset a decrease in sales of household and seasonal products. Sales of the Company's new "Protecten" medicated skin cream, which commenced in January, 2007, and selling price adjustments also contributed to the double-digit growth in OTC products.

- Domestic sales - increased 6.2 per cent to $4,692,695 (2006 - $4,420,449).

- U.S. sales - decreased 1.8 per cent to $1,163,577 (2006 - $1,185,172). Prior to conversion into Canadian dollars, the Company's reporting currency; sales to the U.S. decreased 3.9 per cent.

The principal factors for the increase in comparative net earnings for the six months year-to-date were:

- The 4.5 per cent increase in sales; and

- A shift in product mix and selling price adjustments, which resulted in comparable gross profit of 24.1 per cent (2006 - 20.1 per cent), a 4.0 percentage point increase; and

- A decrease in amortization expense of 7.6 per cent compared to the prior year; and

- A decrease in bank charges and interest expense of 37.1 per cent compared to the prior year due to lower borrowing costs from mortgage(s) financed June 30, 2006.

Barring any unforeseen events, the Company's management is maintaining its expectation for continued growth in both sales and earnings for 2007.

RESULTS OF OPERATIONS

Sales for the quarter ended June 30, 2007 were $2,742,775 (2006 - $2,910,322), a decrease of 5.8 per cent and for the six months year-to-date were $5,856,272 (2006 - $5,605,621), an increase of 4.5 per cent.

Gross profit for the quarter ended June 30, 2007 was $627,954 (2006 - $564,207), an increase of 11.3 per cent. Gross profit expressed as a percentage of sales was 22.9% (2006 - 19.4%), an increase of 3.5 percentage points. A shift in product mix and selling price adjustments were the primary factors for the increase in gross profit. Gross profit during the second quarter of last year was also negatively impacted by a product recall, which reduced gross profit in that period by 0.5 percentage points. Gross profit for the six months ended June 30, 2007 was $1,411,189 (2006 - $1,127,139), an increase of 25.2 per cent. Gross profit expressed as a percentage of sales was 24.1% (2006 - 20.1%), an increase of 4.0 percentage points.

Warehouse, selling and administrative expenses were $448,503 (2006 - $402,355) for the three months ended June 30, 2007, an increase of 11.5 per cent. Increases in; selling, general and administrative expenses, wages and public company administration were the primary causes for the overall increase compared to the year prior. Warehouse, selling and administrative expenses when expressed as a percentage of sales were 16.4 per cent (2006 - 13.8 per cent) for the quarter ended June 30, 2007. Warehouse, selling and administrative expenses for the six months ended June 30, 2007 were $892,272 (2006 - $817,866), an increase of 9.1 per cent. Increases in general and administrative expenses, wages and public company administration were the primary causes for the overall increase for the six months year-to-date. Warehouse, selling and administrative expenses when expressed as a percentage of sales were 15.2 per cent (2006 - 14.6 per cent) for the six months ended June 30, 2007.

EBITA (Earnings before Interest, Taxes and Amortization) for the quarter increased 10.9 percent to $179,451 (2006 - $161,852). EBITA when expressed as a percentage of sales was 6.5 per cent (2006 - 5.6 per cent) for the quarter ended June 30, 2007. EBITA for the six months year-to-date has increased $209,644 or 67.8 percent to $518,917 (2006 - $309,273). EBITA as a percentage of sales for the six months year-to-date, was 8.9 per cent (2006 - 5.5 per cent).

Amortization expense was $70,115 (2006 - $85,186) for the quarter ended June 30, 2007, a decrease of 17.7 per cent. Amortization expense was $140,273 (2006 - $151,803) for the six months year-to-date, a decrease of 7.6 per cent. Property, plant & equipment amortization increased due to; a change in estimate adopted during the first quarter of 2007 for computer equipment. Amortization of trademark rights increased due to; a change in estimate adopted during the first quarter of 2007. The comparative decrease in amortization expense overall is due to; the elimination of deferred finance expenses last year relating to the Company's previous financing agreement.

Bank charges and interest expense for the quarter decreased 47.5 per cent to $54,833 (2006 - $104,503) due to lower borrowing costs from mortgage(s) financed June 30, 2006. Bank charges and interest expense for the six months year-to-date have decreased 37.1 per cent to $109,913 (2006 - $174,866).

Income taxes that would otherwise have been payable of $18,800 (2006 - $3,700) were used to reduce the Company's future income tax benefit for the quarter. A change in estimate of the Company's future income tax benefit for the quarter of $2,800 (2006 - $NIL) resulted from changes to projected future earnings. The adjustment decreased earnings by $2,800 for the quarter ended June 30, 2007. Income taxes that would otherwise have been payable of $93,000 (2006 - $7,500) for the six months year-to-date were used to reduce the Company's future income tax benefit. A change in estimate of the Company's future income tax benefit for the year-to-date of $4,700 (2006 - $NIL) resulted from the Company's improved financial performance for the year-to-date. The adjustment increased earnings by $4,700 for the year-to-date. As with all estimates, it is possible that changes in future conditions could require further changes in the recognized amounts for income taxes. Should a change be required it would be accounted for in the period in which those amounts became known. The Company follows the liability method of accounting for income taxes, and has a future income tax benefit arising from undepreciated capital cost (UCC) in excess of net book value (NBV), amounts deductible for tax purposes in future periods and losses available to be carried forward to the extent they are likely to be realized that reduce any taxes, which would otherwise be payable. Accordingly, management believes that EBITA, earnings before tax, and cash flow from operations are more useful measures of the Company's financial performance, however investors should be cautioned that these measures should not be construed as an alternative to net income determined in accordance with cGAAP.

Normal Course Issuer Bid

Between January 1, 2007 and May 18, 2007, the Company purchased 267,718 shares at an average cost of $0.42 per share plus fees, for a total cost of $115,817, resulting in the Company's normal course issuer bid now being complete. The shares had a stated value of $49,863, resulting in a charge to retained earnings of $65,954. The normal course issuer bid was funded from cash from operations.

For the quarter ended June 30, 2007, shareholder's equity increased to 49.14 cents per share from 46.74 cents per share at the end of 2006, an increase of 5.13 per cent on a per share basis.



RW Packaging Ltd.
Statement of Operations and Retained Earnings
---------------------------------------------
Three (3) months ended Six (6) months ended
June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006


Revenue $ 2,742,775 $ 2,910,322 $5,856,272 $5,605,621
Manufacturing
& Operating
Costs $ 2,563,324 $ 2,748,470 $5,337,355 $5,296,348
----------- ----------- ---------- ----------
EBITA $ 179,451 $ 161,852 $ 518,917 $ 309,273
Amortization $ 70,115 $ 85,186 $ 140,273 $ 151,803
----------- ----------- ---------- ----------
EBIT $ 109,336 $ 76,666 $ 378,644 $ 157,470
Bank Charges
and
Interest $ 54,833 $ 104,503 $ 109,913 $ 174,866
----------- ----------- ---------- ----------
Earnings
(Loss)
Before Tax $ 54,503 ($ 27,837) $ 268,731 ($ 17,396)
Future
Income Tax
Benefit $ 18,800 $ 3,700 $ 93,000 $ 7,500
Change in
Estimate
of FIT $ 2,800 $ 0 ($ 4,700) $ 0
----------- ----------- ---------- ----------
Net Earnings
(Loss) for
the Period $ 32,903 ($ 31,537) $ 180,431 ($ 24,896)

Change in
Accounting
Policies $ 0 $ 0 ($ 31,287) $ 0
Excess
Consideration
on Shares
Purchased
for
Cancell-
ation ($ 45,935) $ 0 ($ 65,954) $ 0
Retained
Earnings,
Beginning
of Period $ 2,023,314 $ 1,970,333 $1,927,092 $1,963,692
Retained
Earnings,
End of
Period $ 2,010,282 $ 1,938,796 $2,010,282 $1,938,796
Net Earnings
(loss) per
Share -
Basic and
fully
diluted 0.5 cent/share (0.5 cent/share) 2.7 cents/share (0.4 cent/share)
(expressed
in cents
per share)
Cash Flow
from
Operations $ 193,508 $ 43,273 $ 340,793 $ 264,233

Shareholders
Equity
per Share 49.1 cents/share 46.6 cents/share
(expressed
in cents
per share)
Issued and
Outstanding
Common Shares 6,587,680 6,934,398


RW is GMP licensed and ISO 9001 registered. The Company blends and packages liquid and powder private brand consumer products for major retailers and national brand marketers across North America.

Additional information relating to the Company is available online at www.sedar.com or the Company's website at www.rwpackaging.com.

Shares Issued 6,587,680

2007-08-23 Close $0.355

The TSX Venture Exchange (TSX Venture) has not reviewed, and does not accept responsibility for, the adequacy or accuracy of this release.

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