RW Packaging Ltd.
TSX VENTURE : RWP

RW Packaging Ltd.

March 14, 2008 13:07 ET

RW Packaging-2007 Year-End Results

(FOR THE THREE (3) MONTHS AND YEAR ENDED DECEMBER 31, 2007)

WINNIPEG, MANITOBA--(Marketwire - March 14, 2008) - RW Packaging Ltd. (TSX VENTURE:RWP) -

The Board of Directors announced today the Company's unaudited financial results for the fourth quarter, and audited annual financial results for the year ended December 31, 2007.

OVERALL PERFORMANCE

The Company reported net earnings for the year ended December 31, 2007 of $205,242 (or 3.1 cents per share) on sales of $10,868,138 compared to a net loss of $16,466 (or 0.2 cent per share) on sales of $10,393,794 in 2006.

The principal factors that caused the 4.6 per cent increase in overall comparative sales for the year were:

- Domestic sales - increased 3.6 per cent to $9,415,545 (2006 - $9,086,311) due to; an 8.8 per cent increase in sales of O.T.C. pharmaceutical product's offset by a 13.3 per cent decrease in seasonal products and 0.2 per cent decrease in sales of household products.

- U.S. sales - increased 11.1 per cent to $1,452,593 (2006 - $1,307,483). Prior to conversion into Canadian dollars, the Company's reporting currency; sales to the U.S. increased 9.6 per cent.

The principal factors that caused the increase in comparative net earnings for the year were:

- the 4.6 per cent increase in sales;

- an increase in gross profit of 14.2 per cent or $325,688 due to a shift in product sales mix (a greater percentage of sales generated from O.T.C. pharmaceutical product's resulted in overall percentage gross profit for the year being 24.1 per cent compared to 22.0 per cent the year prior), and;

- a reduction in bank charges and interest expense of 23.9 per cent compared to the prior year.

RESULTS OF OPERATIONS

The Company reported net earnings for the three months ended December 31, 2007 of $955 (or 0.0 cent per share) on sales of $2,429,506 compared to a net loss of $38,294 (or 0.5 cent per share) on sales of $2,561,176 for the same period in 2006. Sales for the period decreased 5.1 per cent compared to the prior year. Domestic sales decreased 6.3 per cent to $2,359,164 (2006 - $2,518,644) primarily due to lower sales of seasonal and household products. Weather and a reduction in promotional activity by customer's negatively impacted sales of seasonal products, particularly Windshield Washer Fluid. U.S sales increased 66.6 per cent to $70,342 (2006 - $42,232), during the period.

Gross profit for the quarter of $601,797 (2006 - $588,488) increased 1.8 percentage points, to 24.8 per cent of sales compared to 23.0 per cent of sales for the same period in 2006. A shift in product mix and a reduction in comparable cost-of-goods were the primary factors for the increase in gross profit for the period.

Gross profit for the year ended December 31, 2007 of $2,615,870 (2006 - $2,290,182) increased 2.1 percentage points, to 24.1 per cent of sales, compared to 22.0 per cent of sales in 2006. The increase in gross profit of 14.2 per cent or $325,688 was due primarily to a shift in product mix with a greater percentage of sales generated from O.T.C. pharmaceutical products, which typically provide the Company higher gross profit.

Warehouse, selling and administrative expenses were $461,793 (2006 - $448,218) for the three months ended December 31, 2007, an increase of 3.0 per cent. Warehouse, selling and administrative expenses for the year ended December 31, 2007 were $1,792,692 (2006 - $1,654,566), an increase of 8.3 per cent. Increases in equipment repairs & maintenance, warehouse supplies, R&D and lab expenses, artwork development, recruitment, travel, and wages & accrued incentives, 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 19.0 per cent (2006 - 17.5 per cent) for the quarter, and 16.5 per cent (2006 - 15.9 per cent) for the year ended December 31, 2007.

EBITA (Earnings before Interest, Taxes and Amortization) for the quarter decreased 0.2 percent to $140,004 (2006 - $140,270) due to the reduction in sales and increase in warehouse, selling and administrative expense. EBITA when expressed as a percentage of sales was 5.8 per cent (2006 - 5.5 per cent) for the quarter ended December 31, 2007. EBITA for the year ended December 31, 2007 increased $187,562 or 29.5 percent to $823,178 (2006 - $635,616). EBITA as a percentage of sales for the year, was 7.6 per cent (2006 - 6.1 per cent).

Amortization expense was $70,151 (2006 - $65,372) for the quarter, and 280,574 (2005 - $282,543) for the year ended December 31, 2007, respectively, a decrease of 0.7 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 5.1 per cent to $53,798 (2006 - $56,692). Bank charges and interest expense for the year ended December 31, 2007 decreased 23.9 per cent, to $218,162 (2006 - $286,739) due to lower borrowing costs from new mortgage(s) completed June 30, 2006.

The Company's statutory tax rate for 2007 was 34.9 per cent (2006 - 35.2%) however; the effective rate in 2007 was 34.2 per cent (2006 - 37.1%), due to the effect of items that are not deductible for tax purposes. Income taxes that would otherwise have been payable of $4,400 (2006 - a gain of $1,700) for the quarter, and $111,100 (2006 - $24,600) for the year ended December 31, 2007 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 quarter of $10,700 (2006 - $58,200) resulted from; changes to projected future earnings and changes in Federal and Provincial income taxes and rates announced during the year that are considered to have been substantively enacted. The adjustment decreased earnings by $10,700 (2006 - $58,200) for the quarter ended December 31, 2007. A change in estimate of the Company's future income tax benefit for the year of $8,100 (2006 - $58,200) resulted from; changes to projected future earnings and changes in Federal and Provincial income taxes and rates announced during the year that are considered to have been substantively enacted. The adjustment decreased earnings by $8,100 (2006 - $58,200) for the year ended December 31, 2007. 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.

Between January 1, 2007 and May 18, 2007, the Company purchased 267,718 shares at an average cost of $0.42 per share plus brokerage 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 year ended December 31, 2007, shareholder's equity increased to 49.5 cents per share from 46.7 cents per share at the end of 2006, an increase of 6.0 per cent on a per share basis.



RW Packaging Ltd.
Statement of Operations and Retained Earnings
---------------------------------------------

Three (3) months ended Twelve (12) months ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2007 2006 2007 2006

Revenue $ 2,429,506 $ 2,561,176 $10,868,138 $10,393,794
Manufacturing &
Operating Costs $ 2,289,502 $ 2,420,906 $10,044,960 $ 9,758,178
----------- ----------- ----------- -----------
EBITA $ 140,004 $ 140,270 $ 823,178 $ 635,616
Amortization $ 70,151 $ 65,372 $ 280,574 $ 282,543
----------- ----------- ----------- -----------
EBIT $ 69,853 $ 74,898 $ 542,604 $ 353,073
Bank Charges
and Interest $ 53,798 $ 56,692 $ 218,162 $ 286,739
----------- ----------- ----------- -----------
Earnings
Before Tax $ 16,055 $ 18,206 $ 324,442 $ 66,334
Future Income
Tax Benefit $ 4,400 ($ 1,700) $ 111,100 $ 24,600
Change in
Estimate
of FIT $ 10,700 $ 58,200 $ 8,100 $ 58,200
----------- ----------- ----------- -----------
Net Earnings
(loss) for
the Period $ 955 ($ 38,294) $ 205,242 ($ 16,466)

Change in
Accounting
Policies $ 0 $ 0 ($ 31,287) $ 0
Excess
Consideration
on Shares
Purchased for
Cancellation $ 0 ($ 20,134) ($ 65,954) ($ 20,134)

Retained
Earnings,
Beginning
of Period $ 2,034,138 $ 1,985,520 $ 1,927,092 $ 1,963,692
Retained
Earnings,
End of Period $ 2,035,093 $ 1,927,092 $ 2,035,093 $ 1,927,092

Net Earnings
(loss) per
Share -
Basic and fully 0.0 cents (0.5 cents 3.1 cents (0.2 cents
diluted /share /share) /share) /share)
(expressed
in cents
per share)

Cash Flow from
Operations $ 6,640 $ 251,742 $ 393,413 $ 386,527

Shareholders
Equity 49.5 cents 46.7 cents
per Share /share /share
(expressed in
cents
per share)

Issued and Outstanding
Common Shares 6,587,680 6,855,398


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
2008-03-13 Close $0.65

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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