Spinrite Income Fund

Spinrite Income Fund

March 01, 2007 17:49 ET

Spinrite Reports Fourth Quarter and Annual Results for Fiscal 2006

LISTOWEL, ONTARIO--(CCNMatthews - March 1, 2007) - Spinrite Income Fund (TSX:SNF.UN), today announced its financial results for the 13 weeks and 52 weeks ended December 31, 2006.

"Despite the ongoing challenges in the craft yarn industry, we are encouraged by our fourth quarter results," said Dario Margve, President and Chief Executive Officer. "Fancy yarn sales continued to decline but all other craft yarn segments demonstrated solid growth against the prior year and retailers are making progress in reducing their fancy yarn inventories."

"We significantly improved our balance sheet in 2006 by reducing inventory and debt levels," continued Mr. Margve. "While there is still work to be done in these areas, we are confident we will make further gains as we execute our 2007 business plan."

Fourth Quarter Results

Revenue for the fourth quarter of 2006 was $21.6 million, a decrease of $2.5 million, or 10%, from $24.1 million in the fourth quarter of 2005. Although fancy yarns continued to cause a decline in total sales, all other yarn segments reflected a combined sales increase of 24% over the prior year.

Gross profit percentage was 25.1% for the quarter compared to 18.5% in the prior year. Adjusted EBITDA(i) for the fourth quarter was $3.8 million, an increase of $2.2 million from $1.6 million in the prior year period. Foreign exchange gains of $1.0 million in the fourth quarter of 2006 and a $2.5 million inventory writedown in the fourth quarter of 2005 contributed to the increase in adjusted EBITDA.

2006 Annual Results

Revenue for the 52 weeks ended December 31, 2006 was $73.3 million, a decrease of $49.6 million, or 40.4%, from $122.9 million in 2005. While the sales of all other craft yarn segments were stable, the decrease was primarily associated with a 75% decline in fancy yarn sales.

Gross profit percentage for the year was 23.5%, excluding inventory write-downs, compared to 39.0% in 2005. The decrease was due to the change in sales mix from higher margin fancy yarns to classic yarns and the liquidation of fancy yarns at significant discounts.

Excluding inventory write-downs, Adjusted EBITDA(i) was $9.5 million for the year compared to $34.1 million in 2005. Included in 2006 Adjusted EBITDA(i) are foreign exchange gains of $3.1 million.

Before the impact of the $5.7 million inventory write-down in the third quarter, gross inventory was reduced by $10.9 million, or 31%, in 2006 with most of the reduction coming from the fancy yarn segment. Debt levels were reduced by $9.4 million, or 19%, during the year.

Conference Call and Webcast

Management will host a conference call and webcast at 2 p.m. ET on Friday, March 2, 2007 to discuss the results. The call can be accessed by calling 416-340-2219 or 1-866-862-3915.

The Fund's audited financial statements, notes to financial statements and management's discussion and analysis are available at www.sedar.com and www.spinriteincomefund.com.

About Spinrite Income Fund

Spinrite Income Fund (TSX:SNF.UN) is the largest producer and marketer of craft yarn in Canada and one of the largest in the United States. Established in 1952, Spinrite researches, develops, manufactures and markets a broad variety of consumer craft yarns. The company also supports its market with patterns that provide customers with creative ideas for knitted products. Spinrite has approximately 480 employees at its fully integrated manufacturing and distribution centre in Listowel, Ontario.

(i) Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization after making adjustments for certain non-recurring items. These adjustments include non-recurring management fees, foreign exchange translation gains or losses on debt and other instruments, and pre-funded management arrangements.

Forward-Looking Statements

This press release may contain forward-looking statements relating to expected future events and financial and operating results of the Fund that involve risks and uncertainties. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including market and general economic conditions and the risks and uncertainties detailed from time to time in the Fund's prospectus filed with the Canadian securities regulatory authorities. Due to the potential impact of these factors, the Fund disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

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