Spinrite Income Fund

Spinrite Income Fund

November 09, 2007 10:42 ET

Spinrite Reports Third Quarter Results for 2007

LISTOWEL, ONTARIO--(Marketwire - Nov. 9, 2007) - Spinrite Income Fund (TSX:SNF.UN), today announced its financial results for the 13 weeks and 39 weeks ended September 29, 2007.

Third Quarter Results

Sales of $17.0 million for the third quarter decreased by $2.9 million, or 14.6%, from $19.9 million for the prior year quarter. The decrease was due to liquidation sales in the prior year that were not repeated in 2007 and the stronger Canadian dollar. Sales of classic yarns were down 4.3% from the prior year quarter while sales of fancy yarns continued to fall short of management's expectations, down 50.5%.

The gross profit rate for the third quarter improved to 30.5% from (6.7)% in the prior year. The increase in the current year was primarily due to the absence of both the $5.7 million write-down of fancy yarn inventory and the significantly discounted liquidation sales in the prior year. Excluding the inventory write-down, the gross profit rate for the prior year quarter was 21.8%.

Adjusted EBITDA(i) for the third quarter increased to $3.2 million from the prior year period when Adjusted EBITDA was ($3.6) million. Adjusted EBITDA(i) for the prior year quarter included a $5.7 million fancy yarn inventory write-down. Excluding the inventory write-down, Adjusted EBITDA(i) was $2.1 million. Adjusted EBITDA(i) includes foreign exchange gains of $0.3 million and $0.5 million for the 13-week periods ended September 29, 2007 and September 30, 2006, respectively.

Year to Date Results

Sales of $46.8 million for the 39 weeks ended September 29, 2007 were down $4.9 million, or 9.4%, from the prior year for the reasons stated above.

The gross profit rate for the 39 weeks ended September 29, 2007 was 31.5% compared to the prior year result of 11.7% (22.8% excluding the inventory write-down). Adjusted EBITDA(i) for the 39 weeks ended September 29, 2007 was $9.1 million compared to $(50,000) for the prior year period ($5.7 million excluding the inventory write-down). Foreign exchange gains of $1.9 million and $2.1 million are included in Adjusted EBITDA(i) for both the 39 weeks ended September 29, 2007 and September 30, 2006, respectively.


On September 4, 2007, the Fund announced that it has entered into an acquisition agreement with Spinrite Acquisition Corp., a company indirectly controlled by Sentinel Capital Partners, a New York based private equity firm. Under the terms of the agreement, Sentinel will acquire all of the assets of the Fund which will result in the Fund's unitholders receiving $2.25 per unit. The board of trustees has unanimously confirmed its recommendation that unitholders vote in favour of the proposed transaction with Sentinel Capital Partners. More information regarding the proposed transaction can be found in the management information circular or at www.sedar.com.

The Fund's 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 450 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 pre-funded management arrangements which is a non-recurring item.

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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