Spinrite Income Fund
TSX : SNF.UN

Spinrite Income Fund

November 14, 2006 17:11 ET

Spinrite Reports Third Quarter Results for Fiscal 2006

LISTOWEL, ONTARIO--(CCNMatthews - Nov. 14, 2006) - Spinrite Income Fund (TSX:SNF.UN), today announced its financial results for the 13 weeks and 39 weeks ended September 30, 2006.

"We continue to encounter challenges in the fancy yarn segment," said Dario Margve, President and Chief Executive Officer. "However, we are encouraged by the growth in our classic yarn sales and are optimistic that these traditional yarns will continue to demonstrate solid growth in the fourth quarter."

"As a result of the ongoing decline in consumer demand for fancy yarn and the significant oversupply of these products in the market," continued Mr. Margve, "we felt it necessary to take an inventory write down on our remaining fancy yarn inventory."

Third Quarter Results

Revenue for the third quarter of 2006 was $19.9 million, a decrease of $5.7 million, or 22.2%, from $25.6 million in the third quarter of 2005. Although fancy yarns continued to cause a decline in overall sales, classic yarn sales increased 36% from the prior year.

As a result of significant price pressure in the fancy yarn market caused by oversupply, the Fund recorded a $5.7 million write-down on its fancy yarn inventory. Under the terms of its lending agreement, this charge is added back to EBITDA(1) for covenant purposes.

The inventory write-down contributed to a gross loss for the third quarter of $1.3 million compared to a gross profit of $10.2 million in the comparable quarter last year.

Excluding the inventory write-down, Adjusted EBITDA(1) for the third quarter was $2.1 million, a decrease of $5.1 million, or 70.8%, from the third quarter last year.

Year to Date Results

Revenue for the 39 weeks ended September 30, 2006 was $51.7 million, a decrease of $47.1 million, or 47.7%, from $98.8 million in the same period last year.

Year to date gross profit was $6.1 million compared to $41.0 million in the comparable period last year.

Excluding the inventory write-down, Adjusted EBITDA(1) was $5.7 million year to date, a decrease of $24.4 million or 81.1% from the comparable period last year.

Conference Call and Webcast

Management will host a conference call and webcast at 2 p.m. ET on Wednesday, November 15, 2006 to discuss the results. The call can be accessed by calling 416-641-6112 or 1-866-226-1799.

The Fund's unaudited interim 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 500 employees at its fully integrated manufacturing and distribution centre in Listowel, Ontario.

(1)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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