RSIF-Interim Report for the Second Quarter 2005 Results.MONTREAL Montreal (mŏn'trēôl`), Fr. Montréal (môNrāäl`), city (1991 pop. 1,017,666), S Que., Canada, on Montreal island, surrounded by St. Lawrence River and Rivière des Prairies. -- Rogers Sugar Income Fund (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :RSI (Repetitive Strain Injury) Ailments of the hands, neck, back and eyes due to computer use. The remedy for RSI is frequent breaks which should include stretching or yoga postures. .UN) - All amounts are expressed in Canadian Dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents . Volume up 9,200 metric tonnes from comparable quarter of 2004. Net distributable cash of $4.9 million for the quarter versus $4.2 million for the comparable quarter of 2004. New refinancing structure will result in annual interest savings of approximately $2.5 million. Message to Unitholders: On behalf of the Board of Trustees board of trustees Politics The posse of thugs who oversee an institution's administration. See Board of directors. , I am pleased to present the unaudited consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: financial results of Rogers Sugar Income Fund (the "Fund") for the three months and six months period ended March 31, 2005. Volume for the second quarter was 178,098 metric tonnes, as opposed op·pose v. op·posed, op·pos·ing, op·pos·es v.tr. 1. To be in contention or conflict with: oppose the enemy force. 2. to 168,857 in the comparable quarter last year.Industrial volume was up approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 6,000 metric tonnes, recapturing 60% of the shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. from the first quarter.Thick juice sales were also up 4,700 metric tonnes due to the higher beet beet, biennial or annual root vegetable of the family Chenopodiaceae (goosefoot family). The beet (Beta vulgaris) has been cultivated since pre-Christian times. crop in Taber Taber (tā`bər), town (1991 pop. 6,660), S Alta., Canada, NE of Lethbridge. The area is irrigated for crop and livestock raising. The town has a sugar beet refinery and a vegetable cannery. Coal, oil, and natural gas are found nearby. and additional availability of thick juice.Consumer volume was down by 2,300 metric tonnes, bringing the year to date consumer volume 6,200 metric tonnes below last year.This is caused by imports from Costa Rica Costa Rica (kŏs`tə rē`kə), officially Republic of Costa Rica, republic (2005 est. pop. 4,016,000), 19,575 sq mi (50,700 sq km), Central America. in the retail segment and lower consumer demand. Gross margins on a per metric tonne tonne measure of weight or mass; 1 tonne=1000 kg. See also ton. basis were $102.13 for the quarter compared to $111.31 for the comparable quarter last year. The decrease in gross margins was mainly due to the increase in natural gas cost and higher gas consumption in Taber due to the larger beet crop. Net distributable cash was $4.9 million compared to $4.2 million for the comparable quarter last year.Timing in capital investment was the major reason for the increase.Year to date net distributable cash was $17.9 million, $1.9 million less than 2004. The decrease is due mainly to lower operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. in the first quarter of the fiscal year. To date, the Fund distributed $17.8 million, of which $1.8 million was return of capital. On March 31, 2005, the Fund issued second series 6% convertible unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before for net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of approximately $47.6 million.The Fund used $47.5 million of the net proceeds to invest in additional common shares of Rogers.Rogers then notified the private debtholders that a partial redemption Partial Redemption An investment-transaction classification that refers to the withdrawal of a portion of a security's value by the owner. Rather than withdrawing the entire amount of his or her security's value from the account, an investor may prefer to keep a portion of the of $47.5 million would be paid, May 2, 2005, on the $100.0 million debt maturing in August 2005.Rogers is also currently negotiating a $50.0 term loan agreement with a Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. financial institution to pay the balance of the debt maturing in August 2005.This term loan would be drawn in August 2005 when the remaining 8.173% debt matures.With this new refinancing Refinancing An extension and/or increase in amount of existing debt. in place, the Fund and Rogers will save approximately $2.5 million annually in interest costs, starting September September: see month. 2005.
FOR THE BOARD OF TRUSTEES,
SIGNED
------------------------------
Edward Y. Baker, Chairman
Toronto, Ontario - May 5, 2005
Rogers Sugar Income Fund
Consolidated Balance Sheets
(In thousands of dollars)
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March 31 September 30
2005 2004
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ASSETS (unaudited) (audited)
Current assets:
Cash and cash equivalents $79,115 $52,666
Accounts receivable 31,284 37,597
Inventories 56,467 34,379
Prepaid expenses 1,947 2,975
Future income taxes 174 -
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168,987 127,617
Capital assets 209,574 213,454
Other assets 5,284 3,903
Goodwill 318,043 318,043
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$701,888 $663,017
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LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $33,076 $40,603
Distribution payable
to unitholders 2,965 2,965
Income taxes payable 395 450
Future income taxes - 505
Current portion of convertible
unsecured subordinated notes 6,697 6,407
Current portion of
long-term debt (Note 3) 100,000 100,000
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143,133 150,930
Employee future benefits 18,095 17,252
Long-term debt (Note 3) 65,000 65,000
Convertible unsecured
subordinated notes (Note 2) 59,291 12,710
Future income taxes 1,762 1,595
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287,281 247,487
UNITHOLDERS' EQUITY
Trust units 583,494 583,494
Equity component of convertible
unsecured subordinated debentures 65,930 62,800
Deficit (234,817) (230,764)
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414,607 415,530
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$701,888 $663,017
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Rogers Sugar Income Fund
Unaudited Consolidated Statements of Operations
For the periods ended March 31, 2005 and 2004
(In thousands of dollars - except amounts per trust units)
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For the three months For the six months
ended March 31, ended March 31,
2005 2004 2005 2004
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Revenues $102,876 $91,574 $209,297 $200,308
Cost of sales 84,687 72,778 163,729 152,157
Gross margin 18,189 18,796 45,568 48,151
Expenses:
Administration
and selling 5,061 5,125 10,283 10,262
Distribution 2,219 2,617 5,202 5,287
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7,280 7,742 15,485 15,549
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Earnings before
interest, provision
for income taxes,
depreciation and
amortization 10,909 11,054 30,083 32,602
Depreciation and
amortization 3,262 3,237 6,527 6,476
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Earnings before
interest and
provision for income
taxes 7,647 7,817 23,556 26,126
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Interest on long-term
debt and convertible
debentures 3,466 3,648 7,071 7,394
Interest income (103) (29) (332) (131)
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3,363 3,619 6,739 7,263
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Earnings before
provision for income
taxes 4,284 4,198 16,817 18,863
Provision for
income taxes:
Current 178 82 461 366
Future (1,606) (1,662) (512) (669)
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(1,428) (1,580) (51) (303)
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Net earnings $5,712 $5,778 $16,868 $19,166
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Net earnings per
trust unit:
Basic $0.05 $0.05 $0.16 $0.18
Diluted $0.05 $0.05 $0.16 $0.18
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Supplemental
disclosure:
Employee future
benefits expense $1,144 $1,278 $2,289 $2,556
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Rogers Sugar Income Fund
Unaudited Consolidated Statements of Unitholders' Equity
For the periods ended March 31, 2005 and 2004
(In thousands of dollars)
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2005
--------------------------------------------------------------------
Equity
component
of convertible
unsecured
subordinated
Trust units debentures Deficit Total
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For the three months
ended March 31, 2005
Balance
beginning
of period 583,494 $64,316 ($230,020) $417,790
Interest expense on
equity portion of the
convertible unsecured
subordinated debentures - 1,614 (1,614) -
Distributions - - (8,895) (8,895)
Net earnings - - 5,712 5,712
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Balance end of period 583,494 $65,930 ($234,817) $414,607
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2004
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Equity
component
of convertible
unsecured
subordinated
Trust units debentures Deficit Total
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For the three months
ended March 31, 2005
Balance
beginning
of period 583,494 $58,341 ($229,374) $412,461
Interest expense on
equity portion of the
convertible unsecured
subordinated debentures - 1,471 (1,471) -
Distributions - - (8,895) (8,895)
Net earnings - - 5,778 5,778
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Balance end of period 583,494 $59,812 ($233,962) $409,344
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2005
--------------------------------------------------------------------
Equity
component
of convertible
unsecured
subordinated
Trust units debentures Deficit Total
---------------------------------------------------------------------
For the six months
ended March 31, 2005
Balance
beginning
of period 583,494 $62,800 ($230,764) $415,530
Interest expense on
equity portion of the
convertible unsecured
subordinated debentures - 3,130 (3,130) -
Distributions - - (17,791) (17,791)
Net earnings - - 16,868 16,868
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Balance end of period 583,494 $65,930 ($234,817) $414,607
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2004
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Equity
component
of convertible
unsecured
subordinated
Trust units debentures Deficit Total
---------------------------------------------------------------------
For the six months
ended March 31, 2005
Balance
beginning
of period 583,494 $56,960 ($232,430) $408,024
Interest expense on
equity portion of the
convertible unsecured
subordinated debentures - 2,852 (2,908) (56)
Distributions - - (17,790) (17,790)
Net earnings - - 19,166 19,166
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Balance end of period 583,494 $59,812 ($233,962) $409,344
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Rogers Sugar Income Fund
Unaudited Consolidated Statements of Cash Flows
For the periods ended March 31, 2005 and 2004
(In thousands of dollars)
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For the three months For the six months
ended March 31, ended March 31,
2005 2004 2005 2004
--------------------------------------------------------------------
Cash flows from
operating activities:
Net earnings $5,712 $5,778 $16,868 $19,166
Adjustments for
items not
involving cash:
Depreciation and
amortization 3,262 3,237 6,527 6,476
Loss on disposal
of assets - - - 18
Future income
taxes (1,606) (1,662) (512) (669)
Employee future
benefits 163 953 843 1,910
Other 227 310 539 173
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7,758 8,616 24,265 27,074
Changes in non-cash
operating working
capital:
Accounts receivable (4,200) 9,275 6,313 16,807
Inventories 12,963 5,323 (22,088) (19,551)
Prepaid expenses 8,337 (543) 1,028 409
Accounts payable
and accrued
liabilities (10,899) (6,551) (7,691) 3,299
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6,201 7,504 (22,438) 964
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13,959 16,120 1,827 28,038
Cash flows from
financing activities:
Interest expense on
the equity portion
of the convertible
unsecured
subordinated
debentures (1,614) (1,471) (3,130) (2,908)
Distributions to
Unitholders (8,895) (8,895) (17,791) (25,479)
New issue
convertible
debentures 50,000 - 50,000 -
Deferred financing
charges (2,400) - (2,400) -
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37,091 (10,366) 26,679 (28,387)
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Cash flows from
investing activities:
Additions to capital
assets (974) (1,930) (2,057) (2,630)
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Net change in cash and
cash equivalents 50,076 3,824 26,449 (2,979)
Cash and cash
equivalents, beginning
of period 29,039 19,068 52,666 25,871
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Cash and cash
equivalents, end
of period $79,115 $22,892 $79,115 $22,892
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Supplemental
disclosure:
Interest paid on
the debt and equity
components of
convertible
debentures $2,972 $2,600 $9,750 $9,951
Income taxes paid 185 8 491 314
Capital assets
included in
accounts payable
and accrued
liabilities 352 340 352 340
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Rogers Sugar Income Fund
Notes to Interim Unaudited Consolidated Financial Statements
For the periods ended March 31, 2005 and 2004
(Tabular amounts are expressed in thousands of dollars.)
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Rogers Sugar Income Fund (the "Fund") is an open-ended, limited
purpose trust created under the laws of Ontario by a declaration of
trust made as of September 15, 1997 as amended and restated on
September 30, 1997 (the "Declaration of Trust"). An unlimited number
of trust units may be issued pursuant to the Declaration of Trust.
Note 1: Basis of presentation
These interim financial statements have been prepared in accordance
with Canadian generally accepted accounting principles. The same
accounting policies as disclosed in the consolidated financial
statements of the Fund included in our latest Annual Report have been
used. Accordingly, these interim financial statements should be
read in conjunction with the consolidated financial statements and
the notes thereto included in our 2004 Annual Report. These
quarterly financial statements were not reviewed or audited by our
external auditors.
Note 2: Convertible unsecured subordinated debentures
-------------------------------------------------------------
-------------------------------------------------------------
Convertible unsecured subordinated debentures
-------------------------------------------------------------
Balance - September 30, 2004 $19,117
New issue - March 31, 2005 50,000
69,117
Debt reduction and transfer to equity
component for the six-month period ended
March 31, 2005 3,129
65,988
Less current portion 6,697
Balance - March 31, 2005 $59,291
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On March 31, 2005, the Fund issued $50.0 million of second series
6.0% convertible unsecured subordinated debentures, maturing June 29,
2012, with interest payable semi-annually in arrears on June 29 and
December 29 of each year, starting June 29, 2005. The debentures
may be converted at the option of the holder at a conversion price
of $5.30 per trust unit at any time prior to maturity, and cannot
be redeemed prior to June 29, 2008. On or after June 29, 2008 and
prior to June 29, 2010, the debentures may be redeemed by the Fund
only if the weighted average trading price of the trust unit, for
20 consecutive trading days, is at least 125% of the conversion
price of $5.30. Subsequent to June 29, 2010, the debentures are
redeemable at a price equal to the principal amount thereof plus
accrued and unpaid interest.
The proceeds of the debentures, net of the issue costs, is estimated
at $47.6 million. An amount of $47.5 million was used by the Fund
to buy additional common shares in Rogers Sugar Ltd., ("Rogers") a
wholly owned subsidiary of the Fund.
The Fund has not allocated any of the second series 6% convertible
debentures into an equity component, as the calculation of the
equity component is not significant using an approximate interest
rate that would have been applicable to the issuance of similar debt
without the conversion features at the time the debentures were
issued.
Note 3: Long-term debt
Rogers has $100.0 million of 8.173% debentures maturing on August
26, 2005. On March 31, 2005, Rogers advised the Debentureholders,
that $47.5 million, being the net proceeds from additional common
shares issued to the Fund, would be paid on May 2, 2005 to the
Debentureholders prior to maturity. A pre-payment penalty will
also be paid on the same date.
At March 31, 2005, Rogers was in a breach of one of its financial
covenants under its lending agreements. The financial covenant
breached is rolling EBITDA to rolling interest for the last four
quarters being less than 3 to 1, as required. The breach is being
remedied with the repayment of $47.5 million of the 8.173%
debentures on May 2, 2005. This will reduce future interest
payments by almost $4.0 million.
Rogers is also currently negotiating, with a Canadian financial
institution, a new term loan of $50.0 million, to be drawn in
August 2005, when the remaining $52.5 million debentures mature,
which should further reduce interest expense in Rogers.
Note 4: Segment disclosures
The Fund, through its operating companies, operates in the sugar
industry. Management organizes the results into two principal
operating segments for making operating decisions and assessing
performance: Eastern Canada and Western Canada. These segments
are managed separately, since they require specific market
strategies. The Fund assesses the performance of each segment based
on operating income. Accounting policies relating to each segment
are identical to those used for the purposes of the consolidated
financial statements.
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For the three months ended March 31 (unaudited)
2005
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Eastern Western Intersegment
Canada Canada and other Total
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Revenues 62,945 40,557 (626) 102,876
Earnings before interest,
provision for income
taxes and depreciation
and amortization 8,341 2,810 (242) 10,909
Depreciation and
amortization 1,841 1,033 388 3,262
Interest expense 6,339 6,684 (9,660) 3,363
Net income (loss) 33 (3,351) 9,030 5,712
Additions to property,
plant and equipment 439 535 - 974
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2004
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Eastern Western Intersegment
Canada Canada and other Total
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Revenues 56,680 37,631 (2,737) 91,574
Earnings before interest,
provision for income
taxes and depreciation
and amortization 6,659 4,802 (407) 11,054
Depreciation and
amortization 1,866 983 388 3,237
Interest expense 6,740 6,696 (9,817) 3,619
Net income (loss) (1,293) (2,032) 9,103 5,778
Additions to property,
plant and equipment 1,117 813 - 1,930
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For the six months ended March 31 (unaudited)
2005
---------------------------------------------------------------------
Eastern Western Intersegment
Canada Canada and other Total
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Revenues 127,898 82,660 (1,261) 209,297
Earnings before interest,
provision for income
taxes and depreciation
and amortization 21,718 8,692 (327) 30,083
Depreciation and
amortization 3,682 2,068 777 6,527
Interest expense 12,743 13,339 (19,343) 6,739
Net income (loss) 3,316 (4,688) 18,240 16,868
Additions to property,
plant and equipment 792 1,265 - 2,057
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2004
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Eastern Western Intersegment
Canada Canada and other Total
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Revenues 123,838 79,873 (3,403) 200,308
Earnings before interest,
provision for income
taxes and depreciation
and amortization 19,687 12,865 50 32,602
Depreciation and
amortization 3,732 1,967 777 6,476
Interest expense 15,621 13,710 (22,068) 7,263
Net income (loss) 66 (2,152) 21,252 19,166
Additions to property,
plant and equipment 1,425 1,205 - 2,630
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Revenues were derived from customers in the following geographic
areas:
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For the three months For the six months
ended March 31, ended March 31,
--------------------------------------------------------------------
2005 2004 2005 2004
Canada 93,908 84,629 193,030 187,171
United States and Other 8,968 6,945 16,267 13,137
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102,876 91,574 209,297 200,308
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MANAGEMENT'S DISCUSSION AND ANALYSIS Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial : This Management's Discussion and Analysis should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the unaudited financial statements and notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. in this quarterly report. This report contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which reflect the current expectations of the Fund, Lantic and Rogers (collectively the "Company") with respect to future events and performance.Wherever used, the words "may," "will," "anticipate," "intend," "expect," "plan," "believe," and similar expressions identify forward-looking statements.Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at which, such performance or results will be achieved. Forward-looking statements are based on information available at the time they are made, assumptions made by management, and management's good faith belief with respect to future events, and are subject to the risks and uncertainties outlined in this report that could cause actual performance or results to differ materially from those reflected in the forward-looking statements, historical results or current expectations." Additional information relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Fund, Lantic and Rogers, including the Annual Information Form, Quarterly and Annual reports and supplementary information is available on SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review at www.sedar.com. This Management's Discussion and Analysis is dated April 25, 2005. Results of operations:
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Consolidated Results For the three months For the six months
ended March 31, ended March 31,
---------------------------------------------------------------------
(In thousands of dollars,
except for volume
and per trust unit information) 2005 2004 2005 2004
Volume (metric tonnes) 178,098 168,857 358,746 356,837
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Revenues $102,876 $91,574 $209,297 $200,308
Gross margins 18,189 18,796 45,568 48,151
Distribution 2,219 2,617 5,202 5,287
Selling and administration 5,061 5,125 10,283 10,262
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Earnings before depreciation,
amortization, interest
and income taxes (EBITDA) 10,909 11,054 30,083 32,602
Interest, net 3,363 3,619 6,739 7,263
Depreciation and amortization 3,262 3,237 6,527 6,476
Income taxes (1,428) (1,580) (51) (303)
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Net earnings $5,712 $5,778 $16,868 $19,166
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Net earnings per trust unit $0.05 $0.05 $0.16 $0.18
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For the quarter, volume was approximately 9,200 metric tonnes higher
than last year's comparable quarter. Thick juice and industrial
volume were respectively 4,700 and 6,000 metric tonnes over last
year. The increase in industrial sales is due to the timing in
deliveries as the first quarter volume was approximately 10,000
metric tonnes lower. Year to date industrial sales are lower by
almost 4,000 metric tonnes from the previous year. Thick juice sales
will continue to be higher, as the Taber beet crop was larger in
fiscal 2005 than fiscal 2004.
Consumer volume continues to decrease. For the second quarter,
volume was almost 2,300 metric tonnes lower, bringing the year to
date shortfall to 6,200 metric tonnes. Continued access by Costa
Rica in the retail market combined with continued lower consumer
demand, are the major reasons for the decreasing trend.
Gross margins of $18.2 million were $600,000 lower than the
comparable quarter of last year. On a per metric tonne basis, gross
margins were $102.13 in 2005 compared to $111.31 for last year's
comparable quarter. The decrease is due mainly to the increase in
natural gas cost and to the higher consumption of natural gas in
Taber due to the larger crop. Year to date gross margins are $127.02
compared to $134.94 in 2004. The decrease is due mainly to higher
energy costs in 2005.
Distribution costs were almost $400,000 lower than last year's
comparable quarter due to more direct shipments from Taber with the
higher crop and therefore less transfers from Vancouver to the
Prairie market.
Interest expense was lower due mainly to the additional interest
revenue generated on the large cash balance during the quarter, and
to a lower interest expense charged on the debt component of the
convertible unsecured subordinated debenture of the Fund.
Statement of quarterly results:
(In thousands of dollars, except volume
and per trust unit information)
---------------------------------------------------------------------
2005 2004
---------------------------------------------------------------------
(Unaudited) Q2 Q1 Q4 Q3 Q2 Q1
Volume (MT) 178,098 180,648 218,777 191,685 168,857 187,980
Revenues 102,876 106,421 123,687 104,158 91,574 108,734
Gross margins 18,189 27,379 32,929 24,149 18,796 29,355
EBITDA 10,909 19,174 22,161 15,868 11,054 21,548
Net earnings 5,712 11,156 15,115 8,864 5,778 13,388
Net earnings
per trust unit $0.05 $0.11 $0.16 $0.08 $0.05 $0.13
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(In thousands of dollars, except volume and per trust unit
information)
-------------------------------------------------------------
2003
-------------------------------------------------------------
(Unaudited) Q4 Q3
Volume (MT) 189,537 179,428
Revenues 109,713 103,813
Gross margins 27,176 22,488
EBITDA 18,486 13,383
Net earnings 1,614 4,863
Net earnings
per trust unit $0.00 $0.04
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Liquidity: Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was positive $14.0 million for the quarter compared to $16.1 million for the comparable quarter in fiscal 2004.The major reason for the decrease is the higher level of inventories in Taber.On a year to date basis, cash flow from operations is $1.8 million positive compared to $28.0 million.This decrease is due mainly to the movement of non-cash working capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) and liabilities. The distributable cash generated by the operating companies operating company A business that engages in transactions with outsiders. , Lantic and Rogers, is paid to the Fund by payment of interest on the subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes of Lantic and Rogers held by the Fund, after having taken reasonable reserve for capital expenditures and working capital.The cash received by the Fund is used to pay distributions to its Unitholders. The Fund measures distributable cash.Distributable cash is not intended to be representative of cash flow or results of operations determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") and does not have a standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). by GAAP.It may also not be comparable to similar measures used by other companies or income trusts.
The reconciliation of the EBITDA to distributable cash is as follows:
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For the three months For the six months
ended March 31, ended March 31,
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(Unaudited) 2005 2004 2005 2004
Operating activities:
Earnings before depreciation,
amortization, interest
and income taxes (EBITDA) $10,909 $11,054 $30,083 $32,602
Add/(deduct):
Bank, debentures and
convertible debentures
interest (3,363) (3,619) (6,739) (7,263)
Interest amortization
for swap agreement 125 124 249 248
Interest expense on
the equity portion of the
convertible unsecured
subordinated debentures (1,614) (1,471) (3,130) (2,908)
Income taxes paid (185) (8) (491) (314)
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Distributable cash
from operations $5,872 $6,080 $19,972 $22,365
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Investing activities:
Capital expenditures (974) (1,930) (2,057) (2,613)
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(974) (1,930) (2,057) (2,613)
Financing activities:
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Distributable cash from
financing activities - - - -
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Net distributable cash 4,898 4,150 17,915 19,752
Declared distributions
to Unitholders (8,896) (8,895) (17,791) (17,790)
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Available cash ($3,998) ($4,745) $123 $1,962
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Net distributable cash was $4.9 million compared to $4.2 million for the comparable quarter of last year.This was due mainly to the timing in capital expenditures investment.Year to date net distributable cash of $17.9 million is $1.9 million lower than last year due mainly to lower EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become from the operating companies. The decrease for the quarter and year to date in interest payments is due mainly to the higher cash balance and lower interest charged on the convertible unsecured subordinated debenture of the Fund. Capital expenditures were lower in the second quarter than last year due to investment timing. During the quarter, the Fund issued $50.0 million of convertible unsecured subordinated notes for net proceeds of approximately $47.6 million.The Fund invested $47.5 million in Rogers' common shares. Rogers will use these funds to repay $47.5 million of the long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. that matures in August 2005.The debtholders were notified on March 31, 2005 that this repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan would be done May 2, 2005. Contractual obligations: There are two items that have changed materially in the contractual obligations table disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in the Management's Discussion and Analysis of the September 30, 2004 Annual Report. With the issue of $50.0 million of convertible unsecured subordinated debentures, the Fund now has an additional contractual obligation for that amount to be repaid after 5 years. At March 31, 2005, the operating companies had commitments to purchase a total of 1,962,700 metric tonnes of raw sugar, of which only 149,020 metric tonnes had been priced, for a total dollar commitment of $40.5 million, compared to 230,800 metric tonnes for a total dollar commitment of $59.5 million at September 30, 2004.The decrease is due to raw sugar received year to date, while fewer pricings done by the sellers of raw sugar. Capital resources: Lantic and Rogers each have an authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: line of credit of $50 million available to finance their operations.At quarter's end, no amount was drawn from either of the working capital facilities, and Lantic had $26.5 million of cash available, while Rogers had $52.0 million of cash available.Rogers received on March 31, 2005, $47.5 million from the Fund for the purchase of additional common shares. These proceeds will be used, in May 2005, to partially repay the $100.0 million long-term debt, maturing August 26, 2005. At March 31, 2005, Rogers was in a breach of one of its financial covenants under its lending agreements Lending agreement A contract regarding funds transferred between a lender and a borrower. .The financial covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the breached is rolling EBITDA to rolling interest for the last four quarters being less than 3 to 1, as required.The breach is being remedied with the repayment of $47.5 million of the 8.173% debentures on May 2, 2005.This will reduce future interest payments by almost $4.0 million.Rogers is currently negotiating with a Canadian financial institution a term loan to be drawn in August 2005, to repay the remaining balance of the debentures when they mature, which will further reduce future interest cost for Rogers. At quarter's end, inventory level was high compared to year end due to the processing of all sugar beets sugar beet, variety of beet used commercially as a source of sugar. sugar beet Variety of beet (Beta vulgaris) that accounts for about two-fifths of global sugar production, making it second only to sugarcane as a source of the world's sugar. in Taber, Alberta Taber is a town in southern Alberta, Canada in Municipal District of Taber. Taber was established in the late 1890s by European settlers on the banks of the lower Oldman River. during the period of October October: see month. 2004 to January January: see month. 2005. Cash requirements for working capital and other capital expenditures are expected to be paid from available cash resources and from funds generated from operations. Outstanding securities: A total of 88,779,760 units were outstanding at March 31, 2005, the same level as at December December: see month. 31, 2004. Changes in accounting policies and critical accounting estimates: Our critical accounting estimates and assumptions, as well as changes in accounting policies that we made in fiscal 2004 remain substantially unchanged from those that were disclosed in our Management's Discussion and Analysis of the Annual Report for the year ended September 30, 2004. Financial derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. : A significant portion of the Company's sales is made under fixed price, forward sales forward sales npl → ventas fpl a término contracts, which extend up to two years.The Company also contracts to purchase raw cane sugar cane sugar: see sucrose. substantially in advance of the time it delivers the refined sugar produced from the purchase.To mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. its exposure to future price changes, the Company
attempts to manage the volume of refined sugar sales contracted Sales ContractContract between a seller and buyer for the sale of goods, services, or both. for future delivery in relation to the volume of raw cane sugar contracted for future delivery, when feasible (algorithm) feasible - A description of an algorithm that takes polynomial time (that is, for a problem set of size N, the resources required to solve the problem can be expressed as some polynomial involving N). . The Company uses derivative instruments to manage exposures to changes in raw sugar prices and natural gas prices.The Company's objective for holding derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. is to minimize In a graphical environment, to hide an application that is currently displayed on screen. For example, in Windows and Mac, the application's window is removed from the screen and represented by an icon on the Windows Taskbar. In the Mac, the icon is placed in the Dock. See Win Minimize windows. risk using the most efficient methods to eliminate or reduce the impacts of these exposures. Raw sugar The Company's risk management policy is to manage the forward pricing Forward pricing Practice mandated by the SEC that open-end investment companies establish all incoming buy and sell orders on the next net asset valuation of fund shares. forward pricing of purchases of raw sugar in relation to its forward refined sugar sales to reduce price risk.The Company attempts to meet this objective by entering into futures contracts Futures Contract An exchange traded agreement to buy or sell a particular type and grade of commodity for delivery at an agreed upon place and time in the future. Futures contracts are transferable between parties. to reduce its exposure. The Company has designated its futures contracts as fair value hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. instruments. The pricing mechanism of the futures contracts and the respective forecasted raw sugar purchase transactions are the same.As a result, there is no hedge ineffectiveness in·ef·fec·tive adj. 1. Not producing an intended effect; ineffectual: an ineffective plea. 2. Inadequate; incompetent: an ineffective teacher. and, therefore, the following gain or loss is not and will not be reflected in earnings. At March 31, 2005, the Company had $21.8 million in contract amounts with a fair value of $24.6 million. Natural gas The Company uses futures contracts to help manage its natural gas costs.The Company has designated as fair value hedge instruments natural gas futures matched against variable price forecasted gas purchases. The change in the fair value of the designated futures are matched to forecasted natural gas purchases and will be recognized in earnings in the period the related manufactured product is sold.At March 31, 2005, the Company had $1.9 million in natural gas contracts, with a fair value of $1.9 million. Foreign exchange contracts The Company's activities, which result in exposure to fluctuations in foreign exchange rates, consist of the purchasing of raw sugar, the selling of refined sugar and the purchase of natural gas.The Company manages this exposure by creating offsetting positions through the use of financial instruments.These instruments include forward contracts, which are commitments to buy or sell at a future date, and may be settled in cash. Forward foreign exchange contracts have maturities of less than two years and relate exclusively to U.S. currency.The counterparty Counterparty The other participant, including intermediaries, in a swap or contract. to these contracts is a major Canadian financial institution.The Company does not anticipate any material adverse effect on its financial position resulting from its involvement in these types of contracts, nor does it anticipate non-performance by the counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. . At March 31, 2005, the Company had $21.3 million in foreign currency contracts with a fair value of $20.8 million. Risk factors: Risk factors in Lantic's and Rogers' businesses and operations are discussed in the Management's Discussion and Analysis of our Annual Report for the year ended September 30, 2004 and remain substantially unchanged.This document is available on SEDAR at www.sedar.com or on one of our websites at www.lantic.ca or www.rogerssugar.com. Outlook: The sugar market declined slightly again in the second quarter of fiscal 2005 when compared to the same period of 2004.It is still too early to assess if this decline is due to timing or due to consumers changing their eating habits.The shift in sales mix sales mix See product mix. from consumer to industrial sales is likely to continue, which could negatively impact overall gross margins.In addition, the market remains highly competitive, and Lantic / Rogers will continue defending its market share against local and import competition. A potential competitor was expected to start operations in 2003 in New Brunswick New Brunswick, province, Canada New Brunswick, province (2001 pop. 729,498), 28,345 sq mi (73,433 sq km), including 519 sq mi (1,345 sq km) of water surface, E Canada. , but filed in December 2003 with the Court of New Brunswick for protection under the Companies' Creditors Arrangement Act ("CCAA CCAA Comunidades Autónomas CCAA China Center of Adoption Affairs CCAA Companies' Creditors Arrangement Act (Canada) CCAA California Collegiate Athletic Association CCAA Commercial Collection Agency Association ").Since then, numerous extensions were granted by the Court to find financial alternatives for that potential competitor. The latest extension is to May 10, 2005.It would appear that a potential buyer is seeking financing to complete the purchase.In the event a purchase deal is completed in May 2005, it is unlikely that this new potential customer would be operational before Fall 2005. Natural gas prices have been fairly unstable unstable, adj 1. not firm or fixed in one place; likely to move. 2. capable of undergoing spontaneous change. A nuclide in an unstable state is called radioactive. An atom in an unstable state is called excited. in the last few months.As per our hedging policy, we have few hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. positions for the balance of the year.Although not related, natural gas prices tend to follow the movement of crude oil prices and could be open to significant fluctuations over the next few months.Our strategy will be to hedge some positions on the downward trends in order to mitigate the costs to the operations. Lantic is currently working on a bid proposal for the development of a cogeneration cogeneration In power systems, use of steam for both power generation and heating. High-temperature, high-pressure steam from a boiler and superheater first passes through a turbine to produce power. project, further to a call for tender made by Hydro-Quebec Distribution.The bid has to be submitted on May 10, 2005.Hydro-Quebec will announce the winning bids in the Fall of 2005. On February February: see month. 17, 2005, a five-year review was initiated of the antidumping an·ti·dump·ing adj. Intended to discourage importation and sale of foreign-made goods at prices substantially below domestic prices for the same items. and countervailing duties Countervailing duties are a means to restrict international trade in cases where imports are subsidized by a foreign country and hurt domestic producers. According to WTO rules, a country can launch its own investigation and decide to charge extra duties, provided such additional imposed on imports of refined sugar from the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and the European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the European Community .A similar review, completed in 2000, resulted in the continuation continuation - continuation passing style of the duties.The duties are scheduled to expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on November November: see month. 2, 2005, unless continued for a further five-year period.The review is currently in the first stage wherein where·in adv. In what way; how: Wherein have we sinned? conj. 1. In which location; where: the country wherein those people live. 2. the Canada Border Services Agency The Canada Border Services Agency (CBSA) (French: Agence des services frontaliers du Canada - ASFC) is responsible for Canada's border operations. It was created on December 12, 2003, amalgamating Canada Customs (from the now-defunct Canada Customs and Revenue Agency) (CBSA CBSA Canada Border Services Agency CBSA Core-Based Statistical Area CBSA Colorado BioScience Association CBSA College-Bound Student-Athlete CBSA Corporate Benefit Services of America CBSA Canadian Blind Sports Association CBSA Canadian Billiards & Snooker Association ) will determine whether there is a likelihood of resumed dumping dumping, selling goods at less than the normal price, usually as exports in international trade. It may be done by a producer, a group of producers, or a nation. and subsidization sub·si·dize tr.v. sub·si·dized, sub·si·diz·ing, sub·si·diz·es 1. To assist or support with a subsidy. 2. To secure the assistance of by granting a subsidy. should the duties expire.The determination is due on June June: see month. 17, 2005.If the determination is affirmative AFFIRMATIVE. Averring a fact to be true; that which is opposed to negative. (q.v.) 2. It is a general rule of evidence that the affirmative of the issue must be proved. Bull. N. P. 298 ; Peake, Ev. 2. 3. , the review will proceed to the next stage wherein the Canadian International Trade Tribunal The Canadian International Trade Tribunal is an independent quasi-judicial group operating in Canada's trade remedy system. The administrative tribunal, which considers cases of dumping and subsidizing, reports to Parliament through the Minister of Finance. (CITT CITT Canadian International Trade Tribunal CITT Citizens’ Independent Transportation Trust CITT Canadian Institute for Theatre Technology (Canadian equivalent of USITT) CITT Canadian Institute of Traffic and Transportation ) will determine whether there is a likelihood of injury to the Canadian sugar industry should the duties expire.The CITT determination is due on November 2, 2005.Although some changes have been made to the United States and European Union sugar programs, they have not materially changed the factors that led to the continuation of the duties in 2000.There is no assurance that the duties will be continued for a further five years. The Taber beet slicing slice n. 1. a. A thin broad piece cut from a larger object: ate a slice of cheese; examined a slice of the diseased lung. b. campaign terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: late January with almost 109,000 metric tonnes of beet sugar beet sugar: see beet; sucrose. production.The planting for next fiscal crop started in early April with acreage of approximately 34,000, which is slightly less than last year. Rogers' long-term debt of $100.0 million matures in August 2005. A partial redemption of $47.5 million will be done on May 2, 2005, while a term loan is currently being negotiated with a Canadian financial institution for the repayment of the balance of the loan upon maturity.The Fund and Rogers will save approximately $2.5 million annually in interest costs from the refinancing of Rogers' long-term debt. ROGERS SUGAR INCOME FUND (TSX:RSI.UN) |
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