PREMIUM BRANDS INCOME FUND. Second Quarter 2009

Transcription

1 PREMIUM BRANDS INCOME FUND Interim Consolidated Financial Statements Second Quarter 2009 Twenty-six weeks ended June 27, 2009 and June 28, 2008 (Unaudited)

2 Premium Brands Income Fund NOTICE OF NO AUDITOR REVIEW OF INTERIM CONSOLIDATED FINANCIAL STATEMENTS Under National Instrument Continuous Disclosure Obligations, if an auditor has not performed a review of the interim financial statements, the financial statements must be accompanied by a notice indicating that they have not been reviewed by an auditor. The accompanying unaudited interim consolidated financial statements of the Fund have been prepared by and are the responsibility of the Fund s management. The Fund s independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity s auditor. August 5,

3 Premium Brands Income Fund CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands) Jun 27, Dec 31, Jun 28, Current assets: Cash and cash equivalents $ 777 $ 1,679 $ 674 Accounts receivable 37,111 35,020 36,486 Current portion of other assets (note 3) Inventories 52,326 44,088 41,231 Prepaid expenses 2,541 2,240 3,028 Future income taxes ,019 83,359 81,789 Capital assets 68,434 69,833 65,229 Investment in significantly influenced company (note 4) 1, Intangible assets 39,693 41,063 40,328 Goodwill 110, , ,237 Other assets (note 3) 2,814 2,170 1,683 $ 315,804 $ 307,194 $ 298,266 Current liabilities: Cheques outstanding $ 2,230 $ 1,354 $ 779 Bank indebtedness 8,617 9,676 11,189 Distributions payable (note 7) 1,723 1,725 1,710 Accounts payable and accrued liabilities 46,621 42,472 42,307 Current portion of long-term debt (note 5) ,412 55,613 56,140 Puttable interest in subsidiaries 4,050 4,224 3,774 Future income taxes 1,882 1, Long-term debt (note 5) 114, , , , , ,796 Non-controlling interest 1,030 1,155 1,085 Unitholders equity: Unitholders capital 156, , ,382 Accumulated earnings 61,632 52,911 42,766 Accumulated distributions declared (77,391) (67,052) (56,716) Accumulated other comprehensive loss (5,196) (4,419) (5,047) 135, , ,385 $ 315,804 $ 307,194 $ 298,266 The accompanying notes are an integral part of these consolidated financial statements. 3

4 Premium Brands Income Fund CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited and in thousands except per unit amounts) 13 weeks 13 weeks 26 weeks 26 weeks ended ended ended ended Jun 27, Jun 28, Jun 27, Jun 28, Revenue $ 124,298 $ 114,844 $ 228,201 $ 209,193 Cost of goods sold 91,360 82, , ,930 Gross profit 32,938 32,233 58,260 57,263 Selling, general and administrative expenses 21,384 19,923 40,399 37,912 11,554 12,310 17,861 19,351 Depreciation of capital assets 2,191 1,876 4,290 3,623 Interest and other financing costs 1,463 1,850 2,820 3,718 Amortization of intangible and other assets ,277 1,137 Amortization of financing costs Accretion of puttable interest in subsidiaries Unrealized loss (gain) on foreign currency contracts 439 (31) 455 (706) Equity in loss of significantly influenced company Earnings before income taxes and non-controlling interest 6,605 7,773 8,666 11,286 Provision for income taxes Current Future Earnings before non-controlling interest 6,605 7,422 8,596 10,873 Non-controlling interest - net of income taxes (44) (25) (125) 27 Earnings for the period $ 6,649 $ 7,447 $ 8,721 $ 10,846 Earnings per unit Basic and diluted $ 0.38 $ 0.43 $ 0.50 $ 0.62 Weighted average units outstanding (note 9) 17,580 17,444 17,583 17,444 The accompanying notes are an integral part of these consolidated financial statements. 4

5 Premium Brands Income Fund CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands) 13 weeks 13 weeks 26 weeks 26 weeks ended ended ended ended Jun 27, Jun 28, Jun 27, Jun 28, Cash flows from operating activities: Earnings before non-controlling interest $ 6,605 $ 7,422 $ 8,596 $ 10,873 Items not involving cash: Depreciation of capital assets 2,191 1,876 4,290 3,623 Amortization of intangible assets ,274 1,134 Amortization of other assets Amortization of financing costs Accretion of puttable interest in subsidiaries Loss (gain) on sale of assets 6 (2) 12 1 Restricted Trust Unit Plan accrual 139 (141) 234 (59) Long-term incentive plan accrual (1,716) 23 (1,561) 46 Accrued interest income 26 (32) (31) (44) Unrealized loss (gain) on foreign currency contracts 439 (31) 455 (706) Equity in loss of significantly influenced company Future income taxes ,546 10,305 13,695 15,574 Change in non-cash working capital (150) (1,851) (3,711) (865) 8,396 8,454 9,984 14,709 Cash flows from financing activities: Long-term debt - net (192) 2,995 7,282 2,982 Bank indebtedness and cheques outstanding (1,191) (169) (183) 1,570 Purchase of units under normal course issuer bid - - (115) - Distributions paid to unitholders (5,169) (5,128) (10,339) (10,257) (6,552) (2,302) (3,355) (5,705) Cash flows from investing activities: Collection of notes receivable Net proceeds from sales of assets Capital asset additions (2,146) (3,652) (3,356) (7,304) Business acquisitions - (3,030) (1,681) (3,030) Investment in significantly influenced company - - (1,380) - Promissory note from significantly influenced company - - (1,240) - Repayment of unit purchase loans Payments to shareholders of non-wholly owned subsidiaries (160) (100) (160) (100) Other (2,157) (6,292) (7,557) (9,490) Effects of exchange on cash and cash equivalents 38 (8) Decrease in cash and cash equivalents (275) (148) (902) (442) Cash and cash equivalents - beginning of period 1, ,679 1,116 Cash and cash equivalents - end of period $ 777 $ 674 $ 777 $ 674 Interest and other financing costs paid $ 1,499 $ 1,923 $ 2,967 $ 3,841 Net income taxes paid $ - $ 3 $ - $ 3 The accompanying notes are an integral part of these consolidated financial statements. 5

6 Premium Brands Income Fund CONSOLIDATED STATEMENTS OF ACCUMULATED EARNINGS (Unaudited and in thousands) 13 weeks 13 weeks 26 weeks 26 weeks ended ended ended ended Jun 27, Jun 28, Jun 27, Jun 28, Accumulated earnings - beginning of period $ 54,983 $ 35,319 $ 53,078 $ 32,497 Transition adjustment as of January 1 (note 2) - - (167) (577) Adjusted balance - beginning of period 54,983 35,319 52,911 31,920 Earnings for the period 6,649 7,447 8,721 10,846 Accumulated earnings- end of period $ 61,632 $ 42,766 $ 61,632 $ 42,766 CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS (Unaudited and in thousands) 13 weeks 13 weeks 26 weeks 26 weeks ended ended ended ended Jun 27, Jun 28, Jun 27, Jun 28, Accumulated other comprehensive loss - beginning of period $ (4,704) $ (5,495) $ (4,346) $ (5,156) Transition adjustment as of January 1 (note 2) - - (73) - Adjusted balance - beginning of period (4,704) (5,495) (4,419) (5,156) Other comprehensive loss Unrealized gain (loss) on interest rate swap (328) Unrealized foreign exchange translation (loss) gain on investment in self-sustaining foreign operations (745) 136 (1,015) 437 Accumulated other comprehensive loss - end of period $ (5,196) $ (5,047) $ (5,196) $ (5,047) CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Unaudited and in thousands) 13 weeks 13 weeks 26 weeks 26 weeks ended ended ended ended Jun 27, Jun 28, Jun 27, Jun 28, Earnings for the period $ 6,649 $ 7,447 $ 8,721 $ 10,846 Unrealized gain (loss) on interest rate swap (328) Unrealized foreign exchange translation (loss) gain on investment in self-sustaining foreign operations (745) 136 (1,015) 437 Comprehensive earnings $ 6,157 $ 7,895 $ 7,944 $ 10,955 The accompanying notes are an integral part of these consolidated financial statements. 6

7 Premium Brands Income Fund Notes to the Consolidated Financial Statements (Unaudited and in thousands except per unit amounts) 1. Nature of business Premium Brands Income Fund (the Fund) is an unincorporated, open-ended, limited purpose trust established under the laws of the Province of British Columbia pursuant to a Declaration of Trust. Through its subsidiaries, the Fund owns a broad range of leading specialty food businesses with manufacturing and distribution facilities located in British Columbia, Alberta, Saskatchewan, Manitoba and Washington State. In addition, the Fund owns proprietary food distribution and wholesale networks through which it sells both its own products and those of third parties. Due to the seasonal nature of the Fund s business, the results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or the full year. In general, the first quarter is the Fund s weakest, and the second and third quarters are its strongest. 2. Significant accounting policies Basis of preparation These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP) for interim reporting. Accordingly, they do not include all of the financial statement disclosures required by Canadian GAAP for annual financial statements and should be read in conjunction with the Fund s annual audited financial statements and notes for the year ended December 31, 2008 which are filed electronically through the System for Electronic Document Analysis and Retrieval (SEDAR) and are available on line at These unaudited interim consolidated financial statements follow the same accounting policies and methods of computation as used in the 2008 annual financial statements of the Fund, except as disclosed below changes in accounting policy Effective January 1, 2009 the Fund adopted the new Canadian Institute of Chartered Accountants (CICA) Handbook Section 3064 Goodwill and Intangible Assets which replaces Section 3062 Goodwill and Other Intangible Assets and Section 3450 Research and Development Costs. This standard establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. Concurrent with the adoption of this standard, Emerging Issues Committee (EIC) Abstract 27 Revenues and Expenditures During the Pre-operating Period was withdrawn. Accordingly, effective January 1, 2009 all pre-production and start-up costs are expensed as incurred. This change in accounting policy was adopted with retroactive restatement of prior periods and accordingly, the following changes have been made to the historical financial statements: As previously reported Adjustment As adjusted Consolidated balance sheet as at June 28, 2008: Other assets $ 2,158 $ (475) $ 1,683 Future income taxes - long-term liability 919 (55) 864 Accumulated earnings - ending 43,179 (413) 42,766 Accumulated other comprehensive loss (5,040) (7) (5,047) Consolidated balance sheet as at December 31, 2008: Other assets 2,485 (315) 2,170 Future income taxes - long-term liability 1,532 (75) 1,457 Accumulated earnings - ending 53,078 (167) 52,911 Accumulated other comprehensive loss (4,346) (73) (4,419) 7

8 As previously reported Adjustment As adjusted Consolidated statement of operations for the 13 weeks ended June 28, 2008: Amortization of intangible and other assets $ 683 $ (38) $ 645 Earnings 7, ,447 Consolidated statement of operations for the 26 weeks ended June 28, 2008: Amortization of intangible and other assets $ 1,211 $ (74) $ 1,137 Future income taxes 500 (90) 410 Earnings 10, ,846 Consolidated statement of accumulated earnings for the 13 weeks ended June 28, 2008: Accumulated earnings - ending 43,179 (413) 42,766 Consolidated statement of accumulated earnings for the 26 weeks ended June 28, 2008: Accumulated earnings - beginning 32,497 (577) 31,920 Accumulated earnings - ending 43,179 (413) 42,766 Consolidated statement of accumulated other comprehensive loss for the 13 and 26 weeks ended June 28, 2008: Accumulated other comprehensive loss - ending (5,040) (7) (5,047) Consolidated statement of comprehensive earnings for the 13 weeks ended June 28, 2008: Earnings 7, ,447 Unrealized foreign exchange translation gain on investment in self-sustaining foreign operations Comprehensive earnings 7, ,895 Consolidated statement of comprehensive earnings for the 26 weeks ended June 28, 2008: Earnings 10, ,846 Unrealized foreign exchange translation gain on investment in self-sustaining foreign operations 444 (7) 437 Comprehensive earnings 10, ,955 Also effective January 1, 2009 the Fund applied CICA issued EIC Abstract 173 Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. This EIC requires the Fund to take into account its own credit risk and the credit risk of the counterparty in determining the fair value of financial assets and financial liabilities, including derivative instruments, and is to be applied retrospectively without restatement of prior periods. The application of this new EIC did not have any significant impact on the Fund s financial statement disclosures or results of operations. International Financial Reporting Standards (IFRS) In February 2008 the Canadian Accounting Standards Board confirmed that IFRS will replace Canada s current GAAP for publicly accountable profit-oriented enterprises. The effective date of transition is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011 and will require the restatement, for comparative purposes, of its prior fiscal year. The Fund s IFRS implementation project consists of two elements. The first, which the Fund expects to complete in 2009, consists of determining the differences between the Fund s current accounting policies and the requirements under IFRS (referred to the diagnostics phase), identifying the impact of the options, if any, under IFRS on the Fund s accounting and business processes, selecting the appropriate policy and disclosure option, if any, under IFRS and preparing a detailed implementation plan. The second element, which the Fund expects to complete in early 2010, consists of designing and implementing the accounting and business processes, reports and internal controls needed to facilitate collection of the data required for reporting under IFRS. 8

9 To date, the Fund has formed a steering committee to oversee the project, hired a full time resource with a strong background in IFRS to assist in planning and implementation, and has completed the diagnostics phase of the project. Some of the key areas identified by the diagnostics phase where the Fund s financial reporting will likely be impacted by its conversion to IFRS include: property, plant and equipment, intangible assets, consolidation provisions, income taxes, puttable interest and impairment of assets. In addition, there are a number of choices available under IFRS relating to its first time adoption that will impact the Fund s reporting. The Fund will continue to evaluate these and other potential financial reporting changes caused by the adoption of IFRS. The Fund is not, however, at this time able to determine the exact impact that the transition will have on its financial reporting. 3. Other assets Jun 27, Dec 31, Jun 28, Notes receivable and employee unit purchase loans $ 1,012 $ 1,165 $ 1,324 Promissory note from significantly influenced company (note 4) 1, ,252 1,165 1,324 Less: current portion , ,027 Pension benefit asset Unrealized gain on foreign currency contracts Other $ 2,814 $ 2,170 $ 1, Investment in significantly influenced company On February 20, 2009 the Fund completed the acquisition of an interest in S.J. Irvine Fine Foods Ltd. (Irvine) for $2.6 million consisting of $1.38 million for a 25% equity interest and $1.24 million for a promissory note. As part of the transaction the Fund negotiated certain call options that enable it to increase its ownership in Irvine to 100% over time. Irvine, which started operations in January 2008, manufactures high quality processed meats for the foodservice and retail industries out of a modern 40,000 square foot facility located in Saskatoon, SK. 9

10 5. Long-term debt Jun 27, Dec 31, Jun 28, Revolving term facilities with no principal payments until maturity in July The loans bear interest at prime to prime plus 1.0% or at the banker s acceptance rate plus 1.0% to 2.75% based on the Fund s ratio of debt to cash flow calculated quarterly $ 42,500 $ 35,000 $ 30,000 Non-revolving term loan with no principal payments until maturity in July 2010 as long as the Fund s debt to cash flow ratio does not exceed 3.0:1 for two consecutive quarters. In the event that the Fund s debt to cash flow ratio does exceed 3.0:1 for two consecutive quarters, then the Fund will have to make monthly principal payments of $0.3 million if its debt to cash flow ratio is below 3.25:1 and $0.7 million if its debt to cash flow ratio is above 3.25:1. The principal payments will cease if subsequently the Fund s debt to cash flow ratio falls below 3.0:1 for two consecutive quarters. The loan bears interest at prime to prime plus 1.0% or at the banker s acceptance rate plus 1.0% to 2.75% based on the Fund s ratio of debt to cash flow calculated quarterly 64,000 64,000 64,000 US$6.1 million secured Industrial Development Revenue Bond with no principal payments until maturity in July The bond bears interest at the weekly variable rate for such bonds, which averaged % for the 26 weeks ended June 27, 2009, plus 1.0% to 2.0% based on the Fund s ratio of debt to cash flow calculated quarterly 7,063 7,427 6,200 Unsecured notes payable, bearing interest at a rate of 5% to 6.5% and due in 2010 to ,055 1,228 1,289 Other, including capital leases , , ,727 Deferred financing costs (416) (534) (554) Current portion (221) (386) (155) $ 114,263 $ 107,067 $ 101,018 Subsequent to June 27, 2009, the Fund renegotiated the terms of its senior credit facilities (see note 14). 6. Unitholders capital During the 26 weeks ended June 27, 2009, the Fund repurchased and cancelled 15,600 units (26 weeks ended June 28, nil) under its normal course issuer bid resulting in 16,980,294 units and 600,000 exchangeable units outstanding at June 27, Distributions During the six months ended June 27, 2009, the Fund declared distributions to unitholders of $9,986,000 or $0.588 per unit and Premium Brands Holdings Limited Partnership (PBHLP), a subsidiary of the Fund, declared distributions of $353,000 or $0.588 per unit to exchangeable unitholders. The aggregate amounts and record dates of these distributions are as follows: Amount Per unit Record date $ $ January 30, , February 27, , March 31, , April 30, , May 29, , June 30, , ,

11 In June 2009, the Fund and PBHLP declared aggregate distributions of $1.7 million to unitholders and exchangeable unitholders of record on June 30, 2009, which was paid subsequent to the quarter end and is reported as a current liability at June 27, Acquisition On March 6, 2009 the Fund acquired the business and working capital of Multi-National Foods (MNF) for approximately $1.7 million. MNF is a food brokerage business based in Calgary, AB. The Fund has accounted for this acquisition using the purchase method and the results of the acquisition have been included in the Fund s consolidated financial statements from the date of the acquisition. The following table summarizes the estimates of the fair values of the assets acquired and obligations assumed for this acquisition: Net working capital $ 1,641 Goodwill 40 Total purchase cost $ 1,681 Purchase cost $ 1,641 Transaction costs 40 Total purchase cost $ 1, Earnings per unit Earnings per unit is calculated using the weighted average number of Fund units and exchangeable limited partnership units outstanding for the 13 weeks and 26 weeks ended June 27, 2009, respectively, which was 17,580,294 and 17,582,709 (13 weeks and 26 weeks ended June 28, ,443,906). 10. Employee future benefits The total benefit cost of the Fund s defined benefit pension plan for the 26 weeks ended June 27, 2009 was $0.1 million (26 weeks ended June 28, $0.1 million). 11

12 11. Segmented information The Fund has two reportable segments, Retail and Foodservice. The Retail segment includes three operating segments consisting of its specialty food manufacturing and retail distribution businesses. The Foodservice segment includes three operating segments consisting of its three foodservice related businesses. The operating segments within each reportable segment have been aggregated as they have similar economic characteristics. 13 weeks 13 weeks 26 weeks 26 weeks ended ended ended ended Jun 27, Jun 28, Jun 27, Jun 28, Revenue Retail $ 57,433 $ 56,842 $ 104,922 $ 103,993 Foodservice 66,865 58, , ,200 $ 124,298 $ 114,844 $ 228,201 $ 209,193 Segment earnings (loss) before depreciation and amortization: Retail $ 8,582 $ 7,926 $ 13,052 $ 13,230 Foodservice 4,346 5,621 7,129 8,685 Corporate (1,374) (1,237) (2,320) (2,564) $ 11,554 $ 12,310 $ 17,861 $ 19,351 Depreciation of capital assets: Retail $ 1,507 $ 1,326 $ 2,969 $ 2,585 Foodservice Corporate $ 2,191 $ 1,876 $ 4,290 $ 3,623 Amortization of intangible and other assets: Retail $ 246 $ 220 $ 502 $ 524 Foodservice $ 630 $ 645 $ 1,277 $ 1,137 Segment earnings (loss): Retail $ 6,829 $ 6,380 $ 9,581 $ 10,121 Foodservice 3,451 4,845 5,381 7,431 Corporate (1,547) (1,436) (2,668) (2,961) 8,733 9,789 12,294 14,591 Interest and other financing costs 1,463 1,850 2,820 3,718 Amortization of financing costs Accretion of puttable interest in subsidiaries Unrealized loss (gain) on foreign currency contracts 439 (31) 455 (706) Equity in loss of significantly influenced company Provision for income taxes Earnings before non-controlling interest $ 6,605 $ 7,422 $ 8,596 $ 10,873 12

13 Segment assets 26 weeks 26 weeks ended ended Jun 27, Jun 28, Capital asset additions: Retail $ 2,363 $ 3,438 Foodservice 962 3,840 Corporate 31 _26 $ 3,356 $ 7,304 Goodwill additions: Retail $ - $ 1,521 Foodservice 40 - $ 40 $ 1,521 Jun 27, Jun 28, Total assets: Retail $ 155,206 $ 145,740 Foodservice 152, ,089 Corporate 8,012 _18,437 $ 315,804 $ 298,266 Revenue, segment earnings (loss) (defined as earnings (loss) before interest and other financing costs, amortization of financing costs, accretion of puttable interest in subsidiaries, unrealized loss (gain) on foreign currency contracts, equity in loss of significantly influenced company, income taxes and non-controlling interest) and capital assets and goodwill for the periods presented are geographically segmented as follows: 13 weeks 13 weeks 26 weeks 26 weeks ended ended ended ended Jun 27, Jun 28, Jun 27, Jun 28, Revenue: Canada $ 119,939 $ 111,239 $ 219,834 $ 202,477 United States 4,359 3,605 8,367 6,716 $ 124,298 $ 114,844 $ 228,201 $ 209,193 Segment earnings: Canada $ 8,513 $ 9,680 $ 11,998 $ 14,576 United States $ 8,733 $ 9,789 $ 12,294 $ 14,591 Jun 27, Jun 28, Capital assets and goodwill: Canada $ 168,433 $ 164,580 United States 10,710 9,886 $ 179,143 $ 174, Financial instruments Foreign currency risk The Fund has exposure to U.S. dollar currency exchange risk due to annual net U.S. dollar inventory purchases of approximately US$35.0 million. In order to help stabilize the cost of its U.S. dollar denominated purchases, the Fund, from time to time, enters into foreign currency contracts. The Fund does not hold foreign currency contracts for speculative purposes. 13

14 As at June 27, 2009, the Fund had outstanding foreign currency contracts for the purchase of US$6.0 million over the next 9 months at a blended rate of C$ As at June 27, 2009, these contracts have a fair value of $0.3 million favourable (June 28, $0.2 million favourable) and during the 13 weeks and 26 weeks ended June 27, 2009, respectively, the Fund recorded an unrealized loss of $0.4 million and $0.5 million in respect of these contracts (13 weeks and 26 weeks ended June 28, unrealized gain of nil and $0.7 million, respectively) in the consolidated statement of operations. Based on the U.S. dollar balance sheet exposure and the foreign currency contracts outstanding on June 27, 2009, a change of $0.01 in the value of the Canadian dollar relative to the U.S. dollar would have resulted in an unrealized gain (if the Canadian dollar weakens) or an unrealized loss (if the Canadian dollar strengthens) of approximately $0.1 million in its consolidated statement of operations. Interest rate risk All of the Fund s bank indebtedness and approximately 99% ( %) of its long-term debt bear interest at floating rates. The Fund manages some of its interest rate exposure by entering into interest rate swap contracts. During 2007, the Fund entered into an interest swap contract fixing the rate of interest on $32.0 million of its longterm debt for the three-year period ending July 6, 2010 at an effective rate of 5.05% plus 1.0% to 2.75%, based on the Fund s ratio of debt to cash flow calculated quarterly. The Fund has designated this contract as a cash flow hedge and, correspondingly, changes in its fair market value are recognized in the consolidated statement of accumulated other comprehensive loss and the consolidated statement of comprehensive earnings. As at June 27, 2009, the interest rate swap contract had a fair value of $1.8 million unfavourable (June 28, $1.0 million unfavourable) and during the 13 weeks and 26 weeks ended June 27, 2009, respectively, the Fund recorded an unrealized gain in respect of the swap of $0.3 million and $0.2 million (13 weeks and 26 weeks ended June 28, gain of $0.3 million and loss of $0.3 million, respectively) in other comprehensive loss. The fair value is included in accounts payable and accrued liabilities. Based on the interest rate swap contract outstanding on June 27, 2009, a change of 0.25 percentage points in the effective variable interest rate will result in the Fund recognizing a gain (if interest rates increase) or loss (if interest rates decrease) of approximately $0.1 million in its consolidated statement of comprehensive earnings. 13. Comparative figures Certain comparative figures have been reclassified to conform to the financial statement presentation adopted in Subsequent events (a) On July 22, 2009, the Fund completed a transaction by way of a plan of arrangement (the Plan of Arrangement ) with Thallion Pharmaceuticals Inc. ( Thallion ) which resulted in the Fund converting to a publicly traded corporation (the Conversion ) named Premium Brands Holdings Corporation ( New Premium Brands ). New Premium Brands did not retain any of the businesses carried on by Thallion but rather, pursuant to the Plan of Arrangement, Thallion transferred all of its assets, with the exception of its tax attributes, and all of its liabilities to a new subsidiary of its parent corporation ( New Thallion ). As a result, New Premium Brands businesses immediately after the Conversion consisted only of those owned by the Fund immediately prior to the Conversion. Furthermore, the existing trustees and management of the Fund became the board and management of New Premium Brands. The cost of the Conversion, which is subject to certain post-closing adjustments, is estimated at approximately $10.0 million consisting of $8.85 million paid to New Thallion and $1.15 million for transaction costs. (b) As part of the Fund s conversion back to a corporate structure in July 2009, it negotiated a number of changes to its senior credit facilities including the following: the maturity date on the Fund s existing senior credit facilities was extended to July 2012; the Fund added a $10.0 million non-revolving facility that was used to fund the cost of its conversion to a corporate structure; and a quarterly principal payment of $2.0 million with $1.25 million of the payment first going to reduce its new $10.0 million non-revolving credit facility and the balance to its revolving credit facilities (hence enabling it to redraw this amount to fund future capital projects and acquisitions). (c) On August 5, 2009 New Premium Brands Board of Directors approved the implementation of a Dividend Re- Investment Plan ( DRIP ) that will provide shareholders with the option to re-invest all or a portion of the dividends received by them in New Premium Brands shares. New Premium Brands expects to have the DRIP in place in the near future. 14