Spinrite Income Fund Q1 disappoints

13 May '06

3 min read

Revenue for the first quarter of 2006 was $20.5 million, a decrease of 46.1 percent, or $17.5 million from $38.0 million in the first quarter of 2005. Sales were affected by high retail inventory levels, declines in consumer demand for fancy yarn and the continued liquidation of fancy yarns through non-traditional outlets.

Compared to the first quarter of 2005, sales of fancy yarns decreased 76.0 percent to account for 25.5 percent of total sales in the first quarter of 2006, compared to 53.8 percent in the prior year. Sales of classic yarns decreased 18.6 percent in the first quarter compared to last year. Management believes this decline in classic yarns was caused by cautious retail buying rather than a decline in consumer spending.

Spinrite reported Adjusted EBITDA(a) of $3.5 million for the first quarter, a decrease of 69.7 percent, or $8.1 million from the comparable period in 2005. Adjusted EBITDA margin decreased from 30.7 percent to 17.3 percent as a result of lower sales and a decrease in gross profit percentage.

During the first quarter, the Fund repaid $2.7 million on the bank operating facility.

Spinrite Income Fund 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. It also supports its market with patterns that provide customers with creative ideas for knitted products.

Spinrite has approximately 520 employees at its fully integrated manufacturing and distribution centre in Listowel, Ontario.

Spinrite Income Fund

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