Chemtrade Logistics Income Fund Reports Strong 2010 First Quarter Results

Published in Business and Finance on Monday, May 10th 2010 at 14:10 GMT by Market Wire
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 - the strength of demand for our products over the remainder of the year; - the long-term benefits of a strengthened balance sheet and contracts with Canfor and Guangdong ZhongCheng Chemicals; and - the sustainability of the Fund's distribution rate.

 CHEMTRADE LOGISTICS INCOME FUND Consolidated Balance Sheets (in thousands of dollars) March 31, December 31, 2010 2009 ------------------------------------------------------------------------- (unaudited) ASSETS Current assets Cash and cash equivalents $ 48,855 $ 19,885 Accounts receivable 65,901 75,748 Inventories 22,016 20,107 Prepaid expenses and other assets (note 8(b)) 2,059 2,284 ------------------------------------------------------------------------- 138,831 118,024 Restricted cash 2,640 2,599 Notes receivable 2,540 2,627 Property, plant and equipment 151,186 156,960 Other assets 2,137 2,164 Future tax asset 14,722 14,084 Intangibles 101,831 108,389 Goodwill 88,900 90,630 ------------------------------------------------------------------------- $ 502,787 $ 495,477 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND UNITHOLDERS' EQUITY Current liabilities Accounts payable 45,833 42,918 Accrued and other liabilities (notes 5(f) and 8(b)) 43,077 42,920 Distributions payable 3,067 3,067 Income taxes payable 1,572 2,855 ------------------------------------------------------------------------- 93,549 91,760 Long-term bank debt (note 4) 101,370 160,105 Convertible unsecured subordinated debentures (note 4) 67,898 - Other long-term liabilities (notes 5(f) and 8(b)) 10,408 19,075 Post-employment benefits 3,761 4,051 Future tax liability 16,910 20,082 Unitholders' equity Units (note 5(b)) 377,144 377,144 Contributed surplus 9,720 9,720 Equity component of convertible debentures (note 5(c)) 8,395 - Deficit (138,504) (143,112) Accumulated other comprehensive (loss) (note 6) (47,864) (43,348) ------------------------------------------------------------------------- 208,891 200,404 Subsequent event (note 4) ------------------------------------------------------------------------- $ 502,787 $ 495,477 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to consolidated financial statements CHEMTRADE LOGISTICS INCOME FUND Consolidated Statements of Earnings (in thousands of dollars, except per unit amounts) (unaudited) Three Months Ended ------------------ March 31, March 31, 2010 2009 ------------------------------------------------------------------------- Revenue $ 126,824 $ 161,823 Cost of sales and services (excluding depreciation disclosed below) 89,658 137,522 ------------------------------------------------------------------------- Gross profit 37,166 24,301 Selling, general, administrative and other costs 12,689 6,025 ------------------------------------------------------------------------- Earnings before the under-noted 24,477 18,276 Unrealized foreign exchange (gain) loss and ineffectiveness of cash flow hedges (414) 3,903 Debt extinguishment costs (note 4) 571 - Depreciation and amortization 10,813 11,165 Net interest and accretion expense 2,264 2,103 ------------------------------------------------------------------------- Earnings before income taxes 11,243 1,105 Income taxes Current 1,055 708 Future (3,621) (924) ------------------------------------------------------------------------- (2,566) (216) ------------------------------------------------------------------------- Net earnings $ 13,809 $ 1,321 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net earnings per unit (note 5(d)) Basic $ 0.45 $ 0.04 Diluted $ 0.45 $ 0.04 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cost of sales and services for the three months ended March 31, 2010 does not include $5,423 (2009 - $5,537) of depreciation relating to plant buildings and equipment. See accompanying notes to consolidated financial statements. CHEMTRADE LOGISTICS INCOME FUND Consolidated Statements of Changes in Unitholders' Equity (in thousands of dollars) (unaudited) Three Months Ended ------------------ March 31, March 31, 2010 2009 ------------------------------------------------------------------------- Units Balance, beginning of period $ 377,144 $ 389,932 Re-purchase of units - (12,788) ------------------------------------------------------------------------- Balance, end of period $ 377,144 $ 377,144 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Contributed surplus Balance, beginning of period $ 9,720 $ 5,272 Re-purchase of units - 4,448 ------------------------------------------------------------------------- Balance, end of period $ 9,720 $ 9,720 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Equity component of convertible debentures Balance, beginning of period $ - $ - Issuance of debentures (notes 4 and 5(c)) 8,395 - ------------------------------------------------------------------------- Balance, end of period $ 8,395 $ - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Deficit Balance, beginning of period $ (143,112) $ (153,141) Net earnings 13,809 1,321 Distributions (9,201) (9,288) ------------------------------------------------------------------------- Balance, end of period $ (138,504) $ (161,108) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Accumulated other comprehensive (loss) (note 6) Balance, beginning of period $ (43,348) $ (24,127) Other comprehensive (loss) income (4,516) 3,808 ------------------------------------------------------------------------- Balance, end of period $ (47,864) $ (20,319) ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. Consolidated Statements of Comprehensive Income (in thousands of dollars) (unaudited) Three Months Ended ------------------ March 31, March 31, 2010 2009 ------------------------------------------------------------------------- Net earnings $ 13,809 $ 1,321 Change in unrealized loss on translation of self-sustaining foreign operations (5,531) 5,480 Change in unrealized loss on derivatives designated as cash flow hedges (116) (1,672) Losses on derivatives designated as cash flow hedges in prior years transferred to net income in the current year 1,131 - ------------------------------------------------------------------------- Other comprehensive (loss) income (4,516) 3,808 ------------------------------------------------------------------------- Comprehensive income $ 9,293 $ 5,129 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. CHEMTRADE LOGISTICS INCOME FUND Consolidated Statements of Cash Flows (in thousands of dollars) (unaudited) Three Months Ended ------------------ March 31, March 31, 2010 2009 ------------------------------------------------------------------------- Cash provided by (used in): Operating activities: Net earnings $ 13,809 $ 1,321 Items not affecting cash: Depreciation and amortization 10,813 11,165 Future income taxes (3,621) (924) Accretion expense 168 153 Change in fair value of derivatives and unrealized foreign exchange (gain) loss (358) 3,753 ------------------------------------------------------------------------- 20,811 15,468 Decrease (increase) in working capital 8,462 (25,358) ------------------------------------------------------------------------- 29,273 (9,890) Financing activities: Distributions to unitholders (9,201) (9,390) Re-purchase of units - (8,340) Re-payment of long-term debt (54,414) - Issuance of convertible debentures 80,000 - Financing transaction costs (3,859) - Debt extinguishment costs (2,303) - (Decrease) increase in other long-term liabilities (6,374) 873 ------------------------------------------------------------------------- 3,849 (16,857) Investing activities: Decrease in restricted cash (40) - Additions to property, plant and equipment, net of insurance proceeds (note 3) (4,055) (6,087) ------------------------------------------------------------------------- (4,095) (6,087) Effect of exchange rates on cash held in foreign currencies (57) (39) ------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 28,970 (32,873) Cash and cash equivalents - beginning of year 19,885 48,050 ------------------------------------------------------------------------- Cash and cash equivalents - end of year $ 48,855 $ 15,177 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental information: Cash taxes paid $ 2,339 $ 3,269 Cash interest paid $ 2,161 $ 2,285 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. CHEMTRADE LOGISTICS INCOME FUND Notes to Consolidated Financial Statements (in thousands of dollars) (unaudited) March 31, 2010 ------------------------------------------------------------------------- 1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS: Chemtrade Logistics Income Fund (the "Fund") commenced operations on July 18, 2001 when it completed an Initial Public Offering and purchased various assets and related businesses from Marsulex Inc. The Fund operates in four business segments: Sulphur Products & Performance Chemicals (SPPC), Pulp Chemicals, International and Corporate. For additional information regarding the Fund's business segments see Note 7. These interim consolidated financial statements of the Fund have been prepared by management in accordance with accounting principles generally accepted in Canada. These interim consolidated financial statements include the accounts of the Fund and its wholly-owned subsidiaries. Inter-company transactions and balances have been eliminated. These interim consolidated financial statements have been prepared following the same accounting policies and methods of computation as the annual consolidated financial statements of the Fund for the year ended December 31, 2009. These interim consolidated financial statements do not contain all disclosures required by generally accepted accounting principles and accordingly should be read in conjunction with the annual consolidated financial statements and the notes thereto. 2. RECENT ACCOUNTING PRONOUNCEMENTS: (a) Convergence to International Financial Reporting Standards (IFRS) In January 2006, the CICA Accounting Standards Board (AcSB) adopted a strategic plan for the direction of accounting standards in Canada. The AcSB has recently confirmed that accounting standards in Canada for public companies are to converge with IFRS effective for fiscal periods beginning on or after January 1, 2011. The Fund has assembled an IFRS transition team which is continuing to assess the impact of the convergence of Canadian GAAP and IFRS, and will implement the new IFRS standards. (b) Business combinations In January 2009, the CICA issued Handbook Sections 1582, Business Combinations; 1601, Consolidated Financial Statements; and 1602, Non- Controlling Interests. These sections replace Handbook Sections 1581, Business Combinations; and 1600, Consolidated Financial Statements. Section 1582 establishes standards for the accounting for business combinations that is equivalent to the business combination accounting standard under IFRS. Section 1582 is applicable for the Fund's business combinations with acquisition dates on or after January 1, 2011. Early adoption of this section is permitted. Sections 1601 and 1602 establish standards for the preparation of consolidated financial statements and for accounting for a non- controlling interest in a subsidiary in the consolidated financial statements subsequent to a business combination. Sections 1601 and 1602 are applicable for the Fund's interim and annual consolidated financial statements for its fiscal year beginning January 1, 2011. Early adoption of these sections is also permitted. If the Fund chooses to early adopt any one of these sections, the other two sections must also be adopted at the same time. The Fund is currently evaluating the effect of these new sections on the consolidated financial statements. 3. INSURANCE CLAIM: During the third quarter of 2008, an incident occurred at the Fund's Beaumont, Texas facility, which resulted in property damage and business interruption. During the first quarter of 2009, the Fund incurred capital expenditures of US$2,587 relating to the repair of damaged property at the Beaumont facility. Since these repairs were covered under the Fund's insurance policy, these expenditures were included in Accounts receivable as they had not been recovered at the end of the period. 4. LONG-TERM DEBT: During the three months ended March 31, 2010, the Fund entered into an agreement with a syndicate of underwriters to issue $80,000 principal amount of convertible unsecured subordinated debentures ("the Debentures"). The Fund granted the underwriters of the issuance an over-allotment option to purchase up to an additional $12,000 aggregate principal amount of Debentures, at the same price, exercisable in whole or in part at any time for a period of 30 days following the closing. The Fund incurred transaction costs of $3,859, which included the underwriters' fee and other expenses of the offering. The Debentures bear interest at a rate of 6% per annum, payable semi- annually in arrears on March 31 and September 30 in each year commencing September 30, 2010 and will mature on March 31, 2017. The Debentures are convertible, at the option of the holder, into units of the Fund at any time prior to the earlier of the maturity date and the date of redemption specified by the Fund at a conversion price of $16.00 per unit. The Debentures will not be redeemable before and including March 31, 2013. On or after April 1, 2013 and prior to April 1, 2015, the Fund may, at its option, redeem the Debentures in whole or in part provided that the volume weighted average trading price of the trust units of the Fund on the Toronto Stock Exchange during the 20 consecutive trading days ending on the fifth trading day preceding the date on which the notice of redemption is given is not less than 125% of the conversion price. On or after April 1, 2015 and prior to the maturity date, Chemtrade may, at its option, redeem the Debentures, in whole or in part, from time to time at par plus accrued and unpaid interest. Subsequent to March 31, 2010, as allowed under provisions of the agreement to issue the Debentures, the underwriters purchased an additional $10,000 principal amount of the Debentures, increasing the aggregate gross proceeds of the public offering to $90,000. Upon issuance, the Debentures were separated into liability and equity components based on the respective estimated fair values at the date of issuance. The fair value of the liability component is estimated based on the present value of future interest and principal payments due under the terms of the Debentures using a discount rate for similar debt instruments without a conversion feature. The value assigned to the equity component is the estimated fair value ascribed to the holder's option to convert. Interest expense on the Debentures is determined by applying an effective interest rate to the outstanding liability component. The difference between actual cash interest accrued and interest expense is accreted to the liability component. The following table allocates the Debentures between debt and equity: Cost of Borrowing Debt Equity Total --------------------------------------------------------------------- Convertible debentures 6.0% $ 71,310 $ 8,690 $ 80,000 Transaction costs (1)(2) (3,439) (295) (3,734) --------------------------------------------------------------------- At issuance 67,871 8,395 76,266 Accretion expense 27 - 27 --------------------------------------------------------------------- As at March 31, 2010 $ 67,898 $ 8,395 $ 76,293 --------------------------------------------------------------------- --------------------------------------------------------------------- (1) Transaction costs are capitalized and offset with the debt and equity portions of the debentures and amortized over the life of the debentures using the effective interest rate. (2) Transaction costs offset against the equity portion of the convertible debentures are net of income tax recovery of $125. For the three months ended March 31, 2010, the net interest expense was $133, comprised of accrued interest of $106 and accretion expense of $27. The Fund utilized a portion of the net proceeds of the offering to repay $54,414 (US$52,853) of its existing long-term debt. The Fund realized a foreign exchange loss of $215 and wrote off the remaining transaction costs related to the portion of the long-term debt repaid in the amount of $196, both of which are included in debt extinguishment costs on the Consolidated Statements of Earnings. The Fund also collapsed the interest rate swap arrangements related to the portion of its long-term debt that was repaid. As a result of collapsing these arrangements, the Fund had to pay $2,303 to settle the arrangements, however, recognized a loss of only $160 due to amounts previously recognized in net income. This loss has been recorded in debt extinguishment costs on the Consolidated Statements of Earnings. 5. UNITS: (a) Authorized: Unlimited number of units. (b) Outstanding: Number of Units Amount --------------------------------------------------------------------- Units Balance - December 31, 2009 and March 31, 2010 30,670,470 $ 377,144 --------------------------------------------------------------------- --------------------------------------------------------------------- (c) Equity component of convertible debentures: As described in Note 3, during the three months ended March 31, 2010, the Fund entered into an agreement to issue $80,000 principal amount of Debentures. The Debentures are convertible, at the option of the holder, into units of the Fund at any time prior to the earlier of the maturity date and the date of redemption specified by the Fund at a conversion price of $16.00 per unit. For the three month period ended March 31, 2010, there were no debentures converted into units. (d) Net earnings per unit: Net earnings per unit has been calculated on the basis of the weighted average number of units outstanding. The following table provides a breakdown of the numerator and denominator used in the calculation of net earnings per unit and diluted net earnings per unit. Numerator ----------------------------------------------------------------- Three Months Ended ------------------ March 31, March 31, 2010 2009 ----------------------------------------------------------------- Net earnings $ 13,809 $ 1,321 Net interest and accretion expense on convertible debentures 133 - ----------------------------------------------------------------- Diluted net earnings $ 13,942 $ 1,321 ----------------------------------------------------------------- ----------------------------------------------------------------- Denominator ----------------------------------------------------------------- Three Months Ended ------------------ March 31, March 31, 2010 2009 ----------------------------------------------------------------- Weighted average number of units 30,670,470 31,267,886 Weighted average convertible debenture dilutive units 444,444 - ----------------------------------------------------------------- Weighted average number of diluted units 31,114,914 31,267,886 ----------------------------------------------------------------- ----------------------------------------------------------------- (e) Distributions: Distributions paid for the three month period ended March 31, 2010 were $9,201 (2009 - $9,390). All of the Fund's distributions are discretionary. (f) Long-term incentive plan: The Fund operates a Total Return Long-Term Incentive Plan (TR LTIP) which grants cash awards based on achieving total Unitholder return over a performance period. Total Unitholder return consists of changes in unit price and distributions paid to Unitholders. The Fund treats these awards as liabilities with the value of these liabilities being re-measured at each reporting period, based upon changes in the intrinsic value of the awards. Any gains or losses on re-measurement are recorded in the Consolidated Statements of Earnings, provided that the aggregate compensation cost accrued during the performance period is not adjusted below zero. For the three month period ended March 31, 2010, the Fund recorded an expense of $2,174 (2009 - $3,433) related to the TR LTIP. As at March 31, 2010 a liability of $12,977 (December 31, 2009 - $15,979) has been recorded, of which $8,023 (December 31, 2009 - $5,177) is included in Accrued and other liabilities and $4,954 (December 31, 2009 - $10,802) is included in Other long-term liabilities. 6. ACCUMULATED OTHER COMPREHENSIVE (LOSS): The components of accumulated other comprehensive (loss) as at March 31, 2010 and 2009 and other comprehensive (loss) for the three months then ended were as follows: Accumulated Opening Ending other comp- balance Transferred balance rehensive December 31, to net March 31, (loss) 2009 Net change income 2010 --------------------------------------------------------------------- Unrealized (loss) gain on translation of self- sustaining foreign operations $ (40,935) $ (5,531) $ - $(46,466)(1) (Loss) gain on derivatives designated as cash flow hedges (2,413) (116) 1,131(2) (1,398)(3) --------------------------------------------------------------------- Accumulated other comprehensive (loss) $ (43,348) $ (5,647) $ 1,131 $ (47,864) --------------------------------------------------------------------- --------------------------------------------------------------------- Accumulated Opening Ending other comp- balance balance rehensive December 31, March 31, (loss) 2008 Net change 2009 ------------------------------------------------------- Unrealized (loss) gain on translation of self- sustaining foreign operations $ (19,411) $ 5,480 $(13,931)(1) (Loss) gain on derivatives designated as cash flow hedges (4,716) (1,672) (6,388)(3) ------------------------------------------------------- Accumulated other comprehensive (loss) $ (24,127) $ 3,808 $ (20,319) ------------------------------------------------------- ------------------------------------------------------- (1) Net of income tax expense of $nil (2009 - $nil). (2) Ineffectiveness of cash flow hedges and losses on derivatives designated as cash flow hedges in prior years transferred to net income in the current year. (3) Net of cumulative income tax recovery of $1,400 (2009 - $3,839). 7. BUSINESS SEGMENTS: The Fund operates in four business segments: Sulphur Products & Performance Chemicals (SPPC), Pulp Chemicals (Pulp), International (Intl) and Corporate (Corp). SPPC markets, removes and/or produces merchant and regenerated sulphuric acid, liquid sulphur dioxide, sodium hydrosulphite, elemental sulphur and phosphorous pentasulphide. These products are marketed primarily to North American customers. Pulp produces sodium chlorate and crude tall oil. These products are marketed primarily to Canadian customers. International provides removal and marketing services for elemental sulphur and sulphuric acid. These products are marketed to customers in Europe, the Mediterranean, North Africa, Central and South America, North America, as well as in the Pacific region. Corporate is a non-operating segment that provides centralized services such as treasury, finance, information systems, human resources, legal and risk management. Three Months Ended March 31, 2010 --------------------------------------------------------------------- SPPC Pulp Intl Corp Total --------------------------------------------------------------------- Revenue from external customers $ 73,500 $ 10,911 $ 42,413 $ - $126,824 Earnings before the under-noted 16,507 4,782 10,285 (7,097) 24,477 Unrealized foreign exchange (gain) loss and ineffectiveness of cash flow hedges - - - (414) (414) Debt extinguishment costs 571 571 Depreciation and amortization 7,979 2,354 480 - 10,813 Net interest and accretion expense 1,723 405 3 133 2,264 Income taxes (2,288) - 817 (1,095) (2,566) Net earnings (loss) 9,093 2,023 8,985 (6,292) 13,809 Total assets 272,841 77,690 151,995 261 502,787 Goodwill 58,667 - 30,233 - 88,900 Intangibles 65,063 32,841 3,927 - 101,831 Capital expenditures 3,849 199 13 (6) 4,055 --------------------------------------------------------------------- --------------------------------------------------------------------- Three Months Ended March 31, 2009 --------------------------------------------------------------------- SPPC Pulp Intl Corp Total --------------------------------------------------------------------- Revenue from external customers $ 99,695 $ 11,943 $ 50,185 $ - $161,823 Earnings before the under- noted 9,145 4,786 3,821 524 18,276 Unrealized foreign exchange (gain) loss and ineffectiveness of cash flow hedges - - - 3,903 3,903 Depreciation and amortization 8,293 2,272 600 - 11,165 Net interest and accretion expense 1,655 496 (48) - 2,103 Income taxes (866) - 650 - (216) Net earnings (loss) 63 2,018 2,619 (3,379) 1,321 Capital expenditures 5,758 100 40 189 6,087 --------------------------------------------------------------------- --------------------------------------------------------------------- December 31, 2009 --------------------------------------------------------------------- SPPC Pulp Intl Corp Total --------------------------------------------------------------------- Total assets $241,940 $103,821 $148,512 $ 1,204 $495,477 Goodwill 60,097 - 30,533 - 90,630 Intangibles 69,934 34,192 4,263 - 108,389 --------------------------------------------------------------------- --------------------------------------------------------------------- Geographic segments: The Fund operates primarily in Canada, the United States and Europe. Revenue is attributed to customers based on location of customer. Revenue --------------------------------------------------------------------- Three Months Ended ------------------ March 31, March 31, 2010 2009 --------------------------------------------------------------------- Canada $ 26,842 $ 31,523 US and other 57,569 80,115 Europe 42,413 50,185 --------------------------------------------------------------------- $ 126,824 $ 161,823 --------------------------------------------------------------------- --------------------------------------------------------------------- Property, Plant and Equipment, Goodwill and Intangibles --------------------------------------------------------------------- March 31, December 31, 2010 2009 --------------------------------------------------------------------- Canada $ 107,392 $ 110,876 US and other 192,721 202,174 Europe 41,804 42,929 --------------------------------------------------------------------- $ 341,917 $ 355,979 --------------------------------------------------------------------- --------------------------------------------------------------------- For the three months ended March 31, 2010, there were no producers from which the Fund obtained product that accounted for more than 10% of the Fund's total revenue. For the three months ended March 31, 2009, the Fund obtained product from a producer that accounted for 17.7% of the Fund's total revenue. For the three months ended March 31, 2010, revenue from a customer accounted for 10.3% (2009 - 11.5%) of the Fund's total revenues. 8. FINANCIAL INSTRUMENTS: (a) Categories of financial assets and liabilities: The following table summarizes information regarding the carrying values of the Fund's financial instruments: March 31, December 31, 2010 2009 ----------------------------------------------------------------- Held for trading: Cash and cash equivalents $ 48,855 $ 19,885 Restricted cash 2,640 2,599 Notes receivable 2,540 2,627 Derivatives designated as held for trading - gain/(loss) (583) 1,007 Loans and receivables: Accounts receivable 65,901 75,748 Other financial liabilities: Accounts payable 45,833 42,918 Accrued and other liabilities 43,077 42,920 Distributions payable 3,067 3,067 Derivatives designated as cash flow hedges - gain/(loss) (3,999) (6,677) Long-term debt 169,268 160,105 ----------------------------------------------------------------- ----------------------------------------------------------------- (b) Derivatives and hedging: ------------------------------------------------------------------------- March 31, 2010 December 31, 2009 Fair Value Fair Value Notional Notional Amount Asset Liability Amount Asset Liability ------------------------------------------------------------------------- Cash flow hedges: Interest rate swaps US$100,284 $ - $ 3,999 US$153,138 $ - $ 6,677 Derivatives not designated in a formal hedging relationship: Foreign exchange contracts(1) - 261 844 - 1,166 159 Commodity forward contracts(2) N/A 119 119 N/A 148 148 ------------------------------------------------------------------------- Total $ 380 $ 4,962 $ 1,314 $ 6,984 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Current $ 380 $ 963 $ 1,314 $ 307 Non-current - 3,999 - 6,677 ------------------------------------------------------------------------- Total $ 380 $ 4,962 $ 1,314 $ 6,984 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) See below for notional amounts. (2) Includes natural gas forward contracts, commitments to buy and sell commodities and commodity forward contracts related to those commitments. The Fund has entered into swap arrangements with its principal banker, which fix the LIBOR component of its interest rates on all of its outstanding term debt until August 2011. During the three months ended March 31, 2010, the Fund collapsed a portion of its swap arrangements. Losses are included in accrued and other liabilities and other long-term liabilities with the offset included in other comprehensive income, except for the amortization of the fair value liability of the interest rate swaps entered into during the first quarter of 2009 which is included in unrealized foreign exchange (gain) loss and ineffectiveness of cash flow hedges. The Fund has entered into foreign exchange contracts to manage its exposure to foreign currencies. The Fund buys and sells specific amounts of currencies at pre-determined dates and exchange rates, which are matched with the anticipated operational cash flows. Contracts in place at March 31, 2010 include future contracts to sell US$7,829, C$7,602 and (euro) 2,729 at weighted average exchange rates of (euro)0.76, (euro) 0.65 and US$1.34, respectively, for periods through to January 2011. The Fund's International business segment has commitments to buy and sell commodities and has entered into commodity forward contracts to manage its exposure to commodity price changes. The commitments to buy and sell commodities are treated as derivatives and are measured at fair value. The commodity forward contracts are derivatives and are measured at fair value. At March 31, 2010 and December 31, 2009, the net unrealized value of these transactions is not significant. (c) Fair values of financial instruments: Fair value is the value that would be agreed upon in an arm's length transaction between willing and knowledgeable counter- parties. The carrying amounts of cash and cash equivalents, accounts receivable, restricted cash, notes receivable, accounts payable, accrued and other liabilities and distributions payable approximate their fair values because of the short-term maturity of these financial instruments. The carrying amount of long-term debt, excluding transaction costs, approximates fair value as the debt accrues interest at prevailing market rates. CHEMTRADE LOGISTICS INCOME FUND MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2010

 - all of the risks identified in "RISKS AND UNCERTAINTIES" section; - all of the forward-looking statements in the "OUTLOOK" section; - the amount of any TR LTIP payouts and the amounts to be accrued under the TR LTIP; - the ability to comply with the new emission limits imposed by the EPA and the expected cost of compliance; - the estimated impact of the Canadian/U.S. dollar exchange rate on the Fund's business; - the anticipated tax characterization of planned distributions; - the Fund's ability to renew its term debt at maturity; - the implementation of planned maintenance capital expenditures, as well as the cost and timing thereof; - the use and sufficiency of cash flows from operating activities; and - the potential impact of recent accounting pronouncements, including the timing of the implementation of various steps in connection with the transition to IFRS.

 Three Months Ended ------------------ March 31, March 31, ($'000 except per unit amounts) 2010 2009 ------------------------------------------------------------------------- Revenue $ 126,824 $ 161,823 Net earnings $ 13,809 $ 1,321 Net earnings per unit - Basic $ 0.45 $ 0.04 - Diluted $ 0.45 $ 0.04 Total assets $ 502,787 $ 574,336 Long-term bank debt $ 101,370 $ 191,757 Convertible unsecured subordinated debentures $ 67,898 $ - EBITDA(3) $ 24,477 $ 18,276 EBITDA per unit(1) $ 0.80 $ 0.58 Cash flows from operating activities $ 29,273 $ (9,890) Cash flows from operating activities per unit(1) $ 0.95 $ (0.32) Adjusted cash flows from operating activities(3) $ 18,808 $ 15,428 Adjusted cash flows from operating activities per unit(1)(3) $ 0.61 $ 0.49 Distributable cash after maintenance capital expenditures(3) $ 14,935 $ 9,634 Distributable cash after maintenance capital expenditures per unit(1)(3) $ 0.49 $ 0.31 Distributions declared $ 9,201 $ 9,288 Distributions declared per unit(2) $ 0.30 $ 0.30 Distributions paid $ 9,201 $ 9,390 Distributions paid per unit(2) $ 0.30 $ 0.30 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Based on weighted average number of units outstanding for the period of: 30,670,470 31,267,886 (2) Based on actual number of units outstanding on record date. (3) See Non-GAAP Measures.

 Three Months Ended ------------------ March 31, March 31, ($'000) 2010 2009 ------------------------------------------------------------------------ Net earnings $ 13,809 $ 1,321 Add: Unrealized foreign exchange (gain) loss and ineffectiveness of cash flow hedges (414) 3,903 Debt extinguishment costs 571 - Depreciation and amortization 10,813 11,165 Net interest and accretion expense 2,264 2,103 Net taxes (2,566) (216) ------------------------------------------------------------------------ EBITDA $ 24,477 $ 18,276 ------------------------------------------------------------------------ ------------------------------------------------------------------------

 Three Months Ended ------------------ March 31, March 31, ($'000) 2010 2009 ------------------------------------------------------------------------- Cash flows from operating activities $ 29,273 $ (9,890) Add (deduct): Changes in non-cash working capital and other items (10,465) 25,318 ------------------------------------------------------------------------- Adjusted cash flows from operating activities 18,808 15,428 Less: Maintenance capital expenditure 3,873 5,794 ------------------------------------------------------------------------- Distributable cash after maintenance capital expenditure 14,935 9,634 Less: Non-maintenance capital expenditure(1) 182 293 ------------------------------------------------------------------------- Distributable cash after all capital expenditure $ 14,753 $ 9,341 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Non-maintenance capital expenditures are either pre-funded, usually as part of a significant acquisition and related financing or are considered to expand the capacity of the Fund's operations.

 Three Months Ended ------------------ March 31, March 31, ($'000) 2010 2009 ------------------------------------------------------------------------- Revenue $ 73,500 $ 99,695 Earnings before the under-noted (EBITDA) 16,507 9,145 Depreciation and amortization (7,979) (8,293) Net interest and accretion expense (1,723) (1,655) Income tax recovery 2,288 866 ------------------------------------------------------------------------- Net earnings $ 9,093 $ 63 ------------------------------------------------------------------------- -------------------------------------------------------------------------

 Three Months Ended ------------------ March 31, March 31, ($'000) 2010 2009 ------------------------------------------------------------------------- Revenue $ 10,911 $ 11,943 Earnings before the under-noted (EBITDA) 4,782 4,786 Depreciation and amortization (2,354) (2,272) Net interest and accretion expense (405) (496) ------------------------------------------------------------------------- Net earnings $ 2,023 $ 2,018 ------------------------------------------------------------------------- -------------------------------------------------------------------------

 Three Months Ended ------------------ March 31, March 31, ($'000) 2010 2009 ------------------------------------------------------------------------- Revenue $ 42,413 $ 50,185 Earnings before the under-noted (EBITDA) 10,285 3,821 Depreciation and amortization (480) (600) Net interest (expense) income (3) 48 Income tax (expense) (817) (650) ------------------------------------------------------------------------- Net earnings $ 8,985 $ 2,619 ------------------------------------------------------------------------- -------------------------------------------------------------------------

 Three Months Ended ------------------ March 31, March 31, ($'000) 2010 2009 ------------------------------------------------------------------------- Cost of services (recoveries) $ 7,097 $ (524) Recovery (loss) before the under-noted (EBITDA) (7,097) 524 Unrealized foreign exchange gain (loss) and ineffectiveness of cash flow hedges 414 (3,903) Debt extinguishment costs (571) - Net interest and accretion expense (133) - Income tax recovery 1,095 - ------------------------------------------------------------------------- Net earnings $ (6,292) $ (3,379) ------------------------------------------------------------------------- -------------------------------------------------------------------------

 Three Months Year Year Ended Ended Ended March 31, December 31, December 31, ($'000) 2010 2009 2008 ------------------------------------------------------------------------- Cash flows from operating activities $ 29,273 $ 41,133 $ 147,904 Net earnings 13,809 46,920 40,331 Distributions paid during period 9,201 37,003 40,086 Excess of cash flows from operating activities over cash distributions paid 20,072 4,130 107,818 Excess of net income over cash distributions paid $ 4,608 $ 9,917 $ 245 ------------------------------------------------------------------------- -------------------------------------------------------------------------

 Distribution Total Record Date Payment Date Per Unit ($'000) ------------------------------------------------------------------------- Three months ended March 31: January 29, 2010 February 26, 2010 $ 0.10 $ 3,067 February 26, 2010 March 31, 2010 0.10 3,067 March 31, 2010 April 30, 2010 0.10 3,067 ------------------------------------------------------------------------- Total for the three months ended March 31, 2010 $ 0.30 $ 9,201 ------------------------------------------------------------------------- -------------------------------------------------------------------------

 Distribution Total Record Date Payment Date Per Unit ($'000) ------------------------------------------------------------------------- Three months ended March 31: January 30, 2009 February 27, 2009 $ 0.10 $ 3,124 February 27, 2009 March 31, 2009 0.10 3,087 March 31, 2009 April 30, 2009 0.10 3,077 ------------------------------------------------------------------------- Total for the three months ended March 31, 2009 $ 0.30 $ 9,288 ------------------------------------------------------------------------- -------------------------------------------------------------------------

 Foreign Non-Business Other Income Income Total ------------------------------------------------------------------------- 2009 74.8% 25.2% 100.0% 2010(1) 74.0% 26.0% 100.0% ------------------------------------------------------------------------- (1) Represents anticipated tax characterization of planned distributions. The actual tax treatment of 2010 distributions will be determined by February 28, 2011.

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 SUMMARY OF QUARTERLY RESULTS Three Months Ended ------------------ March 31, December 31, September 30, June 30, ($'000) 2010 2009 2009 2009 ------------------------------------------------------------------------- Revenue $ 126,824 $ 132,756 $ 126,989 $ 124,624 Cost of sales and services 89,658 92,289 95,660 96,539 ------------------------------------------------------------------------- Gross profit 37,166 40,467 31,329 28,085 Selling, general, administrative and other costs 12,689 16,410 9,803 10,625 ------------------------------------------------------------------------- Earnings before the under-noted 24,477 24,057 21,526 17,460 Unrealized foreign exchange (gain) loss and ineffectiveness of cash flow hedges (414) 1,109 (6,802) (9,147) Debt extinguishment costs 571 - - - ------------------------------------------------------------------------- Depreciation and amortization 10,813 10,623 11,086 11,272 Loss (gain) on disposal of property, plant and equipment - (15) 94 - Net interest and accretion expense 2,264 2,126 2,122 2,342 Income taxes (net) (2,566) (2,277) (4,509) (580) ------------------------------------------------------------------------- Net earnings $ 13,809 $ 12,491 $ 19,535 $ 13,573 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three Months Ended ------------------ March 31, December 31, September 30, June 30, ($'000) 2009 2008 2008 2008 ------------------------------------------------------------------------- Revenue $ 161,823 $ 292,789 $ 393,971 $ 274,276 Cost of sales and services 137,522 255,955 346,615 230,432 ------------------------------------------------------------------------- Gross profit 24,301 36,834 47,356 43,844 Selling, general, administrative and other costs 6,025 12,630 5,662 13,558 ------------------------------------------------------------------------- Earnings before the under-noted 18,276 24,204 41,694 30,286 Unrealized foreign exchange (gain) loss and ineffectiveness of cash flow hedges 3,903 12,195 3,520 446 Depreciation and amortization 11,165 11,240 9,893 10,145 Gain on disposal of property - - (250) - Net interest and accretion expense 2,103 4,070 3,639 2,795 Income taxes (net) (216) (841) 5,402 3,053 ------------------------------------------------------------------------- Net earnings (loss) $ 1,321 $ (2,460) $ 19,490 $ 13,847 ------------------------------------------------------------------------- -------------------------------------------------------------------------

 Contractual Obligations Less Than 1-3 4-5 After ($'000) Total 1 Year Years Years 5 Years ------------------------------------------------------------------------- Long-Term Debt $ 181,869 $ - $ 101,869 $ - $ 80,000 Operating Leases 53,752 14,690 25,041 11,624 2,397 Interest on Long-Term Debt 40,098 9,673 11,225 9,600 9,600 ------------------------------------------------------------------------- Total Contractual Obligations $ 275,719 $ 24,363 $ 138,135 $ 21,224 $ 91,997 ------------------------------------------------------------------------- -------------------------------------------------------------------------

------------------------------------------------------------------------- Key Activity Milestones Status/Deadlines ------------------------------------------------------------------------- IFRS Conversion Scoping Review of current The review is complete Phase standards vs. IFRS. and the determination Identification of of financial impact is significant in progress. differences. Changes to Canadian Assessment of GAAP and IFRS are available resources. monitored and assessed on an ongoing basis. Assignment and training of cross-functional and core team. Monitoring of changes to Canadian GAAP and IFRS and their impact to the Fund. ------------------------------------------------------------------------- Decisions on Accounting Formal review of All review sessions Policies and IFRS1 differences in each have been completed. area with the core team and members of All IFRS1 and cross-functional team accounting policy as required. choice decisions made. Assessment of differences between IFRS and the Fund's current practices. Decision on accounting policy choices and IFRS1 for each assessed area. ------------------------------------------------------------------------- Information Technology Identification of IT The Fund has upgraded Evaluation requirements, both its ERP software in hardware and software, readiness for IFRS and for IFRS conversion. believes that minimal further IT changes Development of will be required. implementation plan for new or upgraded software and any additional hardware required. ------------------------------------------------------------------------- Control Environment: Review and assessment Appropriate changes to Internal Control Over of impact of accounting ensure the integrity Financial Reporting policy choices and of internal control and Disclosure changes relating to over financial Controls and IFRS conversion. reporting and Procedures disclosure controls and Update of internal procedures are being control testing made based on IFRS procedures and accounting policy documentation for all decisions and IFRS1 accounting policy choices. choices and changes. Implementation of appropriate changes: - MD&A Disclosure Requirements - Key Performance Indicators - Investor Relations Communication Process ------------------------------------------------------------------------- Financial Statement Identification of Skeleton financial Preparation transactions impacted statements will be by IFRS conversion. developed in 2010. An assessment of these transactions, appropriate changes and re-mapping will be completed. The assessment and re-mapping will form the skeleton of the IFRS compliant financial statements. ------------------------------------------------------------------------- Financial Impact Analysis of differences Quantification of Analysis for between Canadian GAAP differences between Transactional Areas and IFRS that was Canadian GAAP and IFRS completed will be during 2010. quantified. Senior Management to review and sign-off. ------------------------------------------------------------------------- Business Activities Identification of Assessments and Impact impacts on business identifications of activities to be impacts of the completed. conversion to IFRS are underway. Completion of any re-negotiations. Identification of impacts is to be completed during 2010 and any necessary re-negotiations are to be completed during that period. ------------------------------------------------------------------------- Impact of Adoption of IFRS --------------------------

 Property, Plant and Equipment -----------------------------

 Intangibles -----------

 Share-Based Payments --------------------

Publication Contributing Sources

Market Wire

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Chemtrade Logistics Income Fund Reports Strong 2010 First Quarter Results