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General Donlee Income Fund Reports Record First Quarter Results And Increases Cash Distributions By 13%
Toronto, Canada, May 9, 2007 - General Donlee Income Fund (the "Fund") (TSX:
GDI.UN) today announced record first quarter results for the period ended
March 31, 2007.
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- Sales rose 33% to $13.3 million, driven by 75% sales growth in the
aerospace and power generation division
- Net earnings grew by 56%, at $2.5 million or $0.285 per Unit
- EBITDA(2) increased by 57% to $3.3 million
- Distributable cash(1) rose by 86%, at $2.6 million or $0.301 per Unit
- Per Unit monthly distributions increased for the third time in less
than a year, to $0.090 or $1.08 annually effective with the May 31
payment - representing a 64% increase in distributions over the last
nine months
- Highest sales order backlog, at $54.8 million, since initial public
offering in 2002, reflecting strong continued demand for General
Donlee's products in 2007 and beyond
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"General Donlee built on the momentum of its strong performance in 2006
with excellent financial results in the first quarter of 2007," said Stan
Spavold, Chairman of the Fund. "Our Unitholders are enjoying the benefits of
our success as our business continues to strengthen. In 2006 alone, our Unit
price increased by 49%, for a total return to Unitholders, including
distributions, of 62%. Building on that performance, in the first three months
of 2007 our unit price increased $2.55 or 37%. Clearly, our efforts to build
Unitholder value are working - and we look forward to continuing to deliver
improved results in the quarters ahead."
Based on the results for the quarter and the positive outlook, Management
and the Trustees have raised the monthly distribution to $0.090 per Unit
effective with the April distribution which is payable May 31, 2007 to
Unitholders of record at the close of business on May 28, 2007.
Financial Highlights
The following summary of financial data presents the interim consolidated
results of operations of the Fund for the three months ended March 31, 2007,
including comparative results for the same period in 2006.
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Three Months Ended
($ millions, except Unit and ------------------
per Unit amounts, unaudited) Mar. 31/07 Mar. 31/06
----------- -----------
Operations
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Sales 13.3 10.0
Gross profit 3.6 2.6
Net earnings 2.5 1.6
Net earnings per Unit $ 0.285(c) $ 0.175(a)
EBITDA(2) 3.3 2.1
EBITDA(2) % of sales 24.8% 21.0%
Distributions
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Distributable cash(1) 2.6 1.4
Distributable cash(1) per Unit $ 0.301(b) $ 0.161(a)
Cash distributions paid 2.0 1.5
Cash distributions paid per Unit (a) $ 0.230 $ 0.165
(a) Based on 8,947,000 Units outstanding for the first quarter of
2006.
(b) Based on weighted average of 8,650,260 Units outstanding for the
first quarter of 2007.
(1) Distributable cash is not a defined term under Canadian generally
accepted accounting principles ("GAAP"), but is determined by the
Fund as cash flow from operating activities (adjusted to remove
changes in non-cash working capital items including derivative
contracts, employee future benefits and future income taxes),
repayment of long-term debt, and is further reduced by the purchases
of property, plant and equipment (not funded by debt) and the reserve
for maintenance capital expenditures, which is estimated by
Management at $1.25 million for 2007 and $2.0 million for 2006. See
reconciliation of distributable cash below. Management believes that
this liquidity measure is a useful supplemental measure of
performance, as it provides investors with an indication of the
amount of cash available for distribution to Unitholders. Investors
are cautioned, however, that distributable cash should not be
construed as an alternative to using net earnings as a measure of
profitability, or to using the statements of cash flows. Further, the
Fund's method of calculating distributable cash may not be comparable
to measures used by other companies or trusts. For details of
distributable cash, see the table below.
(2) EBITDA is not a recognized measure under Canadian generally accepted
accounting principles (GAAP). EBITDA is earnings before interest,
taxes, depreciation and amortization. Management uses, and investors
and other readers may use EBITDA, among other performance measures to
access the operating performance of the business. Reference should be
made to the EBITDA reconciliation to a GAAP measure on page 6 of
Management's Discussion and Analysis for the period ended March 31,
2007 incorporated by reference herein. EBITDA does not have a
standardized meaning and is, therefore unlikely to be comparable with
similar measures presented by other issuers.
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Overall Financial Performance for three months ended March 31, 2007
General Donlee built on the momentum of its strong performance in 2006
with excellent consolidated financial results in the first quarter of 2007. In
the first quarter, our total sales reached $13.3 million, up by $3.3 million
or 33% over the comparable quarter in 2006. Aerospace and power generation
division sales grew by an impressive 75%, at $8.4 million, an increase of
$3.6 million over the same quarter in 2006. This outstanding result is
attributable to higher shipments of commercial and military aerospace
products, thanks to the continuing strength of the aerospace industry and the
equipment upgrades the Company has made in recent years to allow it to
capitalize on the growing demand. The Company's industrial products division
delivered sales worth $4.9 million, a slight decrease of $0.3 million or 6%
below the same quarter in 2006, mostly as a result of the timing of demands
from its customers. Overall, General Donlee's improved sales in the first
quarter of 2007 generated improvements in margins, net earnings and operating
cash flows compared to 2006.
The Fund achieved net earnings of $2.5 million for the three months ended
March 31, 2007, reflecting a 56% increase compared to the same period in 2006,
when its net earnings were $1.6 million. The improved net earnings in the
first quarter of 2007 helped to generate distributable cash(1) of $2.6 million
or $0.301 per Unit, an increase of 86% over the $1.4 million or $0.161 per
Unit in distributable cash(1) in the comparable period in 2006. In the first
quarter of 2007, the cash distributions paid per Unit increased by 33%, at
$2.0 million or $0.230 per Unit, compared to $1.5 million or $0.165 per Unit
in the comparable quarter of 2006.
The Fund's balance sheet continues to be strong, and at December 31,
2006, showed working capital of $12.4 million, down slightly from the
$13.2 million at December 31, 2006, but sufficient to support the Company's
on-going business operations and the current level of distributions. The
consolidated net debt to equity ratio of the Fund at March 31, 2007 remains
conservative at 0.48:1.00. The Company expects continued strong performance in
both divisions and accordingly, that the balance sheet and overall financial
position of the Fund will continue to strengthen.
Distributable Cash(1)
Cash distributions to Unitholders increased by 33% per Unit in the first
quarter of 2007 over 2006. For the three months ended March 31, 2007,
distributable cash(1) was $2.6 million or $0.301 per Unit, an increase of 86%
as compared to the comparable quarter in 2006, when distributable cash(1) was
$1.4 million or $0.161 per Unit.
The following table shows the calculation of distributable cash(1).
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Three Months Ended
Mar. 31 Mar. 31
($000, except per Unit amounts) 2007 2006
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Cash provided by operating activities 1,516 1,208
Adjust for net changes in non-cash working
capital balances related to operations 1,319 792
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Cash provided by operating activities before
changes in non-cash working capital balances 2,835 2,000
Other adjustments:
Derivative contracts 146 (121)
Employee future benefits 90 58
Future income taxes (153) -
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2,918 1,937
Prorated reserve for maintenance capital
expenditures (313) (500)
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Distributable cash(1) 2,605 1,437
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Cash distributions paid to Unitholders 1,990 1,476
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Net earnings per Unit $0.285 $0.175
Distributable cash(1) per Unit $0.301 $0.161
Cash distributions paid per Unit $0.230 $0.165
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As a means of further enhancing Unitholder value, the Fund also
repurchased 4,600 Units at prevailing market prices in the first quarter of
2007, under the Fund's normal course issuer bid. As of March 31, 2007 the
total number of trust Units repurchased and cancelled is 298,840.
Outlook
"We are proud to be building on our excellent 2006 performance with even
stronger results in the first three months of 2007," said Spavold. "Our
results continue to reflect the positive influence of the combination of an
upturn in the aerospace industry, excellent ongoing work to maintain customer
relationships, prudent investments in equipment that allow us to increase
capacity and profitability, and the commitment of our highly skilled
workforce."
Forecasts for 2007 in the aerospace industry predict even more activity
than has been seen in recent years - and General Donlee's commercial aerospace
segment results bear that out, as quarter by quarter, they continue to deliver
higher volumes. General Donlee's sales order backlog, at $54.8 million, is
stronger than ever, reflecting solid demand for the Company's products through
the balance of the year and beyond. General Donlee also expects to sustain
steady sales activity in its industrial products division in 2007, as it
continues to focus on solidifying customer relationships and on operational
improvements, so that it can generate increased sales revenue and higher gross
profit margins.
Looking ahead, General Donlee anticipates further improvements in
profitability thanks to investments it has made in new equipment, which will
increase capacity and enhance efficiency. The May 2007 increase in the monthly
per Unit distribution, to $0.090, which was the third increase since August
2006, indicates the Company's confidence for the balance of 2007.
"We look forward to continuing our work to deliver leading products at
the highest quality standards, and to working with our customers to further
strengthen our relationships - so that we can continue delivering greater
Unitholder value in the quarters ahead," said Spavold.
Company Profile
The Fund is a trust established to hold the securities of General Donlee
Limited, a leading diversified manufacturer of precision-machined products for
the military, commercial and general aerospace industries, and a specialist in
the manufacture of precision-machined products for the industrial products and
power generation industries. General Donlee's operating strategy focuses on
targeting niche markets for products that are aligned with its sophisticated
manufacturing capabilities and skilled workforce.
SEDAR Filings
Today the Fund filed its interim Consolidated Financial Statements
(including the notes thereto) and Management's Discussion and Analysis for the
three months ended March 31, 2007 with SEDAR at www.sedar.com. These documents
are also available on the Fund's website at www.generaldonlee.com on the
Financial Reports page.
In addition to these documents, the Fund also files its Annual Report,
its Annual Information Form, its Notice of Annual Meeting and Management
Information Circular, and its interim financial statements with SEDAR.
Forward-Looking Information
As with all forward-looking statements, caution must be exercised to
ensure that appropriate interpretation is made. Certain forward-looking
statements are based on information currently available to Management, but are
subject to a number of uncertainties and risks that could cause actual results
to differ materially from the results discussed in the forward-looking
statements. These uncertainties and risks include, but are not limited to:
dependence on commercial aircraft sales and defence procurement; dependence on
power generation sales and sales to the industrial sector; production rates;
shipping schedules and timing of deliveries; dependence on key customers;
dependence on third party suppliers and manufacturers; raw material costs;
competition; satisfying product specifications; product liability and warranty
claims; environmental and other government regulation; quality certification
requirements; hedging effects; interest and foreign exchange rates; leverage
and restrictive debt covenants; continued availability of credit facilities;
regulatory requirements; reliance on key personnel and our skilled workforce;
changes in accounting policies; the ability to obtain orders, contract awards
and terminations; input costs; possible changes to the tax laws affecting
income trusts; and domestic and international economic conditions. In
addition, these forward-looking statements relate to the date on which they
are made. Although the forward-looking statements contained herein are based
upon what Management believes to be reasonable assumptions, the Fund cannot
assure Unitholders that actual results will be consistent with these
forward-looking statements, and the Fund disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In formulating the forward-looking
statements herein, Management has assumed that business and economic
conditions affecting it will continue substantially in the ordinary course,
including without limitation with respect to industry conditions, general
levels of economic activity, regulation, taxes, foreign exchange rates and
interest rates, that there will be no material changes in its facilities,
equipment, customer and employee relations, credit arrangements or credit and
collections experience, and that the integration of new equipment will proceed
relatively smoothly. Further information can be found in the disclosure
documents filed by General Donlee Income Fund with the securities regulatory
authorities, available at www.sedar.com or through the Fund's website at
www.generaldonlee.com.
For further information:
Gerald Thain
Chief Financial Officer,
tel: 416.743.4417
email: gthain@generaldonlee.com
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