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General Donlee Income Fund Reports Third Quarter 2005 Results
Toronto, Canada, Nov 14, 2005 - General Donlee Income Fund (TSX: GDI.UN) today
announced its financial results for the third quarter ended September 30,
2005. Sales for the period were $7.9 million and net earnings were
$1.5 million. Distributable cash(1) for the third quarter totaled
$1.1 million, or $0.121 per unit. Distributions paid in the third quarter
totaled $0.9 million or $0.097 per unit and included the increased regular
distribution of $0.04 per unit for August and a special extra distribution of
$0.04 per unit.
Financial Highlights
The following summary of financial data reflects the interim consolidated
results of operations of the Fund for the three-month and nine-month periods
ended September 30, 2005:
<<
Three Months Ended Nine Months Ended
------------------ ------------------
($ millions, except unit Sept. 30, Sept. 30, Sept. 30, Sept. 30,
and per unit amounts, unaudited) 2005 2004 2005 2004
--------- --------- --------- ---------
Sales $ 7.9 $ 6.3 $ 24.8 $ 22.2
Gross profit 2.0 1.2 5.4 5.0
Net earnings before goodwill charge 1.5 nil 2.0 0.6
Net earnings before charge
per unit (a) $ 0.167 $ 0.003 $ 0.223 $ 0.063
Net earnings (loss) 1.5 (9.7) 2.0 (22.5)
Net earnings (loss) per unit (a) $ 0.167 $(1.080) $ 0.223 $(2.517)
Distributable cash(1) 1.1 0.6 3.2 2.4
Distributable cash per unit (a) $ 0.121 $ 0.066 $ 0.352 $ 0.269
Cash distributions paid 0.9 0.8 1.3 3.6
Cash distributions paid
per unit (a) $ 0.097 $ 0.087 $ 0.147 $ 0.400
(a) based on 8,947,000 units.
During the third quarter of 2005 results for both the aerospace and power
generation division and the industrial products division reflected
improvements over the prior year. Commercial aerospace performed solidly in
the aerospace and power generation division and the improvement in the
industrial products division reflected gains in all areas. Planned military
shipments were delayed, likely to the fourth quarter, due to challenges with
outsourcing suppliers. Although the capital goods markets remained relatively
flat, our margins did continue to improve.
In the current quarter, distributable cash(1) was $ 1.1 million or $0.121
per unit, bringing the year-to-date total to $3.2 million or $0.352 per unit.
With the payment of the August distribution at the end of September, the
monthly targeted distribution rate was increased from $0.0084 per unit to
$0.04 per unit. In addition a special additional distribution of $0.04 was
declared and paid at the end of September.
Today, the Fund's trustees declared the October 2005 distribution at an
increased rate of $0.055 per unit which will be paid to Unitholders on
November 30, 2005, to holders of record on November 25, 2005. The new targeted
distribution rate is equivalent to $0.66 per unit per annum, reflecting a
37.5% increase over the previous level of $0.48 per unit per annum.
Management's Discussion and Analysis
The following is a discussion of the Interim Consolidated Financial
Statements of General Donlee Income Fund (the "Fund") for the three- and nine-
month periods ended September 30, 2005. It provides an overview of the results
of operations and the financial condition of the Fund. Comparisons are
supplied for the similar three- and nine-month periods ended September 30,
2004. The Interim Consolidated Financial Statements have been prepared in
accordance with Canadian generally accepted accounting principles and are
reported in Canadian dollars. The following discussion should be read in
conjunction with the audited Consolidated Financial Statements of General
Donlee Income Fund, including notes thereto, and Management's Discussion and
Analysis ("MD&A") for the year ended December 31, 2004. These financial
reports and the audited Consolidated Financial Statements, including notes,
for the year ended December 31, 2004, as well as the three- and nine-month
periods ended September 30, 2005 including a full set of financial notes, are
available on General Donlee Income Fund's Website at www.generaldonlee.com and
on www.sedar.com.
Company Profile
General Donlee Income Fund (the "Fund") is a trust established to hold
the securities of General Donlee Limited ("General Donlee" or the "Company").
General Donlee is a leading diversified manufacturer of precision-machined
products for the military, commercial and general aerospace industries, and
also a specialist in the manufacture of precision-machined products for the
industrial products and power generation industries. The Fund was established
on March 14, 2002 and commenced operations on May 3, 2002, when it completed
an initial public offering.
General Donlee's operating strategy focuses on targeting niche markets
for products that are aligned with its sophisticated manufacturing
capabilities and skilled workforce. Management believes that the future growth
of the Company is dependent on its ability to leverage these resources into
long-term contracts for complex machining programs.
Overall Performance
Sales for the first nine months of 2005 compared to the same period in
2004 reflect a 12% increase. Sales in the Company's aerospace and power
generation products division increased 7% compared to the same period in 2004.
The increase would have been greater, but the delayed shipment of the
previously discussed military products was deferred likely until the fourth
quarter, due primarily to outside processing delays. In the industrial
products division, shipments in the first nine months of 2005 increased 18%
over the same period in the prior year. The improvement in the level of
shipments in the industrial products division is a result of some of the
operational issues being resolved with the appointment in the first quarter of
a new interim general manager and a concentrated effort to ship products on a
timely basis.
Since the Fund commenced operations in May 2002, market conditions have
been extremely challenging. The fallout of September 11, 2001 has severely
impacted the aerospace business, the capital equipment markets have been in
the down part of the cycle and the strengthened Canadian dollar versus the
U.S. dollar has further negatively impacted gross margins. Despite these
conditions, the Fund has continued to generate positive cash flows and to pay
a cash distribution to Unitholders each month, without impairing its balance
sheet.
There is more than adequate working capital to support the Company's
on-going current operations. The consolidated net debt to equity ratio of the
Fund is low with modest interest requirements. With the pick-up in the
aerospace and power generations products division expected to continue and a
strong effort in the industrial products division to further restore margins,
when markets do recover, General Donlee expects to be in a good position to
take advantage of the opportunities. Effective with the August distribution
paid in September, the Fund increased the targeted monthly distribution level
to $0.04 per unit and paid a special additional cash distribution of $0.04 per
unit.
Results of Operations
Financial Summary
The Interim Consolidated Financial Statements of the Fund include the
operations of the aerospace and power generation products division and the
industrial products division of General Donlee. The Fund's consolidated sales
for the third quarter ended September 30, 2005 totaled $7.9 million, up
$1.6 million or 25% from the $6.3 million recorded in the comparable quarter
in 2004. For the nine months to-date in 2005, total sales were $24.8 million,
up $2.6 million or 12% from the $22.2 million in the comparable period last
year.
In the third quarter of 2005, the Fund recorded net earnings of
$1.5 million. In the third quarter of 2004, the Fund broke even before
recording a goodwill impairment charge of $9.7 million. Net loss in the third
quarter of 2004 totaled $9.7 million after the goodwill impairment charge. For
the nine-month period ended September 30, 2005, the Fund earned $2.0 million.
In the comparable nine-month period for 2004, the Fund incurred a net loss of
$22.5 million, reflecting a non-cash goodwill impairment charge of
$23.1 million and earnings from operations of $0.6 million.
Sales
Total Fund sales for the quarter ended September 30, 2005 were
$7.9 million, an increase of $1.6 million compared to the similar period in
2004. For the nine-month period ended September 30, 2005, sales were
$24.8 million an increase of $2.6 million, compared to the similar period last
year.
Third Quarter Year-to-date
-------------- Incr/ -------------- Incr/
($ millions) 2005 2004 (Dec) 2005 2004 (Dec)
---------------------- ----------------------
Aerospace and power
generation products 4.7 3.6 1.1 13.3 12.4 0.9
Industrial
products 3.2 2.7 0.5 11.5 9.8 1.7
----------------------------------------------
7.9 6.3 1.6 24.8 22.2 2.6
----------------------------------------------
Aerospace and Power Generation Products Division
For the third quarter and year-to-date periods ended September 30, 2005,
the aerospace and power generation division's net increase in sales compared
to the same period in the prior year can be attributed as follows:
($ millions) Increase / (Decrease)
---------------------
Third Quarter Year-to-Date
------------- ------------
Military aerospace (0.4) (1.5)
Commercial aerospace 1.8 3.9
Industrial (0.2) 0.0
Power generation (0.1) (1.5)
------ -------
1.1 0.9
------ -------
In the third quarter of 2005, the volume increase in the commercial
aerospace segment reflects increased shipments, as was the case for the
improvement in the last quarter.
For the nine months to September 30, 2005, military shipments that had
been scheduled for the third quarter have been delayed likely until the fourth
quarter. Commercial aerospace business remains strong, whereas activity in the
power generation segment continues to be substantially below the level of last
year.
Industrial Products Division
In the third quarter ended September 30, 2005, the industrial products
division's sales of gears, splines and assemblies were $3.2 million, an
increase of $0.5 million, or 19% over the same period in 2004. The increased
shipments in the quarter reflect the steady volume of orders that were
received during the quarter.
The division's sales for the nine months ended September 30, 2005 were
$11.5 million, an increase of $1.7 million, or 17% over the same period last
year, reflecting the shipment of the delayed orders from 2004 and the increase
in new orders received during the year. The industrial products division is
currently experiencing increased production activity with its largest
customer.
Foreign Currency
In both the third quarter and year-to-date periods ended September 30,
2005, the Canadian dollar was on average 8% higher versus the U.S. dollar for
the comparable periods in 2004, which had adverse impacts on consolidated
sales of approximately $0.3 million and $1.0 million respectively. These
levels exclude the impact of foreign exchange forward contracts.
Backlog
The sales order backlog at September 30, 2005 totaled $50.2 million, an
increase of 5% compared to the $47.7 million total at December 31, 2004, and
is also up 16% from the $43.3 million at the end of the second quarter in June
of this year. The aerospace and power generation division accounts for
approximately 93% of the total backlog, while the industrial products
division, which has a shorter product cycle, accounts for the balance. The
proportion contributed by the industrial products division is similar to last
year. The backlog increase in the period reflects an excess of new orders
received compared with shipments in the period and includes the 3-year
$5 million agreement announced in mid-October. The impact of foreign currency
rate changes on sales backlog levels is immaterial.
Gross Profit
Gross profit for the third quarter and the nine-month period ended
September 30 2005 has improved over the same quarter and the nine-month period
ended September 30, 2004.
2005 2004
---- ----
Gross % of Gross % of
($ millions) Profit Sales Profit Sales
------ ----- ------ -----
Quarter ended Sept. 30 2.0 25.5% 1.2 18.5%
Nine months ended Sept. 30 5.4 21.7% 5.0 22.7%
The gross profit percentage level for the three months ended September
30, 2005 is significantly improved over the 16.8% level achieved in the first
quarter of the year. It reflects increased operating efficiencies, as most of
the operational issues have been resolved in the industrial products division.
In addition sales volume increases and product mix in the aerospace and power
generation division contributed to an improved gross margin level. The lower
gross profit percentage level for the nine months ended September 30, 2005
relative to the 2004 level is the result of adverse product mix, reduced
margins in the industrial products segment due to rising steel prices and
operational issues and a higher Canadian dollar versus the U.S. dollar (as
discussed in the Foreign Currency section above). Rising energy costs have had
a minimal impact on the Company's costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the quarter ended
September 30, 2005 were $0.8 million or 9.7% of sales, and included Fund costs
of $0.1 million. Selling, general and administrative expenses for the same
period ended September 30, 2004, were $0.8 million or 13.2% of sales, and
included Fund costs of $0.2 million.
Selling, general and administrative expenses for the nine-month period
ended September 30, 2005 were $2.6 million or 10.3% of sales, and included
Fund costs of $0.6 million. Selling, general and administrative expenses for
the nine-month period ended September 30, 2004 were $2.4 million or 10.9% of
sales, and included Fund costs of $0.6 million. The major increase in costs in
2005 was the result of one-time employment-related costs in the industrial
products division in the first quarter.
Interest Expense
Interest expense was $0.1 million on the $9.7 million term loan for the
quarter ended September 30, 2005. Interest expense for the same period ended
September 30, 2004 was $0.1 million. Interest expense for the nine-month
period ended September 30, 2005 of $0.3 million was approximately equal to the
total for the nine-month period ended September 30, 2004.
Foreign Exchange Gain
Foreign exchange gain for the quarter ended September 30, 2005 reflects
mainly the net impact of the Company's foreign exchange forward contracts
which, when marked-to-market at September 30, 2005, produced a foreign
exchange gain of $0.4 million. Foreign exchange gain for the third quarter
ended September 30, 2004 was $0.4 million. Foreign exchange gain on the
Company's forward exchange forward contracts for the nine-month period ended
September 30, 2005 was $0.4 million. Foreign exchange gain during the
nine-month period ended September 30, 2004 was $0.3 million.
The Company enters into foreign exchange forward contracts to seek to
minimize its exposure to fluctuations in foreign currency exchange rates.
These derivative products do not qualify for hedge accounting treatment;
therefore, the contracts are recorded on the consolidated balance sheet at
fair value with a corresponding gain or loss recorded in earnings. As exchange
rates fluctuate, foreign exchange gains and losses vary from period to period.
Amortization
Third Quarter Year-to-date
------------- ------------
($ millions) 2005 2004 2005 2004
---- ---- ---- ----
Property and equipment (a) 0.5 0.4 1.5 1.3
Other assets 0.0 0.7 0.9 2.0
--- --- --- ---
0.5 1.1 2.4 3.3
-------------------------------------------------------------------------
(a) Included in cost of sales
The value of the contracted sales agreements (Other assets) that were
acquired in May 2002 were fully amortized at the end of April 2005, resulting
in a reduction in amortization expense of $0.6 million for the third quarter
of 2005.
Gain on Disposal of Property, Plant and Equipment
A gain of $0.03 million was recognized in the first quarter of 2004 as a
result of the sale of a grinder that was replaced by a new grinder in the
industrial products division.
Goodwill
Effective June 30, 2002, the Fund adopted the CICA accounting standard
set out in Section 3062, "Goodwill and Other Intangible Assets". Under this
standard, goodwill is no longer amortized, but instead is tested for
impairment.
During the second quarter of 2004, the Fund recorded a non-cash
impairment charge of $13.5 million. Allocation of the impairment charge was
$10.35 million against the aerospace and power generation products division
and $3.15 million against the industrial products division. During the third
quarter of 2004, the Fund recorded a non-cash impairment charge of
$9.65 million against the industrial products division.
For the nine months ended September 30, 2004, the total goodwill
impairment charge was $23.15 million, allocated $10.35 million to the
aerospace and power generation products division and $12.80 million to the
industrial products division.
Income Taxes
At December 31, 2004, the Company had non-capital loss carry forwards and
other undeducted items totaling $3.4 million for which no benefit has been
recognized in the consolidated financial statements. Income earned by the Fund
that is distributed annually to Unitholders is not currently subject to
taxation in the Fund but is taxed at the individual Unitholder level.
Net Earnings (Loss)
Net earnings of the Fund for the quarter ended September 30, 2005 were
$1.5 million. For the comparable quarter ended September 30, 2004, the net
loss of the Fund was $9.7 million after the goodwill impairment charge. For
the nine-month period ended September 30, 2005, net earnings were
$2.0 million, which compared to a net loss of $22.5 million after the goodwill
impairment charge of $23.1 million for the nine-month period ended September
30, 2004. The following table outlines the earnings components that
contributed to these consolidated results.
Third Quarter Year-to-date
------------- ------------
2004 2004
---- ----
Before After Before After
($ millions) 2005 G/W G/W 2005 G/W G/W
---- --- --- ---- --- ---
Aerospace and power
generation products 1.0 0.1 0.1 1.8 1.0 (9.3)
Industrial products 0.6 0.1 (9.6) 0.8 0.2 (12.6)
Fund (0.1) (0.2) (0.2) (0.6) (0.6) (0.6)
----- ----- ----- ----- ----- -----
1.5 0.0 (9.7) 2.0 0.6 (22.5)
----- ----- ----- ----- ----- ------
G/W: goodwill impairment charge
Quarterly Financial Information
-------------------------------------------------------------------------
($000, except per 2005 2005 2005 2004
unit amounts) Third Second First Fourth Rolling
Quarter Quarter(b) Quarter(b) Quarter 12 months
-------------------------------------------------------------------------
Total sales 7,867 8,823 8,063 8,063 32,816
-------------------------------------------------------------------------
Net earnings (loss)
before goodwill
charge 1,493 878 (372) 558 2,557
-------------------------------------------------------------------------
Net earnings (loss) 1,493 878 (372) 558 2,557
-------------------------------------------------------------------------
Net earnings (loss)
before goodwill per
unit (basic and
diluted) $0.167 $0.098 $(0.042) $0.062 $0.285
-------------------------------------------------------------------------
Net earnings (loss)
per unit (basic and
diluted) $0.167 $0.098 $(0.042) $0.062 $0.285
-------------------------------------------------------------------------
Distributable cash(1) 1,084 1,602 465 969 4,120
-------------------------------------------------------------------------
Cash distributions 866 225 226 226 1,543
-------------------------------------------------------------------------
(b) Distributable cash was not re-stated in prior periods' calculations
to reflect the reserve for maintenance capital expenditures, as required
by the bank covenant dealing with the annual distributable cash
calculation.
-------------------------------------------------------------------------
($000, except per 2004 2004 2004 2003
unit amounts) Third Second First Fourth Rolling
Quarter Quarter Quarter Quarter 12 months
-------------------------------------------------------------------------
Total sales 6,264 6,989 8,940 9,372 31,565
-------------------------------------------------------------------------
Net earnings (loss)
before goodwill
charge (13) 25 614 1,151 1,777
-------------------------------------------------------------------------
Net earnings (loss) (9,663) (13,475) 614 1,151 (21,373)
-------------------------------------------------------------------------
Net earnings (loss)
before goodwill per
unit (basic and
diluted) ($0.001) $0.003 $0.069 $0.129 $0.200
-------------------------------------------------------------------------
Net earnings (loss)
per unit (basic and
diluted) ($1.080) ($1.506) $0.069 $0.129 $(2.388)
-------------------------------------------------------------------------
Distributable cash(1) 591 361 1,455 2,063 4,470
-------------------------------------------------------------------------
Cash distributions 782 1,228 1,566 1,567 5,143
-------------------------------------------------------------------------
General Donlee's business operations are cyclical. The most significant
factors leading to variations in operating results are economic conditions,
aerospace and business capital spending levels, the level of the Canadian
dollar versus foreign currencies, reliance on customers' orders, and the time
required to manufacture and ship to the customer. The Company's products are
required to be produced to customer requirements and sales revenue is
recognized only when products are completed and shipped. Accordingly,
fluctuations in customer demand and the timing of shipments contribute to
variability in the Company's sales.
Derivative Contracts
The Company has entered into foreign exchange forward contracts to seek
to reduce exposure to currency rate fluctuations. As at September 30, 2005,
the Company had foreign currency forward exchange contracts outstanding to
sell U.S. $7.8 million at an average exchange rate of CDN $1.2358 per U.S
dollar (U.S. $0.8092 per Canadian dollar), maturing from October 2005 to
December 2006.
Balance Sheet
Consolidated working capital at September 30, 2005 was $12.9 million. At
December 31, 2004, working capital totaled $10.2 million. The current ratio at
September 30, 2005 was 3.8:1.0, which is up from 3.1:1.0 at December 31, 2004.
The increase in the ratio is primarily the result of higher cash balances
resulting from lower distributions paid in 2005.
The consolidated net debt to equity ratio was 0.29:1.00 at September 30,
2005 (total debt net of cash), down from the December 31, 2004 level of
0.35:1.00. In the first quarter of 2005, $0.3 million of the term loan was
repaid.
Units Outstanding
Upon completion of the initial public offering in May 2002, the Fund had
8,947,000 units outstanding. To-date since May 2002, no units have been issued
or retired, and as at September 30, 2005, there are 8,947,000 units
outstanding. There have been no options granted on the Fund's units. The units
are listed for trading on the Toronto Stock Exchange under the symbol GDI.UN.
Liquidity
Cash flow generated by the Company is required to fund capital
expenditures, distributions to Unitholders of the Fund, and third party bank
interest, as well as other ongoing operational requirements. There is more
than adequate working capital to support the Company's on-going current
operations. The consolidated net debt to equity ratio is low and the Company
has an available revolving operating credit facility of $3.0 million.
Cash Flow From Operating Activities
During the quarter ended September 30, 2005, cash provided by operating
activities was $1.1 million. This was comprised of cash flows from operations
of $1.6 million, while non-cash working capital items required $0.5 million,
reflecting increases in work-in-process inventory, and decreases in accounts
payable, partially offset by decreases in accounts receivable and prepaid
expenses. The increase in work-in-process inventory reflects the investment in
material, labour and overhead as a result of the delay in the military
shipment, as discussed above, and the increased production levels in the
aerospace and power generation division. Lower accounts payable reflects the
payment to suppliers for the raw material purchases. Lower accounts receivable
reflects the more timely collection of customer accounts.
For the quarter ended September 30, 2004, cash provided from operating
activities was $1.5 million, comprised of $0.7 million from operations, while
non-cash working capital items contributed a further $0.8 million. This
working capital increase reflected lower accounts receivable partially offset
by higher inventories and higher accounts payable.
During the nine-month period ended September 30, 2005, cash provided by
operating activities was $2.9 million. This was comprised of cash flows from
operations of $4.2 million, while non-cash working capital items required
$1.3 million, reflecting increases in prepaid expenses and work-in-process
inventory and decreased accounts payable, partially offset by decreases in
accounts receivable. For the nine-month period ended September 30, 2004, cash
provided from operating activities was $3.7 million, comprised of $3.9 million
from operations, while non-cash working capital items required $0.2 million.
This working capital increase reflected lower accounts receivable, partially
offset by higher inventories and prepaid expenses and lower accounts payable.
Distributions
Distributable Cash(1)
For the quarter September 30, 2005, distributable cash(1) was
$1.1 million or $0.121 per unit. For the quarter ended September 30, 2004,
distributable cash(1) was $0.6 million or $0.066 per unit.
For the nine-month period ended September 30, 2005, distributable cash(1)
was $3.2 million or $0.352 per unit. For the nine-month period ended September
30, 2004, distributable cash(1) was $2.4 million or $0.269 per unit.
The following table shows the calculation of distributable cash(1)
reflecting cash flows from operations and cash requirements for capital
expenditures.
Nine-Month
Quarter Ended Period Ended
------------- ------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Cash provided by operating
activities $1,061 $1,510 $2,910 $3,658
Net changes in non-cash working
capital balances related to
operations 577 (800) 1,328 231
---------------------------------------
Cash provided by operating
activities before changes in
non-cash working capital balances 1,638 710 4,238 3,889
Add (deduct) items not affecting
cash:
Derivative contracts 331 330 33 (116)
Employee future benefits 39 33 118 82
Gain on disposal of equipment 0 0 0 31
--------- --------- --------- ---------
2,008 1,073 4,389 3,886
Term loan repayment 0 0 (300) 0
Advance of long-term debt (capital) 0 0 0 1,475
Repayment of long-term debt
(capital) 0 (435) 0 (876)
Purchases of property, plant and
equipment (net of proceeds from
disposal) 0 (47) (14) (2,078)
--------- --------- --------- ---------
Prorated reserve for maintenance
capital expenditures (924) 0 (924) 0
--------- --------- --------- ---------
Distributable cash(1) 1,084 591 3,151 2,407
--------- --------- --------- ---------
--------- --------- --------- ---------
Cash distributions paid to
Unitholders 866 782 1,317 3,576
---------------------------------------
Net earnings (loss) per unit $0.167 $(1.080) $0.223 $(2.517)
--------- --------- --------- ---------
Distributable cash(1) per unit $0.121 $0.066 $0.352 $0.269
--------- --------- --------- ---------
Cash distributions paid per unit $0.097 $0.087 $0.147 $0.400
--------- --------- --------- ---------
(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 and
employee future benefits, repayment of long-term bank debt and further
reduced by purchases of property, plant and equipment (not funded) or
reserve for maintenance capital expenditures (as required by the bank
covenant) if actual capital expenditures do not exceed $1.25 million
annually. 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.
Cash Distributions
The Fund increased its monthly distribution from $0.0084 to $0.04 per
unit for August and made a special additional payment of $0.04 per unit at
that time. Total cash distributions paid by the Fund in the quarter ended
September 30, 2005 amounted to $0.9 million or $0.097 per unit and included a
special payment of $0.04 per unit. The $0.4 million distribution for the month
of September 2005 was paid October 31, 2005, and is not included in the
preceding quarterly figure. For the nine-month period ended September 30,
2005, cash distributions paid to Unitholders were $1.3 million or $0.147 per
unit.
For the quarter ended September 30, 2004 cash distributions amounted to
$0.8 million or $0.087 per unit. For the nine-month period ended September 30,
2004, cash distributions paid to Unitholders were $3.6 million or $0.40 per
unit.
Details of the cash distributions paid for the nine months ended
September 30, 2005 are:
Period Record Date Payment Date Per Unit Total
------ ----------- ------------ -------- -----
($ 000)
December(04) January 27 January 30 $0.0084 75
January February 24 February 27 0.0084 75
February March 28 March 31 0.0084 76
------- ---
First quarter sub-total 0.0252 226
------- ---
March April 26 April 29 0.0084 75
April May 26 May 31 0.0084 75
May June 27 June 30 0.0084 75
------- ---
Second quarter sub-total 0.0252 225
------- ---
June July 26 July 29 0.0084 75
July August 26 August 31 0.0084 75
August September 27 September 30 0.0800 716
------- ---
Third quarter sub-total 0.0968 866
------- ---
Year-to-date total $0.1472 1,317
------- -----
Monthly distributions are usually paid on or about the last day of the
month, for the prior month, with a record date typically three business days
earlier. The Company's credit facilities have not been and are not intended to
be used to make distributions.
Tax Status of Cash Distributions in 2005
The Fund is the sole registered holder of $82.95 million of notes, issued
by the Company, bearing interest at 15.82% per annum ($13.1 million annually).
The interest earned on the notes is currently the only material source of
income to the Fund. As a result of the decline in General Donlee's
profitability caused by, among other things, weak business conditions and the
stronger Canadian dollar during 2005, the Fund has formally waived during the
third quarter defaults related to a total of $2.0 million of unpaid interest
(2004 - $2.8 million). Year-to-date in 2005, the Trustees have formally waived
$7.5 million of unpaid interest (2004 - $6.7 million) which is net of Fund
costs paid by the Company on behalf of the Fund. The unpaid back interest for
the third quarter and year-to-date to September 30, 2005 will therefore not be
recoverable by the Fund, and the Company is not in default under the note
indenture.
Outlook for Future Distributions
In October 2004, the Fund reported in a press release that the largest
customer of the industrial products division had terminated a sourcing
agreement with a view to increasing its overseas outsourcing of components.
After discussions with the customer it was hoped that the division would
receive substitute volumes of parts and components that were not intended to
be sourced overseas. However, Management at that time warned that the time
lag, the margins and the engineering-related costs between losing the
production to overseas sourcing and the anticipated substitute volume was
unknown and was at that time expected to have a negative impact on General
Donlee's sales and margins in the short to mid-term. In actual fact, a
substantial volume of components were displaced from the industrial products
division and switched to overseas outsourcing. Substitute orders have been
received from the customer amounting to approximately the same sales value as
those lost, however, the change in production mix has had some adverse impact
on the division's margins, as was expected. Current discussions with the
customer informed Management that additional components may temporarily be
returning to the industrial products division's production facility. At this
time it is difficult for Management to place a value on this additional work,
however it is expected to have a favourable impact on the results of the
industrial products division during the fourth quarter of 2005.
After Management's assessment of the changes in the relationship with
this major customer and the mid to longer-term impact on the Fund's sales
revenue, margins and cash flow, the Board has approved the adjusted level of
monthly distributions to $0.04 per unit for the foreseeable future. Management
based its assessment on the pick up in sales and cash flow generation in the
aerospace and power generation division that is occurring in 2005, as well as
the expected favourable impact in the industrial products division.
Capital Resources
Credit Facilities
During the first quarter, the Company negotiated a renewed credit
arrangement totaling $16.8 million, which became effective during March 2005.
The facility includes a $9.7 million non-amortizing term loan, a $3.0 million
revolving operating loan facility, a $4.0 million non-revolving operating
lease facility and a $0.1 million corporate credit card facility. The term
loan expires April 30, 2008, the operating loan facility is renewable annually
and the operating lease will be amortized over 5 years. The financial
covenants have been revised to correspond with the increased facility.
During the first quarter of 2005, the original $10.0 million
non-amortizing term facility was reduced to $9.7 million and was fully drawn
at September 30, 2005. The $3.0 million operating credit facility, the
$4.0 million operating lease and the $0.1 million corporate credit card
facility were not utilized at September 30, 2005.
Subsequent to the quarter end, the Company has drawn $0.8 million under
the new operating lease facility for the down payment on a new $3.0 million
multi-functional machining centre that is scheduled for delivery late in 2006.
The Company has three key financial loan covenants governing its credit
facilities. These financial covenants are: a fixed charge coverage covenant; a
senior debt financial covenant; and an annual cash distributions covenant. At
September 30, 2005, the Company was compliant with these key financial loan
covenants.
Additions to Property, Plant and Equipment
Additions to property, plant and equipment were nil for the quarter ended
September 30, 2005 and $0.01 million for the nine-month period ended
September 30, 2005.
Management has reviewed the future capital needs and the Company expects
to have approximately $0.3 million in capital expenditures during the last
quarter of 2005, which will be financed from operating cash flow. Management
has entered into an agreement for the acquisition of a new large capacity
multi-functional machining centre which will be funded by the operating lease
facility. The purchase of this equipment was contingent on formalizing a
3-year agreement with an existing customer in the aerospace and power
generation segment providing for additional orders currently estimated at
$5.0 million. This agreement has now been formalized. The balance of the
$3.0 million will be funded primarily in the year 2006, and will be financed
over 5 years utilizing the $4.0 million operating lease facility. The addition
of this machining centre will help reduce the production scheduling
constraints currently facing the aerospace and power generation division and
provide it with greater flexibility in the production of future aerospace and
power generation components.
Contractual Obligations
($ 000) Payment Due by Period
1 Year 1-3 4-5 Over
Total or less Years Years 5 Years
----- ------- ----- ----- -------
Bank debt 9,700 0 9,700 0 0
-----------------------------------------------
Total contractual
obligations 9,700 0 9,700 0 0
-----------------------------------------------
The $9.7 million non-amortizing term loan matures on April 30, 2008. The
interest rate on the non-amortizing term loan is Canadian bank prime plus
1/4%.
The asset relating to employee future benefits reflects the accounting
for the actuarial determination that a shortfall in the funding of future
pension benefits was estimated as a result of the actuarial review completed
as at December 31, 2004. The results of the review require the Company to make
special payments over the next five years to deal with a pension deficiency,
consisting of a going concern deficiency of $0.7 million and a solvency
deficiency of $1.9 million. The required payment for 2005 in respect of the
total deficiency is estimated at $0.5 million. In addition, another actuarial
review is required as of December 31, 2005, as the actuarially estimated asset
to solvency liability ratio of the plan was approximately 76% as at
December 31, 2004.
Off-Balance Sheet Arrangements
The Fund has off-balance sheet arrangements, which include a pension plan
and a foreign exchange forward contracts program (as detailed in the Foreign
Exchange section).
Transactions with Related Parties
The Fund did not have any material transactions with related parties
during the third quarter of 2005 or since the inception of the Fund's
operations in May 2002.
Proposed Transactions
Although the Fund from time to time assesses acquisition opportunities
that would fit its strategy and sphere of expertise, there is no proposed
acquisition being considered at present. There is also no part of the
operations that is being considered for disposal at this time.
Critical Accounting Assumptions
The preparation of consolidated financial statements in conformity with
Canadian generally accepted accounting principles requires Management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates. The major
items incorporating estimates or assumptions by Management are discussed
below.
Valuation of Work-in-Process Inventories
Work-in-process is valued on an average cost basis which involves
determining the total labour hours required to arrive at the last operation
completed. The labour hours are then multiplied by the Company labour and
overhead rates to arrive at a dollar cost. All purchases of raw material and
outside process costs, which have been incurred to reach this stage of
completion, are also added to the value of the labour and overhead to arrive
at the work-in-process inventory value.
Provision for Slow Moving, Scrap or Obsolete Inventories
A review of all inventories on hand is completed to identify all parts
which may not be categorized as saleable in the immediate future, as a result
of being surplus or defective. A realizable value is then determined for the
parts, and a provision is taken against inventories.
Allowance for Doubtful Accounts
An allowance for uncollectible accounts is provided for, based on a
selection of specific amounts due from customers, which may be deemed as
uncollectible.
Amortization of Property, Plant and Equipment
Amortization is calculated on a straight-line basis over the estimated
useful lives of the assets. The Company uses a 10-year life for buildings, a
10-year life for production equipment, a 5-year life for office furniture and
equipment and a 3-year life for computer equipment.
Values of Pension Obligations and Assets
Pension assets are valued at fair value. Assumptions supplied by the
actuary and Management for the discount rate, expected long-term rate of
return on plan assets, salary escalation rate, and retirement ages of
employees are used to account for the defined benefit pension plans.
Amount of Pension Costs Charged to Earnings
The cost of pension benefits earned by employees is actuarially
determined using the projected credit benefit method pro-rated based on
services in accordance with the recommendations of the Canadian Institute of
Chartered Accountants. For the quarter ended September 30, 2005, the Company
made contributions to the pension fund of $0.2 million, which included the
$0.1 million to partially fund the deficiency and $0.1 million for regular
contributions. For the nine months ended September 30, 2005, the Company made
contributions to the pension fund of $0.5 million, which included $0.2 million
to partially fund the deficiency and $0.3 million for regular contributions.
Impairment of Intangible and Goodwill Assets
The Fund applies the recommendations of the Canadian Institute of
Chartered Accountants on accounting for goodwill and other intangible assets.
In accordance with the standard, goodwill is not amortized and is tested
annually for impairment in value or more frequently if required. To perform
this annual impairment test the Company must estimate the fair value of the
divisions using a combination of the present value of future cash flows
approach, a multiple of earnings approach and the market capitalization
approach.
Fair Values of Acquired Assets and Liabilities on the Acquisition Date
The acquisition of assets and liabilities has been accounted for by the
purchase method. The purchase price has been allocated to assets and
liabilities based on the book values from the predecessor company, with the
difference between the purchase price and net assets of the predecessor
company received being recorded as Other assets and Goodwill.
New Accounting Policies
The Fund has had no major changes in accounting policies since its
inception in May 2002. The key accounting policies followed are outlined in
Note 2 of the Fund's audited Consolidated Financial Statements as at
December 31, 2004.
Financial Instruments
The Company's financial instruments consist of cash, accounts receivable,
accounts payable and accrued liabilities and long-term debt, the amounts of
which are included in the Fund's balance sheet as at September 30, 2005. There
have not been any significant changes to the nature of these financial
instruments since December 31, 2004.
Business Risks and Uncertainties
Sales
The Company is dependent on the military, commercial and general
aerospace industries. Although the military business remains relatively solid,
recent economic conditions within the commercial airline industry have meant
that uncertainty exists in the market for the industry's manufacturers and
suppliers. The downturn in the commercial airline industry has particularly
affected the wide-body aircraft market, whereas General Donlee manufactures
most of its aerospace components for the business and regional jet and
narrow-body commercial aircraft and military markets. In most instances, these
sales are supported by long-term contracts with a history of very few
cancellations. The most serious competition comes from the in-house
capabilities of the Company's aerospace customers.
The Company is also dependent on industrial manufacturers. A further
slowdown could adversely affect the Company's sales to industrial producers.
Further deterioration in the condition of these customers or the loss of
business in-house or to foreign competition could affect the Company's future
sales volumes.
Key Customers
Although the Company has a reasonably diversified customer base and
strong, stable relationships, the loss of a large customer could have an
adverse effect on the Company. For the year ended December 31, 2004, 78% of
the Company's sales were to 10 of its customers. Of the two largest customers,
one from the aerospace and power generation products division represented 15%
of total sales and one from the industrial products division accounted for 27%
of total Company sales. In the nine-month period ended September 30, 2005, a
similar pattern existed with 77% of total sales made to 10 of its customers.
Of the two largest customers, one from the aerospace and power generation
products division represented 15% of total sales and one from the industrial
products division accounted for 28% of total sales. In the third quarter of
2004, a change in the sourcing relationship occurred with the largest customer
of the industrial products division. This change has had an adverse impact on
the cash flow generated by the Company; however, at this point, it is very
difficult to quantify the future impact as short-term orders from this
customer are increasing. Termination or reduction by one or both of such
customers of their relationship or volume of business with the Company could
have a material adverse effect upon its results.
Raw Material Costs
The Company's business exposes it to potential unrecoverable raw material
costs in certain instances. Although some long-term contracts allow for
materials cost escalation, not all do. In most cases, the raw materials that
the Company uses are not available on futures or forwards markets. The Company
attempts to commit with its suppliers to lock in forward pricing on
significant items where possible.
Product Liability
The Company's businesses expose it to potential product liability risks
that are inherent in the development, manufacture and sale of aerospace,
industrial and power generation products. Although the Company maintains what
Management believes to be suitable product liability insurance, there can be
no assurance that it will be able to maintain such insurance on acceptable
terms or that any such insurance will provide adequate protection against
potential liabilities. Insufficient insurance coverage in the event of a
significant claim could have a material adverse effect on the Company's
business, financial condition and results of operations.
Bank Financing
General Donlee's operations are dependent on adequate bank financing.
During the first quarter of 2005, General Donlee renewed its existing
financing with a $16.8 million facility that includes a $9.7 million
non-amortizing term loan, a revolving operating line of $3.0 million, a
non-revolving $4.0 million operating lease facility and a $0.1 million
corporate credit card facility.
General Donlee's ability to make repayments of the principal or interest
on, or to refinance, its indebtedness will depend on its future operating
performance and cash flow, which are subject to prevailing economic
conditions, prevailing interest rate levels, and financial, competitive,
business and other factors, many of which are beyond its control.
The Company's credit facility contains three financial covenants that
limit the discretion of General Donlee with respect to certain business
matters. The covenants include a fixed charge covenant, a senior debt covenant
and an annual cash distributions covenant. A failure to comply with the
obligations in the Company's credit facility could result in an event of
default, which, if not cured or waived, could permit acceleration of the
relevant indebtedness. These covenants place restrictions on, among other
things, the ability of the Company to incur additional indebtedness, to pay
interest to the Fund, to declare and pay distributions, to create liens or
other encumbrances, to make payments, investments, loans and guarantees and to
sell or otherwise dispose of assets and merge or consolidate with another
entity. A copy of the Company's credit facility can be viewed on the Internet
at www.sedar.com.
Foreign Exchange
For the first nine months of 2005, approximately 49% of General Donlee's
sales revenue was denominated in U.S. dollars. It is estimated by Management
that a one cent increase in the value of the Canadian dollar, resulting in a
weaker U.S. dollar against the Canadian dollar, would impact gross profit
negatively by approximately $0.1 million per annum. Varying amounts of raw
material and service purchases are denominated in U.S. dollars, providing some
natural offset in our U.S. dollar exposure. General Donlee also seeks to
reduce its U.S. dollar exchange exposure by entering into foreign exchange
forward contracts.
Reliance on Key Personnel and Skilled Workforce
General Donlee's operation is dependent on the abilities, experience and
efforts of its Management and highly skilled workforce. While General Donlee
has entered into employment agreements with certain members of its Management,
the business prospects of the Company could be adversely affected if any of
these people are unable or unwilling to continue their employment with General
Donlee.
Possible Changes to Income Tax Treatment of Income Trusts
On September 8, 2005, the federal Department of Finance released a
consultation paper and launched public consultations on tax and other issues
related to publicly-listed, flow-through entities ("FTEs") including income
funds. The focus of the paper is to, among other things, assess whether the
tax system should be modified. In the consultation paper, the Department of
Finance identified three possible policy responses to issues relating to FTEs:
(i) limiting deductibility of interest expense by operating entities, (ii)
taxing FTEs in a manner similar to corporations, or (iii) making the tax
system more neutral with respect to all forms of business organization by
better integrating the personal and corporate tax system. The Department of
Finance indicated that this was not an exhaustive list of the possible policy
responses. It is possible that no changes will be made to the Canadian tax
system as a result of the consultation paper and the public consultations. In
addition, if changes are made to the Canadian tax system to implement a
particular policy response, it cannot be determined at this time whether or
how such changes will affect the holding by a particular holder of units of
the Fund.
Outlook
Aerospace industry forecasts for 2005 and 2006 are somewhat more
optimistic than has been the case over the last few years. General Donlee has
started to see higher volumes in its commercial and military aerospace
segments and this has been reflected in General Donlee's sales order backlog,
which remains strong at September 30, 2005.
At September 30, 2005, General Donlee's sales order backlog totaled
$50.2 million, which compares to $47.7 million at the 2004 year-end. Most of
this backlog is accounted for by the aerospace and power generation division,
due to the longer term nature of its contracts.
The aerospace and power generation division is experiencing some pick up
in activity in the aerospace segment, however the power generation area
remains relatively inactive. While market conditions continue to be
challenging, we are cautiously optimistic that the aerospace and power
generation business will improve in step with improving industry forecasts.
The industrial products division has been impacted by weak conditions in
the capital equipment markets. In the near term in the industrial products
business, we expect to experience increased sales activity, as well we plan to
continue to focus on operational improvements in order to seek to generate
higher gross profit margins.
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. 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.
SEDAR Filings
In addition to filing the audited annual and unaudited interim
consolidated financial statements (including the notes thereto) on
www.sedar.com, General Donlee Income Fund files its Annual and Interim
Management's Discussion and Analysis, its Annual Information Form and its
Notice of Annual Meeting and Management Information Circular.
General Donlee Income Fund
Interim Consolidated Balance Sheets
As at September 30, 2005 and December 31, 2004
(in thousands of dollars, except unit and per unit amounts)
-------------------------------------------------------------------------
Sept. 30, 2005 Dec. 31, 2004
-------------------------------------------------------------------------
(unaudited) (audited)
Assets
Current
Cash $ 1,372 $ 183
Accounts receivable 4,439 5,938
Inventory 10,737 8,115
Prepaid expenses 322 263
Derivative contracts 613 580
-------------------------------------------------------------------------
17,483 15,079
Property, plant and equipment 8,382 9,895
Goodwill 16,507 16,507
Other assets 75 849
Employee future benefits 194 76
Future income taxes 118 -
-------------------------------------------------------------------------
$ 42,759 $ 42,406
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities $ 3,692 $ 3,879
Customer deposits 766 726
Current portion of long-term debt - 300
Future income taxes 118 -
-------------------------------------------------------------------------
4,576 4,905
-------------------------------------------------------------------------
Long-term debt 9,700 9,700
-------------------------------------------------------------------------
14,216 14,605
-------------------------------------------------------------------------
Unitholders' Equity
Trust units 83,021 83,021
Deficit (54,538) (55,220)
-------------------------------------------------------------------------
28,483 27,801
-------------------------------------------------------------------------
$ 42,759 $ 42,406
-------------------------------------------------------------------------
-------------------------------------------------------------------------
General Donlee Income Fund
Interim Consolidated Statements of Earnings and Deficit
For the Periods Ended September 30, 2005 and 2004
(unaudited)
(in thousands of dollars, except unit and per unit amounts)
-------------------------------------------------------------------------
Three-Month Three-Month Nine-Month Nine-Month
Period Ended Period Ended Period Ended Period Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
-------------------------------------------------------------------------
Sales $ 7,867 $ 6,264 $ 24,754 $ 22,193
Cost of sales 5,863 5,107 19,394 17,159
-------------------------------------------------------------------------
Gross profit 2,004 1,157 5,360 5,034
-------------------------------------------------------------------------
Expenses
Selling, general
and administrative 762 827 2,557 2,411
Interest 114 121 342 357
Foreign exchange
gain (372) (424) (402) (267)
Amortization of
other assets 7 646 864 1,938
-------------------------------------------------------------------------
511 1,170 3,361 4,439
-------------------------------------------------------------------------
Earnings before
undernoted items 1,493 (13) 1,999 595
Gain on disposal
of property, plant
and equipment - - - (31)
Goodwill
impairment charge - 9,650 - 23,150
-------------------------------------------------------------------------
Net earnings (loss)
for the period 1,493 (9,663) 1,998 (22,524)
Deficit at
beginning of period (55,168) (45,107) (55,220) (29,452)
Distributions paid
to unitholders (866) (782) (1,317) (3,576)
-------------------------------------------------------------------------
Deficit at
end of period $ (54,538) $ (55,552) $ (54,538) $ (55,552)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Loss per trust unit -
Basic and diluted
(8,947,000 units) $ 0.167 $ (1.080) $ 0.223 $ (2.517)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Distributions per
trust unit -
Basic and diluted
(8,947,000 units) $ 0.097 $ 0.087 $ 0.147 $ 0.400
-------------------------------------------------------------------------
-------------------------------------------------------------------------
General Donlee Income Fund
Interim Consolidated Statements of Cash Flows
For the Periods Ended September 30, 2005 and 2004
(unaudited)
(in thousands of dollars, except unit and per unit amounts)
-------------------------------------------------------------------------
Three-Month Three-Month Nine-Month Nine-Month
Period Ended Period Ended Period Ended Period Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
-------------------------------------------------------------------------
Cash flows from
operating activities
Net earnings (loss)
for the period $ 1,493 $ (9,663) $ 1,999 $ (22,524)
Add (deduct) items
not affecting cash:
Amortization of
property, plant
and equipment 508 440 1,526 1,322
Amortization of
other assets 7 646 864 1,938
Gain on disposal - - - (31)
Derivative contracts (331) (330) (33) 116
Employee future
benefits (39) (33) (118) (82)
Goodwill
impairment charge - 9,650 - 23,150
-------------------------------------------------------------------------
Cash provided by
operating activities
before changes in
non-cash working
capital balances 1,638 710 4,238 3,889
Net change in
non-cash working
capital balances
related to
operations (577) 800 (1,328) (231)
-------------------------------------------------------------------------
Cash provided
by operating
activities 1,061 1,510 2,910 3,658
-------------------------------------------------------------------------
Cash flows from
investing activities
Purchase of property,
plant and equipment - (47) (14) (2,142)
Proceeds from
disposal of property
plant and equipment - - - 64
Deferred finance
charges - - (90) -
-------------------------------------------------------------------------
Cash used in
investing activities - (47) (104) (2,078)
-------------------------------------------------------------------------
Cash flows from
financing activities
Advances of
long-term debt - - - 1,475
Repayment of
long-term debt - (435) (300) (876)
Distributions paid (866) (782) (1,317) (3,576)
-------------------------------------------------------------------------
Cash used in
financing activities (866) (1,217) (1,617) (2,977)
-------------------------------------------------------------------------
Net increase
(decrease) in cash
during the period 195 246 1,189 (1,397)
Cash at beginning
of period 1,177 843 183 2,486
-------------------------------------------------------------------------
Cash at end
of period $ 1,372 $ 1,089 $ 1,372 $ 1,089
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For further information:
Gerald Thain
Chief Financial Officer,
tel: 416.743.4417
email: gthain@generaldonlee.com
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