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General Donlee Income Fund Reports Strong First Quarter 2006 Results
Toronto, Canada, May 15, 2006 - General Donlee Income Fund (the "Fund")
(TSX: GDI.UN) today announced its financial results for the first quarter
ended March 31, 2006.
Financial Highlights
The following summary of financial data reflects the interim consolidated
results of operations of the Fund for the three-month period ended March 31,
2006, including comparative results for the same period in 2005.
<<
($ millions, except unit and per Three-Month Period Ended
unit amounts, unaudited) ------------------------
March 31, 2006 March 31, 2005
-------------- --------------
Operations
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Sales 10.0 8.1
Gross profit 2.6 1.4
Net earnings (loss) 1.6 (0.4)
Net earnings (loss) per unit(a) $ 0.175 $ (0.042)
Distributions
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Distributable cash(1) 1.4 0.5
Distributable cash per unit(a,1) $ 0.161 $ 0.052
Cash distributions paid 1.5 0.2
Cash distributions paid per unit(a) $ 0.165 $ 0.025
(a) Based on 8,947,000 units outstanding.
(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 debt and further
reduced by the higher of purchases of property, plant and equipment
(not funded by debt) or reserve for maintenance capital expenditures
which are estimated by Management at $2.0 million for 2006. As
Management refined the calculation of distributable cash at
September 30, 2005 to be more meaningful, and included a reserve for
future capital expenditures, no reserve was provided for the quarter
ended March 31, 2005. 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.
Overall Performance
Operating results for the first quarter ended March 31, 2006 compared to
the first quarter in 2005 reflected consolidated sales of $10.0 million, an
increase of 24% over the comparable period in 2005. The Company's aerospace
and power generation division recorded sales of $4.8 million, an increase of
$0.7 million and contributed 40% of the increase in total sales. The
industrial products division recorded sales of $5.2 million, an increase of
$1.2 million and 60% of the increase in total sales. Gross profit in the first
quarter this year was $2.6 million an improvement of $1.2 million as the total
margin rose to 25.9% from 16.8% in the same quarter in 2005. The improvement
was due to improved production efficiencies in the industrial products
division in addition to higher production and sales levels in both divisions.
Net earnings in the first quarter of 2006 were $1.6 million, or $0.175 per
unit, whereas in the prior year there was a net loss of $0.4 million.
At the end of the first quarter of 2006 working capital was
$12.9 million, an increase of $0.4 million compared to the December 31, 2005
level, primarily reflecting the work in process related to the military order,
which was not shipped in the quarter. At the end of the first quarter, the
current ratio was 3.1:1.0, down slightly from the year end level of 3.3:1.0.
There is more than adequate working capital to support the Company's on-going
current operations and the consolidated net debt to equity ratio of the Fund
is low with modest interest requirements.
The improved profit level in the first quarter of 2006 helped to generate
$1.4 million of distributable cash(1), which compares to distributable cash(1)
of $0.5 million in the first quarter last year. In each of the three months in
the 2006 quarter, the cash distribution paid was $0.055 per unit or $0.165 per
unit for the quarter. Distributable cash(1) in the first quarter of 2006
included a reserve for maintenance capital expenditures of $0.5 million, which
reflects one quarter of the expected full year total spending of $2.0 million.
The following table shows the calculation of distributable cash(1)
reflecting cash flows from operations and cash requirements for capital
expenditures and repayment of term debt.
Three Months Ended
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March 31, 2006 March 31, 2005
-------------- --------------
Cash provided by operating activities $1,208 $1,112
Adjust for net changes in non-cash
working capital balances related to
operations 792 (207)
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Cash provided by operating activities
before changes in non-cash working
capital balances 2,000 905
Other adjustments:
Derivative contracts (121) (159)
Employee future benefits 58 33
--------------- ---------------
1,937 779
Term loan repayment - (300)
Purchases of property, plant and
equipment (net of proceeds from
disposal) - (14)
Prorated reserve for maintenance capital
expenditures (500) -
--------------- ---------------
Distributable cash(1) $1,437 $465
--------------- ---------------
Cash distributions paid to Unitholders 1,476 226
Net earnings (loss) per unit $0.175 $(0.042)
Distributable cash(1) per unit $0.161 $0.052
Cash distributions paid per unit $0.165 $0.025
Today the Trustees declared the April 2006 distribution at the current
monthly rate of $0.055 per unit, equivalent to an annual target of $0.66 per
unit, or 13.9% based on the closing unit price of $4.75 on Friday, May 12,
2006. The April distribution will be paid on May 31, 2006 to holders of record
on May 26, 2006.
Outlook
On balance, results for the first quarter 2006 met Management's
expectations. The outlook for the balance of the year remains positive for
both the aerospace and power generation division and the industrial products
division. The backlog at March 31, 2006 is $50.5 million, a slight increase
from the level of $50.1 million at year end 2005. The catapult barrel
assemblies will most likely start to be shipped in the latter part of the
second quarter, which should help support aerospace results for the next three
to four quarters. The industrial products division is experiencing solid
business orders and we hope that these levels of orders will continue.
Company Profile
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 and purchased all of the outstanding shares of a predecessor company
of General Donlee.
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.
SEDAR Filings
Today the Fund filed its Interim Financial Statements and Management's
Discussion and Analysis for the quarter ended March 31, 2006 with Sedar at
www.sedar.com. The Fund's first quarter 2006 Interim Report to Unitholders is
now available on our website at www.generaldonlee.com on the Financial Reports
page.
In addition to the interim filings each quarter, the Fund also files its
annual audited Consolidated Financial Statements (including the notes
thereto), its annual Management's Discussion and Analysis, its Annual
Information Form and its Notice of Annual Meeting and the Management
Information Circular.
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:
Ralph Barnes
Director, Investor Relations,
tel: 416.743.4417
email: rbarnes@generaldonlee.com
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