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General Donlee Income Fund Reports Record Quarterly Results And Increases Cash Distributions By 27%
Toronto, Canada, Aug 10, 2006 -
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- Net earnings in the second quarter of 2006 are $2.5 million up 178%
over the second quarter of 2005.
- Distributable cash is up 56% quarter over quarter.
- Distributions increased 27% to $0.07 per month or $0.84 annually.
- Trustees approve filing of notice requesting approval for normal
course issuer bid.
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General Donlee Income Fund (the "Fund") (TSX: GDI.UN) today announced
record results for the second quarter ended June 30, 2006. Sales of
$11.3 million were 28% higher than the same quarter in 2005, primarily due to
a 51% sales increase in the aerospace and power generation division, to
$6.8 million. Industrial products sales increased 5% and continued a strong
uptrend of improving results.
Net earnings in the second quarter of 2006 of $2.5 million were up 178%
compared to the same period in 2005, with both divisions making solid
contributions to the improved results.
Based on the results for the quarter and year to date, distributions were
increased to $0.07 per unit from $0.055 per unit, effective with the July
distribution payable August 31, 2006. This increased level of distribution
represents an annualized amount of $0.84 per unit, versus the current level of
$0.66 per unit.
The Board of Trustees for the Fund is of the opinion that, from time to
time, the purchase of units of the Fund at the prevailing market price would
be a worthwhile investment and in the best interests of the Fund and its
unitholders. Accordingly, it has approved the filing of a notice with the
Toronto Stock Exchange requesting its approval to purchase, through the
facilities of the Toronto Stock Exchange for cancellation, up to 5% of the
Fund's issued and outstanding units. The commencement of a normal course
issuer bid by the Fund is subject to the approval of the Toronto Stock
Exchange.
Financial Highlights
The following summary of financial data reflects the interim consolidated
results of operations of the Fund for the three-month and six-month periods
ended June 30, 2006, including comparative results for the same periods in
2005.
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Three Months Ended Six Months Ended
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($ millions, except unit and June 30, June 30, June 30, June 30,
per unit amounts, unaudited) 2006 2005 2006 2005
-------- -------- -------- --------
Operations
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Sales 11.3 8.8 21.3 16.9
Gross profit 3.2 2.0 5.8 3.4
Net earnings 2.5 0.9 4.0 0.5
Net earnings per unit(a) $ 0.278 $ 0.098 $ 0.453 $ 0.056
Distributions
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Distributable cash(1) 2.4 1.5 3.8 2.0
Distributable cash per unit(a,1) $ 0.264 $ 0.169 $ 0.424 $ 0.221
Cash distributions paid 1.5 0.2 3.0 0.5
Cash distributions paid per
unit(a) $ 0.165 $ 0.025 $ 0.330 $ 0.050
Payout ratio(2) 63% 15% 78% 23%
(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 and six months ended June 30, 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.
(2) Payout ratio is not a defined term under Canadian generally
accepted accounting principles (GAAP), but is determined as
actual distributions divided by distributable cash. The Fund's
method of calculating payout ratio may not be comparable to other
companies or trusts.
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Overall Financial Performance
Sales of $21.3 million for the six months ended June 30, 2006 reflect a
26% increase over the same period in 2005. Sales in the Company's aerospace
and power generation products division increased 35% compared to 2005 and
reflected a positive trend in the aerospace segment. In the industrial
products division, sales for the six months ended June 30, 2006 increased 17%
compared to same period in 2005. The improvement in the level of shipments in
the industrial products division and increased margins are a result of the
continued support from its largest customer. For the Company, improved
shipments in the six months ended June 30, 2006 generated improvements in
margins, net earnings and operating cash flows compared to the same period in
2005.
For the six months ended June 30, 2006, the Fund achieved net earnings of
$4.0 million, which compares to the same period of 2005 when the Fund had net
earnings of $0.5 million. The improved net earnings in the first half of 2006
helped to generate distributable cash(1) of $3.8 million or $0.424 per unit,
which compares to distributable cash(1) of $2.0 million or $0.221 per unit in
the comparable period in 2005. In the first half of 2006, the monthly cash
distribution paid was $0.055 per unit or $0.33 per unit over the six months.
The Fund's balance sheet at June 30, 2006, shows continued improvement as
working capital has increased to $14.0 million. Management and the Trustees
believe this is sufficient to support the Company's on-going business
operations and the increased distributions. The consolidated net debt to
equity ratio of the Fund at June 30, 2006 is low at 0.38:1.00. With the
pick-up in the both divisions expected to continue, the balance sheet and
overall financial position of the Fund should continue to strengthen.
A table showing the calculation of distributable cash(1) can be viewed in
the second quarter Management's Discussion and Analysis filed on
www.sedar.com.
Outlook
Aerospace industry forecasts for 2006 continue to look more positive than
they have over the last few years. General Donlee continues 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
June 30, 2006 at $49.2 million.
In the near term, in the industrial products business, we expect to
continue to experience steady sales activity, as well we plan to continue to
focus on solidifying customer relationships and on operational improvements in
order to seek to generate higher gross profit margins.
As a result of the improvements in the business profitability and the
above described positive outlook, Management and the Trustees are confident in
setting the monthly distribution level at $0.07 per unit.
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 (including the
notes thereto) and Management's Discussion and Analysis for the three months
ended June 30, 2006 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 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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