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General Donlee Income Fund Reports Record Third Quarter Results
Toronto, Canada, Nov 10, 2006 - General Donlee Income Fund (the "Fund") (TSX:
GDI.UN) today announced a second consecutive quarter of record results.
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- Third quarter sales of $10.9 million rose 39% versus a year ago.
- Q3 net earnings of $1.9 million are up 29% over 2005.
- Distributable cash of $1.8 million rose 67% over the same quarter in
2005.
- Distributions paid of $1.7 million increased 101% compared to the
third quarter in 2005.
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Sales of $10.9 million were 39% higher than 2005. Sales rose 51% to
$7.1 million in the aerospace and power generation division. The Industrial
products division sales were $3.8 million, an increase of 19%, continuing a
strong uptrend of improving results.
Net earnings in the third quarter of 2006 of $1.9 million or $0.216 per
unit rose 29% compared to the same period in 2005.
Distributable cash in the third quarter was $1.8 million, or $0.202 per
unit, compared to $1.1 million or $0.121 per unit in the third quarter last
year. During the third quarter of 2006, distributable cash was reduced by
$1.6 million, representing an increase in working capital required to support
increased activity in the operations. Distributions paid were $1.7 million or
$0.195 per unit in the quarter compared with $0.9 million and $0.097 per unit
in 2005.
The Board of Trustees for the Fund is of the opinion that, from time to
time, the purchase of units of the Fund at the prevailing market price would
be a prudent investment. Under the Fund's normal course issuer bid the Fund
purchased no units in the third quarter of 2006. Subsequent to the end of the
third quarter, the Fund purchased 44,700 units for cancellation.
Financial Highlights
The following summary of financial data reflects the interim consolidated
results of operations of the Fund for the three-month and nine-month periods
ended September 30, 2006, including comparative results for the same periods
in 2005.
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($ millions, except Three Months Ended Nine Months Ended
unit and per unit ------------------ -----------------
amounts, unaudited) Sept. 30/06 Sept. 30/05 Sept. 30/06 Sept. 30/05
----------- ----------- ----------- -----------
Operations
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Sales 10.9 7.9 32.2 24.8
Gross profit 3.0 2.0 8.8 5.4
Net earnings 1.9 1.5 6.0 2.0
Net earnings
per unit(a) $ 0.216 $ 0.167 $ 0.668 $ 0.223
Distributions
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Distributable cash(1) 1.8 1.1 5.6 3.1
Distributable cash
per unit(a,1) $ 0.202 $ 0.121 $ 0.626 $ 0.342
Cash distributions paid 1.7 0.9 4.7 1.3
Cash distributions paid
per unit(a) $ 0.195 $ 0.097 $ 0.525 $ 0.147
Payout ratio(2) 97% 80% 84% 43%
(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 three months 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 $32.2 million for the nine months ended September 30, 2006
reflect a 30% increase over the same period in 2005. Sales for nine months of
$18.7 million in the Company's aerospace and power generation division
increased 41% compared to 2005 and reflected a continuing positive trend in
the aerospace segment. In the industrial products division, sales of $13.5
million for the nine months ended September 30, 2006 increased 18% compared to
the same period in 2005. The improvement in the level of shipments in the
industrial products division and increased margins are a result of increased
activity across the customer base. For the Company, improved sales in the nine
months ended September 30, 2006 generated improvements in margins, net
earnings and operating cash flows compared to the first nine months in 2005.
For the nine months ended September 30, 2006, the Fund achieved net
earnings of $6.0 million, which reflects a 200% increase compared to the same
period of 2005, when the Fund had net earnings of $2.0 million. The improved
net earnings in the first nine months of 2006 helped to generate distributable
cash(1) of $5.6 million or $0.626 per unit, which compares to distributable
cash(1) of $3.1 million or $0.342 per unit in the comparable period in 2005.
In the first nine months of 2006, the cash distributions paid were $4.7
million or $0.525 per unit compared to $1.3 million or $0.147 per unit in
2005.
The Fund's balance sheet at September 30, 2006, shows continued
improvement as working capital increased to $14.5 million. Management and the
Trustees believe this is 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 September 30, 2006 is conservative at
0.30:1.00. With the pick-up in 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 third quarter Management's Discussion and Analysis filed on www.sedar.com
and on the Fund's website at www.generaldonlee.com.
Outlook
Aerospace industry forecasts for 2006 and 2007 continue to look more
positive than they have over the last few years. General Donlee continues to
see higher volumes in its commercial aerospace segment and this has been
reflected in General Donlee's sales order backlog, which remains strong at
September 30, 2006 at $51.8 million compared to $50.1 million at December 31,
2005.
In the near term, in the industrial products division, the Company
expects to continue to experience steady sales activity. As well the Company
expects to continue to focus on solidifying customer relationships and on
operational improvements in order to generate increased sales revenue and
higher gross profit margins.
The Company continues to invest in new equipment to support the increased
production demands and future growth.
As a result of the strong year-to-date results and the positive outlook,
Management and the Trustees are confident in maintaining 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
and nine months ended September 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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