|
General Donlee Income Fund Reports Third Quarter 2009 Results
Toronto, Canada, Nov 9, 2009 - The General Donlee Income Fund
(the "Fund" or "General Donlee") (TSX: GDI.UN) today announced its
results for the third quarter, ended September 30, 2009. Reflecting
an ongoing trend in its industry driven by wide-reaching economic
pressures, the Fund's sales and earnings for the quarter fell short
of those in the same period in 2008, though the ongoing strategic
efforts of General Donlee Limited's (the "Company") management were
able to limit the decrease somewhat by adjusting its operations to
suit market conditions. General Donlee's third quarter 2009 results
included:
- Sales of $8.6 million, down 36% from the Q3 2008 sales level of $13.4
million
- Net Income at $0.2 million, down from the $1.4 million earned in Q3
2008
- Distributable cash(1) of $(0.6) million or $(0.120) per Unit, as
compared to $2.3 million or $0.392 per Unit in the same period last
year
- $0.270 in distributions paid to Unitholders for the quarter
While the reduction in production levels and sales flowing from an
industry slowdown led to the Fund's net income being reduced to $0.2
million in the third quarter of 2009, down from the $1.4 million it earned
in the same period in 2008, the gain on the valuation of foreign exchange
forward contracts helped mitigate some of the negative impact on earnings.
Cash flow from operating activities of $3.6 million for the third quarter
consisted of cash from operating activities of $(0.1) million and a net
change in non-cash working capital items of $3.7 million.
While Management understands the relationship between the general economic
downturn, its customers' reduced production levels, and General Donlee's
own sales results, it also recognizes that the best way to see the Company
through current market challenges is to be flexible, making changes to its
own operations to reflect the times. Accordingly, General Donlee has made
productivity enhancements in recent quarters including a reduction in the
number of labour hours scheduled to better-reflect production demands,
which, together with the continuing sales order backlog, did help mitigate
the impact of the economic slowdown on General Donlee's overall health.
The Fund continued to pay regular monthly distributions to Unitholders at
the rate of $0.090 per Unit in the third quarter of 2009, despite the
pressure on sales. The ongoing effect on sales from the continued economic
conditions in the industry has impacted negatively on General Donlee's
financial results; one of the attendant outcomes of this is that the
Fund's payout ratio in the last two quarters has been significantly higher
than target. The Fund has historically had - and continues today to have -
a strong commitment to long-term Unitholder value, which has been
consistently illustrated in Management and the Trustees' decisions to
historically maintain a conservative payout ratio. Given the Fund's
conservative payout ratio in the past, Management and the Trustees had
decided to maintain the current distribution level, but will continually
monitor the Fund's results and their potential impact on future
distributions to Unitholders.
Together with its third quarter results, the Fund announced the
resignation of Melinda Lee from its Board of Trustees, and her replacement
by David Wood, Vice President of Finance, Municipal Enterprises Limited,
effective immediately. The Board of Trustees would like to thank Melinda
Lee for all her hard work over the past few years.
Financial Highlights for the Three and Nine Months Ended September 30,
2009
The following summary of financial data presents the consolidated results
of operations of the Fund for the three-month and nine-month periods ended
September 30, 2009, including comparative results for the same periods in
2008.
Three Months Ended Nine Months Ended
($ millions, except Unit and ------------------ -----------------
per Unit amounts, unaudited) Sept 30/09 Sept 30/08 Sept 30/09 Sept 30/08
---------- ---------- ---------- ----------
Operations
----------
Sales 8.6 13.4 32.9 39.1
Gross profit 1.0 3.7 8.2 10.9
Net income 0.2 1.4 5.0 5.1
Basic income per Unit $0.040(a) $0.237(b) $0.930(c) $0.744(d)
Distributions
-------------
Distributable cash(1) (0.6) 2.3 2.8 6.7
Distributable cash per
Unit(1) $(0.120)(a) $0.392(b) $0.514(c) $0.983(d)
Distributions paid 1.4 1.5 4.4 5.4
Distributions paid per Unit $0.270 $0.270 $0.810 $0.810
(1) Distributable cash is not a defined term under Canadian generally
accepted accounting principles ("GAAP"), but is determined by the
Fund as cash flow provided by operating activities (adjusted to
remove changes in non-cash working capital items), less repayment of
long-term bank debt and less the pro-rated reserve for maintenance
capital expenditures, for which Management estimates $1.25 million
for 2009. See reconciliation of distributable cash below. Management
believes that this liquidity measure is a useful supplemental measure
of performance, as it provides investors with an indication of the
amount of cash available for distribution to Unitholders. Investors
are cautioned, however, that distributable cash should not be
construed as an alternative to using net earnings as a measure of
profitability, or to using the statements of cash flows. Further, the
Fund's method of calculating distributable cash may not be comparable
to measures used by other companies or trusts. For details of
distributable cash, see the table below.
(a) Based on weighted average of 5,332,317 Units outstanding for the
third quarter of 2009.
(b) Based on weighted average of 5,830,392 Units outstanding for the
third quarter of 2008.
(c) Based on weighted average of 5,412,561 Units outstanding for
year-to-date 2009.
(d) Based on weighted average of 6,811,435 Units outstanding for
year-to-date 2008.
Overall Financial Performance for nine months ended September 30, 2009
In the nine months ended September 30, 2009, General Donlee delivered
sales of $32.9 million, down by $6.2 million or 16% from the sales level
in the same period of 2008, generally reflecting the impacts of the
economic downturn in the markets serviced by the Company. The Company's
aerospace and power generation products division delivered sales of $22.3
million, a decrease of $1.4 million, or 6%, over 2008, mostly due to a
decrease in commercial aerospace sales, offset by higher power generation
and military aerospace sales net of the increased U.S. dollar ("USD").
General Donlee's industrial products division produced 2009 sales of $10.6
million, a decrease of $4.8 million or 31% from the same period last year,
due to the continued slowdown in the capital goods market and client
changes to its delivery schedules for commercial aerospace landing gear
components.
The Fund achieved net income of $5.0 million for the nine months ended
September 30, 2009, similar to the same period last year, primarily due to
a gain on its USD foreign exchange forward contracts.
Distributable cash(1) for the nine months ended September 30, 2009 was
$2.8 million, or $0.514 per Unit, as compared to $6.7 million or $0.983
per Unit in the comparable period in 2008; the Fund maintained its monthly
distribution level at $0.090. In the nine months ended September 30, 2009,
distributions paid were $4.4 million or $0.810 per Unit, compared to $5.4
million or $0.810 per Unit in 2008; the Fund was able to reduce the level
of distributions paid by repurchasing Trust Units under its Issuer Bids,
thereby leaving a lower number of Trust Units outstanding.
General Donlee continues to maintain adequate working capital to support
its current operations, as well as additional credit facilities to support
any growth. At September 30, 2009, General Donlee had working capital of
$18.7 million, down from the $19.9 million reported at December 31, 2008,
and a September 30, 2009 current ratio of 5.3:1.
Distributable Cash(1)
Distributable cash(1) for the nine months ended September 30, 2009 was
$2.8 million, or $0.514 per Unit, as compared to the $6.7 million, or
$0.983 per Unit posted in the nine months ended September 30, 2008. This
was the result of a slowdown in the industries serviced by the Company,
which led to reduced cash provided by operating activities.
Regular distributions paid to Unitholders were $0.810 per Unit for the
nine months ended September 30, 2009, unchanged from the same period in
2008.
The following table shows the calculation of distributable cash(1).
Three Months Ended Nine Months Ended
($000, except per Sept 30 Sept 30 Sept 30 Sept 30
Unit amounts) 2009 2008 2009 2008
---------- ---------- ---------- ----------
Cash provided by operating
activities $3,561 $4,840 $8,864 $8,051
Adjust for net changes in
non-cash working capital
balances related to
operations (3,645) (2,010) (4,421) (83)
-------------------------------------------
Cash provided by operating
activities before changes
in non-cash working capital
balances (84) 2,830 4,443 7,968
Repayment of long-term
bank debt (245) (232) (725) (331)
Reserve for maintenance
capital expenditures (313) (313) (938) (938)
-------------------------------------------
Distributable cash(1) $(642) $2,285 $2,780 $6,699
Distributions paid to
Unitholders $1,440 $1,548 $4,379 $5,448
-------------------------------------------
Basic income per Unit $0.040 $0.237 $0.930 $0.744
Distributable cash(1) per
Unit $(0.120) $0.392 $0.514 $0.983
Distributions paid per Unit $0.270 $0.270 $0.810 $0.810
Payout ratio(2) n/a 69% 158% 82%
(2) Payout ratio is not a defined term under Canadian GAAP, but is
determined as actual distributions divided by distributable cash. The
Fund's method of calculating its payout ratio may not be comparable
to measures used by other companies or trusts.
Outlook
The impacts of an overall industry slowdown, itself a response to
difficult economic realities that have characterized the year so far,
continued to manifest themselves in the Fund's financial performance in
the third quarter of 2009. Always focused on responsible stewardship of
Unitholders' investment, the Fund continues to respond to external
challenges by working to control costs, continuing to adjust its labour
requirements to match expected decreases in production levels in both the
industrial and aerospace segments. Between actions like these, General
Donlee's diverse platform of products, and its wide customer base,
Management is optimistic about the Company's ability to mitigate any
material negative impacts of the ongoing market pressures in the quarters
ahead.
Given that industry consensus does not anticipate an imminent turnaround
in the general economic outlook, the Trustees and Management fully expect
the Company to have to continue to respond to the current economic
upheaval for the balance of 2009. However, while the Company's performance
in the final quarter of 2009 is not expected to be as strong as that of
last year, its $36.3 million sales order backlog reflects a continuing
demand for its products. Together, the sales order backlog and the
operational improvements the Fund has made, including workforce
adjustments and cost-cutting measures to better-scale General Donlee's
operations to current market conditions, position General Donlee well to
sustain its business through to the eventual economic turnaround.
General Donlee's flexible business strategies have been - and demonstrably
remain, especially in challenging economic times - the key to the
Company's success over the span of many years and economic cycles.
Management and the Trustees maintain an unwavering focus on making the
best possible decisions to foster long-term Unitholder value, from
adjusting our costs to better-reflect the times, to re-purchasing
securities to increase remaining Unitholders' proportionate shares of the
Fund. While the Fund's tactics may change as conditions dictate, that
focus on value will not change, in the balance of 2009 and beyond.
Company Profile
The Fund is a trust established to hold the securities of General Donlee
Limited, a leading diversified manufacturer of precision-machined products
for the military, commercial and general aerospace industries, and a
specialist in the manufacture of precision-machined products for the
industrial products and power generation industries. General Donlee's
operating strategy focuses on targeting niche markets for products that
are aligned with its sophisticated manufacturing capabilities and skilled
workforce.
SEDAR Filings
Today the Fund filed its interim Consolidated Financial Statements
(including the notes thereto) and Management's Discussion and Analysis for
the three and nine months ended September 30, 2009 with SEDAR at
www.sedar.com. These documents are also available on the Fund's website at
www.generaldonlee.com on the Financial Reports page.
In addition to these documents, the Fund also files its Annual Report,
Annual Information Form, its Notice of Annual Meeting and Management
Information Circular, and its interim financial statements with SEDAR.
Forward-Looking Information
As with all forward-looking statements, caution must be exercised to
ensure that appropriate interpretation is made. Certain forward-looking
statements are based on information currently available to Management, but
are subject to a number of uncertainties and risks that could cause actual
results to differ materially from the results discussed in the forward-
looking statements. These uncertainties and risks include, but are not
limited to: dependence on commercial aircraft sales and defence
procurement; dependence on power generation sales and sales to the
industrial sector; production rates; shipping schedules and timing of
deliveries; dependence on key customers; dependence on third party
suppliers and manufacturers; raw material costs; competition; satisfying
product specifications; product liability and warranty claims;
environmental and other government regulation; quality certification
requirements; hedging effects; ability to fund pension deficits, interest
and foreign exchange rates; leverage and restrictive debt covenants;
continued availability of credit facilities; regulatory requirements;
reliance on key personnel and the Company's 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; economic growth and fluctuations (including the global
credit crisis, and pension performance, funding and expenses); 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
|
print
page
