General Donlee Income Fund Reports Third Quarter 2009 Results
- 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
- $0.270 in distributions paid to Unitholders for the quarter
While the reduction in production levels and sales flowing from an industry slowdown led to the Fund's net income being reduced to
While Management understands the relationship between the general economic downturn, its customers' reduced production levels, and General Donlee's own sales results, it also recognizes that the best way to see the Company through current market challenges is to be flexible, making changes to its own operations to reflect the times. Accordingly, General Donlee has made productivity enhancements in recent quarters including a reduction in the number of labour hours scheduled to better-reflect production demands, which, together with the continuing sales order backlog, did help mitigate the impact of the economic slowdown on General Donlee's overall health.
The Fund continued to pay regular monthly distributions to Unitholders at the rate of
Together with its third quarter results, the Fund announced the resignation of
Financial Highlights for the Three and Nine Months Ended September 30,
2009
The following summary of financial data presents the consolidated results
of operations of the Fund for the three-month and nine-month periods ended
September 30, 2009, including comparative results for the same periods in
2008.
Three Months Ended Nine Months Ended
($ 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
In the nine months ended
The Fund achieved net income of
Distributable cash(1) for the nine months ended
General Donlee continues to maintain adequate working capital to support its current operations, as well as additional credit facilities to support any growth. At
Distributable Cash(1)
Distributable cash(1) for the nine months ended
Regular distributions paid to Unitholders were
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
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
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.
%SEDAR: 00017571E
For further information: Gerald Thain, Chief Financial Officer, Telephone: (416) 743-4417, E-mail: [email protected], Web site: www.generaldonlee.com
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