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General Donlee Income Fund Reports Second Quarter 2009 Results

^{Published on 2009-08-10 05:14:06, Last Modified on 2009-08-10 05:14:17 - Market Wire}
 

 TORONTO, Aug. 10 /CNW/ - The General Donlee Income Fund (the "Fund" or "General Donlee") (TSX: GDI.UN) today announced its results for the second quarter, ended June 30, 2009. During the quarter, the Fund continued to generate overall positive results despite the current economic slowdown, thanks in part to its efforts to adjust its operations to suit market conditions. General Donlee's second quarter 2009 results reflected both the impacts of the economic slowdown and its own strategies to soften them: - Sales were $10.5 million, down 21% from the Q2 2008 sales level of $13.3 million - Despite the decrease in sales, Net Income was $1.9 million, in line with the $1.9 million in Q2 2008 - Distributable cash(1) was $0.9 million or $0.161 per Unit, as compared to $2.1 million or $0.309 per Unit in the same period last year - Distributions paid to Unitholders for the quarter were $0.270 per Unit - The Fund repurchased 135,600 in trust Units through a Normal Course Issuer Bid The Fund's net income of $1.9 million in the second quarter of 2009 was in line with the $1.9 million in the same period in 2008, with the positive impact of the strengthened U.S. Dollar ("USD") in both divisions and the gain on the valuation of foreign exchange forward contracts mitigating the reduction in sales. Cash flow from operating activities also increased during the second quarter as a result of a positive net change in non-cash working capital items. Management expects the productivity enhancements the Company undertook in recent quarters, including revising labour hours to better-reflect production demands and the current sales order backlog, to continue to play a role in General Donlee's overall health during the ongoing slowdown in its industry. The General Donlee Income Fund in the second quarter of 2009 repurchased 135,600 Units at prevailing market prices. The Fund also repurchased and cancelled $32,000 in principal amount of convertible debentures under a normal course issuer bid, resulting in a small gain. In the second quarter, the Fund was able to continue to pay regular monthly distributions to Unitholders at the rate of $0.090 per Unit, despite the pressure on sales. The continued economic conditions in the industry have had a negative impact on the recent financial results of General Donlee, specifically its payout ratio in the second quarter being significantly higher than target. Considering the Fund's conservative payout ratio in the past and it's reasonable payout ratio year to date, Management and the Trustees have decided to maintain the current distribution level but will continually monitor the Fund's results and their potential impact on future distributions to Unitholders. Financial Highlights The following summary of financial data presents the consolidated results of operations of the Fund for the three-month and six-month periods ended June 30, 2009, including comparative results for the same periods in 2008. ($ millions, except Unit and Three Months Ended Six Months Ended per Unit amounts, ------------------ ---------------- unaudited) June 30/09 June 30/08 June 30/09 June 30/08 ---------- ---------- ---------- ---------- Operations ---------- Sales 10.5 13.3 24.3 25.7 Gross profit 2.7 3.6 7.1 7.2 Net income 1.9 1.9 4.8 3.7 Basic income per Unit $0.352(a) $0.273(b) $0.884(c) $0.505(d) Distributions ------------- Distributable cash(1) 0.9 2.1 3.4 4.4 Distributable cash per Unit(1) $0.161(a) $0.309(b) $0.628(c) $0.604(d) Distributions paid 1.5 1.8 2.9 3.9 Distributions paid per Unit $0.270 $0.270 $0.540 $0.540 (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 5,398,973 Units outstanding for the second quarter of 2009. (b) Based on weighted average of 6,817,294 Units outstanding for the second quarter of 2008. (c) Based on weighted average of 5,453,347 Units outstanding for year-to-date 2009. (d) Based on weighted average of 7,310,086 Units outstanding for year-to-date 2008. Overall Financial Performance for six months ended June 30, 2009 In the first six months of 2009, General Donlee delivered sales of $24.3 million, down by $1.4 million or 5% from the sales level in the same period of 2008, generally reflecting the impacts of the economic downturn in the market. The Company's aerospace and power generation products division delivered sales of $16.5 million, an increase of $0.5 million, or 3%, over 2008, mostly due to higher power generation sales, military aerospace sales and the rising U.S. dollar ("USD"), offset by a decrease in commercial aerospace sales. General Donlee's industrial products division produced 2009 sales of $7.8 million, a decrease of $1.9 million or 20% from the same period last year, due to the slowdown in the capital goods market and client changes to its delivery schedules for commercial aerospace landing gear components. However, the Fund achieved net income of $4.8 million for the six months ended June 30, 2009, an improvement over the $3.7 million in the same period last year, primarily due to a gain on its USD foreign exchange forward contracts. While distributable cash(1) for the first half of fiscal 2009 was $3.4 million, or $0.628 per Unit, as compared to $4.4 million or $0.604 per Unit in the comparable period in 2008, the Fund was able to maintain its monthly distribution level at $0.090. In the first six months of 2009, distributions paid were $2.9 million or $0.540 per Unit, compared to $3.9 million or $0.540 per Unit in 2008; this decrease was due to the lower number of Trust Units outstanding following the Fund's repurchases under its Issuer Bids. General Donlee continues to maintain adequate working capital to support its current operations, as well as additional credit facilities to support any continued growth. At June 30, 2009, General Donlee had working capital of $19.8 million, similar to the $19.9 million reported at December 31, 2008, and a current ratio of 5.2:1. Distributable Cash(1) Distributable cash(1) for the six months ended June 30, 2009 was $3.4 million, or $0.628 per Unit, as compared to the six months ended June 30, 2008, when distributable cash(1) was $4.4 million, or $0.604 per Unit. The reduced cash provided by operating activities led to the decrease in overall distributable cash during the period; however, the distributable cash per Unit remained consistent due to the reduction in trust units through issuer bids. Regular distributions paid to Unitholders were $0.540 per Unit for the six months ended June 30, 2009, unchanged from the same period in 2008. The following table shows the calculation of distributable cash(1). Three Months Ended Six Months Ended ($000, except per June 30 June 30 June 30 June 30 Unit amounts) 2009 2008 2009 2008 ---------- ---------- Cash provided by operating activities $3,289 $1,194 $5,303 $3,211 Adjust for net changes in non-cash working capital balances related to operations (1,868) 1,324 (776) 1,927 ------------------------------------------ Cash provided by operating activities before changes in non-cash working capital balances 1,421 2,518 4,527 5,138 Repayment of long-term bank debt (241) (99) (480) (99) Reserve for maintenance capital expenditures (312) (312) (625) (625) ------------------------------------------ Distributable cash(1) $ 868 $2,107 $3,422 $4,414 Distributions paid to Unitholders $1,455 $1,792 $2,939 $3,900 ------------------------------------------ Basic income per Unit $0.352 $0.273 $0.884 $0.505 Distributable cash(1) per Unit $0.161 $0.309 $0.628 $0.604 Distributions paid per Unit $0.270 $0.270 $0.540 $0.540 Payout ratio(2) 168% 87% 86% 89% (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 In the second quarter of 2009, the economic realities that have characterized General Donlee's industry for more than a year had their first significant impact on the Fund's financial performance. The Company is taking action to control costs in light of the external challenges, and continues to adjust its labour requirements to match expected decreases in production levels in both segments, as both the industrial and aerospace industries are expected to be weaker in the coming months than they were in the prior year. Management is hopeful that General Donlee's diverse platform of products and wide customer base will help to mitigate any material negative impacts of these market realities. The Trustees and Management anticipate that, in the months to come, the Company's strategies will continue to have to respond to the current economic upheaval. While the last half of 2009 is not expected to be as strong as last year, General Donlee's $43.6 million sales order backlog down from the $50.6 million at December 31, 2008, still remains a good indication of the ongoing demand for its products. Between that and the operational improvements, labour adjustments and cost cutting measures the Fund has made, General Donlee believes it is equipped to ride out the current recession. The General Donlee Income Fund's strategies are sound - and they allow it to modify its business to suit the times. As its track record of operational adjustments and security re-purchases demonstrates, General Donlee is consistently focused on delivering a profitable performance for its Unitholders regardless of challenging times. That focus will continue in the balance of 2009. 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 six months ended June 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 ]. %SEDAR: 00017571E 

For further information: Gerald Thain, Chief Financial Officer, Telephone: (416) 743-4417, E-mail: [ gthain@donleeprecision.com ], Web site: [ www.generaldonlee.com ]