WINNIPEG, July 11 /CNW/ - Exchange Industrial Income Fund ("EIIF" or the
"Fund") today announced that it was restating its consolidated interim
unaudited financial statements for the period ending March 31, 2008 that was
originally released on May 14, 2008. The consolidated interim unaudited
financial statements for this period have been restated as of today's date.
There has been no change to the consolidated income statement or
consolidated balance sheet of the consolidated interim unaudited financial
statements, but additional disclosure has been added to the notes to the
financial statements. The new disclosure for the first quarter of the 2008
fiscal period is required under Section 3862: Financial Instruments -
Disclosures of the Canadian Institute of Chartered Accountants Handbook which
outlines the new disclosure required for financial instruments and risks
arising from financial instruments. The restated consolidated interim
unaudited financial statements of EIIF are available on SEDAR at
The following is the revised disclosure for Note 12 of the interim
consolidated financial statements relating to the risks that EIIF faces
relative to changes in interest rates and foreign currency exchange rates at
March 31, 2008:
"12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Senior management is responsible for setting acceptable levels of risk
and reviewing risk management activities as necessary.
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices.
Market risk is comprised of currency, interest rate and other price risk.
During the first quarter of 2008 the Fund withdrew US dollars from
its credit facility and as at March 31, 2008 there was
US $21.4 million outstanding. The USD funds were used mainly for the
cash portion of the purchase price for the acquisition of Stainless
and also for the purchase of an aircraft by the Aviation segment.
The outstanding funds in USD results in currency risk that the
future cash flows will fluctuate with the changes in market currency
rates. The exposure is offset by the cash generated through the
operations of its Manufacturing segment subsidiaries, in particular
the operations of Stainless throughout the United States, and by
cash balances held at some of the consolidated entities. The Fund
does not use derivative instruments to reduce its exposure to the
Included in the results of the Fund for the first quarter of 2008, a
net foreign exchange loss of $152 was recorded on the income
statement and a currency translation adjustment of $236 was recorded
as a credit through Other Comprehensive Income on the translation of
the Stainless financial statements.
A $0.01 strengthening in the value of the Canadian dollar in
relation to the US dollar applied to the Fund's financial
instruments outstanding at March 31, 2008 would have increased the
net earnings for the period by $0.1 million and increased the
foreign currency translation adjustment in Other Comprehensive
Income by less than $0.1 million.
The Fund is subject to the risk that future cash flows associated
with the debt facility outstanding (Note 5) will fluctuate due to
fluctuations in interest rates and the degree of volatility of the
rates. The Fund manages this risk and seeks financing terms in
individual arrangements that are most advantageous. The Fund has not
used derivative instruments to mitigate this risk.
The terms of the debt facility allow for the Fund to choose the base
interest rate between Prime, Bankers Acceptances or London Inter
Bank Offer Rate (LIBOR). At March 31, 2008, $28.8 million was
outstanding under the Canadian Prime rate, US $19.9 million was
outstanding under LIBOR, and US $1.5 million was outstanding under
the US Prime rate.
Based on the outstanding debt facility at March 31, 2008, net of
cash and cash equivalents, a 1% increase in interest rates for the
Fund would have decreased the net earnings for the period by
approximately $0.3 million.
Credit risk arises from the potential that a counterparty will fail to
perform its obligations. In addition, the Fund is exposed to credit risk
from its customers. While the operations serve markets in Western Canada,
the Fund has a large number of customers, which minimizes the
concentration of credit risk.
As at March 31, 2008, $2.7 million of the outstanding receivables were
greater than 90 days outstanding. The majority of this relates to
payments from the Canadian federal and provincial governments in the
Aviation segment which are considerably slower to be collected but have
low credit risk for the Fund. Management at each of the Fund's
subsidiaries monitor accounts receivables overdue amounts on a daily
basis and respond accordingly. The Fund's subsidiaries maintain an
allowance for doubtful accounts when justified and is reviewed on a
The Fund is subject to risk that it will encounter difficulty in
renegotiating a renewal of its current debt facility (Note 5) or funds to
meet the commitment associated with the debt facility that becomes due in
2010. The Fund doesn't anticipate any significant problem in
renegotiating a credit facility to renew or replace the credit facility
at the end of its term."
Further information about these results can be found in disclosure
documents filed by the Fund with the securities regulatory authorities
available at www.sedar.com.
The Fund is a diversified, acquisition-oriented income trust, focused on
opportunities in the industrial products and transportation sectors which are
ideally suited for public markets except for their size. The strategy of the
Fund is to invest in profitable, well-established companies with strong cash
flows operating in niche markets in Canada and/or the United States. The
objectives of the Fund are: (i) to provide Unitholders with stable and growing
cash distributions; (ii) to maximize Unit value through on-going active
monitoring of its subsidiaries; and (iii) the continuing acquisition of
additional companies or businesses or interests therein in order to expand and
diversify the Fund's investments.
It is currently operating in two niche business segments: aviation and
specialty manufacturing. The aviation segment consists of Perimeter Aviation
Ltd. and Keewatin Air Limited and the specialty manufacturing segment consists
of Jasper Tank Ltd., Overlanders Manufacturing LP, Water Blast Manufacturing
LP, and Stainless Fabrication, Inc.
The statements contained in this news release that are forward-looking
are based on current expectations, and are subject to a number of
uncertainties and risks, and actual results may differ materially. These
uncertainties and risks include, but are not limited to, the dependence of
Exchange Industrial Income Fund on the operations and assets currently owned
by it, the degree to which its subsidiaries are leveraged, the fact that cash
distributions are not guaranteed and will fluctuate with the Fund's financial
performance, dilution, restrictions on potential future growth, the risk of
unitholder liability, competitive pressures (including price competition),
changes in market activity, the cyclicality of the industries, seasonality of
the businesses, poor weather conditions, and foreign currency fluctuations,
legal proceedings, commodity prices and raw material exposure, dependence on
key personnel, and environmental, health and safety and other regulatory
requirements. Further information about these and other risks and
uncertainties can be found in the disclosure documents filed by Exchange
Industrial Income Fund with the securities regulatory authorities, available
Visit us at: www.eiif.ca.
For further information:
For further information: Mike Pyle, President and CEO, Exchange
Industrial Income Fund, 1067 Sherwin Road, Winnipeg, MB, R3H 0T8, Phone: (204)
982-1850, Fax: (204) 982-1855, E-mail: email@example.com