Advanced Fiber Technologies (AFT) Income Fund Reports Results for the Third Quarter 2005.LENNOXVILLE, Quebec Lennoxville, population 4,963 (2001), is a borough (Fr. arrondissement) of the City of Sherbrooke, Quebec, Canada. It was originally a town, but was amalgamated into the larger city of Sherbrooke in 2002. -- Advanced Fiber Technologies (AFT) Income Fund (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :AFT.UN) announces its results for the third quarter ended September September: see month. 30, 2005. For the third quarter, sales amounted to $16.0 million, a 11.3% decrease from $18.0 million in the corresponding quarter of last year. Comparative figures of 2004 were restated to reflect the forward exchange contracts in 2004 that were determined to not meet the documentation requirements for hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). (See Note 2 to the unaudited interim financial statements).Earnings before interest, income taxes, depreciation and amortization or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (see reconciliation with net earnings (loss) below) were $0.8 million versus $4.8 million in the same quarter of last year.The decrease of $4.0 million in the third quarter of 2005 is due to lower volume in the core business, the unfavourable U.S. dollar exchange rate, higher material costs, and higher selling, general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. .Cash available for distribution was $0.5 million ($0.04 per unit) compared with $1.8 million ($0.13 per unit) in the third quarter a year ago.For the third quarter 2005, the net loss was $2.3 million compared with net earnings of $1.3 million last year. These results include the impact of the normal summer shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down at all manufacturing facilities. At quarter end, the Fund did not comply with the financial covenants related to its Credit Facility and Senior Secured Notes. The Fund is in discussion with its lenders regarding amendments to its Credit Facility and Senior Secured Notes.As required by the Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. Emerging Issues Committee Abstract of Issues Discussed EIC-59, the Fund has reclassified as a current liability the entire $45 million balance of its Senior Secured Notes, even though no accelerated repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan has been demanded by the lenders.
Distribution Highlights
(in thousands Three-month periods ended Nine-month periods ended
of dollars September 30, October 1, September 30, October 1,
except per 2005 2004 2005 2004
unit amounts)
---------------------------------------------------------------------
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(Restated - (Restated -
Note 2 to Note 2 to
financial financial
statements) statements)
Earnings (loss)
before income taxes $(2,250) $1,141 $(50,384) $1,465
Plus
Depreciation
and amortization 2,113 2,699 7,495 7,946
Write-down of
intangible assets - - 14,213 -
Goodwill impairment - - 32,015 -
Restructuring charges - - - 1,500
Less
Current income taxes 28 35 37 84
Maintenance capital
expenditures 301 341 921 620
Net variation
of fair market
value of forward
exchange contracts
and deferred
foreign exchange
gains (985) 1,689 (809) 1,689
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Distributable cash $519 $1,775 $3,190 $8,518
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Distributable cash
per unit $0.04 $0.13 $0.23 $0.63
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Distributions
declared per unit $0.00 $0.25 $0.20 $0.85
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Average number
of units
(in thousands) 13,860 13,860 13,860 13,605
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For the nine-month period ended September 30, 2005, sales amounted to $53.7 million, a 7.6% decrease from sales of $58.1 million reported for the comparable period in 2004.For the nine-month period in 2005, the Fund generated EBITDA of $6.1 million after accounting for cost of sales, selling, general and administrative expenses as well as the realized and unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on foreign exchange.For the comparable period of 2004, the Fund generated EBITDA of $13.6 million on the same basis and excluding the restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. .As a percentage of sales, EBITDA was 11.3% of sales for the nine-month period in 2005, compared with 23.4% for the corresponding period in 2004. On October October: see month. 26, 2005, the collective agreement for the Lennoxville Lennoxville, town (1991 pop. 4,046), S Que., Canada, at the confluence of the St. Francis and Massawippi rivers, SE of Sherbrooke. It is chiefly a residential town and is the seat of Bishop's Univ. (1843). facility was renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. for a six-year term.The new conditions, coupled with efficiency gains from automation now in place, will allow a reduction of labour costs of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 20%. Cash Distributions The Fund declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. no distributions to its Unitholders during the third quarter ended September 30, 2005 compared with distributions of $3.5 million ($0.25 per unit) for the same quarter in 2004.The Fund suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. its monthly cash distributions in the second quarter of 2005. Use of non GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measurements Distributable cash is not a defined term under Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP), but is determined by the Fund as earnings before income taxes adjusted for non-cash expenses Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) or non-recurring expenses including depreciation, amortization, asset impairments and write-downs and restructuring charges, and reduced by maintenance capital expenditures, net of disposals, current income taxes, changes in forward exchange contracts and deferred foreign exchange gains. EBITDA, or earnings before interest, income taxes, depreciation and amortization, is not a recognized measure under GAAP.Management believes that, in addition to net earnings, EBITDA is a useful supplemental measure that provides investors with an indication of cash available for distribution prior to debt service, capital expenditures and income taxes.EBITDA, as defined by the Fund, also excludes restructuring charges and unusual items such as goodwill impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. .Investors are cautioned, however, that EBITDA should not be construed as an alternative to net earnings determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP as an indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of the Fund's performance, or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows.The Fund's method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to measures used by other issuers.
EBITDA Reconciliation with Net earnings (loss)
(in thousands Three-month periods ended Nine-month periods ended
of dollars) September 30, October 1, September 30, October 1,
2005 2004 2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
(Restated - (Restated -
Note 2 to Note 2 to
financial financial
statements) statements)
Net earnings (loss) $(2,278) $1,321 $(49,116) $1,294
Plus
Depreciation and
amortization 2,113 2,699 7,495 7,946
Write-down of
intangible assets - - 14,213 -
Goodwill impairment - - 32,015 -
Restructuring charges - - - 1,500
Provision for income taxes 28 (180) (1,268) 171
Interest expense 910 910 2,725 2,700
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EBITDA $773 $4,750 $6,064 $13,611
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EBITDA (% of sales) 4.8% 26.4% 11.3% 23.4%
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Operating Results Sales for the three-month period ended September 30, 2005 were $16.0 million compared with $18.0 million last year.The difference of $2.0 million reflects a decrease of $2.6 million or 15.7% from screening components and an increase of $0.6 million from the Finebar(R) and Optimum complementary product lines.Direct sales to End-users were $12.7 million (79% of total sales) and sales to Original Equipment Manufacturers (OEMs) were $3.3 million (21% of total sales).For the comparable period of 2004, sales to End-users represented $12.9 million (72% of total sales) and sales to OEMs represented $5.1 million (28% of total sales). Total sales decreased by $3.0 million mainly due to volume and price in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). .The gross margin for the three-month period ended September 30, 2005 was 28.7% compared to 35.2% in the corresponding quarter of last year.The reduction of 6.5 percentage points in gross margin on total sales for the quarter represents $1.0 million and is explained by higher material costs of $0.5 million, a lower exchange rate for the US$sales of $0.3 million, and additional costs of $0.5 million due to permanent lay-offs and union negotiations, partially offset by productivity gains and cost reduction gains of $0.3 million during the quarter. Selling, general and administrative ("SG&A") expenses for the three-month period ended September 30, 2005 were $3.4 million versus $3.2 million last year.Incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. expenses are related to i) the increased infrastructure costs required to service a greater proportion of End-users and new complementary products, ii) the timing of certain legal and accounting service fees, and iii) a gain on disposal of assets in 2004. The realized and unrealized loss Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. on foreign exchange represented $0.4 million for the three-month period ended September 30, 2005, compared with a gain of $1.6 million for the corresponding period in 2004 essentially due to the restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of 2004 figures to reflect a marked-to-market Marked-to-market An arrangement whereby the profits or losses on a futures contract are settled each day. gain on forward exchange contracts. EBITDA for the three-month period ended September 30, 2005, amounted to $0.8 million or 4.8% of sales versus $4.8 million or 26.4% of sales last year (17.0% excluding the restatement for hedge accounting). Sales for the nine-month period of 2005 were $53.7 million compared with $58.1 million last year.Direct sales to End-users were $40.4 million (75% of total sales) and sales to OEMs were $13.3 million (25% of total sales).For the comparable period of 2004, sales to End-users represented $39.4 million (68% of total sales) and sales to OEMs represented $18.7 million (32% of total sales). The difference of $4.4 million in sales for the nine months included a decrease of $6.8 million or 12.5% from screening components and an increase of $2.4 million from the Finebar(R) and Optimum complementary product lines.The decrease in sales to OEMs was $5.4 million while the increase to End-users was $1.0 million. Sales to OEMs are rapidly decreasing because many OEMs are now manufacturing their screen cylinders internally. The gross margin for the nine-month period was 29.7% compared to 36.7% last year.The reduction of 7.0 percentage points in gross margin on total sales for the period represents $3.8 million and is explained by higher material costs of $1.4 million, a lower exchange rate for the US$sales of $1.9 million and additional costs of $0.5 million due to permanent lay-offs and union negotiations.The gain of $1.6 million from the productivity and cost reduction initiatives was enough to offset the lower absorption absorption [Lat.,=sucking from], taking of molecules of one substance directly into another substance. It is contrasted with adsorption, in which the molecules adhere only to the surface of the second substance. of fixed manufacturing costs. Selling, general and administrative ("SG&A") expenses for the nine-month period ended September 30, 2005 were $10.4 million versus $9.8 million last year.Incremental expenses are related to i) the increased infrastructure costs required to service a greater proportion of End-users and new complementary products, ii) additional administrative compliance costs, and iii) a gain on disposal of assets in 2004. The realized and unrealized gain on foreign exchange represented $0.5 million for the nine-month period of 2005 compared with a gain of $2.2 million in 2004 essentially due to the restatement of 2004 figures to reflect a marked-to-market gain on forward exchange contracts. EBITDA for the nine-month period of 2005 amounted to $6.1 million or 11.3% of sales versus $13.6 million or 23.4% of sales last year (20.5% excluding the restatement for hedge accounting). Liquidity and Capital Resources At September 30, 2005, the Fund had cash on hand of $0.9 million and a revolving line of credit Revolving line of credit A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years. now standing at $4.0 million of which an amount of $2.3 million was drawn at quarter end.Both the credit agreement and the Senior Secured Notes indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. include financial covenants that, once breached, prohibit pro·hib·it tr.v. pro·hib·it·ed, pro·hib·it·ing, pro·hib·its 1. To forbid by authority: Smoking is prohibited in most theaters. See Synonyms at forbid. 2. the Fund from making distributions.The debt to EBITDA ratio stood at 4.74 versus a maximum covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the of 3.0.The current ratio stood at 2.06, before the reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of the Senior Secured Notes as short term liability, versus a minimum covenant of 1.50.The interest coverage ratio stood at 2.92 versus a minimum covenant of 4.50.The minimum covenant of $16.0 million for the trailing 12 months EBITDA was also not met at quarter end.All these covenants were calculated on the Advanced Fiber Technologies (AFT) Trust consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . The Fund is holding discussions with its short term and long term lenders with a view to amending the Credit Facility and Senior Secured Notes to deal with the current situation. Under the Credit Facility, the non-compliance with the financial covenants constitutes an Event of Default and the Fund cannot declare TO DECLARE. To make known or publish. By tho constitution of the United States, congress have power to declare war. In this sense the word, declare, signifies, not merely to make it known that war exists, but also to make war and to carry it on. 4 Dall. 37; 1 Story, Const. Sec. any distributions until the Event of Default is cured.In addition, the short term lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. has the right to accelerate repayment of any outstanding loans. Under the Senior Secured Notes, the non-compliance with the financial covenants constitutes a default that, if not cured within 30 days following a formal notice by the Noteholders, becomes an Event of Default.The Fund cannot declare any distributions until the default is cured.In addition, upon an Event of Default, Noteholders are entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to the immediate payment of any outstanding capital and accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. on the Senior Secured Notes and, if not paid, to the realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. of their securities. The final outcome of the discussions is not known, however, it may result in more stringent credit conditions and higher interest rates. Finebar(R) As of September 30, 2005, the cumulative sales of Finebar(R) products for the prior twelve months had exceeded the minimum required for the exercise of the purchase option of the Finebar(R) business by AFT.The minimum profitability of the Finebar(R) business for the exercise of the put option by Norwalk Norwalk (nôr`wôk'). 1 City (1990 pop. 94,279), Los Angeles co., S Calif.; settled in the 1850s, inc. 1957. With the arrival (1875) of the Southern Pacific RR, it became a center for the dairy and logging industries, but Industrial Components, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control ("NIC (1) (Network Interface Card) See network adapter. See also InterNIC. (2) (New Internet Computer) An earlier Linux-based computer from The New Internet Computer Company (NICC), Palo Alto, CA. ") had also been exceeded, subject to an audit of the Finebar(R) business.NIC is now in a position to exercise its put option on the Finebar(R) business.Had NIC exercised this option at September 30, 2005, the estimated purchase price payable by AFT for the business would have been approximately $5 million.As of the date of the issue of these unaudited interim consolidated financial statements, NIC has not exercised this option. While AFT is currently in a position to exercise its purchase option on the Finebar(R) assets, management does not foresee fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. doing so until AFT is in a more favourable liquidity position. The option term for both parties expires at the end of July July: see month. 2006. Appointment of New Trustees During the quarter, two new trustees were appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. to hold office until the next annual meeting of AFT's Unitholders.The new trustees are Messrs Jean Noelting and Vrege Armoyan. The newly appointed trustees will replace Messrs. Jim Rogers For other uses, see: James Rogers (disambiguation). James Beeland Rogers, Jr. (born 19 October 1942) is a co-founder, along with George Soros, of the Quantum Fund. and Roch Saint Roch (Latin: Rochus; Italian: Rocco; French: Roch; Spanish and Portuguese: Roque; c. 1295 – traditionally 16 August 1327[1]) was a Christian saint, a confessor whose death is commemorated on 16 August; he is specially invoked against the plague. Leblanc Leblanc is a French surname. It can refer to: Companies
tenure, in education, a guarantee of the permanence of a college or university teacher's position, awarded upon successful completion of a probationary period, usually seven years. as trustee A user or group of users that has been given access rights to files on a network server. See also TRUSTe. .Mr. Roch Leblanc will continue to serve as President and Chief Executive Officer of the Fund and its operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. . As part of this Board reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. , AFT also formed a new corporate strategy committee of the Board of Trustees board of trustees Politics The posse of thugs who oversee an institution's administration. See Board of directors. to review, assess and consider all other steps that may have to be taken by AFT in these difficult times. Outlook "Our customers in the pulp and paper industry The global pulp and paper industry is dominated by North American (United States, Canada), northern European (Finland, Sweden) and East Asian countries (such as Japan). Australasia and Latin America also have significant pulp and paper industries. continue to face a number of challenges, such as rising energy, transportation and fiber costs, structural overcapacity o·ver·ca·pac·i·ty n. Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. and increased competition from low-cost regions _ all of which are contributing to the poor profitability in the industry," commented Roch Leblanc, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of AFT Income Fund. "There is overcapacity in the screening components business and continuing pressure on prices. In this difficult environment, we anticipate that sales will continue to be soft." "However, our focus on initiatives to reduce labour and material costs as well as selling, general and administration overhead should improve our operating results sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen ," added Mr. Leblanc."At the same time, we will address the excess capacity in our facilities and continue to discuss with our lenders regarding our non-compliance with their covenants, all with a view to returning AFT to a sound financial footing." Forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. Information Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. contained herein are based on current expectations and are subject to a number of risks and uncertainties, and actual results, actions or events could differ materially from those set forth in this discussion.The forward-looking information contained herein is current only as of the date of this document. There should not be an expectation that such information will in all circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise. These uncertainties and risks include, but are not limited to, the dependence on certain key suppliers, competitive pressures and changes in market activity, risks associated with international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. and foreign exchange, liquidity and debt covenants, legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. , environmental, health and safety and other regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. .Further information can be found in the disclosure documents filed by Advanced Fiber Technologies (AFT) Income Fund with the securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities , available at www.sedar.com Webcast Advanced Fiber Technologies (AFT) Income Fund invites interested investors and financial media to access a live webcast of the conference call covering its third quarter results at www.aft-global.com on Wednesday Wednesday: see week. , November November: see month. 2, 2005 at 10:00 a.m.
Advanced Fiber Technologies (AFT) Income Fund
Consolidated Balance Sheets
As at As at
September 30, December 31,
2005 2004
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(in thousands of dollars) (unaudited) (audited)
Assets
Current assets
Cash and cash equivalents $899 $210
Accounts receivable 11,180 15,453
Inventories 12,151 11,243
Prepaid expenses 862 997
Forward exchange contracts
maturing within twelve months 811 1,232
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25,903 29,135
Property, plant and equipment 25,613 28,261
Deferred financing fees 813 1,033
Intangible assets (Note 5) 26,244 44,715
Forward exchange contracts 579 560
Goodwill (Note 4) 33,488 65,503
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$112,640 $169,207
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Liabilities and Unitholders' Equity
Current liabilities
Bank loans (Note 6) $3,075 $1,444
Accounts payable and accrued liabilities 9,215 11,724
Cash distributions payable - 693
Income taxes payable 29 204
Current portion of deferred foreign
exchange gains (Note 3) 146 -
Current portion of long-term
obligations (Note 6) 45,067 222
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57,532 14,287
Long-term obligations (Note 6) 1,746 46,393
Deferred foreign exchange gains (Note 3) 261 -
Future income taxes 206 1,511
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59,745 62,191
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Unitholders' equity (Note 7)
Units 129,482 129,482
Cumulative foreign currency
translation adjustment (972) 1,261
Cumulative earnings (losses) (31,561) 17,555
Cumulative distributions (44,054) (41,282)
52,895 107,016
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$112,640 $169,207
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Advanced Fiber Technologies (AFT) Income Fund
Consolidated Statements of Earnings (Unaudited)
Three-month periods ended Nine-month periods ended
September 30, October 1, September 30, October 1,
2005 2004 2005 2004
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(in thousands of (Restated - (Restated -
dollars except Note 2) Note 2)
units and per
unit amounts)
Sales $15,974 $17,999 $53,665 $58,057
Cost of sales 11,389 11,659 37,731 36,739
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Gross margin 4,585 6,340 15,934 21,318
Selling, general and
administrative expenses 3,408 3,175 10,373 9,841
Realized and unrealized
loss (gain) on
foreign exchange 404 (1,585) (503) (2,134)
Restructuring charge - - - 1,500
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Earnings before
the under-noted 773 4,750 6,064 12,111
Interest expense
- long-term obligations 805 753 2,379 2,302
Interest expense - other 105 157 346 398
Amortization of
deferred financing fees 73 65 220 193
Depreciation of property,
plant and equipment 1,018 1,129 3,333 3,469
Amortization of
intangible assets 1,022 1,505 3,942 4,284
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Earnings (loss)
before unusual items
and income taxes (2,250) 1,141 (4,156) 1,465
Write-down of intangibles
(Note 5) - - 14,213 -
Goodwill impairment
(Note 4) - - 32,015 -
---------------------------------------------------------------------
Earnings (loss) before
income taxes (2,250) 1,141 (50,384) 1,465
Provision for
income taxes
Current 28 35 37 84
Future - (215) (1,305) 87
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28 (180) (1,268) 171
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Net earnings (loss) $(2,278) $1,321 $(49,116) $1,294
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Basic weighted average
number of units
(in thousand of units) 13,860 13,860 13,860 13,605
Diluted weighted
average number
of units
(in thousand of units)
(Note 7) 13,860 13,860 13,860 13,605
Basic earnings (loss)
per unit (Note 7) $(0.16) $0.10 $(3.54) $0.10
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Diluted earnings (loss)
per unit (Note 7) $(0.16) $0.10 $(3.54) $0.10
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Advanced Fiber Technologies (AFT) Income Fund
Consolidated Statements of Unitholders' Equity (Unaudited)
Three-month periods ended Nine-month periods ended
September 30, October 1, September 30, October 1,
2005 2004 2005 2004
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(in thousands of (Restated - (Restated -
dollars) Note 2) Note 2)
Balance, beginning
of period $55,999 $111,361 $107,016 $110,227
Issuance of units - 5 - 9,636
Net earnings (loss) (2,278) 1,321 (49,116) 1,294
Change in cumulative
foreign translation
adjustment (826) (1,067) (2,233) (1,450)
Distributions declared - (3,465) (2,772) (11,552)
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Balance, end of period $52,895 $108,155 52,895 $108,155
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Advanced Fiber Technologies (AFT) Income Fund
Consolidated Statements of Cash Flows (Unaudited)
Three-month periods ended Nine-month periods ended
September 30, October 1, September 30, October 1,
2005 2004 2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
(in thousands of (Restated - (Restated -
dollars) Note 2) Note 2)
Operating activities
Net earnings (loss) $(2,278) $1,321 $(49,116) $1,294
Items not affecting
cash
Depreciation of
property, plant
and equipment 1,018 1,129 3,333 3,469
Amortization of
intangible assets
and deferred
financing fees 1,095 1,570 4,162 4,477
Write-down of
intangible assets - - 14,213 -
Goodwill impairment - - 32,015 -
Translation adjustment - - 134 (579)
Loss (gain) on
disposition of
property, plant
and equipment (4) - 36 -
Decrease (increase)
in forward exchange
contracts 578 (2,032) 402 (2,032)
Deferred foreign
exchange gains 407 - 407 -
Future income taxes - (215) (1,305) 87
Change in non-cash
working capital items (1,017) (176) (265) (2,856)
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(201) 1,597 4,016 3,860
---------------------------------------------------------------------
Investing activities
Maintenance capital
expenditures (301) (341) (921) (620)
Expansion/productivity
capital expenditures (238) (459) (918) (744)
Proceeds on disposition
of property, plant
and equipment 18 - 21 -
Acquisition of
Optimum Filtration - - - (5,975)
---------------------------------------------------------------------
(521) (800) (1,818) (7,339)
---------------------------------------------------------------------
Financing activities
Distribution to Unitholders - (4,158) (3,465) (12,245)
Repayment of
long-term obligations (104) - (313) (94)
New long term
obligations (Note 6) 584 - 584 -
Change in bank loans 1,049 2,057 1,685 1,685
Issuance of Trust units - 5 - 10,186
Cost related to
issuing units - - - (550)
Fees related to the
amendment to existing
Senior Secured Notes
and credit facility - (150) - (150)
---------------------------------------------------------------------
1,529 (2,246) (1,509) (1,168)
---------------------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents
for the period 807 (1,449) 689 (4,647)
Cash and cash equivalents,
beginning of period 92 2,016 210 5,214
---------------------------------------------------------------------
Cash and cash equivalents,
end of period $899 $567 $899 $567
---------------------------------------------------------------------
---------------------------------------------------------------------
Advanced Fiber Technologies (AFT) Income Fund
Notes to the Consolidated Financial Statements (Unaudited)
For the period from January 1, 2005 to September 30, 2005
1. Basis of presentation In the opinion of management, the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. unaudited interim consolidated financial statements, prepared in accordance with Canadian generally accepted accounting principles, contain all adjustments necessary to present fairly the financial position of Advanced Fiber Technologies (AFT) Income Fund as at September 30, 2005 and October 1, 2004 as well as its results of operations and its cash flows for the nine-month periods ended September 30, 2005 and October 1, 2004. While management believes that the disclosures presented are adequate, these unaudited interim consolidated financial statements and notes should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with Advanced Fiber Technologies (AFT) Income Fund's 2004 annual consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: audited financial statements and notes.These unaudited interim consolidated financial statements follow the same accounting policies as the most recent annual consolidated audited financial statements, except as noted below. These interim consolidated financial statements have not been subject to a review by the Fund's external auditors The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. . These consolidated financial statements include the accounts of the Fund and its directly and indirectly wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. from their dates of acquisition.The wholly owned subsidiaries are: Advanced Fiber Technologies (AFT) Trust, Advanced Fiber Technologies (AFT) Inc., Advanced Fiber Technologies (AFT) Oy, Advanced Fiber Technologies (AFT) Co., Ltd. (formerly Poong Nam Nam Vietnam. NAM (US) n abbr (= National Association of Manufacturers) → nationaler Verband der verarbeitenden Industrie (AFT) Ltd.), Varkauden Metallikiinteistot Oy and Advanced Fiber Technologies (AFT) Ltd. The accompanying unaudited interim consolidated financial statements have been prepared on a going concern basis.The going concern basis of presentation assumes that the Fund will continue in operation for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future and will be able to realize its assets and discharge To liberate or free; to terminate or extinguish. A discharge is the act or instrument by which a contract or agreement is ended. A mortgage is discharged if it has been carried out to the full extent originally contemplated or terminated prior to total execution. its liabilities and commitments in the normal course of business.There is uncertainty as to whether or not the lenders will decide to accelerate the repayment of the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. obligations of the Fund due to the breach of a number of its debt covenants.As such, the realization of assets and the discharge of liabilities in the ordinary course of business are subject to uncertainty. In this situation, as required by the Canadian Institute of Chartered Accountants Emerging Issues Committee Abstract of Issues Discussed EIC-59, the Fund has reclassified as a current liability the entire $45 million balance of its Senior Secured Notes, and this despite the fact that no accelerated repayment has been demanded by the lenders. The unaudited interim consolidated financial statements do not reflect any other adjustments that would be necessary if the going concern basis was not appropriate and assume that lenders do not accelerate the repayment of the long-term obligations.If the going concern basis was not appropriate for these unaudited interim consolidated financial statements, significant adjustments would be necessary in the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.Management's on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" plans with respect to the uncertainties described above are as follows: - Continuing discussions with its lenders in respect of its non-compliance with its debt covenants, repayment terms, waivers and/or modifications thereto; - Continuing the restructuring of the operations to reduce costs. 2. Restatement of prior period financial statements related to the application of hedge accounting As at January January: see month. 1, 2004, the Fund adopted Canadian Institute of Chartered Accountants ("CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) ") Accounting Guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. No. 13 ("AcG-13"), Hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. Relationships, on a prospective basis.AcG-13 applies to all existing and new hedging relationships, provides additional documentation and designation DESIGNATION, wills. The expression used by a testator, instead of the name of the person or the thing he is desirous to name; for example, a legacy to. the eldest son of such a person, would be a designation of the legatee. Vide 1 Rop. Leg. ch. 2. 2. requirements for hedge accounting and requires regular, periodic assessment of hedge effectiveness.Derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. that are economic hedges, but do not qualify for hedge accounting, are recognised at fair value on the balance sheet, with changes in fair value recorded in earnings in accordance with Emerging Issues Committee of the CICA, Abstract No. 128, Accounting for Trading, Speculative Speculative Securities that involve a high level of risk. speculative Of or relating to an asset or a group of assets with uncertain returns. The greater the degree of uncertainty the more speculative the asset. or Non-Hedging Derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. Financial Instruments.Consequently, each of the unaudited interim consolidated financial statements for 2004 was prepared using hedge accounting. During the 2004 external audit, it was determined that the forward exchange contracts on hand as at December December: see month. 31, 2004, as well as the forward exchange contracts which matured during 2004 did not qualify for hedge accounting because of deficient de·fi·cient adj. 1. Lacking an essential quality or element. 2. Inadequate in amount or degree; insufficient. deficient a state of being in deficit. documentation and designation.Therefore, all forward exchange contracts on hand as at December 31, 2004, were marked-to-market with changes in fair value recognized in the statement of earnings.Also, all forward exchange contracts that matured during 2004 were accounted for as if they had not qualified for hedge accounting.All these changes were recognized during the fourth quarter of 2004. The Fund is now restating the financial information presented for the quarter and nine-month period ended October 1, 2004.The financial information previously presented for the first and second quarters and the three- and six-month periods ending respectively on April 2, 2004 and July 2, 2004 was not restated since the impact was not significant. The table below reflects the effect of this restatement on net earnings as presented previously for the quarter and nine-month period ended October 1, 2004.
Quarter and nine-month period ended October 1, 2004
(in thousands of dollars, except per unit amounts)
Increase /
(Decrease)
Assets
Current assets
Accounts receivable (433)
Fair value of forward exchange contracts
maturing within 12 months 1,138
Fair value of forward exchange contracts 894
--------------------------------------------------------------------
Total assets 1,599
--------------------------------------------------------------------
--------------------------------------------------------------------
Liabilities and unitholders' equity
Current liabilities
Accounts payable (90)
--------------------------------------------------------------------
--------------------------------------------------------------------
Revenues
Sales (161)
Realized and unrealized gain on foreign exchange 1,850
--------------------------------------------------------------------
Net earnings 1,689
--------------------------------------------------------------------
--------------------------------------------------------------------
Basic earnings per unit 0.13
--------------------------------------------------------------------
--------------------------------------------------------------------
Diluted earnings per unit 0.13
Beginning on March 30, 2005, the Fund's documentation is adequate to qualify its forward exchange contracts for hedge accounting and therefore 2005 financial statements were prepared accordingly. 3. Significant accounting policies Hedging relationships The Fund uses forward exchange contracts to manage its foreign exchange risk exposures on foreign currency denominated sales.The Fund's policy is to not utilize derivative financial instruments for trading or speculative purposes.Beginning on March 30, 2005, the Fund formally documents all relationships between hedging instruments and hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. items.The Fund also formally assesses, both at the hedge's inception INCEPTION. The commencement; the beginning. In making a will, for example, the writing is its inception. 3 Co. 31 b; Plowd. 343. Vide Consummation; Progression. and on an ongoing basis, whether the forward exchange contracts that are used in hedging transactions are effective in offsetting changes in cash flows of hedged items. All forward exchange contracts that qualify for hedge accounting are recorded in the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. and changes in fair value are deferred and recognized over the term of the hedging relationship.All forward exchange contracts that do not qualify for hedge accounting, or are not designated as a hedge, are recorded in the consolidated balance sheet as either an asset or liability with changes in fair value recognized in earnings. Beginning on March 30, 2005, the Fund's forward exchange contracts qualify for hedge accounting.Accordingly, as of that date, the Fund recorded a marked-to-market gain of $597,000 that was excluded from distributable cash.In the future, changes in the fair market value of forward exchange contracts will be deferred until their realization. During the third quarter, the Fund settled early foreign exchange contracts with a total nominal value Nominal Value The stated value of an issued security that remains fixed, as opposed to its market value, which fluctuates. Notes: When referring to fixed-income securities, the nominal value is also the face value. of _3.15 million.These contracts had expiry dates expiry date expire n → date f d'expiration; (on label) → à utiliser avant ... expiry date expire n → Ablauftermin m ranging between October 2005 and January 2007 and were settled early to meet cash flow needs of the Fund which could not be fulfilled ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. by the modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. Credit Facility.The total gain realized on the early settlement of these contracts was $0.6 million.This gain was deferred since these contracts had been designated as part of a hedging relationship and the hedged items are still probable PROBABLE. That which has the appearance of truth; that which appears to be founded in reason. .This gain will be included in earnings as the hedged items are realized.This gain was included in distributable cash. Intangible assets As of January 1, 2005, the Fund has reviewed its estimate of the useful life of certain customer relationships from 20 years to 13 years.This change, which was applied on a prospective basis, resulted in additional amortization expense for the quarter of $180,000 and for the year to date of $540,000. Following the impairment test mentioned in Note 4, certain write-downs of intangible assets were recorded.As a result, amortization expense for the period was $335,000 lower than it would have been had there been no write-down. 4. Goodwill impairment During the second quarter of 2005, the Fund conducted an impairment test of goodwill and recorded a decrease in value of $32,015,000 since the carrying amount of goodwill for each of the economic units below was estimated to be higher than its fair value, resulting from difficult overall market conditions.Based on the overall conditions under which the impairment was recorded, the only future income tax asset recorded in relation to this impairment was that which was sufficient to eliminate any future tax liability which had been previously recorded in relation to these assets. The following table shows the changes in the carrying amount of goodwill in the period:
Canada Finland South Korea Total
--------------------------------------------------------------------
Balance at December 31, 2004
and April 2, 2005 43,348 21,635 520 65,503
Impairment (25,668) (6,347) - (32,015)
--------------------------------------------------------------------
Balance at July 1, 2005 and
September 30, 2005 17,680 15,288 520 33,488
--------------------------------------------------------------------
--------------------------------------------------------------------
5. Intangible assets
Following the impairment test mentioned in Note 4, the following
write-downs of intangible assets were recorded as at the end of the
second quarter of 2005. No future income tax asset was recorded in
relation to these write-downs given the overall conditions under
which they were made.
Patents and license, unpatented technology and know-how (i)
Canada Finland South Korea Total
--------------------------------------------------------------------
Balance at December 31, 2004 12,060 10,227 600 22,887
Amortization for Q1
to Q3 2005 (1,155) (565) (73) (1,793)
Translation adjustment - (317) 1 (316)
Write-down in Q2 (4,203) (4,382) - (8,585)
--------------------------------------------------------------------
Balance at September 30, 2005 6,702 4,963 528 12,193
--------------------------------------------------------------------
--------------------------------------------------------------------
Customer relationships (i)
Canada Finland South Korea Total
--------------------------------------------------------------------
Balance at December 31, 2004 9,608 11,326 592 21,526
Amortization for Q1 to Q3 2005 (765) (1,194) (55) (2,014)
Write-down in Q2 (4,166) (1,462) - (5,628)
--------------------------------------------------------------------
Balance at September 30, 2005 4,677 8,670 537 13,884
--------------------------------------------------------------------
--------------------------------------------------------------------
Non-compete agreement (i)
Canada Finland South Korea Total
--------------------------------------------------------------------
Balance at December 31, 2004 302 - - 302
Amortization for Q1 to Q3 2005 (135) - - (135)
Write-down in Q2 - - - -
--------------------------------------------------------------------
Balance at September 30, 2005 167 - - 167
--------------------------------------------------------------------
--------------------------------------------------------------------
Total intangible assets (i)
Canada Finland South Korea Total
--------------------------------------------------------------------
Balance at December 31, 2004 21,970 21,553 1,192 44,715
Amortization for Q1
to Q3 2005 (2,055) (1,759) (128) (3,942)
Translation adjustment - (317) 1 (316)
Write-down in Q2 (8,369) (5,844) - (14,213)
--------------------------------------------------------------------
Balance at September 30, 2005 11,546 13,633 1,065 26,244
--------------------------------------------------------------------
--------------------------------------------------------------------
(i) The December 31, 2004, balances presented here are different from
those presented in Note 4 of the unaudited interim financial
statements as at July 1, 2005. The change is related only to a
difference in the allocation method and does not change the overall
total of intangible assets at December 31, 2004.
6. Long term obligations and Credit Facility At the end of the third quarter 2005, the Fund was not in compliance with the financial covenants under its Credit Facility and Senior Secured Notes.The Fund is discussing amendments to its loan covenants A loan covenant is a condition in a commercial loan or bond issue that requires the borrower to fulfill certain conditions or forbids the borrower from undertaking certain actions, or possibly restricts certain activities to circumstances when other conditions are met. with the lenders.In this situation, as required by the Canadian Institute of Chartered Accountants Emerging Issues Committee Abstract of Issues Discussed EIC-59, the Fund has reclassified as a current liability the entire $45 million balance of its Senior Secured Notes, even though no accelerated repayment has been demanded by the lenders.While the Senior Secured Note holders have not accelerated the repayment of its long term obligations, the Credit Facility has been reduced to a revolving maximum of $4.0 million. Advanced Fiber Technologies (AFT) Co., Ltd. (formerly Poong Nam (AFT) Ltd.) borrowed under its working capital loan facility an amount of $558,000 (500 million won), maturing in 2008 and bearing interest at 5.39% for the first year with no capital repayment until maturity. 7. Unitholders' equity During the first quarter of 2005, 60,000 options were granted to two officers with an exercise price of $6.38 per option.The fair value of the options granted amounted to $0.68 per option.Options are granted for a period of 10 years and vest 20% per year over a period of five years.The fair value of these options was calculated using the Black-Scholes valuation model and the following assumptions: Dividend yield 10.36% Expected volatility 37.5% Risk-free interest rate 4.6% Expected life (years) 10 The fair value of these options will be recognized as an expense over the vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period of the options.The total expense recorded for these options in the third quarter of 2005 was $2,000.The cumulative total expense recorded for these options since they were granted to the end of the third quarter of 2005 is $5,000. At September 30, 2005, there were 471,626 options outstanding. These options were not taken into account in calculating diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. earnings (loss) per unit for either the three-month or the nine-month period ended September 30, 2005 since the exercise price of these options was above the market price of the units. 8. Employee future benefits The Fund measures its accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. pension obligation and the fair value of plan assets for accounting purposes as at December 31 of each year.The method used for the amortization of past service costs is linear over the average remaining service life of active employees.During the year, the expense recorded is an estimate of values expected at December 31 as well as any current contributions made in the period.The pension expense recorded is as follows:
Three-month periods ended Nine-month periods ended
September 30, October 1, September 30, October 1,
2005 2004 2005 2004
--------------------------------------------------------------------
Current contributions
made 62,715 63,788 196,831 206,764
--------------------------------------------------------------------
--------------------------------------------------------------------
In 2004, the plan was amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. in order to open an early retirement window for defined benefit members who attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. age 55 as of January 1, 2004 and retired on July 1, 2004.The cost for this amendment was estimated at $456,000 which was recorded entirely in 2004 and is funded over a period of five years. 9. Commitments As of September 30, 2005, the cumulative sales of Finebar(R) products for the prior twelve months had exceeded the minimum required for the exercise of the purchase option of the Finebar(R) business by AFT.The minimum profitability of the Finebar(R) business for the exercise of the put option by Norwalk Industrial Components, LLC ("NIC") had also been exceeded, subject to an audit of the Finebar(R) business.NIC is now in a position to exercise its put option on the Finebar(R) business.Had NIC exercised this option at September 30, 2005, the estimated purchase price payable by AFT for the business would have been approximately $5 million.As of the date of the issue of these unaudited interim consolidated financial statements, NIC has not exercised this option. While AFT is currently in a position to exercise its purchase option on the Finebar(R) assets, management does not foresee doing so until AFT is in a more favourable liquidity position. The option term for both parties expires at the end of July 2006. 10. Comparative figures Certain comparative figures have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the current period presentation. Advanced Fiber Technologies (AFT) Income Fund (TSX:AFT.UN) |
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