General Donlee Income Fund Reports Record Results for 2006



    Fourth Quarter of 2006 General Donlee's third consecutive quarter
    of record results

    TORONTO, March 12 /CNW/ - General Donlee Income Fund (the "Fund")
(TSX: GDI.UN) today announced its third consecutive quarter of record results,
with the release of its results for the fourth quarter and the fiscal year
ended December 31, 2006.

    
    In the fourth quarter of 2006 financial results were excellent:

    -   Sales rose 44% to $13.5 million, driven by 81% sales growth in the
        aerospace and power generation division
    -   Net earnings of $3.0 million or $0.340 per Unit, were up 88%
    -   Distributable cash was $2.9 million or $0.330 per Unit representing
        an increase of 314%
    -   Distributions rose by 38%, with $1.8 million or $.210 per Unit paid
        to Unitholders
    

    As a means of further enhancing Unitholder value, the Fund repurchased
294,240 Units at prevailing market prices in the fourth quarter of 2006, under
the Fund's normal course issuer bid. Subsequent to the end of the fourth
quarter, the Fund repurchased an additional 4,600 Units for cancellation.
    "Our performance in the fourth quarter of 2006, which was our third
consecutive quarter of record results, added to our growing momentum," said
Stan Spavold, Chairman of the Fund. In the year 2006, net earnings increased
by 150% and significantly increased returns to our Unitholders. As a result of
our solid performance, monthly distributions to Unitholders were increased
twice within an eight-month period, to the current monthly distribution level
of $0.08 per Unit announced last month.
    At the end of 2006, General Donlee's sales order backlog stood at
$51.6 million, compared with $50.1 million at December 31, 2005. This backlog
reflects the on-going positive outlook for the aerospace industry in general,
and strong continued demand for General Donlee's products in particular, in
2007 and beyond.

    Financial Highlights

    The following summary of financial data presents the interim consolidated
results of operations of the Fund for the three-month and twelve-month periods
ended December 31, 2006, including comparative results for the same periods in
2005.

    
                                Three Months Ended     Twelve Months Ended
    ($ millions, except         ------------------     -------------------
    Unit and per Unit         Dec. 31/06  Dec. 31/05  Dec. 31/06  Dec. 31/05
    amounts, unaudited)       ----------  ----------  ----------  ----------

        Operations
        ----------
        Sales                     13.5         9.4        45.7        34.1
        Gross profit               4.5         2.8        13.3         8.1
        Net earnings               3.0         1.6         9.0         3.6
        Net earnings per Unit $  0.340(c) $  0.184(a) $  1.009(b) $  0.407(a)

        Distributions
        -------------
        Distributable cash(1)      2.9         0.7         8.5         3.8
        Distributable cash per
         Unit(1)              $  0.330(c) $  0.082(a) $  0.956(b) $  0.424(a)
        Cash distributions paid    1.8         1.3         6.5         2.7
        Cash distributions paid
         per Unit(a)          $  0.210    $  0.150    $  0.735    $  0.297


        (a)   Based on 8,947,000 Units outstanding for the year 2005.
        (b)   Based on weighted average of 8,914,044 Units outstanding for
              the year 2006.
        (c)   Based on weighted average of 8,816,251 Units outstanding for
              the fourth quarter of 2006.

    (1) Distributable cash is not a defined term under Canadian generally
        accepted accounting principles ("GAAP"), but is determined by the
        Fund as cash flow from operating activities (adjusted to remove
        changes in non-cash working capital items including derivative
        contracts, employee future benefits and future income taxes),
        repayment of long-term debt and is further reduced by the purchases
        of property, plant and equipment (not funded by debt) and the reserve
        for maintenance capital expenditures which are estimated by
        Management at $2.0 million for 2006 and $1.25 million for 2005. 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.
    


    Overall Financial Performance for 2006

    General Donlee delivered record performance in 2006 on a number of
fronts. Sales results of $45.7 million for the twelve months ended
December 31, 2006 reflect a 34% increase over the same period in 2005. Of that
amount, sales of $28.1 million in the Company's aerospace and power generation
division increased 53% compared to 2005, reflecting a continuing positive
trend in the aerospace segment. In the industrial products division, sales of
$17.6 million increased 12% compared to the same period in 2005, with a
greater level of shipments and higher margins as a result of increased
activity across the customer base. Overall, General Donlee's improved sales in
2006 generated improvements in margins, net earnings and operating cash flows
compared to 2005.
    The Fund achieved net earnings of $9.0 million for the twelve months
ended December 31, 2006, reflecting a 150% increase compared to the same
period in 2005, when its net earnings were $3.6 million. The improved net
earnings in 2006 helped to generate distributable cash(1) of $8.5 million or
$0.956 per Unit, an increase of 124% over the $3.8 million or $0.424 per Unit
in distributable cash(1) in the comparable period in 2005. In 2006, the cash
distributions paid per Unit grew by 147%, at $6.5 million or $0.735 per Unit,
compared to $2.7 million or $0.297 per Unit in 2005.
    The Fund's balance sheet continues to grow stronger, and at December 31,
2006, showed an increase in working capital to $13.2 million. "We believe that
our balance sheet is sufficient to support the Company's on-going business
operations and the current level of distributions," said Chairman Stan
Spavold. "The consolidated net debt to equity ratio of the Fund at
December 31, 2006 is conservative at 0.41:1.00. We expect continued strong
performance in both divisions and accordingly, the balance sheet and overall
financial position of the Fund should continue to strengthen."

    Distributable Cash(1)

    Cash distributions to Unitholders increased by 147% per Unit in 2006 over
2005. For the year ended December 31, 2006, distributable cash(1) was
$8.5 million or $0.956 per Unit, as compared to the year ended December 31,
2005, when distributable cash(1) was $3.8 million or $0.424 per Unit.

    
    The following table shows the calculation of distributable cash(1).

                                 Three Months Ended     Twelve Months Ended
      ($000, except in           Dec. 31     Dec. 31     Dec. 31     Dec. 31
       per Unit amounts)           2006        2005        2006        2005
                               ----------  ----------  ----------  ----------

    Cash provided by
     operating activities          3,776         474       9,784       3,384
    Adjust for net changes
     in non-cash working
     capital balances
     related to operations          (102)      1,119         964       2,447
                               ----------------------------------------------
    Cash provided by
     operating activities
     before changes in non-
     cash working capital
     balances                      3,674       1,593      10,748       5,831
    Other adjustments:
    Derivative contracts            (491)       (118)       (527)        (85)
    Employee future benefits         356         269         531         387
    Future income taxes             (115)          -        (227)          -
                               ----------------------------------------------
                                   3,424       1,744      10,525       6,133

    Deferred finance charge            -           -           -         (90)
    Term loan repayment                -        (700)          -      (1,000)
    Reserve for maintenance
     capital expenditures           (500)       (312)     (2,000)     (1,250)
                               ----------------------------------------------
    Distributable cash(1)          2,924         732       8,525       3,793
                               ----------------------------------------------

    Cash distributions paid
     to Unitholders                1,842       1,342       6,539       2,659
                               ----------------------------------------------

    Net earnings per Unit      $   0.340   $   0.184   $   1.009   $   0.407

    Distributable cash(1)
     per Unit                  $   0.330   $   0.082   $   0.956   $   0.424

    Cash distributions paid
     per Unit                  $   0.210   $   0.150   $   0.735   $   0.297
    


    Outlook

    Aerospace industry forecasts for 2007 call for continued growth, and
General Donlee has positioned itself to take advantage of the resultant
opportunities. The Fund's 2006 results reflect the higher volumes in General
Donlee's commercial aerospace segment, and its highest-ever sales order
backlog at the end of the year, shows continuing demand for the Company's
products and services in 2007 and into the future.
    The Company anticipates steady sales activity in its industrial products
division in 2007. In the year ahead Management of this division, intends to
focus on strengthening customer relationships, and on making further
operational improvements intended to increase sales revenue and improve
margins.
    General Donlee expects that in 2007, its profitability will be augmented
by investments it has recently made in new equipment to meet increased
production demands. The Company will also evaluate additional investments in
equipment that could result in further improvements and support future growth.
"As always, our actions will be guided by our objective to optimize results
and returns to Unitholders," said Spavold.
    Overall, the Company expects its recent outstanding performance to
continue, driven by the continuing demand for its products in the marketplace
and the quality and efficiency of its operations.

    Senior Management Appointment

    The Fund is also pleased to announce the official appointment of Peter
Bowers as General Manager of the General Gear Division. Peter has been with
General Gear since November 2005 and has been a key factor in that Division's
excellent results of the past year. "The trustees are extremely pleased with
Peter's performance since he joined the General Gear team and are confident he
is the right candidate to lead the Division's further growth" added Spavold.

    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 annual audited Consolidated Financial Statements
(including the notes thereto) and Management's Discussion and Analysis for the
year ended December 31, 2006 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
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; interest and foreign exchange rates; leverage
and restrictive debt covenants; continued availability of credit facilities;
regulatory requirements; reliance on key personnel and our 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; 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:

For further information: Gerald Thain, CFO, General Donlee Limited,
Telephone: (416) 743-4417, E-mail: gthain@donleeprecision.com, Web site:
www.generaldonlee.com

Organization Profile

GENERAL DONLEE INCOME FUND

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