General Donlee Income Fund Reports Strong Third Quarter Results



    Results Continue to Build Momentum as Company Evaluates Opportunities to
    Deliver Further Unitholder Value

    TORONTO, Nov. 9 /CNW/ - General Donlee Income Fund (the "Fund")  (TSX:
GDI.UN) today announced strong third quarter results for the period ended
September 30, 2007. Highlights of the quarter included:

    
    -   Sales rose 7% to $11.7 million, driven by 15% sales growth in the
        aerospace and power generation division
    -   Distributable cash(1) was $1.9 million or $0.223 per Unit
    -   Net earnings, at $1.4 million or $0.165 per Unit, decreased by
        $0.5 million due to interest on new convertible debentures, the
        proceeds of which will be deployed to deliver further Unitholder
        value
    -   EBITDA(2) increased by 21% to $2.9 million
    -   Distributions paid to Unitholders increased by 30% vs. a year ago, or
        $0.075 per Unit
    -   Sales order backlog, at $57.9 million, reflecting strong continued
        demand for General Donlee's products in 2007 and beyond
    

    "General Donlee's continuing solid performance in the third quarter of
2007 gave further strength to the momentum we have been building over the last
year and a half," said Ken Chalmers, Executive Chairman of the Fund. "We were
proud to deliver a total return to Unitholders, including distributions, of
62% in 2006 - and our performance in the first nine months of 2007 has built
on that success. We continue to deliver increased sales results and to improve
profitability - and with the proceeds of the convertible debenture we
undertook in the second quarter, our balance sheet is strong. We are
ideally-positioned to continue delivering solid performance, and to take
advantage of opportunities to deliver further Unitholder value down the line."

    Financial Highlights

    The following summary of financial data presents the interim consolidated
results of operations of the Fund for the three-month and nine-month periods
ended September 30, 2007, including comparative results for the same periods
in 2006.

    
    ($ millions,          Three Months Ended          Nine Months Ended
     except Unit       -------------------------  -------------------------
     and per Unit       Sept 30/07   Sept 30/06    Sept 30/07   Sept 30/06
     amounts,          ------------ ------------  ------------ ------------
     unaudited)

    Operations
    ----------
    Sales                     11.7         10.9          39.2         32.2
    Gross profit               3.0          3.0          10.8          8.8
    Net earnings               1.4          1.9           7.0          6.0
    Net earnings per Unit  $ 0.165(b)   $ 0.216(a)    $ 0.812(c)   $ 0.668(a)
    EBITDA(2)                  2.9          2.4          10.6          7.6
    EBITDA(2) % of sales      24.8%        22.0%         27.0%        23.6%

    Distributions
    -------------
    Distributable cash(1)      1.9          1.8           7.7          5.6
    Distributable cash(1)
     per Unit              $ 0.223(b)   $ 0.202(a)    $ 0.901(c)   $ 0.626(a)
    Cash distributions
     paid                      2.3          1.7           6.5          4.7
    Cash distributions
     paid per Unit         $ 0.270      $ 0.195       $ 0.760      $ 0.525

    (a) Based on 8,947,000 Units outstanding for the third quarter and year-
        to-date 2006.
    (b) Based on weighted average of 8,482,852 Units outstanding for the
        third quarter of 2007.
    (c) Based on weighted average of 8,591,086 units outstanding year-to date
        2007.
    (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 the reserve for maintenance capital
        expenditures, which is estimated by Management at $1.25 million for
        2007 and $2.0 million for 2006. 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.
    (2) EBITDA is not a recognized measure under Canadian GAAP. EBITDA is
        earnings before interest, taxes, depreciation and amortization.
        Management uses, and investors and other readers may use, EBITDA,
        among other performance measures, to assess the operating performance
        of the business. Reference should be made to the EBITDA
        reconciliation to a GAAP measure on page 8 of Management's Discussion
        and Analysis for the period ended September 30, 2007, incorporated by
        reference herein. EBITDA does not have a standardized meaning and is,
        therefore, unlikely to be comparable with similar measures presented
        by other issuers.
    

    Overall Financial Performance for nine months ended September 30, 2007

    General Donlee's continuing solid performance in the third quarter of
2007 gave further strength to the momentum it has been building over the last
year and a half. Total sales in the first nine months of 2007 reached
$39.2 million, up by $7.0 million - or 22% - over the comparable period in
2006.
    Sales in General Donlee's aerospace and power generation division
delivered a 41% increase, at $26.4 million, representing growth of
$7.7 million over the same period in 2006.
    The increase is due to higher shipments of commercial and military
aerospace products, which the Company has been able to make thanks to
increased customer demand and equipment upgrades Management strategically made
to allow General Donlee to capitalize on growth in the aerospace industry. The
Company's industrial products division also delivered steady sales of
$12.8 million in the first nine months of 2007, a slight decrease of
$0.7 million below the same period in 2006. A new four-year, $14 million
contract to supply landing gear components to a local aerospace manufacturer
announced early in the third quarter will also allow the Company's industrial
products division to capitalize on the ongoing growth in the aerospace
industry, with shipments on that new contract beginning in the fourth quarter.
Overall, General Donlee's improved sales in the first nine months of 2007
generated improvements in margins, net earnings, and operating cash flows
compared to the same period in 2006.
    The Fund achieved net earnings of $7.0 million for the nine months ended
September 30, 2007, reflecting a 17% increase compared to the $6.0 million
earned in the same period in 2006. The improved net earnings in the first nine
months of 2007 helped to generate distributable cash1 of $7.7 million or
$0.901 per Unit, an increase of 38% over the $5.6 million or $0.626 per Unit
in distributable cash1 generated in the comparable period in 2006. In the
first nine months of 2007, the cash distributions paid per Unit increased by
38%, at $6.5 million or $0.760 per Unit, compared to $4.7 million or $0.525
per Unit in the comparable period of 2006.
    The Fund's balance sheet remains strong, and as at September 30, 2007,
showed working capital of $48.7 million, up substantially from $13.2 million
at December 31, 2006. This increase is the direct result of the proceeds from
the $50.0 million convertible debenture that closed on June 20, 2007. The
consolidated net debt to equity ratio of the Fund at September 30, 2007 is
0.68:1 as a result of the cash and cash equivalents on hand from the debenture
issue. The Company's current working capital is more than sufficient to
support its ongoing business operations and the current level of
distributions. "Our cash position is strong, and our operating margins remain
steady. Now, we are evaluating strategic initiatives to deploy cash that will
allow us to deliver even further Unitholder value in the future," said Mr.
Chalmers.

    Distributable Cash(1)

    Cash distributions to Unitholders increased by 38% per Unit in the first
nine months of 2007 over the comparable period in 2006. For the nine months
ended September 30, 2007, distributable cash1 was $7.7 million or $0.901 per
Unit, an increase of 38% as compared to the comparable period in 2006, when
distributable cash1 was $5.6 million or $0.626 per Unit.

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

    
                                       Three-Month Period   Nine-Month Period
                                      ------------------- -------------------
                                             Ended               Ended
                                            -------             -------
                                       Sept 30   Sept 30   Sept 30   Sept 30
    ($000s, except per Unit amounts)     2007      2006      2007      2006
                                      --------- --------- --------- ---------

    Cash provided by
     operating activities               $3,172    $4,179    $7,136    $6,008
    Adjustment for net changes
     in non-cash working
     capital balances
     related to operations              (1,282)   (1,652)      747     1,066
                                      --------- -----------------------------
    Cash provided by
     operating activities
     before changes in
     non-cash working
     capital balances                    1,890     2,527     7,883     7,074
    Other adjustments:
    Derivative contracts                   170      (313)      973       (36)
    Employee future benefits               100        50       291       175
    Gain on disposal of equipment            -         -         8         -
    Future income taxes                     46        41      (479)     (112)
                                      --------- --------- --------- ---------
                                         2,206     2,305     8,676     7,101

    Prorated reserve for
     maintenance capital
     expenditures and purchases           (313)     (500)     (938)   (1,500)
                                      --------- --------- --------- ---------
    Distributable cash(1)               $1,893    $1,805    $7,738    $5,601

    Cash distributions paid
     to Unitholders                     $2,265    $1,745    $6,503    $4,697
                                      --------- --------- --------- ---------

    Net earnings per Unit               $0.165    $0.216    $0.812    $0.668

    Distributable cash(1)
     per Unit                           $0.223    $0.202    $0.901    $0.626

    Cash distributions paid
     per Unit                           $0.270    $0.195    $0.760    $0.525

    1.  Distributable cash is not a defined term under Canadian 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 bank debt, and the reserve for
        maintenance capital expenditures, which is estimated by Management at
        $1.25 million for 2007. 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.
    

    Treasury

    On June 20, 2007, the Fund issued $50.0 million of convertible unsecured
subordinated debentures due December 31, 2014 with a coupon rate of 7% per
annum payable semi-annually on June 30 and December 31, commencing on December
31, 2007. The proceeds from the offering will be used by the Fund to fund
acquisitions, repay existing senior debt, and for general corporate purposes
including expansionary capital expenditures - all with an eye to increasing
Unitholder value.
    Toward the same end, on August 20, 2007, the Fund announced that it had
filed a second normal course issuer bid with the Toronto Stock Exchange and
received approval to purchase for cancellation, through the facilities of the
Toronto Stock Exchange, up to 691,296 Units or 10% of the public float
outstanding as of July 31, 2007.  Accordingly, the Fund repurchased 164,482
Units at an average cost of $10.36 in the third quarter of 2007, under the
Fund's normal course issuer bids.  As of September 30, 2007, the total number
of trust Units repurchased and cancelled under both normal course issuer bids
during 2007 was 316,982 Units at an average cost of $10.44.
    Subsequent to the end of the third quarter under the new normal course
issuer bid, the Fund has repurchased and cancelled an additional 414,380 units
at an average cost of $10.05, leaving 113,044 units to be repurchased.

    Outlook

    General Donlee's consistently improved performance over several
consecutive quarters puts the Company in a strong position to continue
delivering solid value for its Unitholders. At $57.9 million, the Company's
sales order backlog remains strong - and Management anticipates continuing
solid demand for its products through the fourth quarter and well into the
future.
    "Our seasoned management team has anticipated the upswing in the
aerospace industry, and has executed on its strategies to ensure General
Donlee is equipped and ready to capitalize on the opportunities it brings,"
said Mr. Chalmers. "We have the commitment of a highly skilled workforce, we
work tirelessly to cultivate customer relationships, and we have made prudent
equipment investments to allow us to increase capacity and profitability.
Going forward, we will continue to make the best benefit of these competitive
advantages, and will monitor and react as best we can to the rising Canadian
dollar and its negative impact on the financial results of the Fund."
    "With the issuance of the $50.0 million convertible unsecured
subordinated debentures late in the second quarter, our balance sheet is
strong; we are in a position to capitalize on strategic opportunities to build
further Unitholder value. We will continue to evaluate potential strategic
initiatives, with a view to further growing the value of our Unitholders'
investment. We look forward to continuing our pattern of success," he said.

    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
nine months ended September 30, 2007 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,
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
    %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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