Hardwoods Distribution Income Fund Announces Changes in Subsidiary Holding Structure in Canada, and Amendment to Canadian Credit Agreement



    TRADING SYMBOL: Toronto Stock Exchange - HWD.UN

    LANGLEY, BC, Feb. 2 /CNW/ - Hardwoods Distribution Income Fund (the
"Fund") today completed changes within its legal holding structure in Canada.
The changes were made to address the potential impact on unitholders of being
allocated taxable income in 2009, at a time when the Fund is not presently
making monthly cash distributions to unitholders. Concurrent with making this
structural change, an amendment was also made to the Fund's Canadian credit
agreement, which will allow for reduced banking fees in 2009.

    
    Highlights

    -   Under the structure of the Fund, the Fund is required to allocate its
        undistributed earnings to unitholders on an annual basis. On November
        3rd, 2008, the Fund announced it had suspended monthly distributions
        to unitholders until such time as market conditions were more
        favourable.

    -   As a result of this decision, the Fund recognized the objective to
        minimize the impact of non-cash taxable income that may be allocated
        to taxable unitholders in 2009. In particular, to address the concern
        that a unitholder may be allocated taxable income in 2009, without
        receiving cash distributions with which to satisfy the resulting tax
        liability that might arise to them.

    -   Accordingly, the Fund reorganized how it holds its' 80% indirect
        ownership in Hardwoods Specialty Products LP ("Hardwoods LP"), which
        carries on the business of Hardwoods in Canada. The Fund's ownership
        interest in Hardwoods LP is now held by a corporate subsidiary of the
        Fund which has approximately $16 million of tax pools available to it
        to reduce to zero any taxable income from Hardwoods LP that would
        otherwise be allocable to unitholders of the Fund in 2009. In
        addition, as Hardwoods LP earnings will now flow through a
        corporation and be subject to corporate taxation, the income trust
        tax commencing in 2011 is now expected to impose no additional taxes
        on the Fund.

    -   Concurrent with making these structural changes, the Fund also
        reduced the size of its Canadian credit facility to $12 million, from
        a previous maximum of $22 million. The reduction in facility size was
        initiated in order to save approximately $20,000 in standby fees
        payable to the bank on unused borrowing capacity in 2009. The revised
        facility maximum of $12 million is considered sufficient to satisfy
        the current working capital financing needs of Hardwoods LP, which at
        December 31, 2008 had borrowings of less than $1 million.
    

    "The changes announced today have accomplished two key objectives for
us," said Maurice Paquette, President and CEO of Hardwoods.
    "First, we have adjusted the Fund's internal structure to minimize
negative tax implications that might have arisen to unitholders during a
period when the Fund is not presently making distributions. We are working
diligently to make the necessary adjustments to successfully manage our
business through the difficult conditions presented by the current economic
downturn. While we make these adjustments, we did not want our taxable
unitholders to be placed in the unenviable position of receiving taxable
income without distributions with which to pay their tax bill. Today's
structural changes should ensure that situation does not arise in 2009."
    "Secondly, reducing expenses is a key priority for our business at this
time. As our bank facility size far exceeded our financing needs in Canada, we
chose to reduce our bank line there in order to save on standby fees. This is
consistent with our overall cost reduction focus," said Paquette.

    About the Fund

    Hardwoods Distribution Income Fund is an unincorporated, open-ended,
limited purpose trust established to hold, indirectly, an 80% interest in the
securities of Hardwoods Specialty Products LP and Hardwoods Specialty Products
USLP (collectively, "Hardwoods"). The Fund was launched on March 23, 2004,
with the completion of an initial public offering of 14,410,000 shares.

    About Hardwoods

    Hardwoods is one of North America's largest distributors of high-grade
hardwood lumber and sheet goods to the cabinet, moulding, millwork, furniture
and specialty wood products industries. At December 31, 2008, Hardwoods
operated 29 distribution centres in the U.S. and Canada.

    Forward Looking Information

    Certain statements in this press release contain forward-looking
information within the meaning of applicable securities laws in Canada
("forward-looking information"). The words "anticipates", "believes",
"budgets", "could", "estimates", "expects", "forecasts", "intends", "may",
"might", "plans", "projects", "schedule", "should", "will", "would" and
similar expressions are often intended to identify forward-looking
information, although not all forward-looking information contains these
identifying words.
    The forward-looking information in this press release includes, but is
not limited to, our expectation that: as Hardwoods LP earnings will now flow
through a corporation and be subject to corporate taxation, the income trust
tax commencing in 2011 is now expected to impose no additional taxes on the
Fund; the reduction in facility size will save approximately $20,000 in
standby fees payable to the bank on unused borrowing capacity in 2009; the
revised facility maximum of $12 million is considered sufficient to satisfy
the current working capital financing needs of Hardwoods LP.
    The forward-looking information is subject to risks, uncertainties and
other factors that could cause actual results to differ materially from
historical results or results anticipated by the forward-looking information.
The factors which could cause results to differ from current expectations
include, but are not limited to: exchange rate fluctuations between the
Canadian and US dollar could affect the amount of cash we have available to
distribute to our unitholders in Canadian dollars; we depend on key personnel,
the loss of which could harm our business; decreases in the supply of, demand
for, or market values of hardwood lumber or sheet goods could harm our
business; we may incur losses related to credit provided to our customers; our
products may be subject to negative trade outcomes; we may not be able to
sustain our level of sales or EBITDA margins; we may be unable to grow our
business or to manage any growth; competition in our markets may lead to
reduced revenues and profitability; we may become subject to more stringent
regulations; importation of products manufactured with hardwood lumber or
sheet goods may increase, and replace products manufactured in North America;
our results are dependent upon the general state of the economy; we are
dependent upon our management information systems; our insurance may be
insufficient to cover losses that may occur as a result of our operations; our
credit facilities contain restrictions on our ability to borrow funds and
restrictions on distributions that can be made; there are tax risks associated
with an investment in our units including changes in tax laws and the
interpretation thereof; our future growth may be restricted by the payout of
substantially all of our operating cash flow; and, other risks described in
our Annual Information Form and our other continuous disclosure documents.
    All forward-looking information in this press release is qualified in its
entirety by this cautionary statement and, except as may be required by law,
we undertake no obligation to revise or update any forward-looking information
as a result of new information, future events or otherwise after the date
hereof.

    %SEDAR: 00020372E




For further information:

For further information: Rob Brown, Chief Financial Officer, Phone:
(604) 881-1990, Fax: (604) 881-1995, Email: robbrown@hardwoods-inc.com

Organization Profile

HARDWOODS DISTRIBUTION INCOME FUND

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890