General Donlee Income Fund Reports Record Second Quarter Results



    - Fifth consecutive quarter of record earnings -

    TORONTO, Aug. 9 /CNW/ - General Donlee Income Fund (the "Fund")
(TSX: GDI.UN) today announced record second quarter results - the Fund's fifth
consecutive quarter of record earnings - for the period ended June 30, 2007.
Highlights of the quarter included:

    
    -   Sales rose 26% to $14.2 million, driven by 44% sales growth in the
        aerospace and power generation division
    -   Net earnings grew by 24%, at $3.1 million or $0.359 per Unit
    -   Distributable cash(1) rose by 37%, at $3.2 million or $0.374 per Unit
    -   EBITDA(2) increased by 34% to $4.3 million
    -   Distributions paid to Unitholders increased by 52% vs. a year ago, or
        $0.095 per unit
    -   Highest sales order backlog, at $61.7 million, since initial public
        offering in 2002, reflecting strong continued demand for General
        Donlee's products in 2007 and beyond
    -   Issued $50.0 million of 7% convertible unsecured subordinated
        debentures due December 31, 2014
    

    "In the second quarter of 2007, General Donlee continued to deliver
strong performance and to build on our growing momentum," said Ken Chalmers,
Executive Chairman of the Fund. "General Donlee continues to drive further
improved performance from its divisions. In less than a year, our
profitability has increased sufficiently to increase monthly distributions to
Unitholders three times. Our strategies to deliver Unitholder value are
clearly paying off - and we will continue to pursue them in the quarters ahead
in seeking to further enhance returns to our Unitholders."

    Financial Highlights

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


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

    Operations
    ----------
    Sales                      14.2         11.3         27.5         21.3
    Gross profit                4.2          3.2          7.8          5.8
    Net earnings                3.1          2.5          5.6          4.0
    Net earnings per Unit   $ 0.359(b)   $ 0.278(a)   $ 0.644(b)   $ 0.453(a)
    EBITDA(2)                   4.3          3.2          7.6          5.3
    EBITDA(2) % of sales       30.3%        28.3%        27.6%        24.9%

    Distributions
    -------------
    Distributable cash(1)       3.2          2.4          5.8          3.8
    Distributable cash(1)
     per Unit               $ 0.374(b)   $ 0.264(a)   $ 0.675(b)   $ 0.424(a)
    Cash distributions
     paid                       2.2          1.5          4.2          3.0
    Cash distributions
     paid per Unit          $ 0.260(b)   $ 0.165(a)   $ 0.490(b)   $ 0.330(a)

    (a) Based on 8,947,000 Units outstanding for the second quarter of 2006.
    (b) Based on weighted average of 8,645,936 Units outstanding for the
        second quarter of 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 6 of Management's Discussion
        and Analysis for the period ended June 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 six months ended June 30, 2007

    In the second quarter of 2007, General Donlee continued to deliver strong
performance and to build on the growing momentum it has been developing over
the course of the last year and a half. This solid quarterly performance
contributed to total sales in the first six months of 2007, reaching     
$27.5 million, up by $6.2 million - or 29% - over the comparable period in
2006.
    General Donlee's aerospace and power generation division sales grew by
57%, at $18.2 million, an increase of $6.6 million over the same period in
2006. The company has been able to achieve this increase due to higher
shipments of commercial and military aerospace products, which are the end
result of equipment upgrades made in recent years to allow General Donlee to
capitalize on the growth of the aerospace industry. The company's industrial
products division also delivered solid sales in the first half of 2007 with
total sales of $9.3 million, which, mostly as a result of the timing of orders
from its customers, represents a slight decrease of $0.4 million or 4% below
the same period in 2006. "Shortly after the end of the second quarter, our
industrial products division announced a new four-year, $14 million contract
to supply landing gear components to a local aerospace manufacturer," said 
Mr. Chalmers, "We are delighted that our industrial products division is now
also able to capitalize on the ongoing growth in the aerospace industry."
Overall, General Donlee's improved sales in the first half of 2007 generated
improvements in margins, net earnings, and operating cash flows compared to
2006.
    The Fund achieved net earnings of $5.6 million for the six months ended
June 30, 2007, reflecting a 40% increase compared to $4.0 million in the same
period in 2006. The improved net earnings in the first half of 2007 helped to
generate distributable cash(1) of $5.8 million or $0.675 per Unit, an increase
of 53% over the $3.8 million or $0.424 per Unit in distributable cash(1) in
the comparable period in 2006. In the first half of 2007, the cash
distributions paid per Unit increased by 44%, at $4.2 million or $0.490 per
Unit, compared to $3.0 million or $0.330 per Unit in the comparable period of
2006.
    The Fund's balance sheet remains strong, and at June 30, 2007, showed
working capital of $50.6 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 June 30, 2007 is .47:1 as
a result of the cash and cash equivalents on hand from the debenture issue.
Working capital is more than sufficient to support the Company's ongoing
business operations and the current level of distributions. "We expect
continued strong performance in both divisions and accordingly, the balance
sheet and overall financial position of the Fund will continue to strengthen,"
said Mr. Chalmers.

    Distributable Cash(1)

    Cash distributions to Unitholders increased by 44% per Unit in the first
half of 2007 over 2006. For the six months ended June 30, 2007, distributable
cash(1) was $5.8 million or $0.675 per Unit, an increase of 53% as compared to
the comparable period in 2006, when distributable cash(1) was $3.8 million or
$0.424 per Unit.

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

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

    Cash provided by
     operating activities             $  2,447  $    621  $  3,955  $  1,829
    Adjustment for net changes
     in non-cash working
     capital balances
     related to operations                 710     1,926     2,029     2,718
                                      --------- --------- --------- ---------
    Cash provided by
     operating activities
     before changes in
     non-cash working
     capital balances                    3,157     2,547     5,984     4,547
    Other adjustments:
    Derivative contracts                   657       398       803       277
    Employee future benefits               101        67       191       125
    Gain on disposal
     of equipment                            -         -         8         -
    Future income taxes                   (372)     (153)     (525)     (153)
                                      --------- --------- --------- ---------
                                         3,543     2,859     6,461     4,796

    Prorated reserve for
     maintenance capital
     expenditures                         (312)     (500)     (625)   (1,000)
                                      --------- --------- --------- ---------
    Distributable cash(1)             $  3,231  $  2,359  $  5,836  $  3,796

    Cash distributions paid
     to Unitholders                   $  2,248  $  1,476  $  4,238  $  2,952
                                      --------- --------- --------- ---------

    Net earnings per Unit             $  0.359  $  0.278  $  0.644  $  0.453

    Distributable cash(1)
     per Unit                         $  0.374  $  0.264  $  0.675  $  0.424

    Cash distributions paid
     per Unit                         $  0.260  $  0.165  $  0.490  $  0.330

    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.
    As a means of further enhancing Unitholder value, the Fund also
repurchased 152,500 Units at prevailing market prices in the first half of
2007, under the Fund's normal course issuer bid. As of June 30, 2007, the
total number of trust Units repurchased and cancelled was 446,740.

    Outlook

    With a number of consecutive quarters of consistent growth and record
results on the books - General Donlee is in an excellent position to continue
delivering solid value for our Unitholders. The company's sales order backlog,
at $61.7 million, is growing, reflecting solid demand for General Donlee's
products through the balance of the year and beyond. The company also expects
to sustain steady sales activity in its industrial products division in 2007,
especially with the addition of the new aerospace contract. "The commitment of
our highly skilled workforce, our relentless work to cultivate customer
relationships, and our prudent equipment investments has allowed us to
increase capacity and profitability," said Mr. Chalmers. "With the issuance of
the $50.0 million convertible debentures, we have also significantly
strengthened our balance sheet enabling us to capitalize on opportunities as
we move forward. We look forward to continuing our pattern of success."

    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
six months ended June 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




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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