General Donlee Income Fund Reports Second Quarter 2009 Results

    TORONTO, Aug. 10 /CNW/ - The General Donlee Income Fund (the "Fund" or
"General Donlee") (TSX: GDI.UN) today announced its results for the second
quarter, ended June 30, 2009. During the quarter, the Fund continued to
generate overall positive results despite the current economic slowdown,
thanks in part to its efforts to adjust its operations to suit market
    General Donlee's second quarter 2009 results reflected both the impacts
of the economic slowdown and its own strategies to soften them:

    -   Sales were $10.5 million, down 21% from the Q2 2008 sales level of
        $13.3 million
    -   Despite the decrease in sales, Net Income was $1.9 million, in line
        with the $1.9 million in Q2 2008
    -   Distributable cash(1) was $0.9 million or $0.161 per Unit, as
        compared to $2.1 million or $0.309 per Unit in the same period last
    -   Distributions paid to Unitholders for the quarter were $0.270 per
    -   The Fund repurchased 135,600 in trust Units through a Normal Course
        Issuer Bid

    The Fund's net income of $1.9 million in the second quarter of 2009 was
in line with the $1.9 million in the same period in 2008, with the positive
impact of the strengthened U.S. Dollar ("USD") in both divisions and the gain
on the valuation of foreign exchange forward contracts mitigating the
reduction in sales. Cash flow from operating activities also increased during
the second quarter as a result of a positive net change in non-cash working
capital items.
    Management expects the productivity enhancements the Company undertook in
recent quarters, including revising labour hours to better-reflect production
demands and the current sales order backlog, to continue to play a role in
General Donlee's overall health during the ongoing slowdown in its industry.
    The General Donlee Income Fund in the second quarter of 2009 repurchased
135,600 Units at prevailing market prices. The Fund also repurchased and
cancelled $32,000 in principal amount of convertible debentures under a normal
course issuer bid, resulting in a small gain.
    In the second quarter, the Fund was able to continue to pay regular
monthly distributions to Unitholders at the rate of $0.090 per Unit, despite
the pressure on sales. The continued economic conditions in the industry have
had a negative impact on the recent financial results of General Donlee,
specifically its payout ratio in the second quarter being significantly higher
than target. Considering the Fund's conservative payout ratio in the past and
it's reasonable payout ratio year to date, Management and the Trustees have
decided to maintain the current distribution level but will continually
monitor the Fund's results and their potential impact on future distributions
to Unitholders.

    Financial Highlights

    The following summary of financial data presents the consolidated results
of operations of the Fund for the three-month and six-month periods ended June
30, 2009, including comparative results for the same periods in 2008.

    ($ millions,
    except Unit and             Three Months Ended       Six Months Ended
    per Unit amounts,           ------------------       ----------------
    unaudited)                June 30/09  June 30/08  June 30/09  June 30/08
                              ----------  ----------  ----------  ----------

    Sales                           10.5        13.3        24.3        25.7
    Gross profit                     2.7         3.6         7.1         7.2
    Net income                       1.9         1.9         4.8         3.7
    Basic income per Unit       $0.352(a)   $0.273(b)   $0.884(c)   $0.505(d)

    Distributable cash(1)            0.9         2.1         3.4         4.4
    Distributable cash
     per Unit(1)                $0.161(a)   $0.309(b)   $0.628(c)   $0.604(d)
    Distributions paid               1.5         1.8         2.9         3.9
    Distributions paid per Unit   $0.270      $0.270      $0.540      $0.540

    (1) Distributable cash is not a defined term under Canadian generally
        accepted accounting principles ("GAAP"), but is determined by the
        Fund as cash flow provided by operating activities (adjusted to
        remove changes in non-cash working capital items), less repayment of
        long-term bank debt and less the pro-rated reserve for maintenance
        capital expenditures, for which Management estimates $1.25 million
        for 2009. 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.

        (a) Based on weighted average of 5,398,973 Units outstanding for the
            second quarter of 2009.
        (b) Based on weighted average of 6,817,294 Units outstanding for the
            second quarter of 2008.
        (c) Based on weighted average of 5,453,347 Units outstanding for
            year-to-date 2009.
        (d) Based on weighted average of 7,310,086 Units outstanding for
            year-to-date 2008.

    Overall Financial Performance for six months ended June 30, 2009

    In the first six months of 2009, General Donlee delivered sales of $24.3
million, down by $1.4 million or 5% from the sales level in the same period of
2008, generally reflecting the impacts of the economic downturn in the market.
The Company's aerospace and power generation products division delivered sales
of $16.5 million, an increase of $0.5 million, or 3%, over 2008, mostly due to
higher power generation sales, military aerospace sales and the rising U.S.
dollar ("USD"), offset by a decrease in commercial aerospace sales. General
Donlee's industrial products division produced 2009 sales of $7.8 million, a
decrease of $1.9 million or 20% from the same period last year, due to the
slowdown in the capital goods market and client changes to its delivery
schedules for commercial aerospace landing gear components.
    However, the Fund achieved net income of $4.8 million for the six months
ended June 30, 2009, an improvement over the $3.7 million in the same period
last year, primarily due to a gain on its USD foreign exchange forward
    While distributable cash(1) for the first half of fiscal 2009 was $3.4
million, or $0.628 per Unit, as compared to $4.4 million or $0.604 per Unit in
the comparable period in 2008, the Fund was able to maintain its monthly
distribution level at $0.090. In the first six months of 2009, distributions
paid were $2.9 million or $0.540 per Unit, compared to $3.9 million or $0.540
per Unit in 2008; this decrease was due to the lower number of Trust Units
outstanding following the Fund's repurchases under its Issuer Bids.
    General Donlee continues to maintain adequate working capital to support
its current operations, as well as additional credit facilities to support any
continued growth. At June 30, 2009, General Donlee had working capital of
$19.8 million, similar to the $19.9 million reported at December 31, 2008, and
a current ratio of 5.2:1.

    Distributable Cash(1)

    Distributable cash(1) for the six months ended June 30, 2009 was $3.4
million, or $0.628 per Unit, as compared to the six months ended June 30,
2008, when distributable cash(1) was $4.4 million, or $0.604 per Unit. The
reduced cash provided by operating activities led to the decrease in overall
distributable cash during the period; however, the distributable cash per Unit
remained consistent due to the reduction in trust units through issuer bids.
    Regular distributions paid to Unitholders were $0.540 per Unit for the
six months ended June 30, 2009, unchanged from the same period in 2008.
    The following table shows the calculation of distributable cash(1).

                                    Three Months Ended     Six Months Ended
    ($000, except per                June 30   June 30    June 30    June 30
     Unit amounts)                    2009       2008       2009       2008
                                   ----------           ----------

    Cash provided by operating
     activities                     $3,289     $1,194     $5,303     $3,211
    Adjust for net changes in
     non-cash working capital
     balances related to operations (1,868)     1,324       (776)     1,927
    Cash provided by operating
     activities before changes in
     non-cash working capital
     balances                        1,421      2,518      4,527      5,138
    Repayment of long-term bank debt  (241)       (99)      (480)       (99)
    Reserve for maintenance capital
     expenditures                     (312)      (312)      (625)      (625)
    Distributable cash(1)           $  868     $2,107     $3,422     $4,414

    Distributions paid to
     Unitholders                    $1,455     $1,792     $2,939     $3,900
    Basic income per Unit           $0.352     $0.273     $0.884     $0.505

    Distributable cash(1) per Unit  $0.161     $0.309     $0.628     $0.604

    Distributions paid per Unit     $0.270     $0.270     $0.540     $0.540

    Payout ratio(2)                    168%        87%        86%        89%

    (2) Payout ratio is not a defined term under Canadian GAAP, but is
        determined as actual distributions divided by distributable cash. The
        Fund's method of calculating its payout ratio may not be comparable
        to measures used by other companies or trusts.


    In the second quarter of 2009, the economic realities that have
characterized General Donlee's industry for more than a year had their first
significant impact on the Fund's financial performance. The Company is taking
action to control costs in light of the external challenges, and continues to
adjust its labour requirements to match expected decreases in production
levels in both segments, as both the industrial and aerospace industries are
expected to be weaker in the coming months than they were in the prior year.
Management is hopeful that General Donlee's diverse platform of products and
wide customer base will help to mitigate any material negative impacts of
these market realities.
    The Trustees and Management anticipate that, in the months to come, the
Company's strategies will continue to have to respond to the current economic
upheaval. While the last half of 2009 is not expected to be as strong as last
year, General Donlee's $43.6 million sales order backlog down from the $50.6
million at December 31, 2008, still remains a good indication of the ongoing
demand for its products. Between that and the operational improvements, labour
adjustments and cost cutting measures the Fund has made, General Donlee
believes it is equipped to ride out the current recession.
    The General Donlee Income Fund's strategies are sound - and they allow it
to modify its business to suit the times. As its track record of operational
adjustments and security re-purchases demonstrates, General Donlee is
consistently focused on delivering a profitable performance for its
Unitholders regardless of challenging times. That focus will continue in the
balance of 2009.

    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
three and six months ended June 30, 2009 with SEDAR at These
documents are also available on the Fund's website at on
the Financial Reports page.
    In addition to these documents, the Fund also files its Annual Report,
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; ability to fund pension deficits, interest and
foreign exchange rates; leverage and restrictive debt covenants; continued
availability of credit facilities; regulatory requirements; reliance on key
personnel and the Company's 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; economic growth and
fluctuations (including the global credit crisis, and pension performance,
funding and expenses); 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 or through the Fund's website at

    %SEDAR: 00017571E

For further information:

For further information: Gerald Thain, Chief Financial Officer,
Telephone: (416) 743-4417, E-mail:, Web site:

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