General Donlee Income Fund Reports Third Quarter 2009 Results

TORONTO, Nov. 6 /CNW/ - The General Donlee Income Fund (the "Fund" or "General Donlee") (TSX: GDI.UN) today announced its results for the third quarter, ended September 30, 2009. Reflecting an ongoing trend in its industry driven by wide-reaching economic pressures, the Fund's sales and earnings for the quarter fell short of those in the same period in 2008, though the ongoing strategic efforts of General Donlee Limited's (the "Company") management were able to limit the decrease somewhat by adjusting its operations to suit market conditions. General Donlee's third quarter 2009 results included:

    -   Sales of $8.6 million, down 36% from the Q3 2008 sales level of $13.4
    -   Net Income at $0.2 million, down from the $1.4 million earned in Q3
    -   Distributable cash(1) of $(0.6) million or $(0.120) per Unit, as
        compared to $2.3 million or $0.392 per Unit in the same period last
    -   $0.270 in distributions paid to Unitholders for the quarter

While the reduction in production levels and sales flowing from an industry slowdown led to the Fund's net income being reduced to $0.2 million in the third quarter of 2009, down from the $1.4 million it earned in the same period in 2008, the gain on the valuation of foreign exchange forward contracts helped mitigate some of the negative impact on earnings. Cash flow from operating activities of $3.6 million for the third quarter consisted of cash from operating activities of $(0.1) million and a net change in non-cash working capital items of $3.7 million.

While Management understands the relationship between the general economic downturn, its customers' reduced production levels, and General Donlee's own sales results, it also recognizes that the best way to see the Company through current market challenges is to be flexible, making changes to its own operations to reflect the times. Accordingly, General Donlee has made productivity enhancements in recent quarters including a reduction in the number of labour hours scheduled to better-reflect production demands, which, together with the continuing sales order backlog, did help mitigate the impact of the economic slowdown on General Donlee's overall health.

The Fund continued to pay regular monthly distributions to Unitholders at the rate of $0.090 per Unit in the third quarter of 2009, despite the pressure on sales. The ongoing effect on sales from the continued economic conditions in the industry has impacted negatively on General Donlee's financial results; one of the attendant outcomes of this is that the Fund's payout ratio in the last two quarters has been significantly higher than target. The Fund has historically had - and continues today to have - a strong commitment to long-term Unitholder value, which has been consistently illustrated in Management and the Trustees' decisions to historically maintain a conservative payout ratio. Given the Fund's conservative payout ratio in the past, Management and the Trustees had decided to maintain the current distribution level, but will continually monitor the Fund's results and their potential impact on future distributions to Unitholders.

Together with its third quarter results, the Fund announced the resignation of Melinda Lee from its Board of Trustees, and her replacement by David Wood, Vice President of Finance, Municipal Enterprises Limited, effective immediately. The Board of Trustees would like to thank Melinda Lee for all her hard work over the past few years.

    Financial Highlights for the Three and Nine Months Ended September 30,

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

                                   Three Months Ended     Nine Months Ended
    ($ millions, except Unit and   ------------------     -----------------
    per Unit amounts, unaudited) Sept 30/09 Sept 30/08 Sept 30/09 Sept 30/08
                                 ---------- ---------- ---------- ----------
    Sales                             8.6       13.4       32.9       39.1
    Gross profit                      1.0        3.7        8.2       10.9
    Net income                        0.2        1.4        5.0        5.1
    Basic income per Unit          $0.040(a)  $0.237(b)  $0.930(c)  $0.744(d)

    Distributable cash(1)            (0.6)       2.3        2.8        6.7
    Distributable cash per
     Unit(1)                      $(0.120)(a) $0.392(b)  $0.514(c)  $0.983(d)
    Distributions paid                1.4        1.5        4.4        5.4
    Distributions paid per Unit    $0.270     $0.270     $0.810     $0.810

    (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 5,332,317 Units outstanding for the
            third quarter of 2009.
        (b) Based on weighted average of 5,830,392 Units outstanding for the
            third quarter of 2008.
        (c) Based on weighted average of 5,412,561 Units outstanding for
            year-to-date 2009.
        (d) Based on weighted average of 6,811,435 Units outstanding for
            year-to-date 2008.

Overall Financial Performance for nine months ended September 30, 2009

In the nine months ended September 30, 2009, General Donlee delivered sales of $32.9 million, down by $6.2 million or 16% from the sales level in the same period of 2008, generally reflecting the impacts of the economic downturn in the markets serviced by the Company. The Company's aerospace and power generation products division delivered sales of $22.3 million, a decrease of $1.4 million, or 6%, over 2008, mostly due to a decrease in commercial aerospace sales, offset by higher power generation and military aerospace sales net of the increased U.S. dollar ("USD"). General Donlee's industrial products division produced 2009 sales of $10.6 million, a decrease of $4.8 million or 31% from the same period last year, due to the continued slowdown in the capital goods market and client changes to its delivery schedules for commercial aerospace landing gear components.

The Fund achieved net income of $5.0 million for the nine months ended September 30, 2009, similar to the same period last year, primarily due to a gain on its USD foreign exchange forward contracts.

Distributable cash(1) for the nine months ended September 30, 2009 was $2.8 million, or $0.514 per Unit, as compared to $6.7 million or $0.983 per Unit in the comparable period in 2008; the Fund maintained its monthly distribution level at $0.090. In the nine months ended September 30, 2009, distributions paid were $4.4 million or $0.810 per Unit, compared to $5.4 million or $0.810 per Unit in 2008; the Fund was able to reduce the level of distributions paid by repurchasing Trust Units under its Issuer Bids, thereby leaving a lower number of Trust Units outstanding.

General Donlee continues to maintain adequate working capital to support its current operations, as well as additional credit facilities to support any growth. At September 30, 2009, General Donlee had working capital of $18.7 million, down from the $19.9 million reported at December 31, 2008, and a September 30, 2009 current ratio of 5.3:1.

Distributable Cash(1)

Distributable cash(1) for the nine months ended September 30, 2009 was $2.8 million, or $0.514 per Unit, as compared to the $6.7 million, or $0.983 per Unit posted in the nine months ended September 30, 2008. This was the result of a slowdown in the industries serviced by the Company, which led to reduced cash provided by operating activities.

Regular distributions paid to Unitholders were $0.810 per Unit for the nine months ended September 30, 2009, unchanged from the same period in 2008.

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

                                  Three Months Ended     Nine Months Ended
    ($000, except per             Sept 30    Sept 30    Sept 30    Sept 30
     Unit amounts)                  2009       2008       2009       2008
                                 ---------- ---------- ---------- ----------
    Cash provided by operating
     activities                   $3,561     $4,840     $8,864     $8,051
    Adjust for net changes in
     non-cash working capital
     balances related to
     operations                   (3,645)    (2,010)    (4,421)       (83)
    Cash provided by operating
     activities before changes
     in non-cash working capital
     balances                        (84)     2,830      4,443      7,968
    Repayment of long-term
     bank debt                      (245)      (232)      (725)      (331)
    Reserve for maintenance
     capital expenditures           (313)      (313)      (938)      (938)
    Distributable cash(1)          $(642)    $2,285     $2,780     $6,699

    Distributions paid to
     Unitholders                  $1,440     $1,548     $4,379     $5,448

    Basic income per Unit         $0.040     $0.237     $0.930     $0.744

    Distributable cash(1) per
     Unit                        $(0.120)    $0.392     $0.514     $0.983

    Distributions paid per Unit   $0.270     $0.270     $0.810     $0.810

    Payout ratio(2)                  n/a        69%       158%        82%

    (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.


The impacts of an overall industry slowdown, itself a response to difficult economic realities that have characterized the year so far, continued to manifest themselves in the Fund's financial performance in the third quarter of 2009. Always focused on responsible stewardship of Unitholders' investment, the Fund continues to respond to external challenges by working to control costs, continuing to adjust its labour requirements to match expected decreases in production levels in both the industrial and aerospace segments. Between actions like these, General Donlee's diverse platform of products, and its wide customer base, Management is optimistic about the Company's ability to mitigate any material negative impacts of the ongoing market pressures in the quarters ahead.

Given that industry consensus does not anticipate an imminent turnaround in the general economic outlook, the Trustees and Management fully expect the Company to have to continue to respond to the current economic upheaval for the balance of 2009. However, while the Company's performance in the final quarter of 2009 is not expected to be as strong as that of last year, its $36.3 million sales order backlog reflects a continuing demand for its products. Together, the sales order backlog and the operational improvements the Fund has made, including workforce adjustments and cost-cutting measures to better-scale General Donlee's operations to current market conditions, position General Donlee well to sustain its business through to the eventual economic turnaround.

General Donlee's flexible business strategies have been - and demonstrably remain, especially in challenging economic times - the key to the Company's success over the span of many years and economic cycles. Management and the Trustees maintain an unwavering focus on making the best possible decisions to foster long-term Unitholder value, from adjusting our costs to better-reflect the times, to re-purchasing securities to increase remaining Unitholders' proportionate shares of the Fund. While the Fund's tactics may change as conditions dictate, that focus on value will not change, in the balance of 2009 and beyond.

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 nine months ended September 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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