Hardwoods Distribution Income Fund Announces 2007 Second Quarter Results



    TRADING SYMBOL: Toronto Stock Exchange - HWD.UN

    Hardwoods Distribution Income Fund will hold a conference call and
    webcast to discuss second quarter and first half financial results on
    Friday, August 10, 2007 at 8:00 a.m. Pacific Time (11:00 a.m. Eastern).
    The call can be accessed by dialing: 1-800-814-4857 or 416-644-3419.

    A replay will be available through August 17, 2007 at: 1-877-289-8525 or
    416-640-1917 Passcode 21240384 followed by the number sign.

    The live and archived webcast can be accessed at
    http://www.vcall.com/IC/CEPage.asp?ID=118686 or on the Fund's
    website at http://www.hardwoods-inc.com

    LANGLEY, BC, Aug. 9 /CNW/ - Hardwoods Distribution Income Fund (the
"Fund") today reported financial results for the second quarter and first half
of 2007. The Fund's results are based on the performance of Hardwoods
Specialty Products LP and Hardwoods Specialty Products USLP (collectively
"Hardwoods") - one of North America's largest wholesale distributors of
hardwood lumber and related sheet good products. Hardwoods serves over
2,500 industrial customers through a network of 36 distribution centres in the
US and Canada.

    Second Quarter 2007 Highlights

    
    -   Gross margin percentage increased to 19.0% in the second quarter and
        18.7% in the first half of 2007, compared to 18.2% and 17.9% in the
        respective periods in 2006

    -   EBITDA increased by 6.7% in the first half of 2007, compared to the
        same period in 2006

    -   Distributable cash increased by 3.2% in the second quarter and 9.3%
        in the first half of 2007, compared to the respective periods in 2006

    -   The Fund achieved a conservative payout ratio of 63.4% for the second
        quarter of 2007 and 68.0% for the first half of 2007, even after
        increasing monthly cash distributions by 5% effective in April 2007.

    -   Bank indebtedness was reduced by $3.5 million, resulting in a
        debt-to-EBITDA ratio of 1.56 at the end of the second quarter,
        compared to 1.77 at December 31, 2006.
    

    "We continued to demonstrate the strength and stability of our business
model in the second quarter of 2007," said Maurice Paquette, Hardwoods'
President and CEO. "Although market conditions were weaker and our sales
revenue was lower than anticipated, we achieved a modest increase in second
quarter distributable cash. Our year-to-date results were even better, with
first-half EBITDA up 6.7% and distributable cash increasing 9.3%, compared to
2006."
    "These are strong results given the market conditions we faced. During
the second quarter US housing starts continued to decline, economic conditions
weakened, and recently the Canadian dollar reached a 30-year high compared to
the US dollar. While these conditions contributed to a 5.9% reduction in our
overall sales, the impact was relatively modest thanks to our strong
geographic and customer diversification and the growing success of our import
program," added Paquette.
    "Our major achievement, however, was continuing to improve our margin
performance in these difficult market conditions. Careful management of our
inventory levels and the expansion of our import program paid off in a second
quarter gross margin percentage of 19.0%. That's a very strong result for our
business," said Paquette. "Combined with our strict focus on cost control, we
were able to increase distributable cash and end the quarter with a very
conservative 63.4% payout ratio, even after increasing our monthly
distributions by 5% in April. We took advantage of our lower payout ratio to
continue reducing debt, and ended the quarter with a stronger balance sheet."
    "Overall, we are pleased with Hardwoods' performance in the second
quarter and first half of 2007. While we anticipate business conditions will
remain challenging through the balance of 2007 and we see some import
challenges on the horizon, we believe we are well positioned to weather this
downturn with a diversified business model, conservative payout ratio and
sound balance sheet," said Paquette.


    
    Summary of Results

    Selected Unaudited Consolidated Financial Information
    (in thousands of Canadian dollars except where noted)

                              For the      For the      For the      For the
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                Ended        Ended        Ended        Ended
                              June 30,     June 30,     June 30,     June 30,
                                 2007         2006         2007         2006
                                 ----         ----         ----         ----

    Total sales           $    89,400  $    95,054  $   181,120  $   188,434
      Sales in the US (US$)    55,596       58,660      110,895      114,293
      Sales in Canada          28,329       29,199       55,255       58,345
    Gross profit               16,994       17,259       33,862       33,768
      Gross profit %            19.0%        18.2%        18.7%        17.9%
    Selling and
     administrative
     expenses                 (11,069)     (11,196)     (22,819)     (23,415)
    Realized gain on
     foreign currency
     contracts                    425          364          694          653
    -------------------------------------------------------------------------
    Earnings before
     interest, taxes,
     depreciation and
     amortization and
     non-controlling
     interest
     ("EBITDA")                 6,350        6,427       11,737       11,006

      Add (deduct):
        Amortization             (475)        (526)        (967)      (1,048)
        Interest                 (625)        (827)      (1,334)      (1,531)
        Mark-to-market
         gain on unrealized
         foreign currency
         contracts                940          754          771          300
        Non-controlling
         interest              (1,238)      (1,165)      (2,041)      (1,745)
        Income taxes             (891)        (724)      (1,602)      (1,175)
    -------------------------------------------------------------------------
    Net earnings for
     the period           $     4,061  $     3,939  $     6,564  $     5,807
    Basic and fully
     diluted earnings per
     Class A Unit         $     0.282  $     0.273  $     0.456  $     0.403
    Average Canadian
     dollar/US dollar
     exchange rate             1.0986       1.1219       1.1350       1.1382
    -------------------------------------------------------------------------



    Distributable Cash and Cash Distributions

    Selected Unaudited Consolidated Financial Information
    (in thousands of dollars except per unit amounts)


                              For the      For the      For the      For the
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                Ended        Ended        Ended        Ended
                              June 30,     June 30,     June 30,     June 30,
                                 2007         2006         2007         2006
                                 ----         ----         ----         ----

    Net cash provided by
     (used in) operating
     activities           $     5,380  $     2,614  $     6,254  $       482
    Increase (decrease)
     in non-cash operating
     working capital             (298)       2,608        3,061        8,390
                          ------------ ------------ ------------ ------------
    Cash flow from
     operations before
     changes in non-cash
     operating working
     capital                    5,082        5,222        9,315        8,872
    Capital expenditures         (214)        (506)        (450)        (759)
                          ------------ ------------ ------------ ------------
    Distributable cash    $     4,868  $     4,716  $     8,865  $     8,113
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Distributions relating
     to the period:
      Class A Units           3,086(1)       3,693      6,026(2)       7,386
      Class B Units               -(3)           -          -(3)           -
                          ------------ ------------ ------------ ------------
                          $     3,086  $     3,693  $     6,026  $     7,386
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Outstanding units and
     per unit amounts:
      Class A Units
       outstanding         14,410,000   14,410,000   14,410,000   14,410,000
      Class B Units
       outstanding          3,602,500    3,602,500    3,602,500    3,602,500
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
      Total Units
       outstanding         18,012,500   18,012,500   18,012,500   18,012,500
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Distributable Cash
     per Unit             $     0.270  $     0.262  $     0.492  $     0.450

    Distributions
     relating to the
     period:
      Class A Units       $   0.214(1) $     0.256  $   0.418(2) $     0.513
      Class B Units       $       -(3) $         -  $       -(3) $         -
      Total Units         $     0.171  $     0.205  $     0.335  $     0.410

    Payout ratio(4)             63.4%        78.3%        68.0%        91.0%
    -------------------------------------------------------------------------

    (1) Includes the cash distributions of $0.068 per Class A Unit per month
        which relate to the operations of the Fund for January, February, and
        March 2007.
    (2) Includes the cash distributions of $0.08542 per Class A Unit per
        month which relate to the operations of the Fund for January,
        February, and March 2006.
    (3) On January 10, 2006, Hardwoods Specialty Products LP and Hardwoods
        Specialty Products US LP, partnerships in which the Fund owns an
        80% interest, announced that quarterly distributions were suspended
        on the subordinated units, represented by the Class B LP and Class B
        US LP units. The Class B LP units and Class B US LP units represent a
        20% interest in the combined business of Hardwoods, which is
        subordinated to the Fund's ownership interest in the business.
        Accordingly, no distributions were declared payable relating to the
        fourth quarter of 2005, the first, second, third and fourth quarters
        of 2006, and the first quarter of 2007 to the non-controlling
        interests. No liability for distributions payable to the non-
        controlling interests is reflected in the March 31, 2007 balance
        sheet.
    (4) Payout ratio measures the ratio of distributions relating to the
        period to distributable cash in the period.
    

    Results from Operations - Three Months Ended June 30, 2007

    For the three months ended June 30, 2007, the Fund and its subsidiaries
generated total distributable cash of $4.9 million, or $0.270 per unit.
Distributions of $3.1 million, or $0.214 per unit, were declared to the public
unitholders (Class A Units) and no distributions were paid to the Class B
Units, resulting in a payout ratio of 63.4% for the second quarter. By
comparison, the Fund generated total distributable cash of $4.7 million or
$0.262 per unit in the second quarter of 2006. Distributions of $3.7 million,
or $0.256 per unit were declared to the Class A Units and no distributions
were paid to the Class B Units, for a payout ratio of 78.3% in the prior year
period.
    Total second quarter sales declined by 5.9% to $89.4 million, from the
$95.1 million reported in 2006. The change in sales revenue reflects a 4.8%
decrease in underlying sales activity and a 1.1% decrease in sales due to the
impact of a stronger Canadian dollar. Sales in the United States, as measured
in US dollars, decreased by 5.2% to $55.6 million, compared to $58.7 million
during the second quarter of 2006. Weaker residential construction markets
were the primary factor in this decline with the most significant impact felt
in Hardwoods' California divisions. Sales growth in the Texas division, which
continues to benefit from the successful introduction of import products,
partially offset this impact.
    Sales in Canada, as measured in Canadian dollars, decreased by 3.0%, to
$28.3 million, from $29.2 million during the second quarter of 2006. Most of
the change in Canadian sales reflects the closure of the Windsor, Ontario
branch in the fourth quarter of 2006. Hardwoods' other Canadian centres
continued to perform well during the quarter.
    Second quarter gross profit declined to $17.0 million, from $17.3 million
in Q2 2006 as a result of the lower sales revenue. However, as a percentage of
sales, gross profit increased to 19.0%, from 18.2% in 2006, reflecting a sharp
focus on inventory control, disciplined selling and increased sales of
higher-margin import products.
    Selling and administrative (S&A) expenses were $11.1 million in the
second quarter compared to $11.2 million in the prior year period. Higher bad
debt expenses were largely offset by the benefit of the stronger Canadian
dollar on S&A expenses at Hardwoods' US operations.
    EBITDA for the period was $6.4 million, unchanged from Q2 2006, with
lower gross profits offset by reduced S&A expenses. Net earnings increased,
however, rising to $4.1 million, from $3.9 million in the second quarter of
2006. The increase in net earnings primarily reflects a $0.2 million reduction
in interest costs resulting from the pay-down of debt during the quarter, and
a $0.1 million increase in mark-to-market adjustment gains on foreign currency
contracts.

    Results from Operations - Six Months ended June 30, 2007

    For the six months ended June 30, 2007, the Fund and its subsidiaries
generated total distributable cash of $8.9 million, or $0.492 per unit.
Distributions of $6.0 million, or $0.418 per unit, were declared to the public
unitholders (Class A Units) and no distributions were paid to the Class B
Units, resulting in a payout ratio of 68.0% for the first half. By comparison,
the Fund generated total distributable cash of $8.1 million or $0.450 per unit
in the first half of 2006. Distributions of $7.4 million, or $0.513 per unit
were declared to the Class A Units and no distributions were paid to the Class
B Units, for a payout ratio of 91.0% in the prior year period.
    Total sales in the first half declined by 3.9% to $181.1 million, from
$188.4 million in 2006, reflecting the more challenging market conditions.
Sales at Hardwoods' US operations, as measured in US dollars, decreased by
3.0%, with the most significant impact felt in the company's California
divisions. Sales in Canada, as measured in Canadian dollars, were down by 5.3%
year-over-year, primarily reflecting the closure of the Windsor, Ontario
distribution centre.
    First-half gross profit of $33.9 million was up slightly from the
$33.8 million reported in the first six months of 2006. The relative stability
in gross profit despite the lower sales revenues reflects Hardwoods' success
in increasing its gross margin percentage to 18.7% of sales, from 17.9% during
the first half of 2006. At the same time, the company decreased its selling
and administrative expenses to $22.8 million, from $23.4 million, largely
because non-recurring expenses that added $0.5 million to 2006 expenses were
not present in 2007.
    The combination of lower S&A expense with a higher gross margin
percentage contributed to improved EBITDA results. First-half EBITDA climbed
6.7% to $11.7 million, from $11.0 million in 2006. Net earnings also increased
to $6.6 million, from $5.8 million in the first half of 2006. The earnings
improvement primarily reflects the increase in EBITDA, a $0.5 million increase
in mark-to-market adjustment gains on foreign currency contracts and a
$0.2 million reduction in interest costs due to the reduction in bank
indebtedness. These gains were partially offset by a $0.3 million increase in
income taxes and a $0.3 million increase in non-controlling interest as a
result of the higher profit in the first half of 2007, compared to 2006.

    Outlook

    Going forward, Hardwoods anticipates that sales will continue to come
under pressure from slowing housing starts, rising interest rates and general
weakness in the US economy. The company's strong product, market and
geographic diversification is expected to offset most, but not all, of the
resulting sales impact. In this environment, maintaining margins in the target
18.5% or better range will remain a key priority. Hardwoods will also continue
to maintain tight control on S&A expenses.
    While the company's import program is expected to remain a profitable and
growing part of its business, products sourced in China are becoming more
expensive. In response to US trade pressure, the Chinese government is
reducing export incentives and allowing some appreciation of the Chinese
currency, which in turn, is contributing to higher product prices. Hardwoods'
strategy will include diversifying its import program with a broader range of
finished and semi-finished products and exploring opportunities to expand
sourcing beyond China.
    With approximately 70% of its operations in the United States, Hardwoods'
sales results are influenced by changes in the value of the Canadian dollar
relative to the US dollar. Distributable cash results are less affected,
however, as the Fund currently has currency hedges in place that fix the
exchange rate on a portion of its distributable cash generated in the United
States at $1.30 Canadian. These hedges will remain in effect until May 2008.
    The government's legislation to tax income trusts was substantively
enacted on June 12, 2007, and these changes will begin to take effect in 2011.
Overall, it is anticipated that the proposed trust tax should have
substantially less impact on Hardwoods Distribution Income Fund than on other
trusts that operate principally or exclusively in Canada. The 70% of
Hardwoods' business that is conducted in the U.S. is already subject to US
taxation. The Fund believes that it will be able to re-organize its business
structure prior to 2011 such that it will not expose its US-sourced income to
additional taxes associated with the proposed new Canadian trust tax. The
remaining 30% of earnings that are generated in Canada are expected to be
subject to tax at a rate of 31.5%.
    Overall, while challenges are anticipated for the balance of 2007, the
Fund remains confident in its business model and its ability to maintain and
possibly increase distributions to unitholders.

    Non-GAAP Measures - EBITDA and Distributable Cash

    References to "EBITDA" are to earnings before interest, income taxes,
depreciation and amortization, mark-to-market adjustments on foreign currency
contracts, goodwill and other intangibles impairment, and the non-controlling
interest in earnings. Management believes that, in addition to net income or
loss, EBITDA is a useful supplemental measure of performance and cash
available for distribution prior to debt service, changes in working capital,
capital expenditures and income taxes.
    EBITDA is not an earnings measure recognized by generally accepted
accounting principles in Canada ("GAAP") and does not have a standardized
meaning prescribed by GAAP. Investors are cautioned that EBITDA should not
replace net income or loss (as determined in accordance with GAAP) as an
indicator of the Fund's performance, or to cash flows from operating,
investing and financing activities or as a measure of its liquidity and cash
flows. The Fund's method of calculating EBITDA may differ from the methods
used by other issuers. Therefore, its EBITDA may not be comparable to similar
measures presented by other issuers.
    Distributable Cash of the Fund is a non-GAAP measure generally used by
Canadian open-ended income funds as an indicator of financial performance. The
Fund defines Distributable Cash as net earnings before depreciation,
amortization, future income taxes, non-controlling interest, gains or losses
on the sale of property, plant and equipment, mark-to-market adjustments on
foreign currency contracts, imputed interest income on employee housing loans,
and goodwill and other intangibles impairment, and after capital expenditures
and contributions to any reserves that the Board of Trustees deem to be
reasonable and necessary for the operation of the Fund.
    The Fund's Distributable Cash may differ from similar computations as
reported by other similar entities and, accordingly, may not be comparable to
distributable cash as reported by such entities. Management believes that
Distributable Cash is a useful supplemental measure that may assist investors
and prospective investors in assessing the return on an investment in Class A
Units.

    About the Fund

    Hardwoods Distribution Income Fund is an unincorporated, open-ended,
limited purpose trust established to hold, indirectly, 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 at $10.00 per
unit.

    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. The company currently operates a
network of 36 distribution centres comprising 1.3 million square feet of
warehouse and distribution space in the U.S. and Canada.

    Forward Looking Statements

    This press release may contain forward-looking statements, which reflect
management's expectations regarding the future growth, results of operations,
performance and business prospects, and opportunities of the Fund.
Forward-looking statements contain such words as "anticipate", "believe",
"continue", "could", "expects", "intend", "may", "plans" or similar
expressions suggesting future conditions or events. Such forward-looking
statements reflect current beliefs and are based on currently available
information. Forward-looking statements involve significant risks and
uncertainties. A number of factors could cause actual results to differ
materially from results discussed in the forward-looking statements, including
the effects, as well as changes in: national and local business conditions;
political or economic instability in local markets; competition; consumer
preferences, spending patterns and demographic trends; legislation and
governmental regulation. Although the forward-looking statements contained in
this press release are based on what management believes to be reasonable
assumptions, management cannot assure readers that actual results will be
consistent with these forward-looking statements.


    
    HARDWOODS DISTRIBUTION INCOME FUND
    Consolidated Balance Sheets
    (Expressed in thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                                     June 30,    December 31,
                                                        2007            2006
    -------------------------------------------------------------------------
                                                  (unaudited)

    Assets

    Current assets:
      Cash and cash equivalents                    $     397       $     594
      Accounts receivable                             46,364          43,767
      Income tax recoverable                             594             596
      Inventory                                       39,379          44,584
      Prepaid expenses                                 1,239           1,098
      Foreign currency contracts (note 4)              1,681           1,129
      -----------------------------------------------------------------------
                                                      89,654          91,768
    Long-term receivables                              2,630           3,236
    Property, plant and equipment                      2,933           3,219
    Deferred financing costs                              27              32
    Foreign currency contracts (note 4)                  463             385
    Other intangible assets                            9,848          10,878
    Goodwill                                          84,217          88,886

    -------------------------------------------------------------------------
                                                   $ 189,772       $ 198,404
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity

    Current liabilities:
      Bank indebtedness (note 6)                   $  35,546       $  39,152
      Accounts payable and accrued liabilities         8,233           7,590
      Distribution payable to Unitholders              1,029             980
      -----------------------------------------------------------------------
                                                      44,808          47,722
    Foreign currency contracts (note 4)                    -             141
    Deferred gain on sale - leaseback of land and
     building                                            618             719
    Non-controlling interests (note 7)                33,640          33,859
    Future income taxes (note 5)                       3,102           2,653
    Unitholders' equity:
      Fund Units                                     133,454         133,454
      Deficit                                         (8,621)         (8,973)
      Accumulated other comprehensive loss           (17,229)        (11,171)
      -----------------------------------------------------------------------
                                                     107,604         113,310
    Contingencies (note 13)

    -------------------------------------------------------------------------
                                                   $ 189,772       $ 198,404
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    HARDWOODS DISTRIBUTION INCOME FUND
    Consolidated Statement of Earnings and Retained Earnings (Deficit)
    (Unaudited)
    (Expressed in thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                Ended        Ended        Ended        Ended
                              June 30,     June 30,     June 30,     June 30,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Sales                 $    89,400  $    95,054  $   181,120  $   188,434
    Cost of sales              72,406       77,795      147,258      154,666
    ------------------------------------------------------------------------

    Gross profit               16,994       17,259       33,862       33,768

    Expenses:
      Selling and
       administrative          11,069       11,196       22,819       23,415
      Amortization:
        Plant and equipment       279          307          567          608
        Deferred financing
         costs                      3           16            6           31
        Other intangible
         assets                   213          224          436          451
        Deferred gain on
         sale - leaseback of
         land and building        (20)         (21)         (42)         (42)
      Interest                    625          827        1,334        1,531
      Foreign currency
       contracts               (1,365)      (1,118)      (1,465)        (953)
      -----------------------------------------------------------------------
                               10,804       11,431       23,655       25,041
    ------------------------------------------------------------------------

    Earnings before
     non-controlling
     interests and income
     taxes                      6,190        5,828       10,207        8,727

    Non-controlling
     interests (note 7)         1,238        1,165        2,041        1,745
    ------------------------------------------------------------------------

    Earnings before income
     taxes                      4,952        4,663        8,166        6,982

    Income taxes:
      Current                     388          308          793          526
      Future (note 5)             503          416          809          649
      -----------------------------------------------------------------------
                                  891          724        1,602        1,175
    ------------------------------------------------------------------------

    Net earnings for the
     period                     4,061        3,939        6,564        5,807

    Retained earnings
     (deficit),
     beginning of period
     (note 3)                  (9,596)          61       (9,159)       1,886

    Distributions declared
     to Unitholders            (3,086)      (3,693)      (6,026)      (7,386)

    ------------------------------------------------------------------------
    Retained earnings
     (deficit), end of
     period               $    (8,621) $       307  $    (8,621) $       307
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------

    Basic and diluted
     earnings per Unit    $      0.28  $      0.27  $      0.46  $      0.40
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------

    Weighted average
     number of Units
     outstanding           14,410,000   14,410,000   14,410,000   14,410,000
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    HARDWOODS DISTRIBUTION INCOME FUND
    Consolidated Statement of Comprehensive Income
    (Unaudited)
    (Expressed in thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                Ended        Ended        Ended        Ended
                              June 30,     June 30,     June 30,     June 30,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------

    Net earnings for the
     period               $     4,061  $     3,939  $     6,564  $     5,807

    Other comprehensive
     income:
      Unrealized losses on
       translation of
       self-sustaining
       foreign operations      (5,403)      (3,208)      (6,049)      (2,902)
      -----------------------------------------------------------------------
      Other comprehensive
       loss                    (5,403)      (3,208)      (6,049)      (2,902)

    -------------------------------------------------------------------------
    Comprehensive income
     (loss)               $    (1,342) $       731  $       515  $     2,905
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statement of Accumulated Other Comprehensive Loss
    (Unaudited)
    (Expressed in thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                Ended        Ended        Ended        Ended
                              June 30,     June 30,     June 30,     June 30,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive loss,
     beginning of period
     (note 3)             $   (11,826) $   (10,736) $   (11,180) $   (11,042)
    Other comprehensive
     loss                      (5,403)      (3,208)      (6,049)      (2,902)

    -------------------------------------------------------------------------
    Accumulated other
     comprehensive loss,
     end of period        $   (17,229) $   (13,944) $   (17,229) $   (13,944)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    HARDWOODS DISTRIBUTION INCOME FUND
    Consolidated Statements of Cash Flows
    (Unaudited)
    (Expressed in thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                Ended        Ended        Ended        Ended
                              June 30,     June 30,     June 30,     June 30,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------

    Cash flows provided by
     (used in) operating
     activities:
      Net earnings for the
       period             $     4,061  $     3,939  $     6,564  $     5,807
      Items not involving
       cash:
        Amortization              475          526          967        1,048
        Imputed interest
         income on employee
         loans                    (16)           -          (16)           -
        Gain on sale of
         property, plant and
         equipment                 (9)          (6)         (19)         (11)
        Mark-to-market
         adjustment on
         unrealized foreign
         currency contracts      (940)        (754)        (771)        (300)
        Non-controlling
         interests              1,238        1,165        2,041        1,745
        Future income taxes       273          352          549          583
      -----------------------------------------------------------------------
                                5,082        5,222        9,315        8,872
      Change in non-cash
       operating working
       capital (note 8)           298       (2,608)      (3,061)      (8,390)
      -----------------------------------------------------------------------
      Net cash provided by
       operating activities     5,380        2,614        6,254          482

    Cash flows provided by
     (used in) financing
     activities:
      Increase (decrease) in
       bank indebtedness       (4,730)       1,056       (1,188)       4,016
      Distributions paid to
       Unitholders             (3,037)      (3,693)      (5,977)      (7,386)
      -----------------------------------------------------------------------
      Net cash provided by
       used in financing
       activities              (7,767)      (2,637)      (7,165)      (3,370)

    Cash flows provided by
     (used in) investing
     activities:
      Additions to property,
       plant and equipment       (214)        (506)        (450)        (759)
      Proceeds on disposal of
       property, plant and
       equipment                   10            7           21           13
      Decrease in long-term
       receivables, net           818          397        1,143        1,561
      -----------------------------------------------------------------------
      Net cash provided by
       (used in) investing
       activities                 614         (102)         714          815
    -------------------------------------------------------------------------
    Increase (decrease)
     in cash                   (1,773)        (125)        (197)      (2,073)
    Cash, beginning of
     period                     2,170          255          594        2,203

    -------------------------------------------------------------------------
    Cash, end of period   $       397  $       130  $       397  $       130
    -------------------------------------------------------------------------

    Supplementary
     information
     (cash amounts):
      Interest paid       $       625  $       827   $    1,334  $     1,531
      Income taxes paid           785          765          791          809
      Transfer of accounts
       receivable to
       long-term customer
       notes receivable,
       being a non-cash
       transaction               1,135          258       1,135          258
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.


    HARDWOODS DISTRIBUTION INCOME FUND
    Notes to Consolidated Financial Statements
    (Unaudited)
    (Tabular amounts expressed in thousands of Canadian dollars)

    Periods ended June 30, 2007 and 2006
    -------------------------------------------------------------------------

    1.  Nature of operations:

        Hardwoods Distribution Income Fund (the "Fund") is an unincorporated,
        open ended, limited purpose trust established under the laws of the
        Province of British Columbia on January 30, 2004 by a Declaration of
        Trust. The Fund commenced operations on March 23, 2004 when it
        completed an initial public offering of Units and acquired an 80%
        interest in a hardwood lumber and sheet goods distribution business
        in North America (the "Business") from affiliates of Sauder
        Industries Limited ("SIL"). The Fund holds, indirectly, 80% of the
        outstanding limited partnership units of Hardwoods Specialty Products
        LP ("Hardwoods LP") and Hardwoods Specialty Products US LP
        ("Hardwoods USLP"), limited partnerships established under the laws
        of the Province of Manitoba and the state of Delaware, respectively.

    2.  Basis of presentation:

        The Fund prepares its consolidated interim financial statements in
        accordance with Canadian generally accepted accounting principles on
        a basis consistent with those used and described in the annual
        consolidated financial statements for the year ended December 31,
        2006 except as discussed in note 3. The disclosures contained in
        these consolidated interim financial statements do not include all
        the requirements of Canadian generally accepted accounting principles
        for annual financial statements, and accordingly, these consolidated
        interim financial statements should be read in conjunction with the
        annual consolidated financial statements for the period ended
        December 31, 2006. Certain comparative figures have been restated to
        conform to the current period's financial statement presentation.

    3.  Adoption of changes in accounting polices:

        Effective January 1, 2007, the Fund adopted five new Canadian
        Institute of Chartered Accountants ("CICA") accounting standards:
        (a) Handbook Section 1530, Comprehensive Income; (b) Handbook Section
        3855, Financial Instruments - Recognition and Measurement;
        (c) Handbook Section 3861 Financial Instruments - Disclosure and
        Presentation; (d) Handbook Section 3865, Hedges; and (e) Handbook
        Section 1506, Accounting Changes. The main requirements of these new
        standards and the resulting financial statement impact are described
        below.

        Consistent with the requirements of the new accounting standards, the
        Fund has not restated any prior period amounts as a result of
        adopting the accounting changes, other than to classify unrealized
        foreign currency translation gain or losses on net investments in
        self-sustaining foreign operations in accumulated other comprehensive
        loss within Unitholders' Equity. As required under the transition
        rules the opening deficit has been adjusted to reflect the cumulative
        impact of adopting the changes in accounting policies described
        below.

        The effect of the adoption of these standards is summarized in the
        following table:


        ---------------------------------------------------------------------
                                         Reclassi-
                                       fication to
                                       accumulated
                                             other   Adjustment
                                As at      compre-  on adoption        As at
                          December 31,     hensive       of new    January 1,
                                 2006         loss    standards         2007
        ---------------------------------------------------------------------
        Long-term
         receivables       $    3,236   $        -   $     (365)  $    2,871
        Non-controlling
         interests             33,859            -          (71)      33,788
        Future income taxes     2,653            -          (99)       2,554
        Unitholders equity:
          Cumulative
           translation
           adjustment         (11,171)      11,171            -            -
          Accumulated other
           comprehensive loss       -      (11,171)          (9)     (11,180)
         Deficit           $   (8,973)  $        -   $     (186)  $   (9,159)
        ---------------------------------------------------------------------

        (a)   Comprehensive Income (Section 1530):

        CICA Section 1530 introduces the term Comprehensive Income,
        which consists of net earnings and other comprehensive income
        ("OCI"). OCI represents changes in Unitholders' equity during the
        period arising from transactions and other events with non-owner
        sources and in the case of the Fund includes unrealized foreign
        currency translation gains or losses arising from self-sustaining
        foreign operations. As a result of adopting this standard, a new
        Statement of Comprehensive Income now forms part of the Fund's
        consolidated financial statements which includes the current period
        net earnings and OCI. Cumulative changes in OCI are included in
        Accumulated Other Comprehensive Income, which is presented as a new
        category of Unitholders' Equity in the balance sheet.

        (b)   Financial Instruments - Recognition and Measurement
              (Section 3855):

        CICA Section 3855 sets out criteria for the recognition and
        measurement of financial instruments for fiscal years beginning on or
        after October 1, 2006. This standard requires all financial
        instruments within its scope, including derivatives, to be included
        on the balance sheet and measured either at fair value or, in certain
        circumstances when fair value may not be considered most relevant, at
        cost or amortized cost. Changes in fair value are to be recognized in
        either the Statements of Earnings or the Statement of Comprehensive
        Income.

        All financial assets and liabilities are recognized when the entity
        becomes a party to the contract creating the item. As such, any of
        the Fund's outstanding financial assets and liabilities at the
        effective date of adoption are recognized and measured in accordance
        with the new requirements as if these requirements had always been in
        effect. Any changes to the fair values of assets and liabilities
        prior to January 1, 2007 are recognized by adjusting opening deficit
        or opening accumulated other comprehensive income.

        All financial instruments are classified into one of the following
        five categories: held-for-trading, held to maturity, loans and
        receivables, available for sale financial assets, or other financial
        liabilities. Initial and subsequent measurement and recognition of
        changes in the value of financial instruments depends on their
        initial classification:

        (i)   Held to maturity investments, loans and receivables, and other
              financial liabilities are initially measured at fair value and
              subsequently measured at amortized cost. Amortization of
              premiums or discounts and losses due to impairment are included
              in current period net earnings using the effective interest
              method.

        (ii)  Available for sale financial assets are measured at fair value,
              with unrealized gains and losses recorded in other
              comprehensive income until the asset is realized, at which time
              they will be recorded in net earnings.

        (iii) Held for trading financial instruments are measured at fair
              value. All gains and losses resulting from changes in their
              fair value are included in net earnings in the period in which
              they arise.

        (iv)  All derivative financial instruments are classified as held for
              trading financial instruments and are measured at fair value,
              even when they are part of a hedging relationship. All gains
              and losses resulting from changes in their fair value are
              included in net earnings in the period in which they arise.

              Upon adoption of these new standards, the Fund has classified
              its financial instruments as follows:

        (v)   Accounts receivable and long term receivables are classified as
              loans and receivables, which are initially measured at fair
              value and subsequently measured at amortized cost. Housing
              loans provided to employees by the Fund to assist in their
              relocation to new operating locations were identified to be
              loans with a non-market rate of interest, requiring an
              adjustment based on the fair market value of the loans at their
              inception, adjusted for the accretion of the fair market value
              discount in the period from inception to the adoption of the
              new accounting standard. This change in accounting standard
              resulted in a decrease in the carrying value of employee
              housing loans receivable of $365,000, a decrease in non-
              controlling interests of $71,000 and future income taxes of
              $99,000, and an increase in deficit of $186,000 on the balance
              sheet at January 1, 2007.

        (vi)  The Fund's foreign currency contracts are a derivative
              financial instrument and as such are classified as held for
              trading, with all gains and losses included in net earnings in
              the period in which they arise. This is consistent with the
              Fund's historic accounting treatment of the foreign currency
              contracts and thus there was no change in accounting on
              adoption.

        (c) Financial Instruments - Disclosure and Presentation
            (Section 3861):

        CICA Section 3861 sets out standards which address the presentation
        of financial instruments and non-financial derivates, and identifies
        the related information that should be disclosed. These standards
        also revise the requirements for entities to provide accounting
        policy disclosures, including disclosure of the criteria for
        designating as held-for-trading those financial assets or liabilities
        that are not required to be classified as held-for-trading; whether
        categories of normal purchases and sales of financial assets are
        accounted for at trade date or settlement date; the accounting policy
        for transaction costs on financial assets and financial liabilities
        classified as other than held-for-trading; and provide several new
        requirements for disclosure about fair value.

        (d)   Hedging (Section 3865):

        CICA Section 3865 specifies the circumstances under which hedge
        accounting is permissible and how hedge accounting may be performed.
        The Fund currently does not hold any financial instruments designated
        for hedge accounting.

        (e)   Accounting Changes (Section 1506):

        CICA Section 1506 revised the standards on changes in accounting
        policy, estimates or errors to require a change in accounting policy
        to be applied retrospectively (unless doing so is impracticable),
        changes in estimates to be recorded prospectively, and prior period
        errors to be corrected retrospectively. Voluntary changes in
        accounting policy are allowed only when they result in financial
        statements that provide reliable and more relevant information. In
        addition, these revised standards call for enhanced disclosures about
        the effects of changes in accounting policies, estimates and errors
        on the financial statements. The impact of this new standard cannot
        be determined until such time as the Fund makes a change in
        accounting policy, other than the changes resulting from the
        implementation of the new CICA Handbook standards discussed in this
        note.

        (f)   Cash Flow Statements (Section 1540):

        Amendments to CICA 1540, Cash Flow Statements, require entities to
        disclose total cash distributions on financial instruments classified
        as equity in accordance with a contractual agreement and the extent
        to which total cash distributions are non-discretionary. This
        disclosure requirement is effective for interim and annual financial
        statements for fiscal periods ending on or after March 31, 2007. The
        Fund has no contractual requirement to pay cash distributions to
        Unitholders' of the Fund. During the three month period ended
        June 30, 2007 $3.0 million (2006 - $3.7 million) in discretionary
        cash distributions were paid to Unitholders. During the six month
        period ended June 30, 2007 $6.0 million (2006 - $7.4 million) in
        discretionary cash distributions were paid to Unitholders.

    4.  Foreign currency contracts:

        The Fund utilizes foreign currency contracts in order to assist in
        managing the Fund's exposure to exchange rate fluctuations on United
        States dollar denominated distributable cash. The foreign currency
        contracts are recognized in the balance sheet and measured at their
        fair value, with changes in fair value recognized currently in the
        statement of operations.

        At June 30, 2007 a subsidiary of the Fund held foreign currency
        contacts covering the period 24 months into the future with terms as
        follows:
                                                  Contract           Receive
                                Sell US      exchange rate          Canadian
        Month                   dollars            ($C/$US)          dollars
        ---------------------------------------------------------------------

        July 2007               US$675,000          1.3001         C$877,568
        August 2007             US$675,000          1.3001         C$877,568
        September 2007          US$675,000          1.3001         C$877,568
        October 2007            US$675,000          1.3001         C$877,568
        November 2007           US$675,000          1.3001         C$877,568
        December 2007           US$675,000          1.3001         C$877,568
        January 2008            US$675,000          1.3001         C$877,568
        February 2008           US$675,000          1.3001         C$877,568
        March 2008              US$675,000          1.3001         C$877,568
        April 2008              US$675,000          1.3001         C$877,568
        May 2008                US$675,000          1.1255         C$759,712
        June 2008               US$675,000          1.1255         C$759,712
        July 2008               US$675,000          1.1255         C$759,712
        August 2008             US$675,000          1.1255         C$759,712
        September 2008          US$675,000          1.1255         C$759,712
        October 2008            US$675,000          1.1255         C$759,712
        November 2008           US$675,000          1.1255         C$759,712
        December 2008           US$675,000          1.1255         C$759,712
        January 2009            US$675,000          1.1255         C$759,712
        February 2009           US$675,000          1.1255         C$759,712
        March 2009              US$675,000          1.1255         C$759,712
        April 2009              US$675,000          1.1255         C$759,712
        May 2009                US$675,000          1.0882         C$734,535
        June 2009               US$675,000          1.0595         C$715,162


        The fair value of the 24 monthly currency contracts covering the
        period July 2007 to June 2009 have been reflected in the financial
        statements and represent a current asset of $1,681,000 and a long-
        term asset of $463,000 at June 30, 2007. The fair values were
        determined based on valuations obtained from the counter-party.

    5.  Future income taxes:

        On June 12, 2007, the Canadian federal government's legislation to
        tax publicly traded income trusts passed third reading in the House
        of Commons and thus the associated income tax became substantively
        enacted for accounting purposes. The legislation imposes a tax of
        31.5% on distributions from Canadian public income trusts. The new
        tax is not expected to apply to the Fund until January 1, 2011 as a
        transition period applies to publicly traded trusts that existed
        prior to November 1, 2006. Historically the Fund had been exempt from
        recognizing future income tax assets and liabilities associated with
        temporary differences arising in the Fund and its subsidiary
        Hardwoods LP.

        As a result of the substantive enactment of the new tax legislation,
        the Fund has recognized future income tax assets and liabilities that
        are expected to reverse subsequent to January 1, 2011. The impact on
        the Fund's consolidated financial statements for the quarter ended
        June 30, 2007 was to increase the future income tax liability by
        $115,000 and record a corresponding future income tax expense.

    6.  Bank indebtedness:

        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                           2007         2006
        ---------------------------------------------------------------------
        Checks issued in excess of funds on deposit  $    1,689   $      797
        Credit facility, Hardwoods LP                     8,898       10,788
        Credit facility, Hardwoods USLP
         (June 30, 2007 - US$23,427;
         December 31, 2006 - US$23,655)                  24,959       27,567
        ---------------------------------------------------------------------
                                                     $   35,546   $   39,152
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    7.  Non-controlling interests:

        ---------------------------------------------------------------------

        Balance, January 1, 2007 (note 3)                         $   33,788
        Interest in earnings for the period                            2,041
        Foreign currency translation adjustment of non-controlling
         interest in Hardwoods USLP                                   (2,189)
        ---------------------------------------------------------------------
        Balance, end of period                                    $   33,640
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The previous owners of the Business (note 1) have retained a 20%
        interest in Hardwoods LP and Hardwoods USLP through ownership of
        Class B Hardwoods LP units ("Class B LP Units") and Class B Hardwoods
        USLP units ("Class B USLP Units"), respectively. The Fund owns an
        indirect 80% interest in Hardwoods LP and Hardwoods USLP through
        ownership of all Class A Hardwoods LP units ("Class A LP Units") and
        Class A Hardwoods USLP units ("Class A USLP Units"), respectively.

        The Class A LP Units and Class B LP Units and the Class A USLP Units
        and Class B USLP Units, respectively, have economic and voting rights
        that are equivalent in all material respects except distributions on
        the Class B LP Units and Class B USLP Units are subject to the
        subordination arrangements described below until the date (the
        "Subordination End Date") on which:

        (a)   the consolidated Adjusted EBITDA, as defined in the
        Subordination Agreement dated March 23, 2004, of the Fund for the
        12 month period ending on the last day of the month immediately
        preceding such date is at least $21,300,000; and

        (b)   cash distributions of at least $29,540,000 ($2.05 per Unit)
        have been paid on the Units and a combined amount of cash advances or
        distributions of at least $7,385,000 has been paid on the Class B LP
        Units and Class B USLP Units, being $2.05 per combined Class B LP and
        Class B USLP Units (as adjusted for issuances, redemptions and
        repurchases of Units, LP Units and USLP Units subsequently and by
        converting the cash distributions or advances by Hardwoods USLP on
        the USLP Units at the rate of exchange used by the Fund to convert
        funds received by it in US dollars into Canadian dollars) for the
        24 month period ending on the last day of the month immediately
        preceding such date.

        The Subordinated End Date had not occurred at June 30, 2007.

        Prior to the Subordination End Date, advances and distributions on
        the LP Units and the USLP Units will be made in the following order
        of priority:

        (a)   At the end of each month, cash advances or distributions will
        be made to the holders of Class A LP Units and Class A USLP Units in
        a combined amount that is sufficient to provide available cash to the
        Fund to enable the Fund to make cash distributions upon the Units for
        such month at least equal to $0.08542 per Unit or, if there is
        insufficient available cash to make distributions or advances in such
        amount, such lesser amount as is available as determined by the board
        of directors of the general partners;

        (b)   At the end of each fiscal quarter of Hardwoods LP and Hardwoods
        USLP, including the fiscal quarter ending on the fiscal year end,
        available cash of Hardwoods LP and Hardwoods USLP will be advanced or
        distributed in the following order of priority:

        (i)   First, in payment of the monthly cash advance or distribution
              to the holders of Class A LP Units and Class A USLP Units as
              described above, for the month then ended;

        (ii)  Second, to the holders of Class A LP Units and Class A USLP
              Units, to the extent that the combined monthly cash advances or
              distributions in respect of the 12 month period then ended (and
              not, for greater certainty, in any previous 12 month period) on
              Class A LP Units and Class A USLP Units were not made or were
              made in amounts less than a combined amount at least equal to
              $1.025 per Unit, the amount of any such deficiency. As of
              June 30, 2007, the amount of such deficiency was $2.9 million;

        (iii) Third, to the holders of Class B LP Units and Class B USLP
              Units in a combined amount for one Class B LP Unit and one
              Class B USLP Unit equal, on a pro-rated basis, to the combined
              amount advanced or distributed on one Class A LP Unit and one
              Class A USLP Unit during such fiscal quarter or, if there is
              insufficient available cash to make advances or distributions
              in such amount, such lesser amount as is available;

        (iv)  Fourth, to the holders of Class B LP Units and Class B USLP
              Units, to the extent only that combined advances or
              distributions in respect of any fiscal quarter(s) during the 12
              month period then ended (and not, for greater certainty, in any
              previous 12 month period) on one Class B LP Unit and one Class
              B USLP Unit were not made, or were made in amounts less, on a
              pro-rated basis, that the combined amount advanced or
              distributed on one Class A LP Unit and one Class A USLP Unit
              during such 12 month period, the amount of such deficiency. As
              of June 30, 2007, the amount of such deficiency was
              $3.0 million;

        (v)   Fifth, to the extent of any excess, to the holders of the Class
              A LP Units and Class B LP Units and Class A USLP Units and
              Class B USLP Units, respectively, so that the combined advances
              or distributions on one Class A LP Unit and one Class A USLP
              Unit are the same as the combined advances or distribution on
              one Class B LP Unit and one Class B USLP Unit in respect of the
              12 month period then ended (and not, for greater certainty, any
              previous 12 month period).

        After the Subordination End Date, the holders of the Class B LP Units
        and Class B USLP Units will generally be entitled to effectively
        exchange all or a portion of their Class B LP Units and Class B USLP
        Units together for up to 3,602,500 Units of the Fund, representing
        20% of the issued and outstanding Units of the Fund on a fully
        diluted basis. In the event the Fund enters into an agreement in
        respect of an acquisition or a take-over bid of the Fund, the holders
        of the Class B LP Units and Class B USLP Units will be entitled to
        exchange such units for Units of the Fund.

    8.  Changes in non-cash operating working capital:

        ---------------------------------------------------------------------
                         Three months Three months   Six months   Six months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------

        Accounts
         receivable        $   (2,162)  $   (1,115)  $   (6,652)  $   (7,591)
        Income taxes
         recoverable             (491)        (454)           2         (278)
        Inventory               1,211         (891)       2,666          761
        Prepaid expenses         (279)        (555)        (198)        (441)
        Accounts payable and
         accrued liabilities    2,019          407        1,121         (841)
        ---------------------------------------------------------------------
                           $      298   $   (2,608)  $   (3,061)  $   (8,390)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    9.  Segment disclosure:

        Information about geographic areas is as follows:

        ---------------------------------------------------------------------
                         Three months Three months   Six months   Six months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------

        Revenue from external
         customers:
          Canada           $   28,329   $   29,199   $   55,255   $   58,345
          United States        61,071       65,855      125,865      130,089

        ---------------------------------------------------------------------
                           $   89,400   $   95,054   $  181,120   $  188,434
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                           2007         2006
        ---------------------------------------------------------------------

        Property, plant and equipment:
          Canada                                     $    1,226   $    1,156
          United States                                   1,707        2,063

        ---------------------------------------------------------------------
                                                     $    2,933   $    3,219
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Goodwill
          Canada                                     $   34,477   $   34,477
          United States                                  49,740       54,409

        ---------------------------------------------------------------------
                                                     $   84,217   $   88,886
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    10. Pensions:

        Hardwoods USLP maintains a defined contribution 401 (k) retirement
        savings plan (the "USLP Plan"). The assets of the USLP Plan are held
        and related investment transactions are executed by the Plan's
        Trustee, ING National Trust, and, accordingly, are not reflected in
        these consolidated financial statements. During the three months
        ended June 30, 2007, Hardwoods USLP contributed and expensed $84,376
        (US$76,803) (three months ended June 30, 2006 - $76,604 (US$68,280))
        in relation to the USLP Plan. During the six months ended June 30,
        2007, Hardwoods USLP contributed and expensed $240,663 (US$212,037)
        (six months ended June 30, 2006 - $220,126 (US$193,398)) in relation
        to the USLP Plan.

        Hardwoods LP does not maintain a pension plan. Hardwoods LP does,
        however, administer a group registered retirement savings plan ("LP
        Plan") that has a matching component whereby Hardwoods LP makes
        contributions to the LP Plan which match contributions made by
        employees up to a certain level. The assets of the LP Plan are held
        and related investment transactions are executed by LP Plan's
        Trustee, Sun Life Financial Trust Inc., and, accordingly, are not
        reflected in these consolidated financial statements. During the
        three months ended June 30, 2007, Hardwoods LP contributed and
        expensed $52,629 (three months ended June 30, 2006 - $55,998) in
        relation to the LP Plan. During the six months ended June 30, 2007,
        Hardwoods LP contributed and expensed $143,504 (six months ended
        June 30, 2006 - $162,749) in relation to the LP Plan.

    11. Related party transactions:

        For the three months ended June 30, 2007, sales of $153,459 (three
        months ended June 30, 2006 - $246,046) were made to affiliates of
        SIL, and the Fund made purchases of $39,669 (three months ended
        June 30, 2006 - $37,702) from affiliates of SIL. For the six months
        ended June 30, 2007, sales of $374,128 (six months ended June 30,
        2006 - $646,194) were made to affiliates of SIL, and the Fund made
        purchases of $160,261 (six months ended June 30, 2006 - $67,267) from
        affiliates of SIL. All these sales and purchases took place at
        prevailing market prices.

        During the three months ended June 30, 2007, the Fund paid $27,000
        (three months ended June 30, 2006 - $27,000) to affiliates of SIL
        under the terms of an agreement to provide transitional services for
        management information systems. During the six months ended June 30,
        2007, the Fund paid $54,000 (six months ended June 30, 2006 -
        $54,000) to affiliates of SIL under the terms of an agreement to
        provide transitional services for management information systems.
        This cost is included in the selling and administrative expense in
        the statement of earnings.

    12. Seasonality:

        The Fund is subject to seasonal influences. Historically the first
        and fourth quarters are seasonally slower periods for construction
        activity and therefore demand for hardwood products.

    13. Contingencies:

        The Fund and its subsidiaries are subject to legal proceedings that
        arise in the ordinary course of its business. Management is of the
        opinion, based upon information presently available, that it is
        unlikely that any liability, to the extent not provided for through
        insurance or otherwise, would be material in relation to the Fund's
        consolidated financial statements.

    


    %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