Gienow Windows & Doors Income Fund
TSX : GIF.UN

Gienow Windows & Doors Income Fund

August 11, 2005 16:01 ET

Gienow Windows & Doors Income Fund Announces the Results of Operations for the Three and Six Months Ended June 30, 2005

CALGARY, ALBERTA--(CCNMatthews - Aug. 11, 2005) -

NOT FOR DISTRIBUTION IN THE United States OR TO U.S. CITIZENS

Gienow Windows & Doors Income Fund (TSX:GIF.UN) (the "Fund") is pleased to provide the results of operations for the three and six months ended June 30, 2005. The Fund's interim consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2005 are included in this release. All numbers are expressed in thousands of dollars except per unit information.

Since the Fund commenced operations on October 19, 2004, there are no comparative figures representing the operations of the Fund in prior periods in the interim consolidated financial statements of the Fund.

Highlights and Major Events for the Period

- Cash distributions of $0.30 per unit matched our forecast for the quarter and we are pleased to report that cash available for distributions was ahead of management's expectations for the quarter by approximately $0.01 per unit.

- Year to date, the cash available for distributions has exceeded management's expectations by approximately $0.05 per unit or roughly 13%.

- The forecast for cash available for distributions for the remainder of the year remains positive and our forecast of continued monthly distributions of $0.10 per unit is validated based upon our current visibility. Consistent with the seasonal nature of our business, we expect the majority of the year to date shortfall in cash available for distributions will be made up during third quarter with the balance made up during fourth quarter.

- Sales of $52,815 for the quarter ended June 30, 2005, were better than management's expectations for the quarter and a 58% increase over the quarter ended March 31, 2005 and approximately an 11.9% increase over the second quarter of fiscal year 2004.

- Gross profit for the quarter ended June 30, 2005, was 32.0 % up from 28.5% in the previous quarter and in line with management's expectations for the quarter.

- Selling and G&A expenses, as a percentage of revenues, were 13.0% for the quarter, down from 18.3% in the previous quarter and in line with management's expectations for the quarter.

- EBITDA for the three months ended June 30, 2005 was approximately $10,000 and in line with management's expectations for the quarter and an increase of approximately 7.0% over the second quarter of fiscal year 2004.

- On July 15th, the Fund completed the indirect acquisition of the operating assets and related obligations of Chantecler Windows and Doors, Inc. / Portes et Fenetres Chantecler, Inc. giving the Fund a beachhead into the eastern Canada new construction market.

- The Fund successfully introduced 7 new product development enhancements during the period, reflecting its continued commitment to new product development and its position as an industry leader in this area.

Outlook

"We continue to experience strong positive economic indicators including housing starts, employment rates and renovation spending within our core markets" said David Munro, President and Chief Executive Officer. "Our year to date cash distributions have exceeded management's expectations by approximately $0.05 per unit or 13%. We continue to build upon the strong operational and financial performance over the past three operating periods and expect that this momentum will continue throughout the balance of the fiscal year."

"In the 2nd quarter, we generated $0.34 per unit of distributable cash which was approximately a $0.01 per unit increase over management's expectations for the period," said Richard Boyer, Chief Financial Officer. "We have experienced three consecutive quarters of stronger than expected performance and we expect this trend to continue as we enter the last half of our fiscal year."

"We are meeting our previously stated objective of lowering our payout ratio and based upon the excess $0.05 per unit earned year to date, we have lowered this ratio to approximately 96%," said Mr. Boyer. "Based upon the results to date and our visibility into the balance of the year, we remain confident in our ability to deliver our distribution target of $1.20 to our unit holders."

Conclusion

Mr. Munro concluded that "we are seeing strong organic growth from our divisions and expect this trend to continue throughout the balance of the year. Subsequent to the end of the quarter, we completed our first acquisition since our IPO on October 19, 2004 and see other opportunities to further consolidate the industry which will further confirm our vision of being the dominant window and door manufacturer in Canada. Our distributable cash performance year to date has exceeded Management's expectations by approximately 13% confirming our ability to deliver the cash distribution target of $1.20 per unit. All of our key operating metrics were in line or better than management's expectations for the quarter, and we believe these trends will continue through the balance of the fiscal year."

Management will host a conference call today at 3:30 p.m. (MDT) to discuss the Fund's financial results for the quarter ended June 30, 2005. The conference call dial-in number is 1-800-396-0424. A replay of the conference call will be available by dialing either 1-416-626-4100 or 1-800-558-5253, pass-code 21253058#, until 5:00 p.m. (MST) on Friday August 19, 2005 or by listening to it at the Fund's website www.gienowincomefund.ca.

Management's Discussion and Analysis for the Three Months Ended June 30, 2005

(all amounts in '000's except for unit and per unit amounts)

August 11, 2005

The information in this Management's Discussion and Analysis ("MD&A") is supplemental to, and should be read in conjunction with the unaudited interim consolidated financial statements of Gienow Windows & Doors Income Fund for the three and six months ended June 30, 2005, the Annual Information Form ("AIF") of the Fund filed on March 31, 2005 and other related materials. These materials can be found on SEDAR at www.sedar.com. The Fund's financial statements are prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). The Fund's reporting currency is the Canadian dollar. Per unit amounts are calculated using the weighted average number of units outstanding for the applicable period.

This discussion contains forward-looking statements. Please see "Note Regarding Forward-Looking Statements" for a discussion of the risks, uncertainties and assumptions relating to those statements. This discussion also makes reference to certain non-GAAP measures to assist in assessing the Fund's financial performance. EBITDA and Distributable Cash are not measures recognized by GAAP and do not have standardized meanings prescribed by GAAP. Therefore, EBITDA and Distributable Cash may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA and Distributable Cash should not be construed as alternatives to net earnings as determined in accordance with GAAP, or as indicators of performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows.

The Management's Discussion and Analysis is presented in the following sections:

- Formation of the Fund

- Business Overview

- Subsequent Events

- Analysis of Operating and Financial Results

- Distributions for the Period

- Outstanding Unit Data

- Capital and Liquidity

- Outlook

- Note Regarding Forward-Looking Statements

Formation of the Fund

Gienow Windows & Doors Income Fund (the "Fund"), is an unincorporated, open-ended, limited purpose mutual fund trust established pursuant to a deed of trust dated September 9, 2004, as amended and restated on October 19, 2004, (collectively the "Deeds of Trust") under and governed by the laws of the Province of Alberta.

On October 19, 2004, the Fund invested in the Gienow Windows & Doors Limited Partnership (the "Partnership") for a limited partnership interest representing a 98% interest therein, and indirectly purchased all of the outstanding shares of Farley Windows Inc. ("Farley"). The acquisitions and subsequent operations of the Partnership and Farley form the basis of operations for the Fund.

Business Overview

The Fund is one of the largest Canadian window and door manufacturers with a national manufacturing and sales presence. It designs, manufactures and sells a full range of high quality, value-priced, custom windows and doors to new home builders, dealers, professional renovators and industrial customers from three manufacturing facilities in Alberta and one in Ontario. The Fund produces a complete line of vinyl, wood, metal-clad wood and aluminum windows, as well as complementary entrance systems including steel, wood and fiberglass entry doors and vinyl, wood, metal-clad wood and aluminum patio doors. Its window products are available in a wide variety of designs, shapes and sizes for all styles of architecture. The Fund also offers installation services and complementary products such as skylights and glass block windows.

The Fund services a wide variety of customers under its Gienow, Award, AWD and Farley brand names. Its distribution channels include new home builders, professional renovators, dealers, a national "big box" retailer and direct sales to the end consumer.

Subsequent Events

On July 15, 2005, the Fund indirectly completed acquisition of the operating assets and assumed all of the related obligations of Chantecler Windows and Doors, Inc./ Portes et Fenetres Chantecler, Inc. ("Chantecler"). The transaction was funded through an expansion of the Fund's credit facilities with the aggregate purchase price being $7,983, including $1,163 in cash and $5,127 in assumed debt. The transaction is expected to be neutral to distributable income in fiscal year 2005 and accretive beginning in fiscal year 2006.

Analysis of Operating and Financial Results

The results of operations in the following discussion encompass the unaudited interim consolidated results of the Fund for the three and six months ended June 30, 2005.

Since the Fund commenced operations on October 19, 2004, there are no comparative figures representing the operations of the Fund in prior periods in the interim consolidated financial statements of the Fund.

Sales

Total sales for the quarter ended June 30, 2005, were $52,815 versus $33,380 in the first quarter and represent quarter over quarter growth of 58%. As communicated previously, the Fund's business is seasonal with peak times occurring in the warmer months when new construction and renovation industries are typically more active. Sales for the quarter were in line with management's expectations for the quarter and were again driven by growth in both of the Fund's key end-markets; new construction and home renovation.

Cost of sales

Cost of sales for the three months ended June 30, 2005, were $35,894 or 68.0% of total sales. Gross profit, defined as sales less cost of sales, for the quarter ended June 30, 2005, was $16,921 or 32.0%.

On a quarter over quarter basis, gross profit increased from 28.5% to 32.0% and again was affected by the seasonality of the Fund's business. As the majority of our plant and labor costs were implemented during the first half of second quarter in advance of the upcoming stronger operating months, we expect gross profit percentage will continue to trend slightly upward for the balance of the fiscal year as increased sales volumes will generate greater plant and labor efficiencies.

Selling, general and administrative expense

Selling, general and administrative expenses ("SG&A") for the three months ended June 30, 2005, were $6,847. As a percentage of sales, SG&A was 13.0% and was in line with management's expectations for the quarter.

On a quarter over quarter basis, SG&A decreased as a percentage of revenue from 18.3% to 13.0%, reflecting the increase in sales volume during the second quarter versus the fixed nature of SG&A expenses. SG&A as a percentage of revenue is expected to continue to trend downward during third quarter as increased sales volumes will offset fixed SG&A expenses.

Interest expense

Interest expense for the quarter ended June 30, 2005, was $886 and consisted primarily of interest on the $57,000 term loan, the $6,272 mortgage payable, as well as capital leases and was consistent with the previous quarter.

Depreciation and amortization

Depreciation and amortization for the quarter ended June 30, 2005, was $2,779 with $1,665 relating to the amortization of intangible assets relating to customer relationships which are being amortized on a straight-line basis over ten years and $1,114 relating to the depreciation of property, plant and equipment and was consistent with the previous quarter.

Income taxes

During the three months ended June 30, 2005, the Fund incurred a future income tax expense of $316 related to Farley and incurred a Ontario capital tax of $54, again related to Farley.

Net earnings

Net earnings for the three months ended June 30, 2005, were $5,961 or the equivalent of $0.24 per unit and in line with management's expectations.

Summary of Quarterly Results

The following table summarizes the Fund's quarterly results:



------------------------------------------------------------------------
Distributable
Net Earnings Income
Quarter Ended Revenue Net Earnings per Unit(2) per Unit(2)
------------------------------------------------------------------------
December 31,
2004(1) $33,791 $4,056 $0.16 $0.23
------------------------------------------------------------------------
March 31, 2005 $33,380 $1,545 $0.06 $0.09
------------------------------------------------------------------------
June 30, 2005 $52,815 $5,961 $0.24 $0.34
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) The quarter ended December 31, 2004 was not a full quarter as the
Fund commenced operations on October 19, 2004

(2) On a basic and diluted basis


EBITDA

References to "EBITDA" are to earnings before interest, taxes, depreciation and amortization. The Fund believes that EBITDA is a useful financial measure as it represents a starting point in the determination of cash available for distribution to unitholders.

The following table reconciles EBITDA to net earnings for the three and six months ended June 30, 2005:



------------------------------------------------------------------------
Three months ended Six months ended
(in thousands of dollars) June 30, 2005 June 30, 2005
------------------------------------------------------------------------
Net earnings for the period $ 5,961 $ 7,506
------------------------------------------------------------------------
Interest 886 1,759
Depreciation and amortization 2,779 5,386
Current income taxes 54 54
Future income taxes (reduction) 316 (1,403)
------------------------------------------------------------------------
EBITDA $ 9,996 $13,302
------------------------------------------------------------------------
------------------------------------------------------------------------


Distributable Cash and Distributable Cash per Unit

Distributable cash represents EBITDA, adjusted for debt service obligations, maintenance capital expenditures, and capital and current income taxes.

For the three months ended June 30, 2005, the Fund distributed $0.30 per unit compared with distributable cash of $0.34 per unit as calculated below. The difference of $0.04 per unit reflects the seasonality of the Fund's operations as the second quarter is the second strongest operating quarter for the Fund. Distributable cash performance for the second quarter exceeded management's expectations by roughly $0.01 per unit, bringing the year to date actual approximately $0.05 per unit ahead of management's expectations.

The majority of the year to date shortfall in distributable cash, of approximately $0.17 per unit, will be made up during the third quarter as it is the strongest operating quarter for the Fund with the balance made up during the fourth quarter. The shortfall in the year to date distributable cash has been financed entirely through the working capital of the Fund.



------------------------------------------------------------------------
(thousands of dollars except Three months ended Six months ended
for trust unit amounts) June 30, 2005 June 30, 2005
------------------------------------------------------------------------
EBITDA $ 9,996 $13,302

Less:
Debt service obligations (1,096) (2,166)
Maintenance capital expenditures (205) (310)
Proceeds from sale of property,
plant and equipment 14 14
Current income taxes (54) (54)

Distributable cash $ 8,655 $10,786
------------------------------------------------------------------------
Distributable cash per unit $ 0.34 $ 0.43
------------------------------------------------------------------------
Distributions declared $ 7,544 $15,089
------------------------------------------------------------------------
Distributions declared per unit $ 0.30 $ 0.60
------------------------------------------------------------------------
------------------------------------------------------------------------


Distributions for the Period

For the three months ended June 30, 2005, the Fund met its distribution targets of $0.10 per unit per month. The details of these distributions are as follows:



------------------------------------------------------------------------
Period Record Date Payment Date Per Unit Amount
------------------------------------------------------------------------
Apr 1 - Apr 30, 2005 April 30, 2005 May 16, 2005 $0.10 $2,514.750
------------------------------------------------------------------------
May 1 - May 31, 2005 May 31, 2005 June 15, 2005 $0.10 $2,514.750
------------------------------------------------------------------------
June 1 - June 30, 2005 June 30, 2005 July 15, 2005 $0.10 $2,514.750
------------------------------------------------------------------------
Total Distributions $0.30 $7,544.250
------------------------------------------------------------------------
------------------------------------------------------------------------


Distributions are declared monthly to unitholders of record on the last business day of each month. The Board of Trustees approve cash distributions on a monthly basis pursuant to the distribution policy it has established, taking into account the Fund's current and prospective performance. Some of the factors considered in making decisions related to distributions include cash amounts to service debt obligations, maintenance and growth capital expenditures, seasonality, and other items considered to be prudent.

Outstanding Unit Data

At June 30, 2005, and August 11, 2005, the Fund had 25,147,500 units outstanding.

Capital and Liquidity

The Fund has an $8,000 demand revolving credit facility and a $57,000 term facility. At June 30, 2005 the Fund had accessed the full $57,000 term facility. As a result of financing its shortfall in cash distributions for the six months ended June 30, 2005, the Fund had accessed $2,600 on its revolving facility, leaving $5,400 available to meet future requirements as at June 30, 2005.

On July 15, 2005, in connection with the acquisition of the assets of Chantecler, the Fund increased its term facility to $59,500 and increased its revolving facility to $12,500. On August 9th, the Fund had accessed the full $59,500 term facility and had accessed approximately $3,086 on its revolving facility.

As such, management believes that the Fund has sufficient liquidity to meet all of its current working capital, distribution and capital expenditure requirements. The Fund was in compliance with all of its banking covenants as at June 30, 2005.

At June 30, 2005, the Fund had working capital of $11,952 as compared to $9,329 as at March 31, 2005, with the increase primarily due to the excess in distributable cash versus cash distributions made for the quarter. During the quarter, the Fund paid distributions of $7,544 to its unitholders.

During the quarter, cash generated in operating activities was $4,910 up from $3,764 in the previous quarter. The Fund also made $210 in principal repayments during the period related to long-term debt and capital leases.

During the quarter, the Fund purchased property, plant and equipment in the amount of $711. Of this amount, $506 was related to growth capital expenditures and $205 related to maintenance capital expenditures. During the quarter, the Fund received lease proceeds of $826.

Outlook

The Fund's product sales are affected by general economic trends. The Fund just completed what is typically its second strongest operating quarter of the fiscal year and is now entering its strongest operating quarter. Management believes that based upon the current market indicators and the current visibility into the end of the third quarter and beyond, that the previous trends started over the past three operating quarters, whereby actual results are exceeding management's expectations, will continue through the balance of fiscal year 2005. Accordingly, the Fund expects to meet its distribution targets for fiscal year 2005.

In this environment, the Fund will continue to focus on growing sales and profitability both organically and through further acquisitions. The Fund continues to capitalize on the organic opportunities through its proven competitive advantages and management does not foresee any reasons for this to change.

On July 15, 2005, the Fund completed its first acquisition since its initial public offering on October 19, 2004. The acquisition of Chantecler provides the Fund with a beachhead into the new construction market in Eastern Canada and can now offer a complimentary product offering to that of Farley's home renovation offering in Eastern Canada.

Management continues to believe that there are other consolidation opportunities within the industry and the Fund will continue to be an industry consolidator and will pursue additional accretive acquisitions to the Fund during fiscal 2005.

Note Regarding Forward-Looking Statements

Certain statements contained in this MD&A constitute forward-looking statements. The use of any of the words "anticipate", "continue", "expect", "estimate", "may", "will", "project", "should", "believe", and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risk, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Management believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon. These statements speak only as of the date of this MD&A. In particular, this MD&A contains forward-looking statements pertaining to Distributable Cash and distributions per unit. The actual results could differ materially from those anticipated in these forward-looking statements. The Fund does not undertake any obligation to publicly update or revise any forward-looking statements.



Consolidated Financial Statements of

GIENOW WINDOWS &
DOORS INCOME FUND
(Unaudited)
Three and six months ended June 30, 2005

GIENOW WINDOWS & DOORS INCOME FUND
Consolidated Balance Sheets

June 30, 2005
(expressed in thousands of dollars except basic and diluted information)

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

Assets June 30 December 31
2005 2004
(unaudited) (audited)

Current assets:
Cash and cash equivalents $ - $ 5,161
Accounts receivable 25,128 19,182
Inventories 8,551 6,709
Prepaid expenses 1,003 1,344
Income taxes receivable 313 888
Due from related parties - 168
------------------------------------------------------------------------
34,995 33,452

Property, plant and equipment 30,898 31,358
Intangible assets 70,038 73,368
Goodwill 190,387 190,952
------------------------------------------------------------------------
$ 326,318 $ 329,130
------------------------------------------------------------------------
------------------------------------------------------------------------

Liabilities and Unitholders' Equity

Current liabilities:
Bank indebtedness $ 2,575 $ -
Accounts payable and accrued liabilities 16,037 13,345
Distributions payable to unitholders 2,515 2,515
Note payable to related parties 952 1,402
Current portion of long-term debt 317 307
Current portion of capital leases 647 481
------------------------------------------------------------------------
23,043 18,050

Capital leases 2,316 1,752
Long-term debt 62,955 63,116
Future income taxes 7,482 8,217

------------------------------------------------------------------------
95,796 91,135

Non-controlling interest 569 459

Unitholders' equity (note 4):
Units 239,515 239,515
Accumulated earnings 11,562 4,056
Accumulated distributions (21,124) (6,035)
------------------------------------------------------------------------
229,953 237,536
Subsequent event (note 7)
------------------------------------------------------------------------
$ 326,318 $ 329,130
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

Approved on behalf of the Trustees:

"signed" "signed"
------------------------ Trustee ------------------------- Trustee
David Munro B.W. Simpson


GIENOW WINDOWS & DOORS INCOME FUND
Unaudited Consolidated Statement of Earnings

Three and six months ended June 30, 2005
(expressed in thousands of dollars except basic and diluted information)

------------------------------------------------------------------------
For the For the
three months six months
(unaudited) (unaudited)

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

Sales $ 52,815 $ 86,195

Cost of sales 35,894 59,752
------------------------------------------------------------------------
16,921 26,443

Selling, general and administrative expenses 6,847 12,968
------------------------------------------------------------------------

Earnings before the undernoted 10,074 13,475

Interest 886 1,759
Depreciation and amortization 2,779 5,386
Foreign exchange gain (2) (16)
Loss on sale of property, plant and equipment 15 22
------------------------------------------------------------------------
3,678 7,151

------------------------------------------------------------------------
Earnings before income taxes and
non-controlling interest 6,396 6,324

Capital tax 54 54
Future income taxes (reduction) 316 (1,403)
------------------------------------------------------------------------
370 (1,349)

------------------------------------------------------------------------
Earnings before non-controlling interest 6,026 7,673

Non-controlling interest (65) (167)

------------------------------------------------------------------------
Net earnings $ 5,961 $ 7,506
------------------------------------------------------------------------
------------------------------------------------------------------------

Basic and diluted:
Net earnings per unit $ 0.24 $ 0.30
Weighted average number of units
outstanding 25,147,500 25,147,500
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


GIENOW WINDOWS & DOORS INCOME FUND
Unaudited Consolidated Statement of Accumulated Earnings

Three and six months ended June 30, 2005
(expressed in thousands of dollars except basic and diluted information)

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

For the For the
three months six months
(unaudited) (unaudited)

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

Accumulated earnings, beginning of period $ 5,601 $ 4,056

Net earnings 5,961 7,506

------------------------------------------------------------------------
Accumulated earnings, end of period $ 11,562 $ 11,562
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


GIENOW WINDOWS & DOORS INCOME FUND
Unaudited Consolidated Statement of Cash Flows

Three and six months ended June 30, 2005
(expressed in thousands of dollars except basic and diluted information)

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

For the For the
three months six months
(unaudited) (unaudited)

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

Cash provided by (used in) the following activities:

Operations:
Net earnings $ 5,961 $ 7,506
Add (deduct) items not affecting cash:
Depreciation and amortization 2,779 5,386
Loss on sale of property, plant and equipment 15 22
Future income taxes (reduction) 1,549 (170)
Non-controlling interest 65 110
Change in non-cash working capital (note 5) (5,459) (4,180)
-----------------------------------------------------------------------
4,910 8,674

Financing:
Increase in bank indebtedness 2,575 2,575
Repayment of long-term debt (76) (151)
Proceeds from capital lease 826 985
Repayment of obligations under capital lease (134) (255)
Repayment of due from related parties - 168
Distributions paid to unitholders (7,545) (15,089)
-----------------------------------------------------------------------
(4,354) (11,767)

Investing:
Purchase of property, plant and equipment (711) (1,632)
Proceeds from sale of property,
plant and equipment 14 14
Repayment of note payable to related parties - (450)
-----------------------------------------------------------------------
(697) (2,068)

------------------------------------------------------------------------
Decrease in cash and cash equivalents (141) (5,161)

Cash and cash equivalents, beginning of period 141 5,161

------------------------------------------------------------------------
Cash and cash equivalents, end of period $ - $ -
------------------------------------------------------------------------
------------------------------------------------------------------------

Supplemental information:
Interest paid $ (867) $ (1,727)
Income taxes recovered 1,585 1,770
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


GIENOW WINDOWS & DOORS INCOME FUND
Notes to Consolidated Financial Statements (unaudited)

Three and six months ended June 30, 2005
(expressed in thousands of dollars except basic and diluted information)


1. Formation of Fund and nature of operations:

Gienow Windows & Doors Income Fund ('the Fund") is an unincorporated, open-ended, limited purpose trust established under a Deed of Trust dated September 9, 2004, which was amended and restated on October 19, 2004, and governed by the laws of the Province of Alberta. On October 19, 2004, the Fund invested in the Gienow Windows & Doors Limited Partnership (the "Partnership") for a limited partnership interest representing a 98% interest therein, and indirectly purchased all of the outstanding shares of Farley Windows Inc. ("Farley"). The acquisition and subsequent operations of the Partnership and Farley form the basis of operations for the Fund.

The Fund is in the business of manufacturing, distributing and sales of windows, doors and related products and services to industrial and residential customers in Canada, the United States and International markets. The Fund's four manufacturing facilities are located in Calgary, Edmonton and Alexandria.

2. Basis of presentation

These unaudited interim consolidated financial statements of the Fund have been prepared following the same accounting policies and methods of computation as the annual consolidated financial statements of the Fund for the period from formation on September 9, 2004 to December 31, 2004. The disclosures provided below are incremental to those included with the annual consolidated financial statements and certain disclosures, which are normally required to be included in the notes to the annual consolidated financial statements, have been condensed or omitted. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the Fund for the period from formation on September 9, 2004 to December 31, 2004.

The consolidated financial statements include the accounts of the Fund and its subsidiaries. The consolidated financial statements are stated in Canadian dollars and have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP").

There are no comparative amounts for 2004 as the Fund did not commence operations until the fourth quarter of 2004.

3. Seasonality of operations

The Fund's revenues are seasonal with peak times occurring in the warmer months when new construction and renovation industries are typically more active. As a result, the demand for the Fund's products and services are traditionally highest in the second and third quarters and the lowest in the first quarter.



4. Unitholders' equity:

The change in accumulated distributions for the six month period ended
June 30, 2005 is as follows:

------------------------------------------------------------------------
Per unit Total
amount amount
------------------------------------------------------------------------

Accumulated distributions,
beginning of period $ 6,035

Distributions declared $ 0.60 15,089

------------------------------------------------------------------------
Accumulated distributions, end of period $ 21,124
------------------------------------------------------------------------
------------------------------------------------------------------------

5. Statement of cash flows:

------------------------------------------------------------------------
Three months ended Six months ended
June 30, 2005 June 30, 2005
------------------------------------------------------------------------

Changes in non-cash working
capital are as follows:

Accounts receivable $ (7,071) $ (5,946)
Income taxes receivable 390 575
Inventories (1,071) (1,842)
Prepaid expenses 283 341
Accounts payable and
accrued liabilities 2,010 2,692

------------------------------------------------------------------------
Relating to operating activities $ (5,459) $ (4,180)
------------------------------------------------------------------------
------------------------------------------------------------------------


6. Segmented information:

The Fund operates in a single operating segment in the business of manufacturing, distributing and sales of windows, doors and related products and services to industrial and residential customers in Canada, the United States and International markets.

The Fund's sales to external customers for the three and six months ended June 30, 2005 and property, plant and equipment at June 30, 2005 and December 31, 2004 by geographic area were as follows:



------------------------------------------------------------------------
Three months ended Six months ended
June 30, 2005 June 30, 2005
------------------------------------------------------------------------
Sales to external customers:
Canada $ 46,253 $ 74,068
United States and International 6,562 12,127

------------------------------------------------------------------------
$ 52,815 $ 86,195
------------------------------------------------------------------------

June 30 December 31
2005 2004
------------------------------------------------------------------------

Property, plant and equipment:
Canada $ 30,706 $ 31,147
United States and International 192 211
------------------------------------------------------------------------
$ 30,898 $ 31,358
------------------------------------------------------------------------


It is not practicable to allocate goodwill by geographic area.

For the three and six months period ended June 30, 2005, sales to one customer amounted to approximately 13% and 11%, respectively.

7. Subsequent event

On July 15, 2005, the Fund indirectly completed the acquisition of the operating assets and assumed all of the related obligations of Chantecler Windows and Doors, Inc./ Portes et Fenetres Chantecler, Inc. ("Chantecler"). The aggregate price was $7,983, including $1,163 in cash and $5,127 in assumed debt. On July 15, 2005, the Fund increased and drew its term facility from $57,000 to $59,500 and increased its demand revolving facility from $8,000 to $12,500.

Contact Information

  • Gienow Windows & Doors Income Fund
    Richard L. Boyer
    Chief Financial Officer
    (403) 203-8200 or toll free at (800) 297-6102
    or
    Gienow Windows & Doors Income Fund
    Mark Weder
    Corporate Controller
    (403) 203-8200 or toll free at (800) 297-6102
    or
    Gienow Windows & Doors Income Fund
    Cindy Smith
    Executive Assistant to the C.E.O.
    (403) 203-8200 or toll free at (800) 297-6102
    Email: info@gienowincomefund.ca
    Website: www.gienowincomefund.ca