Drive Products Income Fund
TSX : DPI.UN

Drive Products Income Fund

August 11, 2009 14:28 ET

Drive Products Income Fund Reports 2009 Second Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - Aug. 11, 2009) - Drive Products Income Fund (TSX:DPI.UN) today announced its 2009 second quarter financial results.

Sales, net loss and EBITDA for the quarter were $19.3 million, $1.8 million and $0.5 million, respectively, compared to $23.9 million, $0.7 million and $1.8 million in the second quarter of 2008. Sales, net loss and EBITDA for the 2009 year to date period were $42.2 million, $2.6 million and $1.7 million, respectively, compared to $48.1 million, $1.0 million and $4.0 million in the 2008 year to date period. Our financial performance is indicative of the continuing general economic downward trend experienced over the past several quarters. The construction and oil and gas segments have been particularly affected and account for much of our sales decreases in our core business units.

"The first half of 2009 saw a significant reduction in demand for our core business products. The current economic environment has had a negative impact on the Fund's revenues and operating profitability", said Greg Edmonds, Chief Executive Officer. In spite of the federal and provincial government's actions to stimulate the economy, it is difficult to assess how long this current recessionary period will last and near term forecasting remains difficult to predict. As customers continue to adjust their strategies, we anticipate continued pricing and competitive pressures in the upcoming quarters. "The Fund's Western branches are doubly challenged by the continued weakness in the oil and natural gas segment. The decline in our Western segment has had a dramatic influence on the profitability of the Fund over the past several quarters."

Despite these challenges, we continue to maintain a healthy balance sheet. Management has implemented several initiatives that address the current challenges and improve our balance sheet. Our working capital has improved since the fourth quarter of 2008 and our bank debt has decreased by 26.4% since the first quarter of 2009. The initiatives have included headcount adjustments, discretionary and capital spending reductions and the suspension of the monthly distributions. Cost reduction initiatives and a close monitoring of our working capital levels will remain a focus of attention for all managers in the upcoming quarters.

Management believes that the long term market fundamentals of the oil and gas industry are positive and that this segment will eventually rebound. We expect government actions to stimulate the economy to eventually benefit the Fund as construction and infrastructure spending are a significant component of these proposals. In addition, these stimulus packages may return confidence to the markets sooner and result in increased capital spending by many of our customers. Should either of these events occur, we believe the Fund is properly positioned to capitalize and increase unitholder value. Until that time, we will continue to manage and protect our balance sheet through the downturn.



SUMMARY OF CONSOLIDATED RESULTS:

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($ thousands
except per
unit figures) Three months ended June 30 Six months ended June 30
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2009 2008 % change 2009 2008 % change
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(unaudited) (unaudited) (unaudited) (unaudited)
$ $ $ $

Sales 19,281 23,922 (19.4%) 42,204 48,103 (12.3%)
Cost of
Sales 13,553 15,801 (14.2%) 29,287 31,910 (8.2%)
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Gross Margin 5,728 8,121 (29.5%) 12,917 16,193 (20.2%)
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General and
Adminis-
trative 5,361 6,207 (13.6%) 11,247 11,923 (5.7%)
Foreign
exchange
(gain) (180) 149 220.8% (17) 284 106.0%
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EBITDA(1) 547 1,765 (69.0%) 1,687 3,986 (57.7%)
Amortization 1,931 2,368 (18.5%) 3,819 4,754 (19.7%)
Interest
expense 115 113 1.8% 249 201 23.9%
Income tax
provision 203 63 222.2% 340 122 178.7
Future income
tax provision
(recovery) 58 (40) (245.0%) (104) (44) 136.4
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Net loss (1,760) (739) 138.2% (2,617) (1,047) 150.0
Other
comprehensive
loss 51 - 17 -
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Net
comprehensive
loss (1,811) (739) 145.1% (2,634) (1,047) 151.6
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Average number
of units
Outstanding
('000s)(2) 13,250 13,974 13,250 13,977

Basic and
diluted
earnings
(loss) per
unit (0.133) (0.053) (0.198) (0.075)

Total assets 66,405 83,324 66,405 83,324

Long term
liabilities 1,437 2,780 1,437 2,780
Distributions
per unit - 0.125 0.063 0.250
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(1) EBITDA is a non-GAAP measure. See "Non-GAAP Measures" below for a
definition of EBITDA. The Fund's taxable earnings are allocated to its
unitholders and taxed in their hands.

(2) For purposes of calculating the average number of units outstanding,
Fund units and Class B LP units exchangeable for Fund units have been
included.


Second Quarter Interim Report

The Fund's Second Quarter Interim Report is available on the Fund's website at www.driveproducts.com and at www.sedar.com.

(1) Non-GAAP Measures

EBITDA and distributable cash are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP. Therefore, EBITDA and distributable cash may not be comparable to similarly titled measures presented by other issuers. Investors are cautioned that EBITDA and distributable cash should not be construed as an alternative to net income or loss determined in accordance with GAAP as indicators of the Fund's performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows. Management believes EBITDA and distributable cash are useful measures in evaluating the performance of the Fund and in determining whether to invest in units. EBITDA means net earnings adjusted to exclude income taxes, gains or losses on disposal of capital assets, amortization of capital assets and intangible assets, and interest expense. We have excluded impairments of goodwill and intangible assets in the presentation of EBITDA because we believe that such charges are non-recurring, one-time charges and that their exclusions will be useful to our investors to compare our period over period and year over year performance. Distributable cash means EBITDA adjusted for maintenance capital expenditures and other adjustments listed in the reconciliation provided in the annual Management's Discussion and Analysis.

About Drive Products Income Fund

Drive Products Income Fund holds a 52% indirect interest in Drive Products. Founded in 1983, Drive Products is a Canadian leader in the design and installation of systems solutions that transform a conventional new truck chassis into a specialized vehicle that meets a customer's technical and performance requirements. To achieve this, Drive Products offers a wide variety of products such as power take-offs, hydraulic pumps, motors and coolers, winches, cables and controls, drivelines, blowers and compressors, hoses and fittings, custom consoles, snowplows, spreaders and electronic spreader controls, from leading international manufacturers, in many instances as the sole distributor in Canada.

Forward-Looking Statements

This press release contains forward-looking statements relating to expected future events and financial and operating results of the Fund. These statements involve known and unknown risks and uncertainties. Actual results may differ materially from those anticipated by such forward-looking statements for a variety of reasons, including without limitation, market and general economic conditions and the risks and uncertainties detailed from time to time in the Fund's continuous disclosure documents filed with the Canadian securities regulatory authorities. The Fund disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

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