Drive Products Income Fund
TSX : DPI.UN

Drive Products Income Fund

November 16, 2009 13:39 ET

Drive Products Income Fund Reports 2009 Third Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - Nov. 16, 2009) – Drive Products Income Fund (TSX:DPI.UN) today announced its 2009 third quarter financial results. 

Sales, net loss and EBITDA for the quarter were $19.1 million, $1.4 million and $0.7 million, respectively, compared to $24.9 million, $0.7 million and $1.9 million in the third quarter of 2008. Sales, net loss and EBITDA for the 2009 year to date period were $61.3 million, $4.1 million and $2.4 million, respectively, compared to $73.0 million, $1.8 million and $5.9 million in the 2008 year to date period. "This has proven to be one of the most challenging years in the history of Drive Products. We are operating in the midst of the worst economic recession in many years, with continuing debate as to how long it will last. Sales in our Western branches alone are down $10.7 million during the 2009 year to date period compared to 2008. The construction and oil and gas segments have been particularly affected and account for much of our sales decreases during the year", said Greg Edmonds, Chief Executive Officer.

"Despite this backdrop, the Fund has responded by strengthening its balance sheet. The Fund has aggressively reduced its borrowings under its secured credit facilities using cash generated from reductions in working capital. With that said, net bank indebtedness has been reduced by $8.1 million since March 31, 2009 and $7.3 million since December 31, 2008. In addition, the working capital ratio has improved in every quarter in 2009, accounts receivable in excess of 90 days have steadily improved and general and administrative expenses have been reduced." 

Management has taken costs out of all of our businesses and we are identifying and implementing further costs savings programs. Layoffs, wage and hiring freezes, along with the suspension of certain employee benefits were implemented in 2009, along with a closer scrutiny of other administrative expenses. In conjunction with the suspension of the Fund's monthly cash distributions, management believes that these actions have well positioned the Fund for recovery when the markets eventually rebound. 

However, there is much work still to be done. In an effort to maintain financial flexibility and capitalize on business opportunities, management will continue to focus on objectives that will improve the Fund's balance sheet. Management still believes that the long term market fundamentals of the oil and gas industry are positive and that this segment will eventually rebound. There are signs that the Canadian economy may be beginning to stabilize. Specific government stimulus packages are now being released, particularly with new construction projects. The Fund is expected to be a major beneficiary of the stimulus packages as it services the construction industry. In addition, the recent awarding of the 2015 Pan American games to Toronto will have a positive impact on the Ontario construction industry. We believe that these government actions will gain more traction in the upcoming quarters and help return confidence to the markets and our customers. Until that time, we will continue to manage and protect our balance sheet through the downturn.

SUMMARY OF CONSOLIDATED RESULTS:



($ thousands except per
     unit figures)



Three months ended September 30



Nine months ended September 30
 20092008% change20092008% change
  (unaudited)(unaudited)  (unaudited)(unaudited) 
 $$ $$ 
       
Sales19,05924,867(23.4%)61,26472,970(16.0%)
       
Cost of Sales 13,514   16,684 (19.0%) 42,802 48,594 (11.9%)
       
Gross Margin5,5458,183(32.2%)18,46224,376(24.3%)
       
General and Administrative5,1925,720(9.2%)16,44017,643(6.8%)
       
Foreign exchange (gain)(366)559165.5%(383)843145.4%
       
EBITDA (1)7191,904(62.3%)2,4055,890(59.2%)
       
Amortization1,9672,410(18.4%)5,7857,164(19.3%)
       
Interest expense95170(44.1%)344371(7.3%)
       
Income tax provision1238151.9%463203128.1%
       
Future income tax  recovery(31)(13)138.5%(135)(57)136.8%
       
Net loss(1,435)(744)92.9%(4,052)(1,791)126.2%
       
Other comprehensive loss(88)─ (105)─ 
       
Net comprehensive loss(1,523)(744)104.7%(4,157)(1,791)132.1%
   
Average number of units
 Outstanding  ('000s) (2)
13,25013,67013,25013,874

Basic and diluted earnings (loss) per unit
(0.115)(0.054)(0.314)(0.129)
   
Total assets63,91782,82263,91782,822

Long term liabilities
1,2891,9681,2891,968

Distributions per unit
─0.1250.0630.375

(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.

Third Quarter Interim Report

The Fund's Third 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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