Onex Corporation
TSX : OCX

Onex Corporation

February 25, 2010 16:00 ET

Onex Reports Full-Year 2009 Results

TORONTO, ONTARIO--(Marketwire - Feb. 25, 2010) -

All amounts in Canadian dollars unless otherwise stated

Onex Corporation (TSX:OCX) today announced its consolidated financial results for the full year ended December 31, 2009.

Full-Year 2009 Highlights

  • Onex sold shares of Emergency Medical Services Corporation in two secondary offerings at an average of approximately 6.3 times Onex' original cost. Onex received US$310 million, including carried interest, compared to a cost of US$46 million.

  • Onex sold its remaining 13 million trust units of Cineplex Galaxy Income Fund through a secondary offering for about $175 million of net proceeds. Over more than a decade, Onex invested US$355 million in its theatre exhibition business and realized total proceeds of approximately US$900 million.

  • Onex sold a portion of its investment in Celestica, receiving net proceeds of $104 million for total proceeds of $939 million since acquisition. To date, Onex' total investment has generated a multiple of capital of about 6 times.

  • Onex Partners III acquired the Tropicana Las Vegas Hotel and Casino with a total equity value of US$305 million, including a US$75 million rights offering.

  • Onex Partners III held its final close, reaching its original fundraising target of US$3.5 billion of third-party capital. Onex increased its commitment to the Fund to US$800 million for a total fund size of US$4.3 billion.

  • The Warranty Group paid a US$42 million dividend, of which US$13 million was Onex' share, and Carestream Health paid a US$72 million distribution, of which US$28 million was Onex' share.

  • Fee-earning assets under management increased by 13% to US$7.5 billion.

  • Full-year management fees rose by 24% to US$88 million.

  • Carried interest distributions of US$19 million were received.

Onex is an investor and asset manager generating value from (i) growth in the Company's $3.9 billion of proprietary capital; (ii) management fees based on the US$7.5 billion of third-party capital committed to its Funds, and (iii) a carried interest based on the performance of those Funds.

Investing

"It feels good to have 2009 behind us. Not because the world has changed with the start of a new year but there seem to be signs that the worst of the economic recession has passed and that the general sense of malaise is gradually lifting," said Gerald W. Schwartz, Chairman and Chief Executive Officer of Onex.

"This time last year, we were reflecting upon our discipline during the buoyant acquisition period of 2005 to 2007 fuelled in part by abundant and inexpensive credit. While we were quite active during this time, we remained true to our conservative investing philosophy and did not burden our operating companies with debt levels that were superficially appealing. We hoped that by staying focused on our core strengths our businesses would be well-positioned to survive the downturn and hopefully grow as industries consolidate," continued Mr. Schwartz. "We are pleased that, for the most part, this is indeed what took place. What 2009 proved was that our guiding investing principles provide significant downside protection while delivering excellent long-term results." 

Despite the dramatic impact on business activity for most industries in 2009, Onex' operating companies retired close to US$1.2 billion of debt in 2009 and paid US$114 million in dividends as a result of strong cash flow generation. 

The swift rebound of the capital markets has been both beneficial and detrimental to transaction activity. The ongoing recovery of the equity markets has created an appetite for public offerings. If the markets continue to be receptive, this may provide an opportunity for some of Onex' businesses to pursue equity offerings. Conversely, sellers' pricing expectations appear to be ahead of their businesses' current performance, making it difficult for value investors like Onex to find attractive acquisition opportunities. As well, with debt more readily available, struggling companies may be able to turn to refinancing options rather than sale alternatives. 

"We remain optimistic that there will be attractive acquisition prospects for Onex in this environment. Many of the potential transactions we are currently considering are proprietary and are the result of our industry focus and our reputation for complex corporate carve-outs from large multinationals," said Mr. Schwartz. "We are working to find similar opportunities where we can acquire businesses at reasonable purchase prices and create value through earnings growth."

With more than $1 billion of cash and cash-like investments, no debt and US$3.9 billion of uncalled third-party capital available, Onex remains well positioned to actively participate in significant investment opportunities.

Onex has stayed true to its active ownership approach to value-oriented investing. By transforming undervalued businesses into industry leaders, Onex has produced impressive returns over its 25-year history. As of December 31, 2009, Onex has generated a 25-year gross IRR of 29% and an average multiple of 3.4 times invested capital from its private equity investing.

Onex continues to believe that its success in building companies and its record of capital preservation and superior returns are direct results of the strong alignment of interests between Onex shareholders, the limited partners and the management team. At December 31, 2009, Onex' management team had over $1 billion invested in Onex shares and in its operating companies.

Asset Management

Onex' asset management business continues to add value through the predictable and growing management fees it earns on third-party capital and the meaningful carried interest opportunity on that capital.

In December 2009, Onex held the final close for Onex Partners III. During an undoubtedly difficult fundraising period, Onex raised a total of US$3.5 billion of third-party capital, reaching its original fundraising target. With the success of its third large-cap fund, Onex has almost doubled its total fee-earning assets under management. As a result, the current annualized rate of management fees is US$88 million for the Onex Partners and ONCAP funds, which offsets the Company's operating costs. In addition, Onex has an 8% carried interest opportunity on US$3.3 billion of invested capital and on US$3.7 billion of uncalled capital.

During the fourth quarter, Onex Credit Partners ("OCP") raised over $200 million for the new OCP Credit Strategy Fund, a publicly-traded Canadian retail fund. This contributed to the tripling of OCP's assets under management during the year, which is a testament to Onex' credit team, their track record and the strength of the Onex brand. We will continue to evaluate opportunities to raise future funds for our platforms – private equity, credit investing and real estate.

Consolidated Fourth-Quarter and Full-Year Results

Onex' quarterly and full-year consolidated financial results do not follow any specific trends due to acquisitions and dispositions of businesses, the impact of foreign currency translation and varying business cycles at its operating companies.

On a consolidated basis for the quarter, revenues decreased 9% to $6.2 billion and operating earnings rose 13% to $513 million compared to the fourth quarter in 2008. Onex reported net earnings for the period of $40 million compared to a $348 million net loss in the fourth quarter of 2008. Cash flow from operations increased 46% to $562 million.

On a consolidated basis for the full year, revenues of $24.8 billion were down 8% and operating earnings increased 7% to $2.0 billion compared to 2008. Net earnings for the year were $112 million compared to a net loss of $283 million in 2008. Cash flow from operations of $1.3 billion was unchanged from 2008. Assets totaled $25.5 billion at December 31, 2009 compared to $29.7 billion at December 31, 2008.

The Company paid a fourth quarter dividend of $0.0275 per Subordinate Voting Share on January 29, 2010 to shareholders of record on January 8, 2010.

Operating earnings as referred to in this press release are a non-GAAP measure. See Management's Discussion and Analysis for the definition and reconciliation to the consolidated statements of earnings.

Attached are the Consolidated Balance Sheets, Statements of Earnings, Statements of Cash Flows and information by industry segment for the full-year ended December 31, 2009 and 2008. The complete financial statements, including Management's Discussion and Analysis of the results, are posted on Onex' website, www.onex.com, and are also available on SEDAR at www.sedar.com. Also attached is the "How We Are Invested" page, which details Onex' $3.9 billion of proprietary capital and provides private company performance information.

Webcast

Onex management will host a conference call to review the Company's fiscal 2009 results at 4:30 p.m. ET today. A live webcast of this conference call will be available in listen-only mode on its website, www.onex.com.

About Onex

Onex is one of North America's oldest and most successful investment firms committed to acquiring and building high-quality businesses in partnership with talented management teams. Onex manages investment platforms focused on private equity, real estate and credit securities. In total, the Company manages approximately US$12 billion. Onex generates annual management fee income and is entitled to a carried interest on approximately US$7.5 billion of third-party capital and also invests its own capital directly and as a substantial limited partner in its Funds.

Onex' businesses generate annual revenues of $32 billion, have assets of $36 billion and employ over 210,000 people worldwide. Onex shares trade on the Toronto Stock Exchange under the stock symbol OCX. For more information on Onex, visit its website at www.onex.com. The Company's security filings can also be accessed at www.sedar.com.

This news release may contain forward-looking statements that are based on management's current expectations and are subject to known and unknown uncertainties and risks, which could cause actual results to differ materially from those contemplated or implied by such forward-looking statements. Onex is under no obligation to update any forward-looking statements contained herein should material facts change due to new information, future events or otherwise.

How We Are Invested
As at December 31, 2009
  Proprietary Capital
  (US$ millions)   (CDN$ millions)
Private Equity          
Onex Partners          
  Private Companies $ 1,3641   $ 1,4341
  Public Companies   4802     5042
  Unrealized Carried Interest on Public Companies   49     52
ONCAP   1533     1613
Direct Investments          
  Private Companies   2514     3404
  Public Companies   1682     1762
      2,465     2,667
Alternative Assets          
Onex Real Estate Partners   695     735
Onex Credit Partners   882     932
      157     166
Other Investments   60     63
Cash and Near-Cash   9886     1,0386
Onex Corporation Debt   Nil     Nil
    $ 3,670   $ 3,934
 
1  Based on the US$ fair value of the investments in Onex Partners' financial statements and US$/CDN$ exchange rate of 1.0510.
2  Based on the December 31, 2009 market values and US$/CDN$ exchange rate of 1.0510.  Excludes Onex' CDN$137 million investment in Onex Credit Partners' unleveraged senior secured loan strategy fund which is included with cash and near-cash items.
3  Based on the CDN$ fair value of the investments in ONCAP's financial statements and US$/CDN$ exchange rate of 1.0510.
4  Historical US$ and historical CDN$ cost amounts.
5  Based on carrying value of Onex Real Estate Partners' investments at December 31, 2009.
6  Includes approximately CDN$11 million of hedge fund investments and CDN$137 million invested in Onex Credit Partners' unleveraged senior secured loan strategy fund.
Significant Public Companies 
 
       
Market Value of Onex' Investment2
  Shares/Units Subject to Carried Interest (millions)  Shares/Units Held by Onex(millions)  Closing Price per Share1  (US$ millions)  (CDN$ millions) 
               
Onex Partners              
  Emergency Medical Services 7.0 4.8 US$ 54.15  $ 2603     $ 2733
  ResCare4 6.2 2.0 US$ 11.20  223    243
  Skilled Healthcare 10.7 3.5 US$ 7.45  263    273
  Spirit AeroSystems 17.2 8.6 US$ 19.86  1723    1803
           480    504
Direct Investments              
  Celestica - 17.7 US$ 9.44  168    176
           $ 648   $ 680
 
1  Closing price on December 31, 2009.
2  Based on closing price on December 31, 2009 and US$/CDN$ exchange rate of 1.0510.
3  Excludes Onex' potential participation in the carried interest.
4  Shares are on an as-if-converted basis.
 
Significant Private Companies
            Cost of Onex' Investment
  Onex Ownership1  LTM EBITDA2 (US$ millions)  Net Debt (US$ millions)  Cumulative Dividends(US$ millions)  Onex Economic Ownership  (US$ millions)  (CDN$ millions) 
Onex Partners              
Center for Diagnostic Imaging 81% $  39 $  57 $  - 19% $  17 $  21
The Warranty Group 94% 993 n/a 119 29% 154 175
Tube City IMS 91% 84 362 - 36% 98 117
Hawker Beechcraft 49% 1274 1,795 - 19% 191 223
Carestream Health 97% 490 1,521 144 38% 186 206
Allison Transmission 49% 498 3,721 - 15% 237 250
Husky Injection Molding Systems 98% 164 258 - 36% 225 226
RSI Home Products 50% n/a n/a - 20% 126 133
Tropicana Las Vegas 71% n/a n/a - 15% 45 49
            1,279 1,400
Direct Investments              
Sitel Worldwide - $  138 $  588 $  - 66% 251 340
            $1,530 $1,740
 
1  Includes the interest of Onex Partners' third-party limited partners and Onex management's interest via Onex Partners.
2  Includes adjustments that are consistent with private equity industry practice.  These adjustments may include non-cash costs of stock-based compensation and retention plans, transition and restructuring expenses including severance payments, the impact of derivative instruments that no longer qualify for hedge accounting, the impacts of purchase accounting, and other similar amounts.
3  Amount presented for The Warranty Group is adjusted net earnings rather than EBITDA.  Net earnings on GAAP basis, including the impacts of purchase accounting, were $95.
4  Includes adjustments for non-cash asset impairment charges and certain reserve increases, and excludes gains on debt repurchases.
Onex Corporation
 
CONSOLIDATED BALANCE SHEETS
 
  As at December 31 (in millions of dollars)   2009   2008
Assets        
Current assets        
Cash and cash equivalents $ 3,206 $ 2,921
Marketable securities   636   842
Accounts receivable   3,062   4,014
Inventories   3,085   3,471
Other current assets   1,384   1,695
    11,373   12,943
Property, plant and equipment   3,759   4,066
Investments   3,255   3,897
Other long-term assets   2,696   3,125
Intangible assets   2,086   2,755
Goodwill   2,312   2,946
  $ 25,481 $ 29,732
Liabilities and Shareholders' Equity        
Current liabilities        
Accounts payable and accrued liabilities $ 3,832 $ 4,617
Other current liabilities   992   1,196
Current portion of long-term debt, without recourse to Onex   425   532
Current portion of obligations under capital leases, without        
  recourse to Onex   21   25
Current portion of warranty reserves and unearned premiums   1,410   1,698
    6,680   8,068
Long-term debt of operating companies, without recourse to Onex   5,505   7,143
Long-term portion of obligations under capital leases of operating        
  companies, without recourse to Onex   41   46
Long-term portion of warranty reserves and unearned premiums   2,034   2,561
Other liabilities   1,955   2,287
Future income taxes   1,237   1,450
    17,452   21,555
Non-controlling interests   6,370   6,624
Shareholders' equity   1,659   1,553
  $ 25,481 $ 29,732
Onex Corporation  
   
CONSOLIDATED STATEMENTS OF EARNINGS  
 
Year ended December 31 (in millions of dollars except per share data)   2009     2008  
Revenues $ 24,831   $ 26,881  
Cost of sales   (19,468 )   (21,719 )
Selling, general and administrative expenses   (2,819 )   (2,744 )
Earnings Before the Undernoted Items   2,544     2,418  
Amortization of property, plant and equipment   (636 )   (624 )
Amortization of intangible assets and deferred charges   (364 )   (366 )
Interest expense of operating companies   (495 )   (550 )
Interest income   53     35  
Loss from equity-accounted investments   (497 )   (322 )
Foreign exchange gains (loss)   (90 )   83  
Stock-based compensation recovery (expense)   (161 )   142  
Other income (expense)   97     (77 )
Gains on dispositions of operating investments   783     4  
Acquisition, restructuring and other expenses   (219 )   (220 )
Writedown of goodwill, intangible assets and long-lived assets   (370 )   (1,584 )
Earnings (loss) before income taxes, non-controlling interests            
  and discontinued operations   645     (1,061 )
Provision for income taxes   (172 )   (252 )
Non-controlling interests   (361 )   1,021  
Earnings (loss) from continuing operations   112     (292 )
Earnings from discontinued operations       9  
Net Earnings (Loss) for the Year $ 112   $ (283 )
Net Earnings (Loss) per Subordinate Voting Share            
Basic and Diluted:            
  Continuing operations $ 0.92   $ (2.37 )
  Discontinued operations $   $ 0.07  
  Net earnings (loss) $ 0.92   $ (2.30 )
Onex Corporation  
   
CONSOLIDATED STATEMENT OF CASH FLOWS  
   
   
Year ended December 31 (in millions of dollars)   2009     2008  
Operating Activities            
Net earnings (loss) for the year $ 112   $ (283 )
Earnings from discontinued operations       (9 )
Items not affecting cash:            
  Amortization of property, plant and equipment   636     624  
  Amortization of intangible assets and deferred charges   364     366  
  Amortization of deferred warranty costs   86     (22 )
  Loss from equity-accounted investments   497     322  
  Foreign exchange loss (gains)   76     (105 )
  Stock-based compensation expense (recovery)   161     (142 )
  Gains on dispositions of operating investments, net   (783 )   (4 )
  Non-cash component of restructuring   5     5  
  Writedown of goodwill, intangible assets and long-lived assets   370     1,584  
  Non-controlling interests   361     (1,021 )
  Future income taxes   (104 )   (66 )
  Other   (66 )   47  
    1,715     1,296  
Changes in non-cash working capital items:            
  Accounts receivable   381     202  
  Inventories   (166 )   (311 )
  Other current assets   58     156  
  Accounts payable, accrued liabilities and other current liabilities   (225 )   (340 )
Increase (decrease) in cash due to changes in working capital items   48     (293 )
Increase (decrease) in warranty reserves and unearned premiums and other            
  liabilities   (423 )   336  
    1,340     1,339  
Financing Activities            
Issuance of long-term debt   1,390     1,047  
Repayment of long-term debt   (1,962 )   (1,242 )
Cash dividends paid   (13 )   (14 )
Repurchase of share capital   (41 )   (101 )
Issuance of share capital provided by L.P. investors and            
  operating companies   368     458  
Distributions by operating companies and to L.P. investors   (576 )   (143 )
Increase (decrease) due to other financing activities   (23 )   4  
    (857 )   9  
Investing Activities            
Acquisition of operating companies, net of cash in acquired            
  companies of $108 (2008 – $5)   (90 )   (209 )
Purchase of property, plant and equipment   (613 )   (859 )
Proceeds from sales of operating investments   1,110      
Decrease due to other investing activities   (184 )   (345 )
Cash from discontinued operations       11  
    223     (1,402 )
Increase (Decrease) in Cash for the Year   706     (54 )
Increase (decrease) in cash due to changes in foreign exchange rates   (421 )   513  
Cash and cash equivalents, beginning of the year   2,921     2,462  
Cash and Cash Equivalents $ 3,206   $ 2,921  
Onex Corporation  
   
2009 INFORMATION BY INDUSTRY SEGMENT  
   
    Electronics                       Customer                    
  Manufacturing                 Financial     Support     Metal         Consolidated  
    Services   Aerostructures     Healthcare     Services     Services     Services     Other     Total  
Revenues $ 6,909   $ 4,641   $ 6,590   $ 1,359   $ 1,780   $ 1,472   $ 2,080   $ 24,831  
Cost of sales   (6,319 )   (3,946 )   (4,766 )   (656 )   (1,140 )   (1,329 )   (1,312 )   (19,468 )
Selling, general and administrative expenses   (224 )   (199 )   (771 )   (509 )   (487 )   (48 )   (581 )   (2,819 )
Earnings before the undernoted items   366     496     1,053     194     153     95     187     2,544  
Amortization of property, plant and equipment   (86 )   (130 )   (200 )   (13 )   (57 )   (66 )   (84 )   (636 )
Amortization of intangible assets and deferred charges   (25 )   (5 )   (224 )   (22 )   (24 )   (14 )   (50 )   (364 )
Interest expense of operating companies   (39 )   (50 )   (226 )   (3 )   (82 )   (49 )   (46 )   (495 )
Interest income       8     7         1         37     53  
Earnings (loss) from equity-accounted investments           7                 (504 )   (497 )
Foreign exchange gains (loss)   (2 )   3     (6 )   1     (10 )   (1 )   (75 )   (90 )
Stock-based compensation expense   (43 )   (12 )   (7 )   (1 )           (98 )   (161 )
Other income (expense)       4     (11 )               104     97  
Gains on dispositions of operating investments                           783     783  
Acquisition, restructuring and other expenses   (92 )   (1 )   (44 )   (2 )   (25 )       (55 )   (219 )
Writedown of goodwill, intangible assets and long-lived assets   (14 )       (180 )       (64 )   (62 )   (50 )   (370 )
Earnings (loss) before income taxes, non-controlling interests and discontinued operations $ 65   $ 313   $ 169   $ 154   $ (108 ) $ (97 ) $ 149   $ 645  
Recovery of (provision for) income taxes   (5 )   (107 )   (130 )   (46 )   (17 )   7     126     (172 )
Non-controlling interests   (54 )   (192 )   (3 )   (76 )   (1 )   59     (94 )   (361 )
Earnings (loss) from continuing operations   6     14     36     32     (126 )   (31 )   181     112  
Earnings from discontinued operations                                
Net earnings (loss)   6     14     36     32     (126 )   (31 )   181     112  
Total assets $ 3,265   $ 4,821   $ 5,616   $ 5,206   $ 745   $ 891   $ 4,937   $ 25,481  
Long-term debt(a) $ 234   $ 902   $ 2,792   $ 203   $ 660   $ 401   $ 738   $ 5,930  
Property, plant and equipment additions $ 69   $ 335   $ 163   $ 12   $ 25   $ 43   $ 66   $ 713  
Goodwill additions $   $   $ 46   $   $   $   $ 7   $ 53  
Goodwill $   $ 3   $ 1,065   $ 361   $ 124   $ 252   $ 507   $ 2,312  
(a) Long-term debt includes current portion, excludes capital leases and is net of deferred charges.
Onex Corporation  
   
2008 INFORMATION BY INDUSTRY SEGMENT  
   
    Electronics                       Customer                    
  Manufacturing                 Financial     Support     Metal           Consolidated  
    Services   Aerostructures     Healthcare     Services     Services     Services     Other     Total  
Revenues $ 8,220   $ 3,965   $ 6,152   $ 1,388   $ 1,856   $ 3,112   $ 2,188   $ 26,881  
Cost of sales   (7,556 )   (3,215 )   (4,504 )   (665 )   (1,197 )   (2,932 )   (1,650 )   (21,719 )
Selling, general and administrative expenses   (274 )   (188 )   (740 )   (460 )   (520 )   (71 )   (491 )   (2,744 )
Earnings before the undernoted items   390     562     908     263     139     109     47     2,418  
Amortization of property, plant and equipment   (97 )   (117 )   (186 )   (12 )   (64 )   (65 )   (83 )   (624 )
Amortization of intangible assets and deferred charges   (16 )   (5 )   (229 )   (19 )   (19 )   (13 )   (65 )   (366 )
Interest expense of operating companies   (53 )   (42 )   (255 )   (9 )   (69 )   (41 )   (81 )   (550 )
Interest income (expense)   16     20     10         2         (13 )   35  
                                                 
Earnings (loss) from equity-accounted investments           13                 (335 )   (322 )
Foreign exchange gains (loss)   (19 )   (6 )   (9 )       10         107     83  
Stock-based compensation recovery (expense)   (25 )   (17 )   (5 )   (1 )           190     142  
Other income (expense)       4     (1 )   (16 )           (64 )   (77 )
Gains on dispositions of operating investments                           4     4  
Acquisition, restructuring and other expenses   (39 )       (92 )   (7 )   (36 )       (46 )   (220 )
Writedown of goodwill, intangible assets and long-lived assets   (1,061 )       (142 )       (129 )   (1 )   (251 )   (1,584 )
 Earnings (loss) before income taxes,
non-controlling interests and discontinued operations
$ (904 ) $ 399   $ 12   $ 199   $ (166 ) $ (11 ) $ (590 ) $ (1,061 )
Recovery of (provision for) income taxes   (6 )   (137 )   (108 )   (65 )   (3 )   4     63     (252 )
Non-controlling interests   791     (245 )   34     (94 )   (1 )   5     531     1,021  
Earnings (loss) from continuing operations   (119 )   17     (62 )   40     (170 )   (2 )   4     (292 )
Earnings from discontinued operations                           9     9  
Net earnings (loss)   (119 )   17     (62 )   40     (170 )   (2 )   13     (283 )
Total assets $ 4,612   $ 4,821   $ 6,660   $ 6,095   $ 1,020   $ 1,026   $ 5,498   $ 29,732  
Long-term debt(a) $ 892   $ 697   $ 3,367   $ 237   $ 796   $ 519   $ 1,167   $ 7,675  
Property, plant and equipment additions $ 124   $ 299   $ 225   $ 21   $ 67   $ 73   $ 50   $ 859  
  Goodwill additions $   $   $ 64   $   $ 7   $ 4   $ 96   $ 171  
  Goodwill $   $ 3   $ 1,398   $ 419   $ 199   $ 355   $ 572   $ 2,946  
(a) Long-term debt includes current portion, excludes capital leases and is net of deferred charges.

Contact Information

  • Onex Corporation
    Christopher A. Govan
    Managing Director
    416.362.7711
    or
    Onex Corporation
    Emma Thompson
    Vice President, Investor Relations
    416.362.7711