Newport Partners Income Fund
TSX : NPF.UN

November 14, 2005 15:32 ET

Newport Partners Announces 2005 Third Quarter Results

TORONTO, ONTARIO--(CCNMatthews - Nov. 14, 2005) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Newport Partners Income Fund ("Newport")(TSX:NPF.UN) today announced the third quarter results of Newport and Newport Private Yield LP ("NPY"). The financial statements of Newport are prepared on a consolidated basis in accordance with generally accepted accounting principles.

Q3 Highlights for Newport

(For the 54-day period from date of commencement of operations on Aug. 8, 2005 to Sept. 30, 2005)

- Announced a 2.7% increase in annual distributions from $0.925 per Unit to $0.95;

- Generated revenue of $61 million and EBITDA of $7.4 million;

- Produced distributable cash flow of $6.9 million;

- Announced three new acquisitions in the period and entered into letter of intent to acquire a fourth business for total investment of $33.5 million;

- Increased authorized credit facility to $55 million to provide for an operating and acquisition line;

- Completed the initial public offering of Newport units on August 8, 2005 (the "Offering"), and exercise of the underwriter's over-allotment option, for approximately $214 million; and

- Achieved overall results in line with management expectations.

Revenue for the 54-day period was $61.0 million and EBITDA was $7.4 million. Most of Newport's operating partnerships had strong revenues and earnings during this quarter. Each of Morrison Williams Investment Management LP ("Morrison Williams"), Newport Partners LP ("NP"), Brompton Funds LP ("Brompton") and Capital C Communications LP ("Capital C") had the most profitable quarters in their histories. These results were offset by lower than expected earnings from Jutan Limited Partnership ("Jutan") and EZEE ATM LP ("EZEE").

The financial services segment, comprised of ESR, NP, Morrison Williams, Brompton and EZEE, contributed $3.4 million of EBITDA during the period. This was in line with management expectations. Better than expected results were delivered by Morrison Williams, NP and Brompton as a result of higher assets under management. Anticipated seasonality factors produced lower results as expected at Elliott Special Risks LP ("ESR") as historically it has generated 65% of its profit during the first six months of the year due to the timing of contingent profit commissions. ESR was not impacted by recent weather catastrophes as it is not a property insurer. Revenues and earnings at EZEE were negatively impacted primarily by a targeted competitive effort against the company's locations in Quebec. EZEE has responded with legal action and simultaneously pursued an early contract renewal program with existing locations. EZEE also expanded its portfolio just after period end with the acquisition of 42 new locations from Edmonton-based Rapid Cash and continues to pursue its consolidation strategy.

The marketing segment, comprised of Gemma Communications LP ("Gemma"), Capital C, Sports And Entertainment Limited Partnership ("S&E") and Kenna Group LP ("Kenna"), contributed $1.5 million of EBITDA during the period exceeding management expectations. The outlook continues to be very positive for this group. Gemma continued its pattern of strong organic growth while Capital C achieved a new higher baseline level of business with the addition of a significant new long-term client contract. S&E's earnings are beginning to return to levels experienced prior to the NHL strike. Kenna, in which Newport purchased an ownership interest on September 14th, is well positioned to capitalize on the demand for marketing automation solutions that help companies optimize their investments in marketing, sales and service.

The oil and gas services segment, comprised of NPC Integrity Energy Services Limited Partnership ("NPC"), contributed $1.5 million of EBITDA during the period which was generally in line with management expectations. Revenues generated by NPC during this typically strong period were above plan as a result of high levels of production and development activity in the oil and gas sector overall. NPC is expected to generate revenues and earnings that will exceed management's plan for the year. During the period, NPC entered into a letter of intent to acquire a business in its industry which is expected to close in November 2005. NPC will continue to make accretive acquisitions in the oil and gas services sector that management believes will contribute to the strength and long-term growth of NPC.

The distribution segment, comprised of Jutan, contributed $1.0 million of EBITDA during the period which was below management expectations. Jutan's results were primarily impacted by product shortages of a key distribution arrangement; a labour disruption at the Vancouver port that delayed deliveries and impacted revenues; currency contracts entered into by previous management that negatively impacted gross margin during the period; and increased general and administrative expenses relating to integration of AVS, acquired in April 2005 and Sonigem, acquired on September 30 2005. These factors are expected to be short-term as the currency contracts expire on December 31 2005; production capacity of its key distribution arrangement is increased in Q1 2006 and Jutan management begins to realize on synergies from integration of its three business lines. Seasonality is also a major factor at Jutan, as historically it has earned 45 - 50% of its revenues during the final four months of the year.

"Newport's business plan of partnering with successful entrepreneurs is working very well. Our eleven businesses are all very profitable and many are having record years of profitability. Where we have had challenges, we believe these to be short-term or seasonal and prove the value of a diversified portfolio of well-established businesses operating in different segments of the economy subject to different business cycles," explained Peter Wallace, President & CEO.

Distributable Cash

Third quarter distributable cash flow was $6.9 million or $0.107 per Unit. Distributions in the period were $8.9 million or $0.138 per Unit. These results are generally in line with Newport's expectations for the period given the seasonality factors impacting cash flows of its two largest operating partners, Jutan and ESR.

Management remains confident that its distributable cash flow will meet its budget for the year. Newport announced a 2.7% increase to monthly distributions per unit from $07708 to $0.07917 ($0.95 per unit annually) in September.

Financial Position

Newport had positive working capital of approximately $19.2 million at September 30, 2005 (excluding the drawn acquisition line of $26.5 million which is used to fund long term investments).

On August 8, 2005, Newport consolidated the banking facilities and repaid all the term debt of all operating partnerships excluding Jutan and Brompton. The $55 million credit facility has two components, an operating facility to be used to fund the working capital requirements of the operating partnerships and an acquisition facility to be used to fund acquisitions. Newport believes it is well positioned to continue its investment program due to its conservatively financed balance sheet.

"While the capital market uncertainty with respect to the federal government's review of flow through entity tax legislation has depressed prices for income trusts, Newport's business plan has not changed and we continue to focus on putting our effort and capital to work behind successful Canadian entrepreneurs," said Mr. Wallace.



(For the 54-Day Period from commencement of
Summary Financial operations on August 8, 2005 to
Table September 30, 2005)

Financial Marketing Oil Distribu- Total
Services & Gas tion
Services
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$000s
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Revenue $7,755 $9,128 $13,588 $30,572 $61,043
Gross Margin 4,200 2,712 2,172 3,416 12,500

EBITDA 3,455 1,493 1,491 961 7,400
Interest (Expense)
/Income 88 (2) (191) (110) (215)
Capital Expenditures (52) (83) (114) (5) (254)
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Distributable Cash $3,491 $1,408 $1,186 $846 $6,931
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Distributions/Unit
($000's except per
Unit amounts)

Total $ No. of Units Per unit
----------------------------------
Distributions - NPY ( non Newport) $5,506 39,925
Distributions - Newport 3,426 24,844
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Total Distributions $8,932 64,769 $0.138
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Cash used in operating
activities ($13,908)
Add: Changes in non cash working
capital 20,363
Add: Income from equity investment 730
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$7,185
Less: Capital expenditures (254)
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Distributable cash $6,931 $0.107
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ABOUT NEWPORT

Newport is an unincorporated, open-ended trust created to hold through the Company's investment in Newport Partners Commercial Trust, interests in Newport Private Yield LP, a limited partnership established under the laws of the Province of Ontario. Newport began trading on the TSX on August 8, 2005 under the symbol NPF.UN.

Newport indirectly owns a 38% interest in NPY. As Newport controls NPY through its 100% indirect ownership of its General Partner, the financial statements of Newport are prepared on a consolidated basis in accordance with generally accepted accounting principles. The 62% interest in NPY not owned by Newport is reflected as a non-controlling interest in the consolidated financial statements.

Newport is the financial partner to successful entrepreneurs who have proven track records and operate businesses that have a history of profitability and consistent cash flows. Newport has an ownership interest in eleven operating partnerships in four business segments. Newport's business strategy allows the entrepreneur to make the operating decisions for the business while strategic and capital allocation decisions are made jointly by Newport and the entrepreneur. Entrepreneurs are attracted to Newport by the opportunity to diversify their personal wealth while still maintaining operational control of their business and benefiting from access to lower cost capital.

Non-Gaap Measures

The terms "EBITDA", "Distributable Cash Flow" and "Distributable Cash Flow per Unit" (collectively the "Non-GAAP Measures") are financial measures used in this report that are not standard measures under Canadian GAAP. Newport's method of calculating Non-GAAP Measures may differ from the methods used by other issuers. Therefore, Newport's Non-GAAP Measures, as presented in this MD&A, may not be comparable to similar measures presented by other issuers.

EBITDA refers to net earnings of Newport and NPY determined in accordance with generally accepted accounting principles, before depreciation and amortization, net of gain or loss on disposal of capital assets, interest expense and income tax expense. Management believes that EBITDA is a useful supplemental measure of performance and is the primary basis on which management assesses financial performance and cash available for debt service, working capital, capital expenditures, income taxes and distribution.

Distributable Cash Flow is not a standard measure under GAAP and is generally used by Canadian income funds as an indicator of financial performance. The method of calculating Newport's Distributable Cash Flow may differ from similar computations as reported by other similar entities and, accordingly, may not be comparable to distributable cash flow as reported by such entities. Newport's distributable cash flow is EBITDA less interest expense, income tax expense and maintenance capital expenditures. Management believes that Distributable Cash Flow and Distributable Cash Flow Per Unit are useful supplemental measures that provide investors with information on cash available for distribution. Newport has a policy of paying a set monthly distribution that is based on historical, current and prospective performance. The operating partnerships of Newport experience seasonality and, as a result, there is variability in the generation of distributable cash and the distribution of cash in certain individual quarters.

Investors are cautioned that the Non-GAAP Measures are not alternatives to measures under GAAP and should not, on their own, be construed as an indicator of Newport's or NPY's performance or cash flows, a measure of liquidity or as a measure of actual return on the Units. These Non-GAAP Measures should only be used in conjunction with the financial statements of Newport and NPY as at September 30, 2005.

Certain statements in this news release may include "forward-looking" statements that relate to future events or future performance and reflect management's expectations and assumptions regarding the growth, results of operations, performance and business prospects and opportunities of Newport and the operating partnerships in which it holds an ownership interest (the "Operating Partnerships"). Such forward-looking statements reflect management's current beliefs and are based on information currently available to management of the Newport and the Operating Partnerships. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other similar expressions concerning matters that are not historical facts. In particular, statements regarding the future operating results and economic performance of Newport and the Operating Partnerships are forward-looking statements. A number of factors could cause actual events or results to differ materially from the events and results discussed in the forward-looking statements. In evaluating these statements, prospective purchasers should specifically consider various factors, including the risks outlined under "Risk Factors", which may cause actual events or results to differ materially from any forward-looking statement. Although the forward-looking statements are based on what management of Newport and the Operating Partnerships consider to be reasonable assumptions based on information currently available to it, there can be no assurance that actual events or results will be consistent with these forward-looking statements, and management's assumptions may prove to be incorrect. These forward-looking statements are made as of the date of this news release, and Newport does not assume any obligation to update or revise them to reflect new events or circumstances.



NEWPORT PARTNERS INCOME FUND
Consolidated Balance Sheet
(In thousands of dollars)
(Unaudited)

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September 30,
2005
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Assets

Current assets:
Cash and cash equivalents $ 13,830
Accounts receivable 68,599
Inventory 37,373
Prepaid expenses 1,833
Other current assets 3,350
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124,985

Property, plant and equipment 13,172

Long-term investments 43,003

Goodwill 264,708

Intangible assets 206,828

Other assets 383

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$ 653,079
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Liabilities and Partners' Equity

Current liabilities:
Bank indebtedness $ 32,407
Acquisition financing facility 26,500
Accounts payable and accrued liabilities 66,913
Deferred revenue 4,210
Current portion of capital lease obligation 2,215
Current portion of long-term debt 132
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132,377

Capital lease obligation 2,491

Long-term debt 2,051

Future tax liability 2,044

Non-controlling interest 280,738

Unitholders' equity 233,378

Commitments and contingencies
Subsequent events

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$ 653,079
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NEWPORT PARTNERS INCOME FUND
Consolidated Statement of Income
(In thousands of dollars, except per unit amounts)
(Unaudited)

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For the period from
August 8, 2005 to
September 30, 2005
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Revenues $ 61,043
Cost of revenues 48,543
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12,500

Expenses
Selling, general and administrative 6,048
Amortization of intangible assets 2,895
Depreciation 516
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9,459
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Income before the undernoted 3,041
Income from equity investment 730
Interest on long term debt 215
Other income 218
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Income before non-controlling interest 3,774
Non-controlling interest (2,390)
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Income $ 1,384
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Income per unit $ 0.06


NEWPORT PARTNERS INCOME FUND
Consolidated Statement of Changes in Financial Position
(In thousands of dollars)
(Unaudited)

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Period from August 8, 2005
to September 30, 2005
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Cash provided by (used in):
Operating activities:
Income for the period $ 1,384
Items not affecting cash:
Depreciation 516
Amortization of intangible assets 2,895
Non-controlling interest 2,390
Income from equity investment (730)
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6,455
Changes in non-cash working capital (20,363)
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Cash (used in) by operating activities (13,908)

Financing activities:
Issuance of units 235,420
Distributions to unitholders (1,511)
Distributions to non-controlling interest (2,329)
Increase in acquisition facilities 26,500
Increase in bank indebtedness 8,196
Decrease in long term debt (560)
Decrease in capital lease obligations (29)
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265,687
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Investing activities:
Acquisition of interest in Newport
Private Yield LP, net of cash acquired (218,331)
Other acquisitions, net of cash acquired (13,221)
Purchase of intangible assets (6,404)
Purchase of property, plant and equipment (254)
Distributions received on equity investment 261
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(237,949)
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Increase in cash and cash equivalents 13,830
Cash and cash equivalents, beginning of period -
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Cash and cash equivalents, end of period $ 13,830
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Supplemental cash flow information:
Interest paid 215
Cash acquired upon acquisitions 17,404


Newport Partners' Third Quarter 2005 Consolidated Financial Statements and Management's Discussion and Analysis are available on the investor relations section of www.newportpartners.ca and on SEDAR at www.sedar.com.

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