Onex Corporation
TSX : OCX

Onex Corporation

February 26, 2009 16:00 ET

Onex Reports Fiscal 2008 Results

Fee-Earning Assets under Management Increase 47%

TORONTO, ONTARIO--(Marketwire - Feb. 26, 2009) -

All amounts in Canadian dollars unless otherwise stated

Onex Corporation (TSX:OCX) today announced its consolidated financial results for the fiscal year ended December 31, 2008.

Fourth Quarter 2008 Highlights

(All year-over-year comparisons are to the full-year 2007)

- The Warranty Group paid a US$42 million dividend, of which US$13 million was Onex' share.

- Onex Partners II acquired a 50% interest in RSI Home Products for a total investment of $338 million, of which $133 million was Onex' share.

- ONCAP II completed the acquisition of Caliber Collision Centers for $67 million, of which Onex invested $30 million.

- Onex raised over US$500 million of third-party capital for Onex Partners III for a total of US$3.0 billion at year-end.

- Fee-earning assets under management of US$7 billion increased 47%.

- Full-year management fees rose 25% to US$65 million.

Onex is a private equity investor and asset manager, generating value from (i) growth in the Company's $4 billion of proprietary capital; (ii) management fees based on the third-party capital committed to its Funds, and (iii) a carried interest based on the performance of those Funds.

Private Equity Investing

"This is one of the most tumultuous economic environments experienced by businesses around the world. Global equity markets have suffered some of the largest losses in history and, despite efforts by central banks to stabilize the global financial system, credit markets remain severely dislocated," said Gerald W. Schwartz, Chairman and Chief Executive Officer of Onex. "In preparation for a prolonged contraction, our operating companies continue to be acutely focused on reducing costs and managing capital spending."

Onex has adhered to several fundamental investing principles that have served the Company well: (i) maintain purchase price discipline; (ii) employ only prudent financial leverage; and (iii) pursue unique opportunities. During the very active private equity investing period of 2005 to 2007, Onex regularly accepted less financial leverage than was offered, resulting in much lower debt/EBITDA multiples for its businesses - 3.6x on average compared to 5.6x for the industry during this period. As well, the Company maintained purchase price discipline, with a 6.4x average purchase price multiple (total enterprise value/EBITDA) relative to the industry average of 9.3x.

"Overall, we are encouraged by the strength of our businesses, and believe that we have built a portfolio of industry leaders that has substantial value creation potential," continued Mr. Schwartz. "Despite the challenging economic and financing environment, two dividends were paid by Onex' companies during 2008 for a total of US$114 million, of which US$41 million was Onex' share. In addition, we completed two attractive acquisitions in the fourth quarter: RSI Home Products, a leading U.S. manufacturer of residential cabinetry; and Caliber Collision Centers, a leading provider of auto collision repair services."

With its disciplined, active ownership approach to value-oriented investing, Onex has generated impressive returns over its 25-year history by transforming undervalued businesses into industry-leading companies across multiple economic and industry cycles. At year-end, Onex had generated a gross IRR of 29% and a multiple of 3.4 times invested capital from its private equity investing.

Onex attributes much of this success to the strong alignment of interests between itself, the shareholders, its limited partners and management, created by the Company's ownership culture. At December 31, 2008, Onex' management team had approximately $900 million invested in Onex shares and the Company's investments.

"We expect that the next few years will yield new opportunities, particularly for value investors like Onex," continued Mr. Schwartz. "Our long standing investing and ownership philosophies have served us well through many cycles and, once again, we look forward to enjoying the benefits of a recovery when it comes."

With approximately $540 million of cash and near-cash investments, no debt and US$3.6 billion of third-party committed uncalled capital available through its Onex- and ONCAP-sponsored funds, the Company is well positioned to capitalize on attractive opportunities.

Asset Management

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

In early 2008, Onex began fundraising for Onex Partners III with a commitment target of US$3.5 billion of third-party capital. At December 31, the Company had closed on just over US$3.0 billion of third-party capital, representing more than a 50% increase over the prior Fund. Due to its successful fundraising efforts, Onex' fee-earning assets under management increased by 47% to US$7 billion compared to the prior year.

In November, the Company began drawing management fees from Onex Partners III. As a result, Onex' full-year management fee revenue increased 25% to US$65 million, which offset the Company's operating costs. The current annualized rate of this growing revenue stream is approximately US$80 million for the Onex Partners and ONCAP funds.

Onex has US$51 million of unrealized carried interest based on the market value of its public companies in Onex Partners I at December 31, 2008. In addition, the Company has an 8% carried interest opportunity on approximately US$2 billion of capital invested in private operating companies and on US$3.6 billion of third-party uncalled committed capital.

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 by Onex, the impact of foreign currency translation and varying business cycles at its operating companies.

On a consolidated basis for the quarter, revenues increased 13% to $6.8 billion and operating earnings rose 10% to $455 million compared to the fourth quarter in 2007. Onex reported a net loss for the period of $348 million compared to a $10 million net loss in the fourth quarter last year. Cash flow from operations was $384 million compared to $597 million in the fourth quarter of 2007.

On a consolidated basis for the full year, revenues of $26.9 billion were up 15% and operating earnings increased 21% to $1.8 billion over 2007. Net loss for the year was $283 million compared to net earnings of $288 million in 2007. Cash flow from operations of $1.3 billion increased from $1.2 billion in 2007. Assets totaled $29.7 billion at December 31, 2008 compared to $26.2 billion at December 31, 2007.

The concurrent annual accounting impairment test for goodwill, intangible assets and long-lived assets and the weak economic environment in the fourth quarter resulted in $1.6 billion of impairment charges in 2008. More than two-thirds of this writedown came from a goodwill impairment recorded by Celestica for its Asia reporting unit. These impairment charges will not impact the businesses' current liquidity, cash flows from operating activities, debt covenants or future operations.

The Company paid a fourth quarter dividend of $0.0275 per Subordinate Voting Share on January 30, 2009 to shareholders of record on January 9, 2009.

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, 2008 and 2007. 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.

Webcast

Onex management will host a conference call to review the Company's fiscal 2008 results at 4:30 p.m. 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 private equity firms. Onex makes private equity investments through the Onex Partners and ONCAP families of Funds. Onex also manages investment platforms focused on Real Estate and Credit Securities. In total, Onex manages approximately US$11 billion. Onex generates annual management fee income and is entitled to a carried interest on approximately US$7 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 $36 billion, have assets of $45 billion and employ 233,000 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.



Consolidated Balance Sheets

As at December 31 (in millions of dollars) 2008 2007
---------------------------------------------------------------------------
Assets
Current assets
Cash and short-term investments $ 2,921 $ 2,462
Marketable securities 842 813
Accounts receivable 4,014 3,463
Inventories 3,471 2,539
Other current assets 1,695 1,461
---------------------------------------------------------------------------
12,943 10,738
Property, plant and equipment 4,066 3,489
Investments 3,897 3,203
Other long-term assets 3,125 2,634
Intangible assets 2,755 2,692
Goodwill 2,946 3,443
---------------------------------------------------------------------------
$ 29,732 $ 26,199
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 4,617 $ 4,033
Other current liabilities 1,196 864
Current portion of long-term debt, without recourse
to Onex 532 217
Current portion of obligations under capital leases,
Without recourse to Onex 25 104
Current portion of warranty reserves and unearned
premiums 1,698 1,544
---------------------------------------------------------------------------
8,068 6,762
Long-term debt of operating companies, without
recourse to Onex 7,143 6,159
Long-term portion of obligations under capital leases
of operating companies, without recourse to Onex 46 26
Long-term portion of warranty reserves and unearned
premiums 2,561 2,364
Other liabilities 2,287 1,663
Future income taxes 1,450 1,373
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21,555 18,347
Non-controlling interests 6,624 6,149
Shareholders' equity 1,553 1,703
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$ 29,732 $ 26,199
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---------------------------------------------------------------------------


Consolidated Statements of Earnings

Year ended December 31 (in millions of dollars
except per share data) 2008 2007
---------------------------------------------------------------------------
Revenues $ 26,881 $ 23,433
Cost of sales (21,719) (19,133)
Selling, general and administrative expenses (2,744) (2,384)
---------------------------------------------------------------------------
Earnings Before the Undernoted Items 2,418 1,916
Amortization of property, plant and equipment (624) (535)
Amortization of intangible assets and deferred
charges (366) (241)
Interest expense of operating companies (550) (537)
Interest income 35 125
Loss from equity-accounted investments (322) (44)
Foreign exchange gains (loss) 83 (118)
Stock-based compensation recovery (expense) 142 (150)
Other income (expense) (12) 6
Gains on sales of operating investments, net 4 1,144
Acquisition, restructuring and other expenses (220) (123)
Writedown of goodwill, intangible assets and
long-lived assets (1,649) (22)
---------------------------------------------------------------------------
Earnings (loss) before income taxes,
non-controlling interests and discontinued
operations (1,061) 1,421
Provision for income taxes (252) (295)
Non-controlling interests 1,021 (1,017)
---------------------------------------------------------------------------
Earnings (loss) from continuing operations (292) 109
Earnings from discontinued operations 9 119
---------------------------------------------------------------------------
Net Earnings (Loss) for the Year $ (283) $ 228
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net Earnings (Loss) per Subordinate Voting Share
Basic and Diluted:
Continuing operations $ (2.37) $ 0.85
Discontinued operations $ 0.07 $ 0.93
Net earnings (loss) $ (2.30) $ 1.78
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Consolidated Statements of Cash Flows

Year ended December 31 (in millions of dollars) 2008 2007
---------------------------------------------------------------------------
Operating Activities
Net earnings (loss) for the year $ (283) $ 228
Earnings from discontinued operations (9) (119)
Items not affecting cash:
Amortization of property, plant and equipment 624 535
Amortization of intangible assets and deferred
charges 366 241
Loss from equity-accounted investments 322 44
Foreign exchange loss (gains) (105) 132
Stock-based compensation expense (recovery) (142) 150
Gains on sales of operating investments, net (4) (1,144)
Non-cash component of restructuring 5 5
Writedown of goodwill, intangible assets and
long-lived assets 1,649 22
Non-controlling interests (1,021) 1,017
Future income taxes (66) 68
Amortization of deferred warranty costs (22) (109)
Other (18) 26
---------------------------------------------------------------------------
1,296 1,096
Changes in non-cash working capital items:
Accounts receivable 202 (358)
Inventories (311) 176
Other current assets 156 242
Accounts payable, accrued liabilities and other
current liabilities (340) 270
---------------------------------------------------------------------------
Increase (decrease) in cash due to changes in
working capital items (293) 330
Increase (decrease) in warranty reserves and
premiums and other liabilities 336 (242)
---------------------------------------------------------------------------
1,339 1,184
---------------------------------------------------------------------------
Financing Activities
Issuance of long-term debt 1,047 1,927
Repayment of long-term debt (1,242) (1,643)
Cash dividends paid (14) (14)
Repurchase of share capital (101) (113)
Issuance of share capital by operating companies 458 2,123
Distributions by operating companies (143) (886)
Decrease due to other financing activities 4 (47)
---------------------------------------------------------------------------
9 1,347
---------------------------------------------------------------------------
Investing Activities
Acquisition of operating companies, net of cash in
Acquired companies of $5 (2007 - $326) (209) (1,840)
Purchase of property, plant and equipment (859) (633)
Proceeds from sales of operating investments - 1,311
Decrease due to other investing activities (345) (1,727)
Cash from discontinued operations 11 216
---------------------------------------------------------------------------
(1,402) (2,673)
---------------------------------------------------------------------------
Decrease in Cash for the Year (54) (142)
Increase (decrease) in cash due to changes in
foreign exchange rates 513 (351)
Cash, beginning of the year - continuing
operations 2,462 2,944
Cash, beginning of the year - discontinued
operations - 11
---------------------------------------------------------------------------
Cash, end of year 2,921 2,462
Short-term investments - -
---------------------------------------------------------------------------
Cash and short-term investments 2,921 2,462
Cash held by discontinued operations - -
---------------------------------------------------------------------------
Cash and Short-term Investments Held by Continuing
Operations $ 2,921 $ 2,462
---------------------------------------------------------------------------
---------------------------------------------------------------------------


2008 Industry Segments

----------------------------------------------------------------------------
Electronics
Manufacturing Financial
Services Aerostructures Healthcare Services
----------------------------------------------------------------------------
Revenues $ 8,220 $ 3,965 $ 6,152 $ 1,388
Cost of sales (7,556) (3,215) (4,504) (665)
Selling, general
and administrative
expenses (274) (188) (740) (460)
----------------------------------------------------------------------------
Earnings before
the undernoted
items 390 562 908 263
Amortization of
property, plant
and equipment (97) (117) (186) (12)
Amortization of
intangible assets
and deferred charges (16) (5) (229) (19)
Interest expense
of operating
companies (53) (42) (255) (9)
Interest income
(expense) 16 20 10 -
Earnings (loss) from
equity-accounted
investments - - 13 -
Foreign exchange
gains (loss) (19) (6) (9) -
Stock-based
compensation
recovery (expense) (25) (17) (5) (1)
Other income
(expense) - 4 (1) (16)
Gains on sales of
operating
investments, net - - - -
Acquisition,
restructuring and
other expenses (39) - (92) (7)
Writedown of
goodwill,
intangible assets
and long-lived
assets (1,061) - (142) -
----------------------------------------------------------------------------
Earnings (loss)
before income
taxes,
non-controlling
interests and
discontinued
operations $ (904) $ 399 $ 12 $ 199
----------------------------------------------------------------------------
Recovery of
(provision for)
income taxes (6) (137) (108) (65)
Non-controlling
interests 791 (245) 34 (94)
----------------------------------------------------------------------------
Earnings (loss)
from continuing
operations (119) 17 (62) 40
Earnings from
discontinued
operations - - - -
----------------------------------------------------------------------------
Net earnings (loss) (119) 17 (62) 40
----------------------------------------------------------------------------
Total assets $ 4,612 $ 4,821 $ 6,660 $ 6,095
----------------------------------------------------------------------------
Long-term debt(a) $ 892 $ 697 $ 3,367 $ 237
----------------------------------------------------------------------------
Property, plant
and equipment
additions $ 124 299 $ 225 $ 21
----------------------------------------------------------------------------
Goodwill additions $ - $ - $ 64 $ -
----------------------------------------------------------------------------
Goodwill $ - $ 3 $ 1,398 $ 419
----------------------------------------------------------------------------

(a) Long-term debt includes current portion, excludes capital leases and is
net of deferred charges.


2008 Industry Segments

----------------------------------------------------------------------------
Customer
Support Metal Consolidated
Services Services Other Total
----------------------------------------------------------------------------
Revenues $ 1,856 $ 3,112 $ 2,188 $ 26,881
Cost of sales (1,197) (2,932) (1,650) (21,719)
Selling, general
and administrative
expenses (520) (71) (491) (2,744)
----------------------------------------------------------------------------
Earnings before
the undernoted
items 139 109 47 2,418
Amortization of
property, plant
and equipment (64) (65) (83) (624)
Amortization of
intangible assets
and deferred charges (19) (13) (65) (366)
Interest expense
of operating
companies (69) (41) (81) (550)
Interest income
(expense) 2 - (13) 35
Earnings (loss) from
equity-accounted
investments - - (335) (322)
Foreign exchange
gains (loss) 10 - 107 83
Stock-based
compensation
recovery (expense) - - 190 142
Other income
(expense) - - 1 (12)
Gains on sales of
operating
investments, net - - 4 4
Acquisition,
restructuring and
other expenses (36) - (46) (220)
Writedown of
goodwill,
intangible assets
and long-lived
assets (129) (1) (316) (1,649)
----------------------------------------------------------------------------
Earnings (loss)
before income
taxes,
non-controlling
interests and
discontinued
operations $ (166) $ (11) $ (590) $ (1,061)
----------------------------------------------------------------------------
Recovery of
(provision for)
income taxes (3) 4 63 (252)
Non-controlling
interests (1) 5 531 1,021
----------------------------------------------------------------------------
Earnings (loss)
from continuing
operations (170) (2) 4 (292)
Earnings from
discontinued
operations - - 9 9
----------------------------------------------------------------------------
Net earnings (loss) (170) (2) 13 (283)
----------------------------------------------------------------------------
Total assets $ 1,020 $ 1,026 $ 5,498 $ 29,732
----------------------------------------------------------------------------
Long-term debt(a) $ 796 $ 519 $ 1,167 $ 7,675
----------------------------------------------------------------------------
Property, plant
and equipment
additions $ 67 $ 73 $ 50 $ 859
----------------------------------------------------------------------------
Goodwill additions $ 7 $ 4 $ 96 $ 171
----------------------------------------------------------------------------
Goodwill $ 199 $ 355 $ 572 $ 2,946
----------------------------------------------------------------------------

(a) Long-term debt includes current portion, excludes capital leases and is
net of deferred charges.


2007 Industry Segments

----------------------------------------------------------------------------
Electronics
Manufacturing Financial
Services Aerostructures Healthcare Services
----------------------------------------------------------------------------
Revenues $ 8,617 $ 4,147 $ 4,826 $ 1,399
Cost of sales (8,079) (3,344) (3,659) (674)
Selling, general
and administrative
expenses (278) (193) (561) (481)
----------------------------------------------------------------------------
Earnings (loss)
before the
undernoted items 260 610 606 244
Amortization of
property, plant
and equipment (114) (89) (160) (10)
Amortization of
intangible assets
and deferred charges (23) (5) (152) (18)
Interest expense
of operating
companies (73) (39) (239) (14)
Interest income 16 31 7 -
Earnings (loss)
from
equity-accounted
investments - - 14 -
Foreign exchange
gains (loss) 3 (2) 28 -
Stock-based
compensation
expense (14) (36) (3) (3)
Other income
(expense) - 11 6 (2)
Gains on sales of
operating
investments, net - - - -
Acquisition,
restructuring and
other expenses (39) (12) (45) (5)
Writedown of
goodwill,
intangible assets
and long-lived
assets (15) - (7) -
----------------------------------------------------------------------------
Earnings (loss)
before income
taxes,
non-controlling
interests and
discontinued
operations $ 1 $ 469 $ 55 $ 192
----------------------------------------------------------------------------
Provision for
income taxes (22) (176) (29) (67)
Non-controlling
interests 18 (265) (36) (87)
----------------------------------------------------------------------------
Earnings (loss)
from continuing
operations (3) 28 (10) 38
Earnings from
discontinued
operations - - - -
----------------------------------------------------------------------------
Net earnings (loss) $ (3) $ 28 $ (10) $ 38
----------------------------------------------------------------------------
Total assets $ 4,419 $ 3,272 $ 5,745 $ 5,536
----------------------------------------------------------------------------
Long-term debt(a) $ 752 $ 567 $ 2,835 $ 194
----------------------------------------------------------------------------
Property, plant
and equipment
additions $ 67 $ 268 $ 136 $ 29
----------------------------------------------------------------------------
Goodwill additions $ - $ - $ 356 $ -
----------------------------------------------------------------------------
Goodwill $ 831 $ 4 $ 1,097 $ 341
----------------------------------------------------------------------------

(a) Long-term debt includes current portion, excludes capital leases and is
net of deferred charges.


----------------------------------------------------------------------------
Customer
Support Metal Consolidated
Services Services Other Total
----------------------------------------------------------------------------
Revenues $ 1,868 $ 1,676 $ 900 $ 23,433
Cost of sales (1,205) (1,529) (643) (19,133)
Selling, general
and administrative
expenses (516) (49) (306) (2,384)
----------------------------------------------------------------------------
Earnings (loss)
before the
undernoted items 147 98 (49) 1,916
Amortization of
property, plant
and equipment (52) (63) (47) (535)
Amortization of
intangible assets
and deferred charges (15) (12) (16) (241)
Interest expense
of operating
companies (65) (41) (66) (537)
Interest income 2 - 69 125
Earnings (loss)
from
equity-accounted
investments - - (58) (44)
Foreign exchange
gains (loss) (1) - (146) (118)
Stock-based
compensation
expense (2) - (92) (150)
Other income
(expense) 2 - (11) 6
Gains on sales of
operating
investments, net - - 1,144 1,144
Acquisition,
restructuring and
other expenses (5) - (17) (123)
Writedown of
goodwill,
intangible assets
and long-lived
assets - - - (22)
----------------------------------------------------------------------------
Earnings (loss)
before income
taxes,
non-controlling
interests and
discontinued
operations $ 11 $ (18) $ 711 $ 1,421
----------------------------------------------------------------------------
Provision for
income taxes (26) 7 18 (295)
Non-controlling
interests (4) 7 (650) (1,017)
----------------------------------------------------------------------------
Earnings (loss)
from continuing
operations (19) (4) 79 109
Earnings from
discontinued
operations - - 119 119
----------------------------------------------------------------------------
Net earnings (loss) $ (19) $ (4) $ 198 $ 228
----------------------------------------------------------------------------
Total assets $ 1,039 $ 881 $ 5,307 $ 26,199
----------------------------------------------------------------------------
Long-term debt(a) $ 688 $ 380 $ 960 $ 6,376
----------------------------------------------------------------------------
Property, plant
and equipment
additions $ 51 $ 55 $ 27 $ 633
----------------------------------------------------------------------------
Goodwill additions $ 381 $ 341 $ 408 $ 1,486
----------------------------------------------------------------------------
Goodwill $ 307 $ 289 $ 574 $ 3,443
----------------------------------------------------------------------------

(a) Long-term debt includes current portion, excludes capital leases and is
net of deferred charges.

Contact Information

  • Onex Corporation
    Donald W. Lewtas
    Chief Financial Officer
    (416) 362-7711
    or
    Onex Corporation
    Christopher A. Govan
    Managing Director
    (416) 362-7711
    Website: www.onex.com