Onex Corporation
TSX : OCX

Onex Corporation

May 13, 2009 16:00 ET

Onex Reports First Quarter 2009 Results

TORONTO, ONTARIO--(Marketwire - May 13, 2009) -

All amounts in Canadian dollars unless otherwise stated

Onex Corporation (TSX:OCX) today announced its consolidated financial results for the three months ended March 31, 2009.

First Quarter 2009 Highlights

- Onex announced, and subsequently completed, the sale of its investment in Cineplex Galaxy Income Fund for net proceeds of approximately $175 million.

- Third-party capital committed to Onex Partners III increased to a total of US$3.1 billion to date.

- Pro forma for the Cineplex Galaxy sale, Onex' cash and near-cash investments increased to approximately $700 million.

Onex is a private equity investor and asset manager, generating value from (i) growth in the Company's $3.6 billion of proprietary capital; (ii) management fees based on the US$6.5 billion of third-party capital committed to its Funds, and (iii) a carried interest based on the performance of those Funds.

Private Equity Investing

Predictions that a recovery may come earlier than previously expected have caused recent rallies in global equity markets. There are also mild signs of hope in the credit markets, although global financial institutions have not resumed lending in any meaningful way. Despite these glimmers of optimism, we still believe that the recession will continue throughout the balance of 2009.

"In what is an extraordinarily challenging year for most businesses, 2009 marks Onex' 25th anniversary. During this quarter century, we have established a strong culture based on long-held investing and ownership philosophies. Never before have these principles proven to be as critical as they are in the present environment," said Gerald W. Schwartz, Chairman and Chief Executive Officer of Onex.

"Fortunately, by focusing on enhancing the productivity and profitability of our businesses, we have built a portfolio of industry leaders that we believe will build long-term value. We are pleased with the recent performance of our businesses, with all but one of our private operating companies meeting or exceeding their financial plans in the first quarter," continued Mr. Schwartz. "And so, while 2009 will undoubtedly be a difficult time, we believe that our businesses are well positioned to endure this downturn and grow both organically and through consolidation of their industries."

During the quarter, Onex announced the sale of its investment in Cineplex Galaxy Income Fund through a secondary offering. The sale has subsequently closed providing the Company with net proceeds of approximately $175 million. This sale brought to a close an investment platform in the theatre exhibition industry that the Company established in 1999. Over the course of 10 years, Onex invested US$355 million and realized total proceeds of US$890 million from Cineplex and Loews.

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 March 31, 2009, Onex had generated a 25-year gross IRR of 29% and a multiple of 3.3 times invested capital from its private equity investing.

"We believe that our success in building great businesses and our record of capital preservation and superior returns are direct results of the strong alignment of interests between Onex, the shareholders, our limited partners and our management team." At March 31, 2009, Onex' management team had approximately $900 million invested in Onex shares and in its operating companies.

"We expect that the next few years will bring opportunities that are particularly attractive for value investors like Onex," continued Mr. Schwartz. "With approximately $700 million of cash and near-cash investments, no debt and US$3.7 billion of third-party uncalled capital available, Onex is well positioned to act on these attractive opportunities."

The first investment by the Company's third large-cap private equity fund, Onex Partners III, is a distressed-for-control opportunity in the currently out-of-favour gaming sector. Over the last several months, Onex has been accumulating the senior debt of Tropicana Las Vegas Resort and Casino, LLC, which is secured by its hotel and casino located on the Las Vegas strip and the 34-acre parcel of land surrounding it. On May 5, the plan of reorganization was confirmed and, subject to certain regulatory approvals, Onex expects to be in a position to take control of Tropicana Las Vegas later this year.

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, the Company began fundraising for Onex Partners III with a target of US$3.5 billion of third-party capital. As of March 31, 2009, Onex had closed on US$3.1 billion of third-party capital and continues to work towards its target. The Fund's final close is scheduled for September 30, 2009. Since the first quarter of 2008, the Company has almost doubled its total fee-earning assets under management.

In late 2008, the Company began drawing management fees from Onex Partners III. As a result, the current annualized rate of this revenue stream is approximately US$80 million for the Onex Partners and ONCAP funds, which more than offsets the Company's operating costs. The Company has an 8% carried interest opportunity on approximately US$2.7 billion of invested capital and on US$3.6 billion of uncalled capital.

Consolidated First-Quarter Results

Onex' quarterly 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 4% to $6.5 billion and operating earnings rose 45% to $523 million compared to the first quarter in 2008. Net earnings for the period grew to $169 million from $45 million in the same quarter last year. Onex reported cash flow from operations of $433 million compared to $275 million in the first quarter of 2008.

The Company paid a first quarter dividend of $0.0275 per Subordinate Voting Share on April 30, 2009 to shareholders of record on April 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 three-months ended March 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.

Webcast

Onex management will host a conference call to review the Company's first-quarter 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, the Company manages approximately US$10 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 $37 billion, have assets of $44 billion and employ 224,000 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

----------------------------------------------------------------------------
(Unaudited)
As at March 31 As at December 31
(in millions of dollars) 2009 2008
----------------------------------------------------------------------------
Assets
Current assets
Cash and short-term investments $ 2,699 $ 2,921
Marketable securities 824 842
Accounts receivable 3,864 4,014
Inventories 3,704 3,471
Other current assets 1,776 1,695
----------------------------------------------------------------------------
12,867 12,943
Property, plant and equipment 4,171 4,066
Investments 3,895 3,897
Other long-term assets 3,167 3,125
Intangible assets 2,774 2,755
Goodwill 3,037 2,946
----------------------------------------------------------------------------
$ 29,911 $ 29,732
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 4,234 $ 4,617
Other current liabilities 1,201 1,196
Current portion of long-term debt,
without recourse to Onex 471 532
Current portion of obligations under
capital leases, without recourse to Onex 26 25
Current portion of warranty reserves and
unearned premiums 1,679 1,698
----------------------------------------------------------------------------
7,611 8,068
Long-term debt of operating companies,
without recourse to Onex 7,382 7,143
Long-term portion of obligations under
capital leases of operating companies,
without recourse to Onex 46 46
Long-term portion of warranty reserves
and unearned premiums 2,521 2,561
Other long-term liabilities 2,240 2,287
Future income taxes 1,344 1,450
----------------------------------------------------------------------------
21,144 21,555
Non-controlling interests 6,986 6,624
Shareholders' equity 1,781 1,553
----------------------------------------------------------------------------
$ 29,911 $ 29,732
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Consolidated Statements of Earnings

----------------------------------------------------------------------------
Three months ended March 31
------------------------------

(Unaudited)
(in millions of dollars, except per
share data) 2009 2008
----------------------------------------------------------------------------
Revenues $ 6,469 $ 6,226
Cost of sales (5,021) (5,048)
Selling, general and administrative
expenses (770) (688)
----------------------------------------------------------------------------
Earnings Before the Undernoted Items 678 490
Amortization of property, plant
and equipment (170) (149)
Amortization of intangible assets and
deferred charges (102) (100)
Interest expense of operating companies (145) (131)
Debt prepayment expense (8) -
Interest income 15 20
Earnings (loss) from equity-accounted
investments 10 (28)
Foreign exchange gains 5 46
Stock-based compensation recovery 6 50
Other expense (17) (4)
Acquisition, restructuring and other
expenses (44) (48)
----------------------------------------------------------------------------
Earnings before income taxes,
non-controlling interests and
discontinued operations 228 146
Recovery of (provision for) income taxes 41 (49)
Non-controlling interests (100) (57)
----------------------------------------------------------------------------
Earnings from continuing operations 169 40
Earnings from discontinued operations - 5
----------------------------------------------------------------------------
Net Earnings for the Period $ 169 $ 45
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net Earnings per Subordinate Voting
Share
Basic and Diluted:
Continuing operations $ 1.38 $ 0.32
Discontinued operations $ - $ 0.04
Net earnings $ 1.38 $ 0.36
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Consolidated Statements of Cash Flows

----------------------------------------------------------------------------

(Unaudited) Three months ended March 31
(in millions of dollars) 2009 2008
----------------------------------------------------------------------------
Operating Activities
Net earnings for the period $ 169 $ 45
Earnings from discontinued operations - (5)
Items not affecting cash:
Amortization of property, plant
and equipment 170 149
Amortization of intangible assets and
deferred charges 102 100
Amortization of deferred warranty costs 19 (15)
Debt prepayment expense 8 -
Loss (earnings) from equity-accounted
investments (10) 28
Foreign exchange gains (18) (22)
Stock-based compensation recovery (6) (50)
Non-controlling interests 100 57
Future income taxes (105) (41)
Other 4 29
----------------------------------------------------------------------------
433 275
Changes in non-cash working capital items:
Accounts receivable 286 (75)
Inventories (108) (142)
Other current assets 102 15
Accounts payable, accrued liabilities
and other current liabilities (558) 15
----------------------------------------------------------------------------
Decrease in cash due to changes in
working capital items (278) (187)
Increase (decrease) in warranty reserves
and unearned premiums and other liabilities (158) 53
----------------------------------------------------------------------------
(3) 141
----------------------------------------------------------------------------
Financing Activities
Issuance of long-term debt 309 231
Repayment of long-term debt (440) (150)
Cash dividends paid (3) (4)
Repurchase of share capital - (53)
Issuance of share capital by operating
companies 36 48
Distributions by operating companies (2) (55)
Increase due to other financing
activities 3 2
----------------------------------------------------------------------------
(97) 19
----------------------------------------------------------------------------
Investing Activities
Acquisition of operating companies, net
of cash in acquired
companies of nil (2008 - nil) - (20)
Purchase of property, plant
and equipment (198) (146)
Decrease due to other investing activities (19) (76)
Cash from discontinued operations - 5
----------------------------------------------------------------------------
(217) (237)
----------------------------------------------------------------------------
Decrease in Cash for the Period (317) (77)
Increase in cash due to changes in
foreign exchange rates 95 78
Cash, beginning of the period -
continuing operations 2,921 2,462
----------------------------------------------------------------------------
Cash, End of the Period 2,699 2,463
Short-term investments - -
----------------------------------------------------------------------------
Cash and Short-term Investments Held by
Continuing Operations $ 2,699 $ 2,463
----------------------------------------------------------------------------
----------------------------------------------------------------------------



INFORMATION BY INDUSTRY SEGMENT FOR THREE MONTHS ENDED MARCH 31, 2009

----------------------------------------------------------------------------
(Unaudited)
(in millions of
dollars) Electronics
Manufacturing Financial
Services Aerostructures Healthcare Services
----------------------------------------------------------------------------
Revenues $ 1,830 $ 1,105 $ 1,667 $ 365
Cost of sales (1,665) (886) (1,221) (179)
Selling, general and
administrative
expenses (75) (60) (201) (141)
----------------------------------------------------------------------------
Earnings before the
undernoted items 90 159 245 45
Amortization of
property, plant
and equipment (24) (32) (54) (3)
Amortization of
intangible assets
and deferred charges (7) (1) (64) (6)
Interest expense of
operating
companies (13) (11) (67) (1)
Debt prepayment
expense (8) - - -
Interest income - 3 2 -
Earnings from
equity-accounted
investments - - 5 -
Foreign exchange
gains (loss) (3) 1 (8) -
Stock-based
compensation
recovery (expense) (8) (4) (2) -
Other income
(expense) - 1 (15) (1)
Acquisition,
restructuring and
other expenses (8) - (14) -
----------------------------------------------------------------------------
Earnings (loss)
before income
taxes,
non-controlling
interests
and discontinued
operations 19 116 28 34
----------------------------------------------------------------------------
Recovery of
(provision for)
income
taxes 5 (40) (12) (13)
Non-controlling
interests (21) (71) (18) (15)
----------------------------------------------------------------------------
Earnings (loss) from
continuing
operations 3 5 (2) 6
Earnings from
discontinued
operations - - - -
----------------------------------------------------------------------------
Net earnings (loss) $ 3 $ 5 $ (2) $ 6
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets $ 4,018 $ 5,322 $ 6,717 $ 6,125
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt(b) $ 737 $ 816 $ 3,465 $ 245
----------------------------------------------------------------------------
----------------------------------------------------------------------------



(Unaudited)
(in millions of
dollars) Customer
Support Metal Consolidated
Services Services Other(a) Total
----------------------------------------------------------------------------
Revenues $ 495 $ 383 $ 624 $ 6,469
Cost of sales (315) (346) (409) (5,021)
Selling, general and
administrative
expenses (134) (15) (144) (770)
----------------------------------------------------------------------------
Earnings before the
undernoted items 46 22 71 678
Amortization of
property, plant
and equipment (16) (18) (23) (170)
Amortization of
intangible assets
and deferred charges (6) (4) (14) (102)
Interest expense of
operating
companies (23) (13) (17) (145)
Debt prepayment
expense - - - (8)
Interest income 1 - 9 15
Earnings from
equity-accounted
investments - - 5 10
Foreign exchange
gains (loss) (1) 1 15 5
Stock-based
compensation
recovery (expense) - - 20 6
Other income
(expense) (1) - (1) (17)
Acquisition,
restructuring and
other expenses (2) - (20) (44)
----------------------------------------------------------------------------
Earnings (loss)
before income
taxes,
non-controlling
interests
and discontinued
operations (2) (12) 45 228
----------------------------------------------------------------------------
Recovery of
(provision for)
income
taxes (4) 3 102 41
Non-controlling
interests - 6 19 (100)
----------------------------------------------------------------------------
Earnings (loss) from
continuing
operations (6) (3) 166 169
Earnings from
discontinued
operations - - - -
----------------------------------------------------------------------------
Net earnings (loss) $ (6) $ (3) $ 166 $ 169
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets $ 1,051 $ 1,153 $ 5,525 $ 29,911
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt(b) $ 843 $ 530 $ 1,217 $ 7,853
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Includes Allison Transmission, CEI, Cineplex Entertainment, Hawker
Beechcraft, Husky, RSI, ONCAP II, Onex Real Estate and
the parent company.
(b) Long-term debt includes current portion, excludes capital leases and
is net of deferred charges.



INFORMATION BY INDUSTRY SEGMENT FOR THREE MONTHS ENDED MARCH 31, 2008


(Unaudited)
(in millions of
dollars) Electronics
Manufacturing Financial
Services Aerostructures Healthcare Services
----------------------------------------------------------------------------
Revenues $ 1,843 $ 1,041 $ 1,353 $ 330
Cost of sales (1,707) (836) (1,002) (158)
Selling, general and
administrative
expenses (66) (44) (185) (121)
----------------------------------------------------------------------------
Earnings (loss)
before the
undernoted items 70 161 166 51
Amortization of
property, plant
and equipment (22) (25) (46) (3)
Amortization of
intangible assets
and deferred charges (4) (1) (54) (5)
Interest expense of
operating
companies (16) (9) (58) (3)
Interest income 7 6 1 -
Earnings (loss) from
equity
-accounted
investments - - 4 -
Foreign exchange
gains 6 - 14 -
Stock-based
compensation
recovery (expense) (5) (4) (1) -
Other income
(expense) - 1 - (1)
Acquisition,
restructuring and
other expenses (3) - (30) (2)
----------------------------------------------------------------------------
Earnings (loss)
before income
taxes,
non-controlling
interests
and discontinued
operations 33 129 (4) 37
----------------------------------------------------------------------------
Recovery of
(provision for)
income
taxes (3) (45) (16) (13)
Non-controlling
interests (26) (78) 7 (17)
----------------------------------------------------------------------------
Earnings (loss) from
continuing
operations 4 6 (13) 7
Earnings from
discontinued
operations - - - -
----------------------------------------------------------------------------
Net earnings (loss) $ 4 $ 6 $ (13) $ 7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets at
December 31, 2008 $ 4,612 $ 4,821 $ 6,660 $ 6,095
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt at
December 31,
2008(b) $ 892 $ 697 $ 3,367 $ 237
----------------------------------------------------------------------------
----------------------------------------------------------------------------


(Unaudited)
(in millions of
dollars) Customer
Support Metal Consolidated
Services Services Other(a) Total
----------------------------------------------------------------------------
Revenues $ 478 $ 614 $ 567 $ 6,226
Cost of sales (312) (573) (460) (5,048)
Selling, general and
administrative
expenses (136) (13) (123) (688)
----------------------------------------------------------------------------
Earnings (loss)
before the
undernoted items 30 28 (16) 490
Amortization of
property, plant
and equipment (13) (15) (25) (149)
Amortization of
intangible assets
and deferred charges (4) (3) (29) (100)
Interest expense of
operating
companies (14) (10) (21) (131)
Interest income 1 - 5 20
Earnings (loss) from
equity
-accounted
investments - - (32) (28)
Foreign exchange
gains 5 - 21 46
Stock-based
compensation
recovery (expense) - - 60 50
Other income
(expense) - - (4) (4)
Acquisition,
restructuring and
other expenses (5) - (8) (48)
----------------------------------------------------------------------------
Earnings (loss)
before income
taxes,
non-controlling
interests
and discontinued
operations - - (49) 146
----------------------------------------------------------------------------
Recovery of
(provision for)
income
taxes (5) - 33 (49)
Non-controlling
interests (1) - 58 (57)
----------------------------------------------------------------------------
Earnings (loss) from
continuing
operations (6) - 42 40
Earnings from
discontinued
operations - - 5 5
----------------------------------------------------------------------------
Net earnings (loss) $ (6) $ - $ 47 $ 45
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets at
December 31, 2008 $ 1,020 $ 1,026 $ 5,498 $ 29,732
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt at
December 31,
2008(b) $ 796 $ 519 $ 1,167 $ 7,675
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Includes Allison Transmission, CEI, Cineplex Entertainment, Hawker
Beechcraft, Husky, Radian, ONCAP II, Onex Real Estate and the
parent company.
(b) 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
    www.onex.com