Onex Corporation
TSX : OCX

Onex Corporation

May 11, 2011 16:04 ET

Onex Reports First-Quarter 2011 Results

TORONTO, ONTARIO--(Marketwire - May 11, 2011) -

All amounts in U.S. dollars unless otherwise stated

Onex Corporation ("Onex") (TSX:OCX) today announced its consolidated financial results for the first quarter ended March 31, 2011 and an update on matters following quarter-end.

Highlights

  • Onex and its affiliates (the "Onex Group") agreed to sell Husky International for $2.1 billion, which, will result in a multiple of invested capital of approximately 2.9 times and a 36% rate of return. Onex' portion of the net proceeds from this sale would be approximately $635 million, including carried interest.

  • The Onex Group agreed to invest $675 million and acquire a significant minority interest in JELD-WEN, the world's largest residential door and window maker. Onex' share of the investment is approximately $120 million.

  • The Onex Group agreed to sell Emergency Medical Services Corporation for $64 per share. Onex' share of the net proceeds will be $339 million including carried interest. This transaction is expected to close at the end of May.

  • The Onex Group sold approximately 10 million shares in Spirit AeroSystems for total proceeds of $245 million, resulting in a multiple of over 7 times cost. Onex received net proceeds of approximately $74 million, including carried interest.

  • During the first quarter, Carestream paid a distribution of $197 million to the Onex Group, of which Onex' share was $78 million.

  • Including realizations and distributions, the value of Onex' interest in Onex Partners' and ONCAP's private investments grew by 5% and 3%, respectively, during the first quarter.

  • At March 31, Onex' unrealized carried interest was $164 million based on the public companies held at market value and on the quarter-end fair values of the private companies in the Onex Partners Funds.

  • At April 30, Onex had no debt at the parent company and over $800 million of cash and near-cash investments.

Onex is an investor and asset manager generating value from (i) growth in the Company's $4.6 billion of proprietary capital; (ii) management fees based on the $9.0 billion of third-party capital committed to its Funds, and (iii) a carried interest based on the performance of those Funds.

Investing

"Starting mid-way though 2010, we saw continuing improvement across most of our operating companies, which resulted in meaningful year-over-year increases in mark-to-market values," said Gerald W. Schwartz, Chairman and Chief Executive Officer of Onex. "This momentum has continued into 2011, with many of our companies generating both earnings growth and strong free cash flow."

In April, TMS International completed an initial public offering with a portion of proceeds being used to fund the company's continued growth as well as to repay notes held by Onex and management. Including prior capital returns and the IPO value of the retained investment, the multiple on invested capital is about 1.6 times. We will consider additional offerings for certain of our other businesses. Fortunately, we can wait for the appropriate time given the strength of our operating companies' balance sheets.

In May, the Onex Group agreed to sell Husky International for $2.1 billion. Upon completion of the transaction, the Onex Group will have received total net proceeds of $1.8 billion, including a prior $98 million distribution, which will result in a multiple of invested capital of approximately 2.9 times and a 36% rate of return. Onex' portion of the net proceeds from this sale would be approximately $635 million, including carried interest. The transaction is expected to close early in the third quarter and is subject to customary closing conditions.

Onex Partners III, Onex' flagship private equity fund, agreed to invest $675 million and acquire a significant minority interest in JELD-WEN, the world's largest residential door and window maker. The transaction is anticipated to close in the second quarter subject to customary regulatory approvals and completion of the associated debt financing.

"The acquisition market continues to improve as does our investment pipeline activity," said Mr. Schwartz. "We remain optimistic that the recent increase in corporate mergers and acquisitions is a precursor to dispositions into the private equity markets. In prior financial cycles, this has been a leading indicator as chief executives look to sell businesses that they no longer consider core to their merged operations. Historically, corporate dispositions and carve-outs have produced some of our best investments."

Although it is difficult to predict investment pace, Onex is well-positioned to respond to the right opportunities. The Company continues to be in excellent financial condition, with over $800 million in cash and near-cash investments at the end of April, no debt at the parent company and approximately $3.0 billion of uncalled committed capital for acquisitions through the Onex Partners and ONCAP Funds.

Over 27 years, Onex has established a strong culture that is based on long-held investing principles. The Company believes that long-term value is best created by focusing on enhancing the productivity and profitability of its businesses. By transforming under-valued businesses into industry leaders, Onex has produced impressive returns over its history. As of March 31, 2011, Onex has generated a 27-year gross IRR of 29% and an average multiple of 3.6 times invested capital from its private equity investing.

Onex continues to believe that its success is a result of the strong alignment of interests between Onex shareholders, our limited partners and the management team. At March 31, 2011, Onex' management team had almost $1.5 billion invested in Onex shares and in its operating companies.

Asset Management

Onex earns recurring asset management fees and carried interest on $9.0 billion of third-party capital. The current annualized rate of total management fees received is approximately $97 million, which typically offsets Onex' operating costs.

At March 31, 2011, there was approximately $62 million of unrealized carried interest allocable to Onex based on the public companies held at market value in Onex Partners I. In addition, Onex has the potential to earn a further $102 million of carried interest on its private businesses in the Onex Partners Funds based on the fair values determined at March 31. Ultimately, the carried interest received will be determined upon the final returns of each Fund.

In February, ONCAP began fundraising for ONCAP III, with a fund size of up to C$800 million in capital commitments. As with each of our Funds, Onex will be the largest limited partner in ONCAP III, representing 35% of the capital commitments to the Fund including commitments from Onex management.

Consolidated First-Quarter Results

Onex' quarterly and full-year consolidated financial results do not follow any specific trends due to acquisitions and dispositions of businesses, changes in the value of our public-traded and privately-held operating companies and varying business cycles at its operating companies.

Effective January 1, 2011, Onex' financial statements are being prepared in accordance with International Financial Reporting Standards and are reported in U.S. dollars. Please see the Q1 Management's Discussion and Analysis and Notes to Interim Consolidated Financial Statements for a review of the significant accounting policies under IFRS that impact Onex' financial statements.

On a consolidated basis for the first quarter, revenues increased 22% to $6.0 billion compared to the same period of the prior year. Onex reported a consolidated net loss of $204 million compared to a net loss of $8 million in the first quarter of 2010. Cash flow from operations was $307 million compared to $112 million in 2010.

The Company paid a first-quarter dividend of C$0.0275 per Subordinate Voting Share on April 29, 2011 to shareholders of record on April 8, 2011.

Attached are the Consolidated Balance Sheets, Statements of Earnings, Statements of Cash Flows and information by industry segment for the quarter ended March 31, 2011 and 2010. 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" schedule, which details Onex' $4.6 billion of proprietary capital and provides private company performance information.

Webcast

Onex management will host a conference call to review the Company's first-quarter 2011 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 $15 billion, of which $10 billion is third-party capital. As well, Onex invests its own capital directly and as a substantial limited partner in its Funds.

Onex' businesses generate annual revenues of $31 billion, have assets of $41 billion and employ more than 238,000 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 March 31, 2011
Proprietary Capital
(US$ millions)
Private Equity
Onex Partners
Private Companies$2,1211
Public Companies5792
Unrealized Carried Interest on Onex Partners Investments1643
ONCAP1834
Direct Investments
Private Companies2515
Public Companies1912
3,489
Alternative Assets
Onex Real Estate Partners1506
Onex Credit Partners1027
252
Other Investments91
Cash and Near-Cash7308
Onex Corporation Debt-
$4,562
1Based on the US$ fair value of the investments in Onex Partners' financial statements.
2Based on the March 31, 2011 market values, except Emergency Medical Services, which is based on a cash price of $64.00 in the merger agreement entered into for the sale of Emergency Medical Services.
3Represents Onex' share of the unrealized carried interest on public and private companies in the Onex Partners Funds.
4Based on the C$ fair value of the investments in ONCAP's financial statements and C$/US$ exchange rate of 1.0314.
5Historical US$ cost amounts.
6Based on carrying value of Onex Real Estate Partners' investments at March 31, 2011.
7Based on the March 31, 2011 market values. Excludes approximately $159 million investment in Onex Credit Partners' unleveraged senior secured loan strategy fund, which is included with cash and near-cash items.
8Includes approximately $159 million invested in Onex Credit Partners' unleveraged senior secured loan strategy fund.
Significant Public Companies
Shares/Units Subject to Carried Interest (millions)Shares/Units Held by Onex (millions)Closing Price per Share1Market Value of Onex' Investment
Onex Partners
Emergency Medical Services7.04.8$64.00$3072
Skilled Healthcare Group10.73.5$14.39502
Spirit AeroSystems317.28.6$25.672222
579
Direct Investments
Celestica-17.8$10.72191
$770
1Closing price in whole dollars on March 31, 2011, except Emergency Medical Services, which is based on a cash price of $64.00 in the merger agreement entered into for the sale of Emergency Medical Services.
2Excludes Onex' potential participation in the carried interest.
3Prior to the sale of shares in April 2011.
Significant Private Companies
Onex and its Limited Partners OwnershipLTM EBITDA1Net DebtCumulative DistributionsOnex' Economic OwnershipCost of Onex' Investment (Net of Returns of Capital)
Onex Partners
Center for Diagnostic Imaging81% $ 39$ 39$ -19%$ 17
The Warranty Group92%1232n/a16129%154
TMS International91%1293302336%93
Hawker Beechcraft49%621,786-19%212
Carestream Health96%4351,76743438%90
Allison Transmission49%6293,319-15%237
Husky International98%24917510036%189
RSI Home Products50%n/an/an/a20%78
Tropicana Las Vegas74%n/a336-16%54
Tomkins56%n/a4n/a4-14%315
ResCare98%111367-20%41
1,480
Direct Investments
Sitel Worldwide68% $ 119$ 644$ -68%251
$ 1,731
1Includes 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.
2Amount presented for The Warranty Group is adjusted net earnings rather than EBITDA and includes a one-time $6 million valuation allowance release in the first quarter of 2011. Net earnings on a GAAP basis, including the impacts of purchase accounting, were $116 million and include a one-time $6 million valuation allowance release in the first quarter of 2011.
3A comprehensive redevelopment underway at Tropicana Las Vegas caused a disruption to its operations, resulting in negative LTM EBITDA that is not reflective of a fully operational hotel and casino.
4This information will be provided once the company reports to its debt holders at the end of May.
Onex Corporation
CONSOLIDATED BALANCE SHEETS
(Unaudited)As atAs atAs at
(in millions of U.S. dollars)March 31, 2011December 31, 2010January 1, 2010
Assets
Current assets
Cash and cash equivalents$1,953$2,532$3,018
Short-term investments766715605
Accounts receivable3,0483,4302,928
Inventories4,3324,0043,204
Other current assets1,1501,4951,101
Assets held by discontinued operations1,810
13,05912,17610,856
Property, plant and equipment3,9564,0563,366
Long-term investments4,9204,8643,448
Other non-current assets1,7871,8721,915
Intangible assets2,2652,5052,241
Goodwill2,2282,6342,198
$28,215$28,107$24,024
Liabilities and Equity
Current liabilities
Accounts payable and accrued liabilities$3,644$3,964$3,268
Current portion of provisions210257255
Other current liabilities1,2231,211974
Current portion of long-term debt, without recourse to Onex119404
Current portion of obligations under finance leases, without recourse to Onex1424320
Current portion of warranty reserves and unearned premiums1,343141,342
Liabilities held by discontinued operations9101,314
7,4637,0036,263
Non-current portion of provisions131284231
Long-term debt of operating companies, without recourse to Onex6,2606,3465,284
Non-current portion of obligations under finance leases, without recourse to Onex424339
Non-current portion of warranty reserves and unearned premiums1,7901,7801,935
Other non-current liabilities2,0181,9211,670
Deferred income taxes853938810
Limited Partners' Interests5,6635,6503,708
24,22023,96519,940
Equity
Share capital373373381
Non-controlling interests3,7643,6383,329
Retained earnings (deficit) and accumulated other comprehensive earnings(142)131374
3,9954,1424,084
$28,215$28,107$24,024
Onex Corporation
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)Three months ended March 31
(in millions of U.S. dollars except per share data)20112010
Revenues$5,954$4,890
Cost of sales (excluding amortization of property, plant and equipment, intangible assets and deferred charges)(4,728)(3,793)
Operating expenses(713)(610)
Interest income116
Amortization of property, plant and equipment(116)(113)
Earnings Before the Undernoted Items408380
Amortization of intangible assets and deferred charges(80)(78)
Interest expense of operating companies(133)(94)
Unrealized increase in value of investments in associates at fair value, net17015
Foreign exchange gains81
Stock-based compensation expense(88)(80)
Other items(74)(27)
Limited Partners' Interests(395)(95)
Earnings (loss) before income taxes and discontinued operations(184)22
Provision for income taxes(56)(61)
Loss from continuing operations(240)(39)
Earnings from discontinued operations3631
Net Loss for the Period$(204)$(8)
Earnings (Loss) from continuing operations attributable to:
Equity holders of Onex Corporation$(310)$(116)
Non-controlling Interests7077
Loss from continuing operations for the Period$(240)$(39)
Net Earnings (Loss) attributable to:
Equity holders of Onex Corporation$(299)$(107)
Non-controlling Interests9599
Net Loss for the Period$(204)$(8)
Net Earnings (Loss) per Subordinate Voting Share of Onex Corporation
Basic and Diluted:
Continuing operations$(2.62)$(0.97)
Discontinued operations0.090.08
Net Loss$(2.53)$(0.89)
Onex Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)Three months ended March 31
(in millions of U.S. dollars)20112010
Operating Activities
Loss for the period from continuing operations$(240)$(39)
Adjustments to net loss:
Provision for income taxes5661
Interest income(11)(6)
Interest expense of operating companies13394
Net earnings (loss) before interest and provision for income taxes(62)110
Cash taxes received121
Items not affecting cash:
Amortization of property, plant and equipment116113
Amortization of intangible assets and deferred charges8078
Amortization of deferred warranty costs1727
Unrealized increase in value of investments in associates at fair value, net(170)(15)
Stock-based compensation expense8575
Limited Partners' Interests39595
Change in provisions3911
Other44(18)
556477
Changes in non-cash working capital items:
Accounts receivable(106)(82)
Inventories(351)(234)
Other current assets28615
Accounts payable, accrued liabilities and other current liabilities(171)(98)
Decrease in cash due to changes in working capital items(342)(399)
Increase in other operating activities127
Increase (decrease) in warranty reserves and premiums7(31)
Cash flows from operating activities (discontinued operations)7458
307112
Financing Activities
Issuance of long-term debt289466
Repayment of long-term debt(129)(686)
Cash interest paid(80)(112)
Cash dividends paid(3)(3)
Repurchase of share capital of Onex Corporation-(2)
Repurchase of share capital of operating companies(28)(1)
Financing provided by Limited Partners3337
Distributions paid to non-controlling interests and Limited Partners(417)(27)
Decrease due to other financing activities(6)(5)
Cash flows used for financing activities (discontinued operations)(6)-
(347)(333)
Investing Activities
Acquisition of operating companies, net of cash in acquired companies of nil (2010 – $23)(8)4
Purchase of property, plant and equipment(125)(158)
Cash interest received12
Decrease due to other investing activities(61)(45)
Cash flows used for investing activities (discontinued operations)(33)(7)
(226)(204)
Decrease in Cash for the Period(266)(425)
Increase (decrease) in cash due to changes in foreign exchange rates10(1)
Cash, beginning of the period – continuing operations2,2452,718
Cash, beginning of the period – discontinued operations287300
Cash and cash equivalents2,2762,592
Cash held by discontinued operations(323)(352)
Cash and Cash Equivalents Held by Continuing Operations$1,953$2,240
Onex Corporation
INFORMATION BY INDUSTRY SEGMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2011
(unaudited)
(in millions of U.S. dollars)
Three months ended March 31, 2011
Electronics Manufacturing ServicesAerostructuresHealthcareFinancial ServicesCustomer Care ServicesMetal ServicesOther(a)Consolidated Total
Revenues$ 1,800$ 1,050$ 1,200$ 299$ 343$ 664$ 598$ 5,954
Cost of sales (excluding amortization of roperty, plant and equipment, intangible assets and deferred charges)(1,664)(890)(834)(141)(224)(612)(363)(4,728)
Operating expenses(59)(42)(231)(105)(92)(16)(168)(713)
Interest income--1---1011
Amortization of property, plant and equipment(15)(26)(32)(1)(8)(12)(22)(116)
Earnings Before the Undernoted Items629210452192455408
Amortization of intangible assets and deferred charges(4)(7)(42)(4)(6)(3)(14)(80)
Interest expense of operating companies(2)(21)(69)(1)(19)(9)(12)(133)
Unrealized increase in value of investments in associates at fair value, net------170170
Foreign exchange gains--2-3-38
Stock-based compensation expense(17)(3)(1)---(67)(88)
Other items(6)1(9)2(7)-(55)(74)
Limited Partners' Interests------(395)(395)
Earnings (loss) before income taxes and iscontinued operations3362(15)49(10)12(315)(184)
Recovery of (provision for) income taxes(3)(16)(9)(12)3(4)(15)(56)
Earnings (loss) from continuing operations3046(24)37(7)8(330)(240)
Earnings from discontinued operations--36----36
Net earnings (loss)$ 30$ 46$ 12$ 37$ (7)$ 8$ (330)$ (204)
Total assets$ 2,997$ 5,031$ 6,147$ 4,920$ 696$ 960$ 7,464$ 28,215
Long-term debt(b)$ -$ 1,146$ 2,735$ 204$ 647$ 404$ 1,243$ 6,379
Net earnings (loss) attributable to:
Equity holders of Onex Corporation$ 3$ 11$ (19)$ 33$ (5)$ 8$ (330)$ (299)
Non-controlling interests2735314(2)--95
Net earnings (loss)$ 30$ 46$ 12$ 37$ (7)$ 8$ (330)$ (204)
(a)Includes Allison Transmission, Hawker Beechcraft, Husky, RSI, Tropicana Las Vegas, Tomkins, ONCAP II, Onex Real Estate and the parent company.
(b)Long-term debt includes current portion, excludes finance leases and is net of financing charges.
Onex Corporation
INFORMATION BY INDUSTRY SEGMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(unaudited)
(in millions of U.S. dollars)
Three months ended March 31, 2010
Electronics Manufacturing Services

Aerostructures


Healthcare

Financial Services
Customer Care Services
Metal Services


Other(a)

Consolidated Total
Revenues$ 1,518$ 1,043$ 752$ 311$ 358$ 471$ 437$ 4,890
Cost of sales (excluding amortization of property, plant and equipment, intangible assets and deferred charges)(1,391)(863)(478)(142)(227)(433)(259)(3,793)
Operating expenses(51)(43)(150)(121)(98)(12)(135)(610)
Interest income156
Amortization of property, plant and equipment(19)(22)(32)(1)(9)(13)(17)(113)
Earnings Before the Undernoted Items571159347241331380
Amortization of intangible assets and deferred charges(4)(6)(40)(6)(7)(3)(12)(78)
Interest expense of operating companies(13)(14)(27)(1)(18)(12)(9)(94)
Unrealized increase in value of investments in associates at fair value, net7815
Foreign exchange gains (loss)(7)(3)291
Stock-based compensation expense(9)(3)(1)(67)(80)
Other items(6)(3)3(8)(13)(27)
Limited Partners' Interests(95)(95)
Earnings (loss) before income taxes and25852643(7)(2)(148)22
discontinued operations
Recovery of (provision for) income taxes4(20)(7)(17)(3)(1)(17)(61)
Earnings (loss) from continuing operations29651926(10)(3)(165)(39)
Earnings from discontinued operations3131
Net earnings (loss)$ 29$ 65$ 50$ 26$ (10)$ (3)$ (165)$ (8)
Total assets at December 31, 2010(b)$ 3,014$ 4,975$ 6,162$ 4,918$ 675$ 862$ 7,501$ 28,107
Long-term debt at December 31, 2010(c)$ –$ 1,145$ 2,996$ 205$ 624$ 404$ 1,215$ 6,589
Net earnings (loss) attributable to:
Equity holders of Onex Corporation$ 3$ 15$ 23$ 24$ (7)$ (2)$ (163)$ (107)
Non-controlling interests$ 26$ 50$ 27$ 2$ (3)$ (1)$ (2)$ 99
Net earnings (loss)$ 29$ 65$ 50$ 26$ (10)$ (3)$ (165)$ (8)
(a)Includes Allison Transmission, Hawker Beechcraft, Husky, RSI, Tropicana Las Vegas, ONCAP II, Onex Real Estate and the parent company.
(b)Total assets for the Other segment at December 31, 2010 includes the assets of Tomkins, acquired in September 2010.
(c)Long-term debt includes current portion, excludes finance leases and is net of financing charges.

Contact Information

  • Onex Corporation
    Emma Thompson
    Vice President, Investor Relations
    416.362.7711
    www.onex.com