Onex Reports Full-Year 2010 Results

TORONTO, ONTARIO--(Marketwire - Feb. 24, 2011) -

All amounts in Canadian dollars unless otherwise stated

Onex Corporation ("Onex") (TSX:OCX) today announced its consolidated financial results for the fourth quarter and full year ended December 31, 2010 and an update on matters following year end.

Highlights

• Onex and Canada Pension Plan Investment Board acquired Tomkins in a transaction valued at approximately US$5 billion; Onex Partners III and certain limited partners invested US$1.2 billion in the equity of the business, of which Onex' share was US$315 million.

• Onex Partners III acquired the remaining interest in ResCare not owned by Onex Partners; Onex Partners III invested US$120 million, of which Onex' share was US$22 million.

• ONCAP II sold CSI Global Education, receiving net proceeds of $126 million, of which $50 million was Onex' share. Including prior amounts received, total proceeds were $146 million, generating a multiple of invested capital of 5.8 times and a gross IRR of 57%.

• ONCAP II acquired Sport Supply Group in a transaction valued at approximately US$200 million; ONCAP II invested US$56 million of equity in the business, of which Onex' portion was US$29 million.

• Onex Credit Partners, Onex' credit investing platform, raised over $340 million through the initial public offering of OCP Senior Credit Fund (TSX: OSL.UN).

• In 2010, our businesses paid US$505 million in distributions, of which Onex received US$140 million, and retired US$775 million of debt.

• The value of our interest in Onex Partners' private investments increased 37% to US$2.1 billion in 2010, which includes distributions received by Onex from these companies during the year. Overall, the value of Onex' proprietary capital grew by 19% in 2010.

• At December 31, the unrealized carried interest was approximately US$133 million based on the public companies held at market value and on the year-end fair values of the private companies in the Onex Partners Funds.

• During the year, Onex repurchased over 2 million shares for $52 million.

• At December 31, Onex had no debt at the parent company and approximately $690 million of cash and near-cash investments, which excludes expected net proceeds from the announced EMSC sale.

Onex is an investor and asset manager generating value from (i) growth in the Company's $4.4 billion of proprietary capital; (ii) management fees based on the US$8.7 billion of third-party capital committed to its Funds, and (iii) a carried interest based on the performance of those Funds.

Investing

"As we look back on 2010, we're pleased with what we've accomplished. We acquired three great businesses and grew the value of our existing portfolio," said Gerald W. Schwartz, Chairman and Chief Executive Officer of Onex. "In the face of ongoing macroeconomic challenges, our operating companies not only persevered but in almost all cases strengthened their competitive positions. This was in large part due to the tremendous efforts to manage costs while still investing in new technologies. The results are tangible – our companies grew their earnings, reduced debt and in some cases paid meaningful distributions." 

During the fourth quarter, a number of our operating companies paid distributions totaling US$322 million, of which Onex' share was US$73 million. Combined with earlier distributions from Husky International, Carestream Health and TMS International, the total paid in 2010 was US$505 million, of which Onex received US$140 million.

Based on the valuations reported to our limited partners, the value of our private investments in the Onex Partners Funds grew 37% to US$2.1 billion, which includes distributions received during the year. The value of Onex' investment in ONCAP II increased 22% to $184 million. The performance of our Funds contributed to an overall increase in the value of Onex' proprietary capital of 19% to US$4.4 billion.

In February, it was announced that a definitive agreement had been reached to sell Emergency Medical Services Corporation to Clayton, Dubilier & Rice LLC for a purchase price of $64 per share. Under the proposed transaction, Onex, Onex Partners I and certain co-investors (the "Onex group") will sell their remaining 13.7 million EMSC shares, or 31% equity interest, for net proceeds of US$878 million. Based on the per-share cash cost of US$6.67 to acquire the business in 2005, this sale would result in a multiple of invested capital of approximately 10 times. Onex' portion of these net proceeds would be US$339 million including carried interest. The Onex group invested US$214 million in the company and will receive total net proceeds of US$1.65 billion, including the secondary offerings completed in 2009. This would result in a multiple of invested capital of approximately 8 times. The transaction is subject to certain customary closing conditions and is expected to close in the second quarter. 

"While our investment pipeline activity has not yet returned to pre-recession levels, the acquisition market continues to improve and we are much busier than we have been in the last few years," said Mr. Schwartz. "We are hopeful that improving macroeconomic conditions and operating performance as well as stable debt markets will persuade business owners that this is an opportune time to sell subsidiaries or mission-critical supply divisions. This segment of the market has represented 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 approximately $690 million in cash and near-cash investments, no debt at the parent company and approximately US$3.1 billion of uncalled committed capital for acquisitions through the Onex Partners and ONCAP Funds. 

Over 26 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 undervalued businesses into industry leaders, Onex has produced impressive returns over its 26-year history. As of December 31, 2010, Onex has generated a 26-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 December 31, 2010, Onex' management team had almost $1.3 billion invested in Onex shares and in its operating companies.

Asset Management

Onex' earns recurring asset management fees and carried interest on US$8.7 billion of third-party capital. The current annualized rate of total management fees received is approximately US$97 million, which offsets Onex' operating costs.

At December 31, 2010, there was approximately US$49 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 US$84 million of carried interest on its private businesses in the Onex Partners Funds based on the fair values determined at year-end. Ultimately, the carried interest received will be determined upon the final returns of each Fund.

During the fourth quarter, Onex Credit Partners ("OCP") raised over $340 million for the new OCP Senior Credit Fund (TSX:OSL.UN), a publicly-traded Canadian retail fund. This contributed to a 50% increase of OCP's assets under management during the year, which is a testament to Onex' credit team, their track record and the strength of the Onex brand. 

In February, ONCAP, Onex' mid-market private equity platform, began fundraising for ONCAP III, with a target fund size of $700 million. As with each of its Funds, Onex will be the largest limited partner in ONCAP III.

Consolidated Fourth-Quarter and Full-Year Results

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

On a consolidated basis for the fourth quarter, revenues increased 6% to $6.5 billion and operating earnings were up 14% to $584 million compared to the same period of the prior year. Onex reported a net loss of $3 million compared to net earnings of $40 million in the fourth quarter of 2009. Cash flow from operations decreased 17% to $465 million as companies invested in inventory and receivables due to growing business activity.

On a consolidated basis for the full year ended December 31, 2010, revenues were down 2% to $24.4 billion and operating earnings increased 3% to $2.0 billion compared to the same period of the prior year. Net loss was $51 million compared to net earnings of $112 million for the year ended December 31, 2009. There were $69 million of gains recorded in 2010, the majority of which was associated with the sale of CSI Global Education. The 2009 net earnings included $349 million of gains primarily from the sale of EMSC shares and Onex' remaining ownership in Cineplex Entertainment, and a non-cash $100 million income tax recovery. Onex reported cash generated from operations for the full year of $917 million compared to $1.3 billion in 2009. 

The Company paid a fourth-quarter dividend of $0.0275 per Subordinate Voting Share on January 31, 2011 to shareholders of record on January 10, 2011.

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, 2010 and 2009. 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' $4.4 billion of proprietary capital and provides private company performance information.

Webcast

Onex management will host a conference call to review the Company's fiscal 2010 results at 4:30 p.m. ET today. A live webcast of this conference call will be available in listen-only mode on its website, www.onex.com.

About Onex

Onex is one of North America's oldest and most successful investment firms committed to acquiring and building high-quality businesses in partnership with talented management teams. Onex manages investment platforms focused on private equity, real estate and credit securities. In total, the company manages approximately US$14 billion, of which US$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 $36 billion, have assets of $42 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 December 31, 2010
		Proprietary Capital
		(US$ millions)		(CDN$ millions)
Private Equity
	Onex Partners
	Private Companies	$	2,0981	$	2,0861
	Public Companies		5212		5182
	Unrealized Carried Interest on Onex Partners Investments		1333		1323
ONCAP			1844		1834
Direct Investments
	Private Companies		2515		3405
	Public Companies		1722		1712
			3,359		3,430
Alternative Assets
Onex Real Estate Partners			1416		1406
Onex Credit Partners			997		987
			240		238
Other Investments			75		75
Cash and Near-Cash			6908		6868
Onex Corporation Debt			Nil		Nil
		$	4,364	$	4,429

1. Based on the US$ fair value of the investments in Onex Partners' financial statements and US$/CDN$ exchange rate of 0.9946.
2. Based on the December 31, 2010 market values and US$/CDN$ exchange rate of 0.9946.
3. Represents unrealized carried interest on public and private companies in the Onex Partners Funds.
4. Based on the CDN$ fair value of the investments in ONCAP's financial statements and US$/CDN$ exchange rate of 0.9946.
5. Historical US$ and historical CDN$ cost amounts.
6. Based on carrying value of Onex Real Estate Partners' investments at December 31, 2010.
7. Based on the December 31, 2010 market values and US$/CDN$ exchange rate of 0.9946. Excludes CDN$156 (US$157) million investment in Onex Credit Partners' unleveraged senior secured loan strategy fund, which is included with cash and near-cash items.
8. Includes approximately CDN$156 (US$157) million invested in Onex Credit Partners' unleveraged senior secured loan strategy fund.

Significant Public Companies
		Shares/
		Units							Market
		Subject		Shares/					Value of
		to		Units		Closing			Onex'
		Carried		Held by		Price			Investment2
		Interest		Onex		per			(US$			(CDN$
		(millions)		(millions)		Share1			millions)			millions)
Onex Partners
	Emergency Medical Services	7.0		4.8		US$	64.61		$	3103		$	3083
	Skilled Healthcare	10.7		3.5		US$	8.98			313			313
	Spirit AeroSystems	17.2		8.6		US$	20.81			1803			1793
										521			518
Direct Investments
Celestica		-		17.8		US$	9.70			172			171
									$	693		$	690

1. Closing price on December 31, 2010.
2. Based on closing price on December 31, 2010 and US$/CDN$ exchange rate of 0.9946.
3. Excludes Onex' potential participation in the carried interest.

Significant Private Companies
													Cost of Onex'
													Investment
					LTM		Net		Cumulative				(Net of
					EBITDA2		Debt		Distributions		Onex		Returns of
		Onex			(US$		(US$		(US$		Economic		Capital)
		Ownership1			millions)		millions)		millions)		Ownership		(US$ millions)		(CDN$ millions)
Onex Partners
	Center for Diagnostic Imaging		81	%	$	39	$	39	$	-	19	%	$	17	$	21
	The Warranty Group		92	%		1123		n/a		161	29	%		154		175
	TMS International		91	%		120		335		23	36	%		93		109
	Hawker Beechcraft		49	%		724		1,716		-	19	%		212		244
	Carestream Health		97	%		447		1,531		234	38	%		165		183
	Allison Transmission		49	%		n/a5		n/a5		-	15	%		237		250
	Husky International		98	%		224		173		100	36	%		189		191
	RSI Home Products		50	%		n/a		n/a		n/a	20	%		78		82
	Tropicana Las Vegas		74	%		n/a6		19		-	16	%		54		59
	Tomkins		56	%		n/a5		n/a5		-	14	%		315		323
	ResCare		98	%		115		381		-	20	%		41		49
														1,555		1,686
Direct Investments
	Sitel Worldwide		-		$	117	$	628	$	-	68	%		251		340
													$	1,806	$	2,026

1. Includes the interest of Onex Partners' third-party limited partners and Onex management's interest via Onex Partners.
2. Includes adjustments that are consistent with private equity industry practice. These adjustments may include non-cash costs of stock-based compensation and retention plans, transition and restructuring expenses including severance payments, the impact of derivative instruments that no longer qualify for hedge accounting, the impacts of purchase accounting, and other similar amounts. LTM EBITDA is presented for investments which have been held by the Company for at least one year.
3. Amount presented for The Warranty Group is adjusted net earnings rather than EBITDA. Net earnings on GAAP basis, including the impacts of purchase accounting, were US$106 million.
4. EBITDA excludes gains on debt repurchases, loss recognized on derivative instruments no longer expected to be effective hedges, severance costs, non-cash stock-based compensation and retention expense, non-cash asset impairment charges, and consulting services and internal costs related to cost-reduction initiatives.
5. This information will be provided once the company reports to its debt holders in March.
6. A comprehensive redevelopment underway at the Tropicana Las Vegas is causing considerable disruption to its operations, resulting in negative EBITDA that is not reflective of a fully operational hotel and casino.

Onex Corporation
CONSOLIDATED BALANCE SHEETS
As at December 31 (in millions of dollars)		2010			2009
Assets
Current assets
Cash and cash equivalents	$	2,518		$	3,206
Marketable securities		711			636
Accounts receivable		3,397			3,062
Inventories		3,614			3,085
Other current assets		1,695			1,384
		11,935			11,373
Property, plant and equipment		4,101			3,623
Investments		3,754			3,255
Other long-term assets		2,436			2,696
Intangible assets		2,233			2,086
Goodwill		2,619			2,312
	$	27,078		$	25,345
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities	$	4,307		$	3,819
Other current liabilities		1,165			992
Current portion of long-term debt, without recourse to Onex		242			425
Current portion of obligations under capital leases, without recourse to Onex		13			21
Current portion of warranty reserves and unearned premiums		1,306			1,410
		7,033			6,667
Long-term debt of operating companies, without recourse to Onex		6,309			5,505
Long-term portion of obligations under capital leases of operating companies, without recourse to Onex		42			41
Long-term portion of warranty reserves and unearned premiums		1,770			2,034
Other liabilities		1,871			1,832
Future income taxes		1,089			1,237
		18,114			17,316
Non-controlling interests		7,483			6,370
Shareholders' equity		1,481			1,659
	$	27,078		$	25,345

Onex Corporation

CONSOLIDATED STATEMENTS OF EARNINGS

Year ended December 31 (in millions of dollars except per share data)			2010		2009
Revenues		$	24,366	$	24,831
Cost of sales			(19,258)		(19,468)
Selling, general and administrative expenses			(2,599)		(2,819)
Earnings Before the Undernoted Items			2,509		2,544
Amortization of property, plant and equipment			(524)		(636)
Amortization of intangible assets and deferred charges			(332)		(364)
Interest expense of operating companies			(420)		(495)
Interest income			38		53
Loss from equity-accounted investments			(250)		(497)
Foreign exchange loss			(69)		(90)
Stock-based compensation expense			(176)		(161)
Other income			35		97
Gains on dispositions of operating investments			122		783
Acquisition, restructuring and other expenses			(233)		(219)
Writedown of goodwill, intangible assets and long-lived assets			(15)		(370)
Earnings before income taxes and non-controlling interests			685		645
Provision for income taxes			(362)		(172)
Non-controlling interests			(374)		(361)
Net Earnings (Loss) for the Year		$	(51)	$	112
Net Earnings (Loss) per Subordinate Voting Share
Basic and Diluted:
	Net earnings (loss)	$	(0.43)	$	0.92

 

Onex Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31 (in millions of dollars)			2010		2009
Operating Activities
Net earnings (loss) for the year		$	(51)	$	112
Items not affecting cash:
	Amortization of property, plant and equipment		524		636
	Amortization of intangible assets and deferred charges		332		364
	Amortization of deferred warranty costs		67		86
	Loss from equity-accounted investments		250		497
	Foreign exchange loss		43		76
	Stock-based compensation expense		163		161
	Gains on dispositions of operating investments, net		(122)		(783)
	Non-cash component of restructuring		1		5
	Writedown of goodwill, intangible assets and long-lived assets		15		370
	Non-controlling interests		374		361
	Future income taxes		86		(104)
	Other		(90)		(66)
			1,592		1,715
Changes in non-cash working capital items:
	Accounts receivable		(175)		381
	Inventories		(604)		(166)
	Other current assets		(360)		58
	Accounts payable, accrued liabilities and other current liabilities		652		(225)
Increase (decrease) in cash due to changes in working capital items			(487)		48
Decrease in warranty reserves and unearned premiums and other liabilities			(188)		(423)

		917		1,340
Financing Activities
Issuance of long-term debt		2,805		1,390
Repayment of long-term debt		(2,625)		(1,962)
Cash dividends paid		(13)		(13)
Repurchase of share capital		(52)		(41)
Issuance of share capital provided by L.P. investors and operating companies		1,412		368
Distributions by operating companies and to L.P. investors		(236)		(576)
Decrease due to other financing activities		(185)		(23)
		1,106		(857)
Investing Activities
Acquisition of operating companies, net of cash in acquired companies of $58 (2009 – $108)		(605)		(90)
Purchase of property, plant and equipment		(870)		(613)
Proceeds from sales of operating investments		127		1,110
Investment in Tomkins Limited		(1,208)		–
Decrease due to other investing activities		(9)		(184)
		(2,565)		223
Increase (Decrease) in Cash for the Year		(542)		706
Decrease in cash due to changes in foreign exchange rates		(146)		(421)
Cash and cash equilavents, beginning of the year		3,206		2,921
Cash and Cash Equivalents	$	2,518	$	3,206

Onex Corporation
INFORMATION BY INDUSTRY SEGMENT
DECEMBER 31, 2010
		Electronics								Customer
	Manufacturing							Financial		Support		Metal			Consolidated
		Services	Aerostructures			Healthcare		Services		Services		Services		Other		Total
Revenues	$	6,717	$	4,293	$	6,548	$	1,199	$	1,381	$	2,091	$	2,137	$	24,366
Cost of sales		(6,173)		(3,578)		(4,866)		(563)		(882)		(1,914)		(1,282)		(19,258)
Selling, general and administrative expenses		(224)		(178)		(716)		(450)		(376)		(55)		(600)		(2,599)
Earnings before the undernoted items		320		537		966		186		123		122		255		2,509
Amortization of property, plant and equipment		(73)		(117)		(159)		(12)		(35)		(51)		(77)		(524)
Amortization of intangible assets and deferred charges		(16)		(4)		(213)		(18)		(19)		(13)		(49)		(332)
Interest expense of operating companies		(15)		(61)		(167)		(3)		(81)		(42)		(51)		(420)
Interest income		–		–		4		–		1		–		33		38
Loss from equity-accounted investments		–		(1)		(7)		–		–		–		(242)		(250)
Foreign exchange gains (loss)		(2)		(5)		(5)		(1)		(5)		1		(52)		(69)
Stock-based compensation expense		(43)		(30)		(12)		–		–		–		(91)		(176)
Other income (expense)		–		5		11		22		(3)		–		–		35
Gains on dispositions of operating investments		–		–		–		–		–		–		122		122
Acquisition, restructuring and other expenses		(57)		(2)		(91)		(1)		(39)		–		(43)		(233)
Writedown of goodwill, intangible assets and long-lived assets		(8)		–		–		(2)		–		–		(5)		(15)
Earnings (loss) before income taxes and non-controlling interests	$	106	$	322	$	327	$	171	$	(58)	$	17	$	(200)	$	685
Recovery of (provision for) income taxes		(23)		(103)		(122)		(61)		6		(11)		(48)		(362)
Non-controlling interests		(76)		(204)		(166)		(78)		–		(4)		154		(374)
Net earnings (loss)		7		15		39		32		(52)		2		(94)		(51)
Total assets	$	3,087	$	5,055	$	6,146	$	4,900	$	669	$	836	$	6,385	$	27,078
Long-term debt(a)	$	–	$	1,138	$	2,972	$	190	$	660	$	375	$	1,216	$	6,551
Property, plant and equipment additions	$	64	$	308	$	167	$	10	$	30	$	42	$	249	$	870
Goodwill additions	$	11	$	–	$	440	$	–	$	–	$	–	$	91	$	542
Goodwill	$	11	$	3	$	1,396	$	342	$	117	$	238	$	512	$	2,619

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

Onex Corporation
INFORMATION BY INDUSTRY SEGMENT
DECEMBER 31, 2009
		Electronics								Customer
		Manufacturing						Financial		Support		Metal				Consolidated
		Services	Aerostructures			Healthcare		Services		Services		Services		Other		Total
Revenues	$	6,909	$	4,641	$	6,590	$	1,359	$	1,780	$	1,472	$	2,080	$	24,831
Cost of sales		(6,319)		(3,946)		(4,766)		(656)		(1,140)		(1,329)		(1,312)		(19,468)
Selling, general and administrative expenses		(224)		(199)		(771)		(509)		(487)		(48)		(581)		(2,819)
Earnings before the undernoted items		366		496		1,053		194		153		95		187		2,544
Amortization of property, plant and equipment		(86)		(130)		(200)		(13)		(57)		(66)		(84)		(636)
Amortization of intangible assets and deferred charges		(25)		(5)		(224)		(22)		(24)		(14)		(50)		(364)
Interest expense of operating companies		(39)		(50)		(226)		(3)		(82)		(49)		(46)		(495)
Interest income		–		8		7		–		1		–		37		53
Earnings (loss) from equity-accounted investments		–		–		7		–		–		–		(504)		(497)
Foreign exchange gains (loss)		(2)		3		(6)		1		(10)		(1)		(75)		(90)
Stock-based compensation expense		(43)		(12)		(7)		(1)		–		–		(98)		(161)
Other income (expense)		–		4		(11)		–		–		–		104		97
Gains on dispositions of operating investments		–		–		–		–		–		–		783		783
Acquisition, restructuring and other expenses		(92)		(1)		(44)		(2)		(25)		–		(55)		(219)
Writedown of goodwill, intangible assets and long-lived assets		(14)		–		(180)		–		(64)		(62)		(50)		(370)
Earnings (loss) before income taxes and non-controlling interests	$	65	$	313	$	169	$	154	$	(108)	$	(97)	$	149	$	645
Recovery of (provision for) income taxes		(5)		(107)		(130)		(46)		(17)		7		126		(172)
Non-controlling interests		(54)		(192)		(3)		(76)		(1)		59		(94)		(361)
Net earnings (loss)		6		14		36		32		(126)		(31)		181		112
Total assets	$	3,265	$	4,685	$	5,616	$	5,206	$	745	$	891	$	4,937	$	25,345
Long-term debt(a)	$	234	$	902	$	2,792	$	203	$	660	$	401	$	738	$	5,930
Property, plant and equipment additions	$	69	$	235	$	163	$	12	$	25	$	43	$	66	$	613
Goodwill additions	$	–	$	–	$	46	$	–	$	–	$	–	$	7	$	53
Goodwill	$	–	$	3	$	1,065	$	361	$	124	$	252	$	507	$	2,312

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