Vicwest Income Fund Reports 2007 Results



    Revenues Reach Record Level

    OAKVILLE, ON, March 5 /CNW/ - Vicwest Income Fund ("Vicwest" or the
"Fund") (TSX: VIC.UN) announced today its financial results for the three and
twelve months ended December 31, 2007.

    
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                          2007 FINANCIAL HIGHLIGHTS

    -   Annual revenue increased 6.2% to $348.1 million, and increased
        9.4% to $90.6 million in the fourth quarter, setting record levels
        for both the fourth quarter and the annual results.

    -   Gross profit of $68.5 million in 2007 was flat to 2006, although it
        increased $0.6 million in the fourth quarter to $18.1 million. Gross
        margin was 19.7% in 2007 compared to 21.0% in 2006, and in the fourth
        quarter was 20.0% versus 21.1% in the previous year.

    -   EBITDA (Non-GAAP Measure)(1) was $36.6 million for 2007, declining
        from $41.0 million in 2006, and in the fourth quarter decreased
        $0.5 million to $10.3 million.

    -   In the fourth quarter the Fund recorded an extraordinary gain of
        $1.4 million related to forfeited shares of a predecessor company
        which was largely offset by an additional $1.3 million in costs
        associated with reorganizing the corporate office.

    -   The Fund generated distributable cash (Non-GAAP Measure)(1) of
        $1.68 per unit in 2007 and declared distributions of $1.56 per unit -
        representing a payout ratio of 94.1% and an annual yield of
        approximately 14%.

    -   The Fund completed the negotiation of an expanded $80 million credit
        facility to support growth initiatives and finished the year with a
        net debt to EBITDA  ratio of less than 1 to 1.

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    (1) For more information, refer to the Non-GAAP Measures section of this
        news release.
    

    Colin Osborne, Vicwest's President and Chief Executive Officer, said,
"Despite increased domestic competition, a sustained appreciation on the
Canadian dollar through the year and a slowdown of investment into the oil and
gas sector, we are pleased with the Fund's overall performance last year and
with its financial condition at year end. Our results are indicative of the
diversity of the Fund and its ability to deal with the cyclicality of its
different segments. Underlying fundamentals in the latter half of 2007 were
more encouraging than in the first half, as sales and gross margins picked up
in the Fund's agricultural and building construction product lines. Our
agricultural storage products division achieved record revenues and our new
insulated metal panels facility demonstrated strong order intake and shipments
through the latter half of 2007. Following the 2007 integration of our three
previously acquired businesses, we remain focused on the pursuit of additional
accretive acquisitions that will provide operating synergies, complementary
product lines and increased distributable cash.
    In the fourth quarter we began a re-alignment of the organization's
structure and management team. This initiative is primarily associated with
the consolidation of the Fund's corporate office functions into one location
and a reorganization of the Fund's building products segment to enable it to
provide improved customer service and support on a national basis."

    2007 RESULTS OF OPERATIONS

    Consolidated revenue reached a record level of $348.1 million as a result
of 6.9% growth in building construction sales and 9.6% growth in agricultural
storage product sales, partially offset by a 4.4% decline in liquid storage
product sales. Building construction markets in Canada continued to experience
competitive pricing pressures, partially attributed to a rising Canadian
dollar and a sluggish US economy, which have attracted some US-based suppliers
to the Canadian marketplace. The Fund achieved record sales in agricultural
storage markets, which were generally robust throughout 2007, both
domestically and internationally. Liquid storage product sales declined with
lower shipments to the oil and gas sector, which had lower well-head
completions in 2007. Tank shipments to other markets such as agricultural and
primary resource sectors compensated for the lower volumes shipped to the oil
patch.
    Gross profit was essentially flat to 2006, but down as a percentage of
revenue largely due to price competition in building construction products and
changes in sales mix. Selling, general and administrative (SG&A) expenses
increased due to costs associated with additional management resources and
corporate initiatives at the executive level of $2.3 million, additional
expenses associated with increased volumes at the Fund's insulated metal panel
production facility, as well as added sales and marketing efforts across all
product segments. EBITDA in 2007 declined primarily because of the increased
SG&A expenses mentioned above, partially offset by a $1.4 million
extraordinary gain on funds received as consideration for forfeited shares of
a predecessor corporation.

    
    Comparative Statements of Income
    (Thousands of Dollars)
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                                Three months ended       Twelve months ended
                                    December 31,              December 31,
                                 2007         2006         2007         2006
                         ----------------------------------------------------

    Revenue               $    90,609  $    82,798  $   348,060  $   327,837
    Cost of goods sold         72,497       65,321      279,560      259,076
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    Gross profit               18,112       17,477       68,500       68,761
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    Gross profit
     percentage                 20.0%        21.1%        19.7%        21.0%
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    Selling, general
     and administrative         9,105        6,777       33,350       27,820
    Foreign exchange
     loss (gain)                  133         (117)         (28)         (75)
    Non-hedge
     derivative gain                -            -            -          (29)
    Amortization of
     property, plant
     and equipment                990          839        4,060        3,258
    Amortization of
     intangible assets            235        1,179        1,049        1,652
    Net interest and
     financing                    766          267        2,281          691
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    Income before income
     taxes and
     extraordinary gain         6,883        8,532       27,788       35,444
    (Recovery of)
     provision for
     income taxes                (231)          (6)         231            3
    Extraordinary gain         (1,433)           -       (1,433)           -
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    Net income for
     the period           $     8,547  $     8,538  $    28,990  $    35,441
    EBITDA (see
     Non-GAAP Measures)   $    10,307  $    10,817  $    36,611  $    41,045
    As a % of revenue           11.4%        13.1%        10.5%        12.5%
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    FOURTH QUARTER RESULTS

    Revenue in the fourth quarter of 2007 rose 9.4% from the same period in
2006, primarily as a result of agricultural storage product revenue increasing
33.5% from the previous year. Revenues from building construction markets were
up 5.8% in the quarter, while liquid storage revenues declined by 2.3%.
    Gross profit in the fourth quarter increased $0.6 million from the fourth
quarter of 2006 due to favourable volumes and improved pricing and margins in
the agricultural storage products segment. Building construction products also
recorded incremental gross profit on higher revenue despite margin pressure
due to competitive pricing issues. Gross profit on liquid storage products
decreased compared to the same quarter a year ago as a result of lower volumes
of products shipped and less favourable product mix.
    Fourth quarter 2007 EBITDA was $10.3 million, compared to $10.8 million
for 2006. The positive impacts of increased revenue and the extraordinary gain
were offset by lower gross margins and higher selling, general &
administrative expenses resulting in similar EBITDA year over year. The higher
SG&A costs included $1.3 million of costs related to the Fund's active changes
to its corporate organization of which $1.2 million are not expected to
reoccur.

    
    STATEMENT OF DISTRIBUTABLE CASH (see Non-GAAP Measures)
    (Thousands of Dollars, except unit and per unit amounts)
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                                Three months ended       Twelve months ended
                                    December 31,              December 31,
                                 2007         2006         2007         2006
                         ----------------------------------------------------
    Net income            $     8,547  $     8,538  $    28,990  $    35,441
    Amortization of
     property, plant
     and equipment                990          839        4,060        3,258
    Amortization of
     intangible assets            235        1,179        1,049        1,652
    Net interest and
     financing                    766          267        2,281          691
    (Recovery of)
     provision for
     income taxes                (231)          (6)         231            3
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    EBITDA (see
     Non-GAAP Measures)        10,307       10,817       36,611       41,045
    Net interest expense         (712)        (250)      (2,323)        (634)
    Cash income tax
     (provision) recovery          (3)           6          (93)          (3)
    Maintenance capital
     additions (see
     Non-GAAP Measures)          (597)      (1,026)      (2,596)      (4,102)
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    Distributable cash
     (see Non-GAAP
     Measures)            $     8,995  $     9,547  $    31,599  $    36,306
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    Cash distributions
     declared             $     7,301  $     9,582  $    29,727  $    34,613
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    Average units
     outstanding           18,720,935   19,555,935   18,819,620   19,555,935
    Net income per unit   $     0.457  $     0.437  $     1.540  $     1.812
    Distributable
     cash per unit        $     0.480  $     0.488  $     1.679  $     1.857
    Cash distributions
     declared per unit    $     0.390  $     0.490  $     1.560  $     1.770
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    For the year, distributable cash was $31.6 million and $9.0 million in
the fourth quarter. The Fund declared cash distributions of $29.7 million,
representing a payout ratio of 94.1% for the year and $7.3 million
(81.2 payout ratio) in the fourth quarter. Since inception of the Fund on
July 1, 2005, cumulative cash distributions have represented a cumulative
payout ratio of 90.0%.
    Although the Fund's quarter results reflect seasonality, regular monthly
distributions are generally made evenly throughout the year and while the Fund
intends to make regular distributions of its available cash, these
distributions are not assured. Actual distributions will depend on numerous
factors, including current and projected financial performance, business
cyclicality, debt covenants and obligations, seasonality, working capital
requirements, future capital requirements and other factors.

    OUTLOOK

    The Fund's revenue and income fluctuate with the seasonality and
cyclicality of the construction, agricultural and energy industries in Canada.
Revenue is generally lowest in the first quarter, improves in the second
quarter as construction activity increases, and reaches a peak toward the end
of the third quarter. The fourth quarter generally remains strong through
October and November but drops off in December due to colder weather.
    In 2008 there are a number of external factors which could influence our
financial performance.
    The Fund expects building construction markets price pressure, fueled by
the Canadian dollar being near par with the US. Near par exchange rates have
attracted increased competition from US-based manufacturers to the extent that
shipping costs are not prohibitive. While the Fund's strategically located
operations and long-term customer base will continue to provide a competitive
logistical advantage, a protracted general economic downturn in the US may
entice US manufacturers to seek volume gains in the Canadian marketplace.
Furthermore, a sluggish US economy may also impact Canada's building
construction outlook although fundamentals remain positive in almost all
segments of the Canadian construction sector.
    The Fund expects continuing momentum in the agricultural storage business
and the potential for an upturn in our liquid storage markets as 2008
progresses. The agricultural industry, worldwide, is reporting record crop
prices and increasing demands. These factors, plus structural changes such as
the increasing demand for biofuels and growing international demand for more
sophisticated foodstuffs, should lend themselves to strong demand for farm
infrastructure, both domestically and internationally. The Fund's liquid
storage segment experienced moderated markets in 2007 with reduced oil and gas
capital expenditures due to low natural gas prices and the uncertainty
surrounding the Alberta royalty review. The Fund is anticipating improving
fundamentals associated with increased exploration activity in Saskatchewan
and BC and a rebalancing of its order book to diversify across other
industries.
    The Fund expects that steel pricing, despite the level of consolidation
in this industry, will continue to be volatile. Timing differences between
steel pricing and finished product pricing can have significant effects, both
positive and negative, on financial results. The Fund will continue to monitor
the situation and provide price leadership in the industry to mitigate any
impact on financial results.
    In 2008, the Fund expects to generate sufficient distributable cash to
maintain regular monthly distributions; however, the Fund will continue to
assess the situation carefully and update Unitholders regularly.
    In December 2007, the Fund received regulatory approval to proceed with
its second Normal Course Issuer Bid. The Fund has the authority to repurchase
and cancel up to 900,000 units throughout 2008 to the extent deemed
appropriate by the trustees of the Fund.

    ABOUT THE FUND

    The Fund, headquartered in Oakville, Ontario, is one of Canada's leading
manufacturers and distributors of construction building products including
metal roofing, siding and other metal building products. The Fund fabricates
and markets these products under the Vicwest, Mercury Metals and Valley Truss
& Metal trade names. Under the Westeel trade name, the Fund is one of Canada's
foremost manufacturers of steel containment products for agricultural storage
of grain and fertilizer. The Fund's liquid storage tanks and accessories are
manufactured and distributed under the trade names Westeel, Northern Steel
Industries and NSI. The Fund has 15 manufacturing facilities strategically
located throughout Canada with approximately 1,000 dedicated employees
committed to providing quality products and excellent service to customers in
domestic and international markets.
    The Fund's Consolidated Financial Statements and Management Discussion
and Analysis of Financial Condition and Results of Operations for the periods
ended December 31, 2007 and 2006 will be filed with applicable regulatory
authorities and will be available on www.sedar.com and on www.vicwestfund.com.

    Non-GAAP Measures

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    "Distributable cash" is not a defined term under Canadian generally
    accepted accounting principles ("GAAP") but is determined by the Fund as
    net income for the period adjusted to remove non cash items, including
    amortization, and is reduced by capital expenditures for the maintenance
    of productive capacity, cash taxes and interest. The Fund's management
    believes that distributable cash is a useful measure of performance as it
    provides investors with an indication of the cash available for
    distribution to Unitholders. Investors are cautioned however that
    distributable cash should not be construed as an alternate to using net
    income or the statement of cash flows as measures of profitability and
    cash usage respectively. Furthermore, the Fund's definition of
    distributable cash may differ from that of other issuers.

    "EBITDA" is earnings before interest, taxes (other than capital taxes),
    depreciation and amortization. The Fund's management believes that in
    addition to net earnings or loss, EBITDA is a useful supplemental measure
    of cash available for distribution prior to debt service, changes in
    working capital, capital expenditures and taxes. However EBITDA is not a
    recognized measure under Canadian GAAP. Investors are cautioned that
    EBITDA should not be construed as an alternative to net earnings or loss
    determined in accordance with GAAP or as an indicator of the Fund's
    performance or as an alternative to cash flows from operating, investing
    and financing activities which measure the Fund's liquidity and cash
    flows. The Fund's method of calculating EBITDA may differ from the method
    used by other issuers and, accordingly, the Fund's EBITDA calculation may
    not be comparable to similarly titled measures used by other issuers.
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    Risks and Uncertainties

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    The Fund is subject to certain risks and uncertainties that could have a
    material adverse effect on the Fund's results of operations, business
    prospects, financial condition, cash distributions to unitholders and the
    trading price of the Fund's units. These uncertainties and risks include,
    but are not limited to: industry cyclicality, steel supply and pricing,
    seasonality and weather, reductions in demand for the Fund's products,
    competition, foreign exchange, labour availability and collective
    bargaining agreements, limitations on growth, product liability, customer
    concentration, collections from customers, lack of long-term agreements,
    uninsured risks, interest rates, distribution arrangements, capital and
    liquidity, environment, supply and install contracts, operating hazards,
    future legal proceedings, risk of securities laws compliance and
    corporate governance changes, tax law changes, dependence of the Fund on
    Vicwest Limited Operating Partnership, and certain risks associated with
    the structure of the Fund including; income tax matters, leverage and
    restrictive covenants, credit facility, nature of units, effect of market
    interest rates on the price of units, restrictions on potential growth,
    and cash distributions not being guaranteed. Further information about
    these and other risks and uncertainties can be found in the disclosure
    documents filed by Vicwest Income Fund with the securities regulatory
    authorities, available at www.sedar.com
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    Forward-looking Statements

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    Certain statements in this press release constitute forward-looking
    statements. Although management believes that the forward-looking
    statements reflected in this report are based on reasonable assumptions,
    such statements involve known and unknown risks and uncertainties and
    other factors, which may cause actual results to be materially different
    from any future results, performance or achievements of the Fund
    expressed or implied by such forward-looking statements. Forward-looking
    statements include, without limitation, statements regarding future
    results, future plans and objectives of the Fund. Forward-looking
    statements generally can be identified by the use of forward looking
    terminology such as "may"," will", "expect", "intend", "estimate",
    "anticipate", "believe", "continue" or the negative thereof or variations
    thereon or other similar terminology. Forward-looking statements involve
    significant risks and uncertainties and should not be read as guarantees
    of future performance or results and will not necessarily be accurate
    indications of whether or not such results will be achieved. A number of
    factors could cause actual results to differ materially from the results
    discussed in the forward looking statements including, but not limited
    to, the factors discussed under " Risks and Uncertainties" in the Fund's
    most recently filed Management Discussion and Analysis and in the Fund's
    Annual Information Form.
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For further information:

For further information: Mr. Colin Osborne, President and CEO, (905)
469-5700; Mr. John Slattery, Executive Vice President and CFO, (905) 469-5706

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Vicwest Inc.

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