Vicwest Income Fund Reports Fourth Quarter and 2006 Annual Results; Accretive Acquisitions Strengthen Foundation for Growth



    OAKVILLE, ON, March 8 /CNW/ - Vicwest Income Fund ("Vicwest" or the
"Fund") (TSX: VIC.UN) today announced results for the fourth quarter and
twelve months ended December 31, 2006.

    
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                               2006 Highlights

    -   Sales for 2006 were $327.8 million, up 6.6% from 2005. In the fourth
        quarter sales increased $11.2 million to $82.8 million, up 15.7% from
        2005.

    -   Gross margin was 21.1% in 2006, down from 23.1% the previous year,
        and fourth quarter margin decreased to 21.2% in 2006 from 24.1% in
        the previous year.

    -   EBITDA for 2006 was $41.0 million compared to $45.1 million in 2005.
        EBITDA in the fourth quarter rose slightly to $10.8 million compared
        to $10.6 million in 2005.

    -   Net earnings were $35.4 million in 2006 compared to $42.1 million in
        2005 primarily as a result of the weaker third quarter. Fourth
        quarter net earnings of $8.5 million in 2006 are down from
        $10.1 million in 2005 as a result of higher amortization.

    -   2006 Distributable cash was $31.8 million or $1.63 per unit
        ($37.3 million or $1.91 per unit before subtracting growth capital
        expenditures of $5.5 million). Cash distributions to unitholders in
        2006 totaled $1.77 per unit.

    -   In the fourth quarter, the Fund acquired Valley Truss & Metal of
        Kensington, P.E.I. - a strategic acquisition which will be
        immediately accretive to earnings and distributable cash.

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    Bryan Held, Executive Chairman and Interim CEO, commented, "2006 was an
eventful year for Vicwest. We completed three strategic acquisitions and
launched a new product line. These initiatives were all aligned with our
operating strategy to grow both sales and earnings by making investments in
value added products with greater margin opportunity and by pursuing prudent
acquisition opportunities.
    Following a record year in 2005, the Fund's 2006 financial performance
was negatively impacted by several factors including a sluggish demand for
construction building products, a slower than expected start up of the
insulated metal panel product line, which reduced earnings by approximately
1.8 million, and competitive pressures in the marketplace. In spite of these
factors, the Fund posted the second highest earnings in the organization's
history. Sales and earnings evidence the benefits of our acquisitions of
Mercury Metals and Northern Steel Industries last February; both of which have
exceeded our earnings expectations.
    The fourth quarter followed a traditional pattern with sales and earnings
showing a seasonal decline from third quarter levels. We are reasonably
pleased with the Fund's fourth quarter results. While gross profits were under
pressure due to market conditions, sales increased across all product
segments, and overall profit margins held firm at the third quarter level of
21%. EBITDA of $10.8 million improved slightly from 2005 and distributable
cash of $9.2 million was roughly equivalent to the prior year."

    BASIS OF PRESENTATION

    The Fund was established on May 20, 2005 and the continuity of interest
method of accounting recognizes the Fund as the successor entity to Vicwest
Corporation. Accordingly, the Fund's consolidated financial statements and
MD&A reflect the financial position, results of operations and cash flow as if
the Fund had always carried on the business formerly carried on by Vicwest
Corporation with all assets and liabilities recorded at the carrying values of
Vicwest Corporation. The Fund will be re-filing its 2005 year end and 2006
quarterly financial statements consistent with this presentation.

    RESULTS OF OPERATIONS

    Steel markets and costs stabilized in 2006 relative to the extreme
volatility experienced in 2004 and 2005 and selling prices for the Fund's
products and margins declined in 2006. Competitive pressures, softening
construction activity in Central Canada and a scarcity of qualified labour
resources in Western Canada all contributed to the compressed margins in 2006
compared to 2005 when more favourable market conditions prevailed. The margin
experience of the second half of 2006 is more in line with historical results
than the record levels of 2004 and 2005, and is more indicative of the Fund's
future margin expectations. In 2006 earnings were reduced by approximately
$1.8 million related to the insulated metal panel product line. The Fund's
fourth quarter 2006 margins and earnings were bolstered by Westeel's grain
storage sales to domestic markets and the impact of the NSI and Mercury Metals
business acquisitions.

    
    Comparative Statements of Income
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    (Unaudited)                     Three months ended   Twelve months ended
    (Thousands of                  December   December   December   December
     Canadian Dollars)             31, 2006   31, 2005   31, 2006   31, 2005
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    Sales                         $  82,798  $  71,575  $ 327,837  $ 307,403
    Cost of sales                    65,221     54,295    258,779    236,327
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    Gross profit                     17,577     17,280     69,058     71,076
      As a % of Sales                 21.2%      24.1%      21.1%      23.1%
    Selling, general and
     administrative                   6,877      6,735     28,117     26,108
    Foreign exchange loss (gain)       (117)        31        (75)       121
    Non-hedge derivative loss (gain)      -         (1)       (29)       184
    Amortization of capital assets      839        628      3,258      2,418
    Amortization of intangible
     assets                           1,179          -      1,652          -
    Other income                          -       (125)         -       (689)
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    Operating income                  8,799     10,012     36,135     42,934
    Write-down of non-operating
     property                             -          -          -       (256)
    Interest expense, net              (267)        91       (691)      (538)
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    Earnings before income taxes      8,532     10,103     35,444     42,140
    Provision for income taxes           (6)        19          3      5,012
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    Net earnings for the period   $   8,538  $  10,084  $  35,441  $  37,128
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    EBITDA                        $  10,817  $  10,640  $  41,045  $  45,096
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      As a % of Sales                 13.1%      14.9%      12.5%      14.7%
      Earnings per unit           $    0.44  $    0.52  $    1.81  $    1.90
    

    Fourth Quarter Results

    Sales

    Consolidated sales in the fourth quarter of 2006 were $82.8 million, up
$11.2 million, or approximately 15.7% from $71.6 million in the fourth quarter
of 2005. The Fund posted increased sales across all product segments with
increases in building construction products and petroleum storage products
resulting from the acquired businesses Mercury Metals and Northern Steel
Industries respectively. In spite of a general softening of demand for
construction products within the industrial and institutional sectors in
Central Canada, the Fund's Vicwest operating division exceeded prior year's
sales on increased volumes. Agricultural storage products also outpaced fourth
quarter 2005 sales on strong domestic sales in the Westeel operating division.

    Gross Profit

    In 2006, fourth quarter gross profit was $17.6 million or 21.2% of sales
compared to 2005 gross profit of $17.3 million or 24.1% of sales. Market
conditions in 2006 were less favourable than those of the record year 2005 and
margins were compressed by competitive pricing pressures in the Vicwest
operating division. However, the declines in building construction products
gross profits were more than offset by increases in the agricultural and
petroleum storage product segments.

    EBITDA

    EBITDA for the three months ended December 31, 2006 was $10.8 million
compared to $10.6 million in 2005. The increase in EBITDA was due to increased
sales and margins from acquired businesses.

    2006 Annual Results

    Sales

    Consolidated sales for the twelve months ended December 31, 2006 were
$327.8 million, up $20.4 million, or 6.6% from $307.4 million in 2005.
    Sales of construction building products outpaced 2005 levels by
$7.1 million as a result of sales from the Mercury Metals division and with
increased volume from the Vicwest operating division.
    Agricultural storage products slipped by $4.1 million due to lower
international shipments and petroleum storage products increased $17.4 million
on sales from Northern Steel Industries.

    Gross Profit

    Gross profit for the twelve months ended December 31, 2006 was
$69.1 million or 21.1% of sales, down from $71.1 million and 23.1% in 2005. 
The most significant decline in year over year gross profit occurred in the
third quarter of 2006 due to unfavourable market conditions and competitive
pressures in the Fund's building construction products segment.

    EBITDA

    EBITDA for the twelve months ended December 31, 2006 was $41.0 million
compared to $45.1 million in 2005.

    
    DISTRIBUTABLE CASH

    (Thousands of Canadian              4th        4th  Jan. 1 to  Jul. 1 to
     Dollars except per unit        Quarter    Quarter    Dec. 31    Dec. 31
     amounts)                          2006       2005       2006     2005(*)
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    Net earnings                  $   8,538  $  10,084  $  35,441  $  27,530
    Amortization                      2,035        641      4,967      1,496
    Net interest expense (income)       250       (104)       634        (27)
    Income tax (recovery) provision      (6)        19          3        156
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    EBITDA                            10,817    10,640     41,045     29,155

    Net cash interest expense           (250)      104       (634)        27
    Income tax recovery (provision)        6       (19)        (3)      (156)
    Maintenance capital               (1,026)   (1,183)    (3,148)    (1,667)
    Capital for growth initiatives      (302)      (39)    (5,464)      (950)
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    Distributable cash            $    9,245  $  9,503  $  31,796  $  26,409
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    Cash distributions declared   $    9,582  $ 15,646  $  34,613  $  21,415
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      Distribution Ratio                104%      165%       109%        81%

    Net earnings per unit         $    0.437  $  0.516  $   1.812  $   1.408
    Distributable cash per unit   $    0.473  $  0.486  $   1.626  $   1.350
    Cash distributions declared
     per unit                     $    0.490  $  0.800  $   1.770  $   1.095
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    ((*)Period subsequent to conversion to an Income Fund)
    

    Distributable cash for the three month period ending December 31, 2006
was $9.2 million. During the same period, the Fund declared cash distributions
of $9.6 million. For the year ended December 31, 2006 distributable cash
generated was $31.8 million, after capital growth initiatives of $5.5 million
and cumulative distributions were $34.6 million. The Fund's business is
subject to seasonality, and consequently the fourth quarter 2006 results
should not be considered indicative of what might occur over a twelve-month
period. Regular monthly distributions are generally made evenly throughout the
year and additional cash distributions reflect seasonal increases in
distributable cash.
    Although the Fund intends to make distributions of its available cash,
these distributions are not assured. Actual distributions will depend on
numerous factors, including the financial performance for the period, business
cyclicality, debt covenants and obligations, seasonality, working capital
requirements, future capital requirements and other factors.
    The Fund may make additional distributions in excess of the monthly
distributions during the year. The distribution declared in respect of the
month ending December 31 in each year may include non-cash allocations
necessary to ensure that the Fund will not be liable for income taxes and, in
such case, the income allocated to unitholders may exceed the cash
distributed.

    OUTLOOK

    The Fund's sales and earnings fluctuate in conjunction with the
seasonality and cyclicality of the construction and energy industries and
crop-growing seasons in Canada. Sales generally are lowest in the first
quarter, improve in the second quarter as construction activity increases and
reach 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.
    The Fund expects its level of business activity in the first quarter 2007
to follow historical patterns with sales evidencing a seasonal decline from
the fourth quarter. Steel prices declined in the first quarter due to high
inventory levels in steel service centres and are expected to increase in the
second quarter. Realized margins of the Fund's construction building products
are likely to follow the movement of steel prices. Competitive pricing
pressures and sluggish ICI construction market conditions are also expected to
continue. Insulated metal panel product sales will likely be low in the first
half 2007, picking up thereafter on completion of product testing and
certification. Agricultural storage sales may be relatively lower in the first
quarter due to delays in international sales and the expectation of reduced
demand from domestic markets. While petroleum storage sales will benefit from
the acquisition of NSI, reduced well drilling expectations may constrain sales
growth in 2007.
    The Fund expects lower earnings in the first half of 2007, and
particularly the first quarter, compared to the results in the first half of
2006. First quarter expenses will include one time costs related to executive
compensation. Increased competitiveness and higher service centre steel
inventories, a slow down in the oil sector, together with higher
administrative costs may impact earnings. The Fund intends to make further
investments in business support systems and personnel as it prepares for
further growth and explores acquisition opportunities. Overall, the Fund
expects 2007 to be a year following normal seasonal patterns and characterized
by continued sales growth due to new product lines and further penetration of
existing markets particularly in the second half, when the insulated metal
panel operations should contribute to sales and profitability. Margins will
continue at more traditional levels due to the influence of steel cost
fluctuations and more competitive market conditions.
    The Fund intends to maintain stable distributions and will continue to
pay additional distributions as appropriate to distribute as much taxable
income as possible. Notwithstanding the above mentioned factors, distributable
cash generated in 2007 is expected to be at least equivalent to the current
year's regular distributions.

    About the Fund

    The Fund's Vicwest business unit, headquartered in Oakville, Ontario is
Canada's leading manufacturer of metal roofing, siding and other metal
building products. The Fund's storage products business unit operating under
the name of Westeel is headquartered in Winnipeg, Manitoba and is Canada's
foremost manufacturer of steel containment products for the storage of grain,
fertilizer and petroleum products. 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 Annual Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations for the periods
ended December 31, 2006 have been filed with applicable securities regulatory
authorities and are available through the SEDAR website (www.sedar.com) under
the Fund's publicly filed documents.

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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 supporting both
    maintenance and growth initiatives, 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 earnings or the statement of cash flows as measures of
    profitability and cash usage respectively. The Fund's business is subject
    to seasonality, consequently, the results for the fourth quarter and
    period ended December 31, 2006 should not be considered representative of
    what might occur over a full twelve-month period. Furthermore, the Fund's
    definition of distributable cash may differ from that of other issuers.

    References to "EBITDA" are to 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 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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    This press release includes certain "forward-looking statements" within
    the meaning of Canadian securities regulations. Such forward-looking
    statements involve known and unknown risks, uncertainties, and other
    factors which may cause the actual results, performance or achievements
    of the Fund to be materially different from any future results,
    performance, or achievements expressed or implied by such forward-looking
    statements. Forward-looking statements include without limitation,
    statements regarding future results, future plans and objectives of
    Vicwest. Forward-looking statements generally can be identified by the
    use of forward-looking terminology such as "may," "will," "expect,"
    "intend," "estimate," "anticipate," "believe," or "continue" or the
    negative thereof or variations thereon or similar terminology. There can
    be no assurance that such statements will prove to be accurate and actual
    results and future events could differ materially from those anticipated
    in such statements. Important factors that could cause actual results to
    differ materially from Vicwest's expectations are disclosed in Vicwest's
    Management's Discussion and Analysis of Financial Condition and Results
    of Operations for the periods ended December 31, 2006.
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For further information:

For further information: Mr. Bryan H. Held, Executive Chairman and
Interim CEO, (905) 825-2252 ext 4252; Mr. Jack Wilson, Vice President,
Finance, (905) 469-5702

Organization Profile

Vicwest Inc.

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