Vicwest Income Fund Reports Second Quarter 2008 Results



    OAKVILLE, ON, Aug. 7 /CNW/ - Vicwest Income Fund ("Vicwest" or the
"Fund") (TSX: VIC.UN) announced today its financial results for the second
quarter ended June 30, 2008.

    
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                          Second Quarter Highlights

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    -   Record quarterly revenues of $103.7 million, which were 11% higher
        than in 2007.

    -   EBITDA (see Non-GAAP measures) was $14.1 million, an improvement of
        $3.0 million or 27% over the $11.1 million reported in the second
        quarter last year.

    -   Earnings per unit increased to $0.64 from the $0.49 earned in 2007,
        an increase of 31.0%.

    -   Distributable cash (see Non-GAAP measures) per unit was up 33% to
        $0.68, compared to $0.51 last year in the second quarter.

    -   The Fund purchased and cancelled almost 1.3 million units in the
        quarter, representing almost 7% of the issued Fund units through a
        Normal Course Issuer Bid ("NCIB") and the favourable settlement of a
        unit ownership dispute.

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    Colin Osborne, Vicwest's President and Chief Executive Officer, said
"Despite the unprecedented increases in steel pricing and continuing
competitive pressures, we are pleased to report that the Fund's second quarter
2008 sales and operating results showed significant improvement over the
second quarter of 2007. Our performance is the result of a disciplined
approach to managing steel costs, selling prices and inventories and a
continued focus on lean and flexible manufacturing initiatives. Rising input
prices, further acceptance of our insulated metal panel product and strong
fundamentals in the agricultural storage business all contributed to the
record sales in the quarter.
    During the quarter, we further strengthened our management team with the
addition of experienced personnel in the Information Technology and
Procurement functions to provide additional support for the execution of the
Fund's growth plans and to improve efficiency through the implementation of
enhanced business systems.
    We also settled a long standing unit ownership dispute which, along with
our Normal Course Issuer Bid, enabled us to purchase and cancel almost
1.3 million units or 6.7% of the number of Fund units issued and outstanding.
As a result of these changes in our capital structure and the improved
financial performance over the last two quarters, our proforma payout ratio
would be 77% based on the current 17.4 million units outstanding and our last
twelve months of distributable cash."

    Results of Operations

    Revenues in the second quarter of 2008 reached a record level of
$103.7 million, up $10.5 million or 11.3% from $93.2 million in the second
quarter of 2007. The largest contributor to the increase was the agricultural
storage segment due to continuing strong domestic and international demand.
Demand in this segment is robust as rising commodity prices contribute to
higher farm incomes and reinvestment into agricultural storage products.
Building construction products revenue also increased due to the continuing
market penetration of the insulated metal panel products. Revenues of liquid
storage products declined during the quarter due to competitive pricing and
lower activity; however, the Fund's marketing efforts have led to an increase
in the order backlog in this quarter relative to the first quarter.

    
    Comparative Statements of Income
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    (Unaudited)                   Three months ended      Six months ended
    (Thousands of                        June 30,              June 30,
     Canadian dollars)              2008        2007        2008        2007
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                                       $           $           $           $
    Revenue                      103,651      93,236     173,679     156,405
    Cost of goods sold            80,352      74,272     138,904     127,442
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    Gross profit                  23,299      18,964      34,775      28,963
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    Gross profit percentage        22.5%       20.3%       20.0%       18.5%
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    Selling, general and
     administrative                9,251       8,042      17,900      16,264
    Foreign exchange gain            (20)       (152)        (24)       (120)
    Amortization of property,
     plant and equipment           1,015       1,046       2,018       2,042
    Amortization of intangible
     assets                          256         257         513         558
    Net interest and financing       634         595       1,289         973
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    Income before income taxes    12,163       9,176      13,079       9,246
    Provision for (recovery of)
     income taxes                    329        (166)         23        (194)
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    Net income for the period     11,834       9,342      13,056       9,440

    EBITDA (see Non-GAAP          14,068      11,074      16,899      12,819
     Measures)
    As a percentage  of revenue    13.6%       11.9%        9.7%        8.2%
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    Second Quarter Results

    The Fund's revenues and earnings fluctuate with the seasonality and
cyclicality of the construction and energy industries and crop-growing seasons
in Canada. Revenues 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.
    Revenue in the second quarter of 2008 increased $10.5 million from the
same period in 2007, primarily as a result of increases of $7.0 million in
revenues of agricultural storage products and $4.0 million in building
construction products, partially offset by a $0.5 million decrease in revenues
of liquid storage products.
    Gross profit for the quarter was $23.3 million or 22.5% of revenue
compared to $19.0 million or 20.3% of revenue, as reported for the second
quarter of 2007. The increase of $4.3 million resulted from gains in building
construction and agricultural storage products segments, while the Fund's
liquid storage segment was down from the prior year. Agricultural storage
product gross profits and margins increased due to a combination of factors
including; higher volumes, favourable product mix and pricing, and operating
efficiencies associated with the Fund's lean and flexible manufacturing
programs. Building construction products also recorded incremental gross
profit for the quarter on higher revenue, improved profitability on insulated
metal panel products and raw material procurement programs. Liquid storage
products gross profit was compressed compared to the same quarter a year ago
as a result of both lower volumes and competitive pricing.
    Second quarter 2008 EBITDA was $14.1 million, compared to $11.1 million
for 2007. The positive impacts of increased revenue and gross margins, more
than offset increased selling, general and administrative expenses resulting
in higher EBITDA quarter over quarter.

    
    Statement of Distributable Cash (see Non-GAAP Measures)
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    (Thousands of Canadian        Three months ended      Six months ended
     dollars except units                June 30,              June 30,
     and per unit amounts)          2008        2007        2008        2007
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                                       $           $           $           $
    Net income                    11,834       9,342      13,056       9,440
    Amortization of property,
     plant and equipment           1,015       1,046       2,018       2,042
    Amortization of intangible
     assets                          256         257         513         558
    Net interest and financing       634         595       1,289         973
    Provision for (recovery of)
     income taxes                    329        (166)         23        (194)
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    EBITDA (see Non-GAAP
     Measures)                    14,068      11,074      16,899      12,819
    Net interest expense            (582)       (561)     (1,186)       (905)
    Cash income tax recovery         (80)        (45)        (44)        (17)
    Maintenance capital additions
     (see Non-GAAP Measures)        (855)       (627)     (1,287)     (1,445)
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    Distributable cash
     (see Non-GAAP Measures)      12,551       9,841      14,382      10,452
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    Cash distributions declared    7,121       7,474      14,403      15,058
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    Average units
     outstanding              18,393,522  19,166,022  18,540,526  19,293,920
    Net income per unit        $    0.64   $    0.49   $    0.70   $    0.49
    Distributable cash
     per unit                  $    0.68   $    0.51   $    0.78   $    0.54
    Cash distributions
     declared per unit         $    0.39   $    0.39   $    0.78   $    0.78
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    The Fund's distributable cash for the three month period ended June 30,
2008 was $12.6 million. During the same period, the Fund declared cash
distributions of $7.1 million. The Fund's business is subject to seasonality,
and consequently the second quarter 2008 results should not be considered
indicative of what might occur over a twelve-month period.
    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.
    For the remainder of 2008 there are a number of external factors which
could influence the Fund's financial performance.
    The Fund continues to expect pressure on volume and pricing in building
construction products with construction markets affected by the impact of a
slowing economy. While the Fund continues to show construction products growth
almost half of this segment's revenues are derived from sales into industrial,
commercial and institutional construction markets which may be affected by a
protracted general economic downturn. To offset potential softening in
traditional product lines, the Fund will continue to focus on growing its
presence in new product lines including insulated metal panel, composite panel
and distributed products. In the near term, the Fund expects steel input costs
to remain at record highs, which may dampen demand for steel based
construction products; however, in the latter portion of the second quarter
the Fund's building construction quoting in agricultural markets showed
encouraging signs with demand above the comparable period in 2007. The Fund
expects that a portion of this activity was related to customers' efforts to
secure supply ahead of announced price increases.
    The Fund expects continuing strong momentum in agricultural storage
markets. The agricultural industry, worldwide, continues to report positive
expectations this year, and the increasing use of biofuels and growing
international demand for more sophisticated foodstuffs should lend themselves
to strong demand for farm infrastructure, both domestically and
internationally. From a margin perspective, the agricultural storage segment
will continue to focus on effectively transferring steel price increases into
the market place.
    The Fund's liquid storage segment experienced moderate markets in 2007
and lower sales through the second quarter of 2008; however, the Fund is
anticipating improving fundamentals associated with a more active winter
drilling program including increasing exploration in Saskatchewan and
British Columbia, and a rebalancing of its order book to diversify across
other industries. Quoting activity in the Fund's liquid storage segment shows
signs of anticipated market improvements, which the Fund expects to
materialize through the latter half of 2008.
    The Fund faced significant volatility in steel pricing through the end of
2007 and the first half of 2008 with North American and global prices
currently well above historical levels. The higher steel pricing is now
filtering its way through the downstream marketplace, the impact of which will
be felt primarily through the third and fourth quarters. Though the rate of
steel price increases has slowed, they have not necessarily ceased and the
North American steel supply is expected to remain tight through the rest of
2008. The Fund dedicates significant time and resources to the management of
steel supply and will continue to take a position of leadership in the
marketplace.

    Conference Call & Webcast

    Management will hold a conference call and live audio webcast on Friday
August 8, 2008, at 10:00 a.m. (EDT) to discuss the Fund's second quarter
results. The call will be hosted by Colin Osborne, President and Chief
Executive Officer and John Slattery, Executive Vice President and Chief
Financial Officer. Following management's presentation, there will be a
question and answer session for analysts and investors.
    To participate in the teleconference, please call 800-814-4860 or
416-644-3430. To access the audio replay, please dial 877-289-8525 or
416-640-1917 and quote the passcode 21278376 followed by the number sign. The
replay will be available until midnight on August 23, 2008.
    To access the live audio webcast please go to:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2339700 or,
    Vicwest's website at www.vicwestfund.com (under Presentations & Calls).
    Both CNW and Vicwest will archive the webcast.

    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 Interim Financial Statements and Management
Discussion and Analysis of Financial Condition and Results of Operations for
the periods ended June 30, 2008 and 2007 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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