Vicwest Income Fund Reports Second Quarter Results



    Toronto Stock Exchange: VIC.UN

    OAKVILLE, ON, Aug. 5, 2009 /CNW/ - Vicwest Income Fund (the "Fund") (TSX:
VIC.UN) today reported financial results for the three and six months ended
June 30, 2009.

    Highlights:

    
    -   Second quarter revenue of $102.3 million, down $1.4 million or 1.4%
        from the same period in 2008. Year to date, revenues were
        $186.6 million, up 7.4% over 2008.
    -   Gross profit for the quarter was $23.5 million or 23.0% of revenues
        compared to $23.3 million or 22.5% of revenues in the same period of
        the prior year. Year to date, gross profit was $40.1 million or 21.5%
        of revenues, up 15.2% over 2008.
    -   EBITDA(1) for the quarter was $12.6 million, compared to
        $14.1 million in 2008, a decrease of $1.5 million. Year to date,
        EBITDA was $18.8 million, up from $16.9 million in 2008.
    -   Distributable cash(1) for the quarter was $10.8 million or $0.62 per
        unit, compared to $12.6 million or $0.68 per unit in the second
        quarter of 2008. Year to date, distributable cash was $16.2 million
        or $0.93 per unit, compared to $14.4 million or $0.78 per unit in the
        prior year.
    -   Net income for the quarter was $10.1 million or $0.58 per unit,
        compared to $11.8 million or $0.64 per unit in the second quarter of
        2008. Year to date, net income was $14.1 million or $0.81 per unit
        compared to $13.1 million or $0.70 per unit in 2008.
    -   Debt to EBITDA ratio remained conservative with the quarter end ratio
        at 0.8 to 1, driven by strong cash flows from operations.
    

    "During the second quarter, the Fund continued to deliver strong
operational performance and achieved solid financial results in the face of
challenging economic conditions," said Colin Osborne, President and Chief
Executive Officer. "While the continued strong financial results demonstrate
the sustainability of our business model and cash flows, we also moved forward
with a number of operational improvements which continue to position the
company for further growth. We have now completed the integration of Westeel
Storage Solutions and the expansion of our manufacturing facilities in
Saskatoon and Regina, enhancing Westeel's overall operating efficiency and
flexibility, as well as its ability to provide comprehensive storage solutions
for a broader range of customers."
    "At the same time, our Vicwest Building Products segment continued to
respond effectively to the current low demand environment. We continue to
leverage our product diversity and invested in enhanced marketing and
distribution initiatives to outperform the overall market trends. Our focus on
product innovation resulted in continued growth of construction panels in the
quarter - a combination of insulated metal and aluminum composite. As well we
continue to focus on facility rationalization initiatives to improve operating
efficiencies while providing even higher levels of customer service. These
initiatives included the launch of a new customer service facility in
Saskatoon, one of the strongest markets in Canada, and advancing our plans for
the consolidation of our three facilities in British Columbia into one single
site designed using lean manufacturing principles."
    "Also in the quarter, we announced that the Fund had commenced the
process of replacing its ageing information technology systems with a
comprehensive enterprise resource planning solution. With a solid and scalable
technology platform in place to integrate multiple systems and provide a
unified view of our business, we will have greater visibility of our
operations and be well positioned to leverage operational efficiencies across
the organization."
    "Finally, we continue to grow the business while maintain a healthy and
conservative balance sheet, ending the quarter with lower debt and a
Debt/EBITDA ratio of 0.8."

    
    -----------------------
    (1) For more information, refer to Non-GAAP measures described below.


    RESULTS OF OPERATIONS

    Comparative Statements of Income

    For the periods ended June 30, 2009 and 2008
    (Thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                   Three months ended       Six months ended
                                         June 30,                June 30,
                                    2009        2008        2009        2008
                              -----------------------------------------------
                                                               $           $

    Revenue                      102,332     103,651     186,632     173,679
    Cost of goods sold            78,809      80,352     146,533     138,904
    -------------------------------------------------------------------------
    Gross profit                  23,523      23,299      40,099      34,775
    -------------------------------------------------------------------------
    Gross profit percentage        23.0%       22.5%       21.5%       20.0%
    -------------------------------------------------------------------------

    Selling, general and
     administrative               10,818       9,251      21,283      17,900
    Foreign exchange loss
     (gain)                          155         (20)        (27)        (24)
    Amortization of property,
     plant and equipment           1,041       1,015      2,111        2,018
    Amortization of intangible
     assets                          288         256        728          513
    Net interest and financing       478         634      1,082        1,289
    -------------------------------------------------------------------------
    Income before income taxes    10,743      12,163     14,922       13,079
    Provision for income taxes       683         329        848           23
    -------------------------------------------------------------------------
    Net income                    10,060      11,834     14,074       13,056

    EBITDA
     (see Non-GAAP Measures)     $12,550     $14,068    $18,843      $16,899
    As a percentage of revenue     12.3%       13.6%      10.1%         9.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    SECOND QUARTER RESULTS

    Revenue

    Consolidated revenue in the second quarter of 2009 was $102.3 million,
down $1.4 million, or 1.4%, from the $103.7 million reported for the second
quarter of 2008. The decrease was attributable to the Vicwest BP division
which decreased $7.7 million compared to 2008, while Westeel reported a
revenue increase of $6.3 million in the quarter.
    Westeel revenue of $42.9 million represented an increase of 17.2% from
the second quarter of 2008. The increase was due to the demand strength in
domestic markets for agricultural storage products, especially in galvanized
bins and hopper cones. Westeel's export revenue from international markets was
down slightly to the comparable quarter in 2008 as difficult credit conditions
in foreign markets continued to affect order intake and shipping volumes.
Revenues from tank shipments were down from the comparable quarter in 2008
with reduced shipments to primary resource sectors.
    Vicwest BP revenue of $59.4 million was down 11.5% from the second
quarter of 2008 with decreased revenues from both Light Commercial and ICI
construction markets. While volumes of steel based decking and cladding
products into construction markets were down across Canada, the decline was
more pronounced in ICI markets.

    Gross Profit

    Gross profit for the quarter was $23.5 million or 23.0% of revenue
compared to $23.3 million or 22.5% of revenue for the second quarter of 2008.
The increase of $0.2 million resulted from gains in the Westeel division
offset by reductions in gross profit and margins from the Vicwest BP segment.
Westeel's gross profits and margins increased due to a combination of factors,
including higher volumes and selling prices, favourable product mix, and
operating efficiencies associated with the Fund's lean and flexible
manufacturing programs and new production facilities. During the second
quarter of 2009, Vicwest BP's gross profit and margin were negatively affected
by lower overall volumes and sales price reductions necessitated by
competitive pricing. Furthermore, in 2008 the Fund was opportunistically
securing steel during a rising steel price environment which positively
affected operating profits and margins. In the first six months of 2009 steel
pricing has dropped consistently each month and thus the Fund has not
benefited from such activities in the current period.

    Selling, General and Administrative Expenses

    During the second quarter of 2009, the Fund incurred selling, general and
administrative expenses of $10.8 million, or 10.6% of revenue, compared to
$9.3 million, or 9.0% of revenue in the second quarter in 2008. Of the $1.5
million increase approximately $1.0 million represented the Fund's continued
investment in human capital and technology to support new product line growth
and customers in both domestic and international markets. The balance of the
increase relates to information technology costs associated with the early
stages of the Fund's enterprise resource planning ("ERP") initiative, the
higher market value of unit based management incentive plans and the deferred
trust unit plan for trustees, as well as increased provisions for credit and
collection risk.

    EBITDA (see Non-GAAP Measures)

    EBITDA for the three months ended June 30, 2009, was $12.6 million as
compared to $14.1 million in 2008. This decline was primarily due to the
increase in selling, general and administrative expenses, and a declining
steel price environment, both of which offset the marginal improvement in
gross profit and gross margins.

    Amortization

    Amortization expense of property, plant and equipment for the three
months ending June 30, 2009 was $1.0 million, which was consistent with the
$1.0 million expensed in 2008. For the quarter ending June 30, 2009,
intangible asset amortization expense was $0.3 million, comparable to the $0.3
million in 2008.

    Net Income

    For the quarter ended June 30, 2009, net income was $10.1 million
compared to $11.8 million for 2008; a decrease of $1.7 million. The decline
was primarily due to higher selling, general and administrative expenses and a
declining steel price environment.

    
    DISTRIBUTABLE CASH (see Non-GAAP Measures)

    Statement of Distributable Cash

    For the periods ended June 30, 2009 and 2008
    (Thousands of Canadian dollars except unit and per unit amounts)
    -------------------------------------------------------------------------
                                   Three months ended       Six months ended
                                        June 30,                June 30,
                                   2009         2008        2009        2008
                              -----------------------------------------------
                                                               $           $

    Net income                   10,060       11,834      14,074      13,056
    Amortization of property,
     plant and equipment          1,041        1,015       2,111       2,018
    Amortization of intangible
     assets                         288          256         728         513
    Net interest and financing      478          634       1,082       1,289
    Provision for income taxes      683          329         848          23
    -------------------------------------------------------------------------
    EBITDA (see Non-GAAP
     Measures)                   12,550       14,068      18,843      16,899
    Net interest expense           (418)        (582)       (962)     (1,186)
    Cash income tax recovery       (434)         (80)       (405)        (44)
    Maintenance capital
     additions (see Non-GAAP
     Measures)                     (860)        (855)     (1,262)     (1,287)
    -------------------------------------------------------------------------
    Distributable cash (see
     Non-GAAP Measures)          10,838       12,551      16,214      14,382
    -------------------------------------------------------------------------
    Cash distributions
     declared                     6,794        7,120      13,588      14,403
    -------------------------------------------------------------------------
    Average units
     outstanding             17,419,468   18,393,522  17,419,468  18,540,526
    Net income per unit           $0.58       $ 0.64       $0.81       $0.70
    Distributable cash per
     unit                         $0.62       $ 0.68       $0.93       $0.78
    Cash distributions
     declared per unit            $0.39       $ 0.39       $0.78       $0.78
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The Fund's business is subject to seasonality, however regular monthly
distributions are generally made evenly throughout the year. 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 year, business cyclicality, debt covenants
and obligations, seasonality, working capital requirements, future capital
requirements and other factors.
    The Fund's definition of distributable cash includes reductions for
capital expenditures for maintenance of existing productive capacity (see
Non-GAAP Measures). Productive capacity is not expected to diminish materially
from production use, technological change, obsolescence or changes in
information technology. Consequently, the Fund does not consider productive
capacity maintenance to be a significant risk to the sustainability of future
distributions. Similarly, the Fund has a strong balance sheet with a
conservative debt level and the impact of current financial obligations is not
considered a significant risk to future distribution levels.
    Distributable cash for the three month period ending June 30, 2009,
decreased 14.3% to $10.8 million compared to $12.6 million in 2008. During the
same periods, the Fund declared cash distributions of $6.8 million and $7.1
million, respectively; the decrease was due to the lower number of units
outstanding resulting from unit buy-backs.

    OUTLOOK

    This Outlook section contains certain forward-looking statements. Please
refer to the disclosure under the heading "Forward-Looking Statements" for a
discussion of risks and uncertainties related to such statements.
    The Fund's revenue and income fluctuate with the seasonal and cyclical
factors in 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 towards 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 terms of Westeel Storage Solutions, drought and excess moisture
conditions have resulted in fewer acres being seeded and potentially a shorter
growing season. As a result, the Fund anticipates decreased demand for
domestic agricultural storage products in the near term. As financial credit
concerns subside, management expects increased revenue from overseas markets
as the developing world increases its investment in agricultural
infrastructure. Westeel's tank sales will continue to be negatively affected
by reduced capital investment in the energy sector and thus the Fund does not
anticipate any recovery in this area in the near term.
    The Fund continues to expect that Vicwest BP's markets will be impacted
by the slower economy. The reduced starts and permits in the non-residential
construction industry are expected to impact results through the year and the
Fund anticipates continued pressure on margins as a result of reduced overall
volume and lower steel prices. To offset the softness in traditional product
lines, the Fund will continue to focus on growing its presence into new
product lines, including insulated metal panel and aluminum composite panel;
however, these activities will not be sufficient to offset a significant
slowdown of our traditional industrial, commercial and institutional products.
Similarly, the Fund's sales and margins in the light commercial and
agricultural markets will also continue to be affected by the slowdown as
competitors respond to softer markets with competitive pricing.
    Steel costs have softened through the first half of 2009 which has put
pressure on margins. Steel pricing appears to have bottomed out and steel
suppliers have introduced price increases in the third quarter, however the
near term impact on margins is uncertain and is a function of downstream
markets' acceptance of price increases.

    CONFERENCE CALL AND WEBCAST

    Management will hold a conference call and live audio webcast on
Thursday, August 6, 2009, at 11:00 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 416-644-3418 or
1-800-732-9303. To access the audio replay, please dial 416-640-1917 or
1-877-289-8525 and quote the passcode 21309866 followed by the number sign.
The replay will be available until midnight on August 13, 2009.
    To access the live audio webcast please go to:
http://www.snwebcastcenter.com/event/?event_id=493 or, visit Vicwest's website
at www.vicwestfund.com (under Presentations & Calls).
    Both CNW and Vicwest will archive the webcast.

    ABOUT VICWEST INCOME FUND

    The Fund is one of Canada's leading manufacturers and distributors of
building construction products, and steel containment products for
agricultural grain, fertilizer and liquid storage. Headquartered in Oakville,
Ontario, the Vicwest Building Products division fabricates and markets metal
roofing, siding and other building products under the Vicwest, Mercury Metals,
Valley Truss & Metal and RCA Metal trade names. Through the Westeel Storage
Solutions division, headquartered in Winnipeg, Manitoba, the Fund designs and
manufactures storage solutions for agricultural grain and fertilizer, as well
as liquid storage tanks and accessories. These products are manufactured and
distributed under the trade names Westeel, Northern Steel Industries and NSI.
The Fund has 16 manufacturing facilities strategically located across Canada
with more than 1,000 dedicated employees committed to providing superior
quality products and delivering 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 June 30, 2009 and 2008 will be filed with applicable regulatory
authorities and will be available on www.sedar.com and on www.vicwestfund.com.

    NON-GAAP MEASURES

    "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.

    RISKS AND UNCERTAINTIES

    The Fund is subject to various risks and uncertainties including:
cyclicality, steel supply and pricing, reduction in demand, capital and
liquidity risk, seasonality and weather, competition, foreign exchange,
labour, pension funding, growth challenges, product liability, customer
concentration, collections from customers, lack of long term agreements,
uninsured risks, interest rates, distribution agreements, environmental,
climate change, supply and install contracts, operating hazards, risk of
future legal proceedings and income tax matters. These business risks are
described in detail in the Fund's Annual Information Form and the Fund's
Annual Report for the year ended December 31, 2008. All of these factors
remain substantially unchanged since the December 31, 2008 year end.

    FORWARD-LOOKING STATEMENTS

    Certain statements in this MD&A constitute forward-looking statements
within the meaning of applicable securities laws. Forward-looking statements
include, but are not limited to, statements made under the heading "Outlook"
and other statements concerning the Fund's 2009 objectives, strategies to
achieve those objectives, as well as statements with respect to management's
beliefs, plans, estimates, and intentions, and similar statements concerning
anticipated future events, results, circumstances, performance or expectations
that are not historical facts. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "outlook",
"objective", "may", "will", "expect", "intend", "estimate", "anticipate",
"believe", "should", "plans" or "continue", or similar expressions suggesting
future outcomes or events. Such forward-looking statements reflect
management's current beliefs and are based on information currently available
to management. Forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those contemplated by
such statements. Factors that could cause such differences include the
cyclical nature of the construction industry, changes in interest rates and
general economic conditions, adverse weather, cost and availability of
materials used to manufacture the Fund's products, competitive developments
affecting the building products industry, and the risk factors described from
time to time in the reports and disclosure documents filed by the Fund with
Canadian securities regulatory agencies and commissions. This list is not
exhaustive of the factors that may impact the Fund's forward-looking
statements. These and other factors should be considered carefully and readers
should not place undue reliance on the Fund's forward-looking statements. As a
result of the foregoing and other factors, no assurance can be given as to any
such future results, levels of activity or achievements and neither the Fund
nor any other person assumes responsibility for the accuracy and completeness
of these forward looking statements. The factors underlying current
expectations are dynamic and subject to change. Although the forward-looking
information contained in this MD&A is based upon what management believes are
reasonable assumptions, there can be no assurance that actual results will be
consistent with these forward-looking statements. Certain statements included
in this MD&A may be considered "financial outlook" for purposes of applicable
securities laws, and such financial outlook may not be appropriate for
purposes other than this MD&A. All forward-looking statements in this MD&A are
qualified by these cautionary statements. Except as required by applicable
law, the Fund undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future
events or otherwise.

    %SEDAR: 00022432E




For further information:

For further information: Colin Osborne, President & Chief Executive
Officer, Vicwest Income Fund, Tel: (905) 469-5700, Fax: (905) 825-1090; John
Slattery, Executive Vice President & Chief Financial Officer, Vicwest Income
Fund, Tel: (905) 469-5706, Fax: (905) 825-1090; www.vicwestfund.com

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