Vicwest Income Fund Reports Strong Fourth Quarter and Year End Results for
2009

Solid Revenues and Improved Margins Contribute to Record Operating Cash Flow

Toronto Stock Exchange: VIC.UN

OAKVILLE, ON, March 3 /CNW/ - Vicwest Income Fund (the "Fund") (TSX: VIC.UN) today reported financial results for the three and twelve months ended December 31, 2009.

Highlights:

    
    -   Annual revenues of $391.8 million, a decrease of only 3.3% from a
        record 2008. Fourth quarter revenue was $94.7 million, down 10.0%
        over the same period in the prior year.
    -   EBITDA(1) for the year was $43.8 million, down from $47.2 million in
        2008. Fourth quarter EBITDA(1) was $8.2 million compared to
        $11.1 million in the same period in 2008.
    -   Gross profit for the year was a record $90.5 million compared to
        $86.9 million in 2008. Gross profit for the quarter was $21.9 million
        compared to $22.3 million in 2008.
    -   Net income per unit for the year was $1.98, down from the $2.09
        achieved in 2008. Net income per unit for the fourth quarter was
        $0.34, compared to $0.47 for the same period in the prior year.
    -   Operating cash flow for the year was a record high $57.3 million
        compared to $44.0 million in the prior year, resulting in a net debt
        to EBITDA ratio at December 31, 2009 of 0.5 to 1.0 compared to a
        ratio of 0.8 to 1.0 at the end of 2008.
    -   Declared cash distributions of $30.7 million in 2009, or $1.76 per
        unit, equaling the per unit cash distributions in 2008.
    

"Despite persistent challenging market conditions, the Fund delivered strong operational and financial results in 2009, again demonstrating the Fund's ability to generate strong cash flow in a variety of market conditions, while continuing to create new opportunities for future growth," said Colin Osborne, President and Chief Executive Officer. "Revenues were consistent with the prior year and gross profit exceeded the record level achieved in 2008. EBITDA for 2009 was $3.4 million less than the record set in 2008 as a result of continued investment in long term growth infrastructure and the direct link between board and management compensation to total unitholder return."

"In addition, the strength of our financial results was matched by our achievements in working capital management and debt reduction. At year end, the Fund's net debt to EBITDA ratio stood at 0.5 to 1, which represented a further improvement over last year."

"Going into 2010, we will continue to position our business to leverage our product and market diversity and focus resources on end-use markets with the greatest growth opportunities, such as agriculture, which now represents the majority of our revenue. To date, domestic demand in agricultural storage remains solid as retailers replenish their inventories, while export growth is expected to improve through 2010 as credit restrictions continue to ease in foreign markets. In the non-residential building sector, the Fund continues to face pressure from reduced demand and margin compression. As a result, our focus remains on managing discretionary and supply costs, while continuing to invest in product development and marketing initiatives that enhance our current market position and create the greatest platform for growth as these markets recover. Lastly, in the fourth quarter, we further streamlined and restructured our liquid storage operations to align our costs with current demand. This product line is well positioned to benefit from a rebound in capital spending which is expected to occur through 2010," said Osborne.

    
    RESULTS OF OPERATIONS

    Comparative Statements of Income
    For the periods ended December 31, 2009 and 2008
    (Thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended
                                         December 31,            December 31,
                                    2009        2008        2009        2008
                              -----------------------------------------------
                                       $           $           $           $

    Revenue                       94,705     105,180     391,776     405,233
    Cost of goods sold            72,801      82,863     301,237     318,383
    -------------------------------------------------------------------------
    Gross profit                  21,904      22,317      90,539      86,850
    -------------------------------------------------------------------------
    Gross margin                   23.1%       21.2%       23.1%       21.4%
    -------------------------------------------------------------------------

    Selling, general and
     administrative               13,559      11,255      46,331      39,616
    Foreign exchange loss (gain)     133          (9)        410           2
    Amortization of property,
     plant and equipment           1,144       1,030       4,368       4,076
    Amortization of intangible
     assets                          403         589       1,466       1,358
    Net interest and financing       359         790       1,866       2,812
    -------------------------------------------------------------------------
    Income before income taxes     6,306       8,662      36,098      38,986
    Provision for income taxes       369         462       1,617       1,425
    -------------------------------------------------------------------------
    Net income                     5,937       8,200      34,481      37,561

    EBITDA(1)                      8,212      11,071      43,798      47,232
    As a percentage of revenue      8.7%       10.5%       11.2%       11.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

FULL YEAR 2009 RESULTS

Revenue

Revenue for the year ended December 31, 2009 was $391.8 million, down 3.3%, or $13.4 million, from the $405.2 million reported for 2008. The decrease is attributable to the Vicwest building products division ("Vicwest BP"), which reported a decrease of $20.1 million compared to 2008, while revenue derived from the Westeel Storage Solutions division ("Westeel") increased $6.6 million. Westeel's revenue increase reflected strength in domestic sales of agricultural storage products, especially galvanized bins and hopper cones, particularly in the first half of the year, offset by a reduction in revenues from exports and liquid storage tanks.

Vicwest BP's revenue reductions were primarily attributed to softer industrial, commercial and institutional construction markets. Sales into construction markets across Canada experienced reduced volumes with emphasis on the Fund's sales of steel-based decking and insulated metal panels. A partial offset came from increased volumes of cladding products and additional sales of architectural panel products from the RCA Metal Inc. business acquisition.

Gross Profit

Gross profit for the year ended December 31, 2009 increased $3.6 million to $90.5 million, compared to $86.9 million as reported for the year ended 2008. Gross margin improved to 23.1% of revenue from 21.4% in the prior year. The increase in gross profit was generated entirely by Westeel. In the first half of 2009, Westeel's volume and revenue performance improved compared to the first half of 2008 attributed to a strong early demand from domestic agricultural markets and a healthy backlog coming into the year. While demand softened in the second half of 2009, Westeel's overall annual gross profit and gross margin increased from the prior year through a combination of improved pricing, volumes, operating efficiencies through the utilization of the Fund's lean and flexible manufacturing programs and expanded manufacturing capabilities in Saskatoon and Regina.

Vicwest BP's 2009 gross profit trailed last year on reduced revenues with the segment's gross margin slightly improved when compared to 2008 results. In the second half of 2009, Vicwest BP's gross profit and margin were positively impacted by favourable product mix and advantageous material purchasing when mid-year steel prices commenced an upward trend. Through most of the first half of 2009, Vicwest BP's gross profit and margin were adversely affected by lower overall volumes and higher cost inventory being sold at reduced prices, as market pricing moved downward in response to reductions in raw material pricing and slowing end market demand.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $6.7 million from the prior year. Approximately a quarter of this increase was due to the rise in market values of the deferred unit-based incentives for management and the deferred trust units for trustees as the Fund's unit price rose by over 145% during the year. The Fund also incurred incremental costs on initiatives to improve customer service, expand sales efforts, rebrand Vicwest BP and its products, to combine the Westeel agricultural and liquid storage business segments into a single Westeel Storage Solutions division, and to streamline corporate management efficiencies.

Net Income and EBITDA(1)

Net income and EBITDA(1) declined as the improvement in gross profit was more than offset by higher selling, general and administrative expenses.

FOURTH QUARTER RESULTS

Revenue

Revenue was $94.7 million, down $10.5 million, or 10.0%, from the $105.2 million reported for the fourth quarter of 2008. The decrease was comprised of a $6.6 million decline in Vicwest BP revenue from reduced volumes of building construction products and a $3.9 million decrease at Westeel on reduced shipments of liquid storage tanks, hopper cones and international product sales, partially offset by an increased demand for agricultural storage in domestic markets.

Gross Profit

Gross profit for the quarter was $21.9 million, or 23.1% of revenue, compared to $22.3 million, or 21.2% of revenue, for the fourth quarter of 2008. The gross profit decrease of $0.4 million resulted from volume reductions of liquid storage tanks, hopper cones and export revenue at Westeel, which was partially offset by a strong margin performance by Vicwest BP, supported by favourable product mix and effective material management.

Selling, General and Administrative Expenses

The Fund incurred selling, general and administrative expenses of $13.6 million, or 14.4% of revenue, compared to $11.3 million, or 10.7% of revenue, in the fourth quarter in 2008. The $2.3 million increase was predominantly a function of $0.9 million in costs related to the higher market value of unit-based management incentives and deferred trust unit plans for trustees, as well as $0.9 million of incremental costs to bolster the marketing of products and improvements in customer service. Additional increases resulted from the realignment of management personnel at a cost of $0.6 million, the investment of $0.3 million in upgrading the Fund's existing information technology systems and increased legal and consulting costs of $0.2 million. These increases were partially offset by reductions in credit and collection risk provisions and reduced costs for management's financial results-based incentive.

Net Income and EBITDA(1)

Net income and EBITDA(1) for the three months ended December 31, 2009 were down principally due to lower gross profit and increased selling, general and administrative expenses of the Fund.

DISTRIBUTABLE CASH(1)

    
    Statement of Distributable Cash
    For the periods ended December 31, 2009 and 2008
    (Thousands of Canadian dollars except unit and per unit amounts)
    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended
                                         December 31,            December 31,
                                    2009        2008        2009        2008
                              -----------------------------------------------
                                       $           $           $           $

    Net income                     5,937       8,200      34,481      37,561
    Amortization of property,
     plant and equipment           1,144       1,030       4,368       4,076
    Amortization of intangible
     assets                          403         589       1,466       1,358
    Net interest and financing       359         790       1,866       2,812
    Provision for income taxes       369         462       1,617       1,425
    -------------------------------------------------------------------------
    EBITDA(1)                      8,212      11,071      43,798      47,232
    Net interest expense            (299)       (730)     (1,626)     (2,598)
    Cash income taxes               (231)       (133)       (656)       (336)
    Maintenance capital
     additions(1)                 (1,541)     (1,921)     (3,781)     (4,208)
    -------------------------------------------------------------------------
    Distributable cash(1)          6,141       8,287      37,735      40,090
    -------------------------------------------------------------------------
    Cash distributions declared   10,273      10,278      30,655      31,475
    -------------------------------------------------------------------------
    Average units
     outstanding              17,415,770  17,419,468  17,418,536  17,976,934
    Net income per unit         $   0.34    $   0.47    $   1.98    $   2.09
    Distributable cash per
     unit                       $   0.35    $   0.48    $   2.17    $   2.23
    Cash distributions
     declared per unit          $   0.59    $   0.59    $   1.76    $   1.76
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Distributable cash for the year ended December 31, 2009, decreased 6.0% to $37.7 million compared to $40.1 million in 2008. During 2009, the Fund declared regular cash distributions of $27.2 million ($0.13 per unit per month), a special cash distribution of $3.5 million ($0.20 per unit) and a special non-cash distribution of $4.5 million ($0.26 per unit). During 2008, the Fund declared regular cash distributions of $28.0 million ($0.13 per unit per month), a special cash distribution of $3.5 million ($0.20 per unit) and a special non-cash distribution of $4.4 million ($0.25 per unit). The decrease in the regular cash distributions was due to the lower number of units outstanding resulting from unit buy-backs in 2008.

Distributable cash for the three months ended December 31, 2009 was lower at $6.1 million compared to $8.3 million in 2008, primarily due to a quarter over quarter decrease in net income of $2.3 million.

Since the inception of the Fund on July 1, 2005, cumulative cash distributions have been $147.9 million, representing a cumulative distribution ratio of 85.3% on distributable cash of $173.3 million.

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

OUTLOOK AND CAPITAL STRUCTURE

This section contains certain forward-looking statements and in particular, there can be no assurances as to the Fund's outlook concerning market conditions or financial performance as discussed in this section. The Fund's expectations are based on the assumptions outlined in the sections entitled "Full Year Results" and "Fourth Quarter Results" and are subject to the risks identified under "Forward-Looking Statements" which may cause actual results and conditions to differ materially from the Fund's outlook. 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.

The Fund expects that, in the near term, Westeel sales will continue to lag the first half of 2009, although the fall of 2009 and early 2010 booking programs for domestic grain bins have been positive as retailers begin to replenish their inventories. Grain prices have declined, although mitigated somewhat by lower input prices, with the expectation that farm incomes will remain positive in 2010. Growth in export sales is expected to improve through 2010 as credit restrictions ease in foreign jurisdictions and local economies improve. The Fund will continue to invest resources in developing sales from promising international markets. Continuing weak sales of Westeel's tank products are expected throughout the first half of 2010 due to the impact of lagging commodity prices for natural gas and oil resulting in reduced drilling and capital investment.

At Vicwest BP, modest improvement is expected in 2010 when compared to the generally depressed commercial and industrial markets of 2009, with better prospects expected for 2011. Institutional construction has increased in 2009, supported by government efforts to stimulate the economy. This is expected to continue during 2010 and into 2011. Agricultural markets are expected to remain static throughout 2010 in keeping with level farm incomes.

Steel costs continue to rise through the early part of 2010, following the trend set during the second half of 2009. Due to softness in some downstream markets, recovery of these price increases will be challenging and could result in margin compression, at least through the early part of 2010.

Since July 2005, the business of the Fund has been conducted within the structure of an income trust pursuant to the Fund Declaration of Trust. In 2007, changes were made to the Income Tax Act (Canada) that will require certain income trusts, including the Fund, to pay taxes after fiscal 2010, similar to those paid by taxable Canadian corporations. In the future, the payment of such taxes will reduce the cash flow of the business, thereby reducing the amount available for distribution to Unitholders.

While the Fund does not currently have definitive plans related to the future capital structure of the business or policies related to future payout ratios, in 2010 the Fund expects to propose to Unitholders that, no later than the end of the calendar year, the Fund would convert to a corporate structure. Such a conversion would be subject to 66.67 percent of Unitholders voting in support of a change. Following conversion, it is presently expected that the newly formed corporation would likely pay dividends to its shareholders, rather than distributions to unitholders, from available cash flow. During 2010, the board of trustees of the Fund would expect to advise Unitholders on the proposed level of dividend and dividend policy on the newly formed corporation.

CONFERENCE CALL AND WEBCAST

Management will hold a conference call and live audio webcast on Thursday, March 4, 2010, at 11:00 a.m. (ET) to discuss the Fund's fourth quarter and year-end 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 416-644-3417 or 1-800-814-4860. To access the audio replay, please dial 416-640-1917 or 1-877-289-8525 and quote the passcode 4216129 followed by the number sign. The replay will be available until midnight on March 11, 2010.

To access the live audio webcast please go to: http://www.snwebcastcenter.com/event/?event_id=783 or, the Fund's website at www.vicwestfund.com (under Presentations & Calls).

Both CNW and the Fund 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. Through its Vicwest building products division, headquartered in Oakville, Ontario, the Fund fabricates and markets metal roofing, siding and other metal building products under the Vicwest, Mercury Metals, Valley Truss & Metal and RCA Metal trade names. The Fund's Westeel Storage Solutions division, headquartered in Winnipeg, Manitoba, 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 approximately 1,200 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 December 31, 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 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 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, reductions in demand for the Fund's products, seasonality and weather, competition, management of the Fund's information, foreign exchange, labour availability and collective bargaining agreements, income tax matters, customer concentration, relationship with suppliers, product liability, capital and liquidity, collections from customers, operating hazards, uninsured risks, supply and install contracts, interest rates, distribution arrangements, lack of long-term agreements, pension funding, future legal proceedings, dependence on key personnel, limitations on growth, environment, climate change, risk of securities laws compliance and corporate governance changes, tax law changes, dependence of the Fund on Vicwest Operating Limited Partnership and certain risks associated with the structure of the Fund including: 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 and will fluctuate with the performance of the business. Further information about these and other risks and uncertainties can be found in the disclosure documents filed by the Fund with the securities regulatory authorities, available at www.sedar.com.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release 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 Capital Structure" and other statements concerning the Fund's 2010 and 2011 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 and agriculture industries, changes in general economic conditions and interest rates, adverse weather, cost and availability of materials used to manufacture the Fund's products, competitive developments, as well as other risk factors included in the most recently filed Management's Discussion and Analysis under the heading "Risks and Uncertainties" and as 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 press release 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 press release may be considered "financial outlook" for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this press release. All forward-looking statements in this press release are qualified by these cautionary statements. The forward-looking statements contained herein are made as of the date of this press release and 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

SOURCE Vicwest Inc.

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

Organization Profile

Vicwest Inc.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890