DPI.UN
2010-03-08
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Drive Products Income Fund Reports 2009 Annual
Financial Results
TORONTO, ONTARIO--(Marketwire - March 8, 2010) - Drive Products Income Fund
(TSX:DPI.UN) today announced its 2009 annual financial results.
Sales, net loss and EBITDA for the 2009 annual period were $82.7 million,
$21.0 million and $3.5 million, respectively, compared to $99.0 million,
$7.5 million and $7.6 million in the 2008 annual period. "The Fund entered
2009 bracing itself for a very tough year as our economy, our country and
the world had entered into a significant downturn. Revenue in 2009 was
impacted by significantly lower sales volumes and aggressive competitive
pricing pressures caused by the downturn. Although we took several actions
throughout the year to control operating expenses, these efforts could not
fully compensate for the impact of the recession and related decrease in
gross margin dollars", said Greg Edmonds, Chief Executive Officer. The net
loss was largely due to write-downs of intangible assets and goodwill
totaling $20.1 million, caused by the reduction in profitability in both
our Eastern and Western segments. It is important to note that the
write-downs are non-cash charges on our consolidated statement of
operations and do not impact cash flows or consolidated EBITDA.
However, during 2009 management took proactive steps to strengthen the
Fund's operations and financial position. "As we move into 2010, I am
pleased to report that we begin the new fiscal year supported by a strong
balance sheet and very little debt. During the year, the Fund generated
strong operating cash flows of $9.5 million compared to $3.1 million in the
prior year. Net bank indebtedness has been reduced by $10.3 million since
December 31, 2008. A corporate-wide initiative aimed at preserving a strong
financial position during the downturn was facilitated by performance
improvements to accounts receivable and inventory, reductions in working
capital and non-essential capital spending and the disposition of a
non-core business."
While there are signs that the Canadian economy is stabilizing, much of it
is due to government stimulus and monetary policy. As such, it will be some
time before we see true sustainable economic growth. To compensate,
management adopted a more conservative approach in 2009. Distributions were
suspended during the year and overhead expenses were removed from all
businesses. Layoffs, wage and hiring freezes were also implemented in 2009.
Headcount, including the disposition of one of our non-core businesses was
reduced by 27% in the year.
Nevertheless, there is much work still to be done. We will continue to
refocus our sales efforts and use our strong financial position to
aggressively compete for market share. We expect the long term market
fundamentals of the oil and gas industry to be positive and that this
segment will eventually rebound. We are optimistic that in 2010, the Fund
will be a beneficiary of the many government stimulus packages as they are
focused on the construction industry. In addition, the recent awarding of
the 2015 Pan American games to Toronto will have a positive impact on the
Ontario construction industry.
SUMMARY OF CONSOLIDATED RESULTS:
/T/
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($ thousands Three months ended December 31 Year ended December 31
except per (See note 1) (See note 1)
unit
figures)
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2009 2008 % change 2009 2008 % change
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(unaudited)(unaudited) (audited)(audited)
$ $ $ $
Sales 24,092 28,853 (16.5%) 82,647 98,959 (16.5%)
Cost of Sales 17,185 19,426 (11.5%) 59,018 66,929 (11.8%)
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Gross Margin 6,907 9,427 (26.7%) 23,629 32,030 (26.2%)
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General and
administrati
ve 5,358 5,978 (10.4%) 20,564 22,427 (8.3%)
Foreign
exchange
(gain) (97) 1,133 108.6% (481) 1,976 124.3%
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EBITDA (2) 1,646 2,316 (28.9%) 3,546 7,627 (53.5%)
Amortization 1,891 2,502 (24.4%) 7,639 9,631 (20.7%)
Interest
expense 75 167 55.1% 419 538 (22.1%)
Current
income tax
provision
(recovery) (82) 69 218.8% 381 272 40.1%
Future income
tax expense
(recovery) (994) (226) 339.8% (1,130) (283) 299.3%
Gain on
discontinued
operations (2,596) - - (2,596) - -
Write-down of
intangible
assets 10,581 5,414 95.4% 10,581 5,414 (3.3%)
Write-down of
goodwill 9,501 - - 9,501 - -
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Net loss from
continuing
operations (16,730) (5,610) 198.2% (21,249) (7,945) 167.5%
Income (loss)
from
discontinued
operations (191) (68) 180.9% 276 475 (41.9%)
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Net loss (16,921) (5,678) 198.0% (20,973) (7,470) 180.7%
Other
comprehensiv
e loss (21) - - (126) - -
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Comprehensive
loss (16,942) (5,678) 198.4% (21,099) (7,470) 182.4%
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Average
number of
units
Outstanding
('000s) (3) 13,250 13,250 - 13,250 13,739 -
Basic and
diluted loss
per unit
from
continuing
operations (1.263) (0.423) - (1.604) (0.578) -
Basic and
diluted
earnings per
unit from
discontinued
operations (0.014) (0.005) - 0.021 0.035 -
Basic and
diluted net
loss per
unit (1.277) (0.429) - (1.583) (0.544) -
Total assets 38,830 75,105 - 38,830 75,105 -
Long term
liabilities 613 1,684 - 613 1,684 -
Distributions
per unit - 0.104 - 0.063 0.880 -
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(1) On November 30, 2009, the Fund sold the assets of Professional
Distribution Services ("PDS"). In accordance with GAAP, the operating
activities of PDS have been removed from the current and comparable
periods and separately disclosed as income from discontinued
operations.
(2) EBITDA is a non-GAAP measure. See "Non-GAAP Measures" below for a
definition of EBITDA. The Fund's taxable earnings are allocated to its
unitholders and taxed in their hands.
(3) For purposes of calculating the average number of units outstanding,
Fund units and Class B LP units exchangeable for Fund units have been
included.
/T/
2009 Annual Report
The Fund's 2009 Annual Report is available on the Fund's website at
www.driveproducts.com and at www.sedar.com.
(1) Non-GAAP Measures
EBITDA and distributable cash are not earnings measures recognized by GAAP
and do not have standardized meanings prescribed by GAAP. Therefore, EBITDA
and distributable cash may not be comparable to similarly titled measures
presented by other issuers. Investors are cautioned that EBITDA and
distributable cash should not be construed as an alternative to net income
or loss determined in accordance with GAAP as indicators of the Fund's
performance or to cash flows from operating, investing and financing
activities as measures of liquidity and cash flows. Management believes
EBITDA and distributable cash are useful measures in evaluating the
performance of the Fund and in determining whether to invest in units.
EBITDA means net earnings adjusted to exclude income taxes, gains or losses
on disposal of capital assets, amortization of capital assets and
intangible assets, and interest expense. We have excluded impairments of
goodwill and intangible assets in the presentation of EBITDA because we
believe that such charges are non-recurring, one-time charges and that
their exclusions will be useful to our investors to compare our period over
period and year over year performance. Distributable cash means EBITDA
adjusted for maintenance capital expenditures and other adjustments listed
in the reconciliation provided in the annual Management's Discussion and
Analysis.
About Drive Products Income Fund
Drive Products Income Fund holds a 52% indirect interest in Drive Products.
Founded in 1983, Drive Products is a Canadian leader in the design and
installation of systems solutions that transform a conventional new truck
chassis into a specialized vehicle that meets a customer's technical and
performance requirements. To achieve this, Drive Products offers a wide
variety of products such as power take-offs, hydraulic pumps, motors and
coolers, winches, cables and controls, drivelines, blowers and compressors,
hoses and fittings, custom consoles, snowplows, spreaders and electronic
spreader controls, from leading international manufacturers, in many
instances as the sole distributor in Canada.
Forward-Looking Statements
This press release contains forward-looking information and forward-looking
statements as defined in applicable securities laws (collectively referred
to as "forward looking statements") relating to expected future events and
financial and operating results of the Fund. Specifically, this press
release contains forward-looking statements regarding the Fund's sales
efforts and business strategies, the Fund's expectations regarding the oil
and gas industry, the anticipated benefits to the Fund from government
stimulus packages and the impact of the 2015 Pan American games. These
statements involve known and unknown risks, uncertainties and assumptions
relating to market and general economic conditions, including with respect
to the oil and gas industry, the focus of government stimulus packages, the
impact of the 2015 Pan American games and the risks, uncertainties and
assumptions detailed from time to time in the Fund's continuous disclosure
documents filed with the Canadian securities regulatory authorities which
could cause actual results to differ materially from those anticipated by
such forward-looking statements. The Fund disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, unless required by
applicable law.
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Drive Products Income Fund
Greg Edmonds
Chief Executive Officer
905-795-3925
greg.edmonds@driveproducts.com
or
Drive Products Income Fund
Chris Boudreau
Chief Financial Officer
905-795-3929
chris.boudreau@driveproducts.com
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