OncoCyte Annual Report 2009

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FY2009 Annual Report · OncoCyte

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Management’s Discussion and Analysis
and Financial Statements

December 31, 2009

THE ONEX OPERATING COMPANIES

Onex’ businesses generate annual revenues of $32 billion, have assets of $36 billion and employ

over 210,000 people worldwide.

Table of Contents

2 Management’s Discussion and Analysis

IBC Shareholder Information

74 Consolidated Financial Statements

CHAIRMAN’S LETTER

Dear Shareholders,

The ﬁrst days of 2009 were fraught with anxiety about the condition of the world ﬁnancial system. That anxiety turned
to outright fear as capital markets plummeted throughout the ﬁrst quarter of the year. Busi nesses everywhere slowed
precipitously as they focused on preserving cash, scrutinizing the credit-worthiness of their customers and waiting
to see what would happen next. Fortunately, what happened next was an improvement in the most liquid markets
followed by an improvement in business con ditions generally. The up-tick thus far has been modest, affecting the
industrial economy more than the consumer economy and still leaving us with some concern about the strength of the
recovery. But the slide has ended.

Several of our operating companies were severely tested. With one exception, they met their challenges and sur-
vived the worst recession since the Great Depression. They reduced their cost structures, improved margins and are well
positioned for future growth. It helped that they weren’t over-leveraged going into the downturn. It also helped that our
recently acquired businesses are amongst the best we’ve ever owned. Whatever the reason, we are proud of our oper -
ating companies’ performance in 2009 and congratulate our management teams on a job well done.

We were also gratiﬁed by the support Onex Part ners received from our existing investors and several new
investors. We met our original target for third-party capital raised of US$3.5 billion. Very few funds were able to attract
new investors during the last two years. Onex Part ners’ success speaks to the value of the Onex brand and its track record
of providing a 29 percent return on invested capital for 25 years. In Decem ber, Onex increased its commitment to Onex
Part ners III to US$800 million, making the total fund size US$4.3 billion. Our increased commitment reﬂects our excel-
lent liquidity position and our belief that some great businesses will become available following the downturn.

Some other highlights of the year:

(cid:129) We sold shares in Cineplex, Celestica and Emer gency Medical Services Corporation for net proceeds to Onex of

about $610 million, realizing very substantial returns on our invested capital;

(cid:129) Onex Partners acquired the Tropicana Las Vegas Hotel and Casino through the purchase and subsequent conver-
sion of its debt. We believe that we acquired Tropi cana Las Vegas during a cyclical low in the gaming sector and well
below precedent levels;

(cid:129) We raised over $200 million for the new Onex Credit Partners Credit Strategy Fund, a publicly traded Cana dian retail
fund, and saw Onex Credit Partners’ assets under management triple to almost US$800 million – a testament to our
credit team, its track record and another example of the strength of the Onex brand; and

(cid:129) Our operating companies retired close to US$1.2 billion of debt and distributed US$114 million in dividends as a

result of strong cash ﬂow generation.

We wouldn’t want to live through too many years like 2009, but when we look back at the year and how we fared, we’re
convinced that our strategy of focused value investing and moderate leverage is right for all times. It’s a strategy that lets
us sleep at night and lets our businesses survive and gain strength during downturns. Onex has never been in better
shape. We’re debt-free, have more than $1 billion in cash and cash-like investments, and enough management fee
income to offset our ongoing operating expenses.

It’s too soon to know how 2010 will shape up, but we’re conﬁdent we’ll ﬁnd opportunities to increase share-

holder value. On behalf of the Onex team, thank you for your continued support.

[signed]

Gerald W. Schwartz
Chairman & CEO, Onex Corporation

Onex Corporation December 31, 2009 1

ONEX CORPORATION

25-Year History of Successful Investing
Founded in 1984, Onex is one of North America’s oldest and most successful investment ﬁrms com-
mitted to acquiring and building high-quality businesses. Onex has completed more than 260 acqui-
sitions with a total value of approximately $43 billion. Employing a value-oriented and active
ownership investment approach in acquiring and building industry-leading businesses in partner-
ship with talented management teams, Onex has generated 3.4 times the capital it has invested and
managed, earning a 29 percent compound IRR on realized and publicly traded investments.

As an investor ﬁrst and foremost, Onex
invests its $3.9 billion of proprietary capital
largely through Onex Partners, its ﬂagship
private equity platform. Onex also invests
through ONCAP, its mid-market private
equity platform, Onex Real Estate Partners
and Onex Credit Partners. Onex is in excel-
lent ﬁnancial condition, with ample cash on
hand and no debt at the parent company.

Onex is entrusted with third-party capital
from institutional investors from around
the world. The Company currently has ap -
proximately US$7.5 billion of invested and
committed capital that it manages on be half
of these limited partners. In return, Onex
receives a stable and growing stream of
annual management fees that offsets the
ongoing operating expenses. In addition,
Onex is entitled to a share of the proﬁts
on the capital it manages for these in ves -
tors. This is commonly referred to as car-
ried interest. Carried interest, if realized,
could signiﬁcantly enhance Onex’ invest-
ment returns.

Onex is a public company whose shares
trade on the Toronto Stock Exchange
under the symbol OCX.

How Onex’ $3.9 billion of Capital is Deployed
at December 31, 2009

Onex Credit Partners 3%

Mid-cap Private Equity 4%

Onex Real Estate 2%

Cash and Near-cash Items 27%

Large-cap Private Equity 64%

Public 18%

Private 46%

Investments are valued at fair value as at December 31, 2009 with the exception
of a limited number of Onex direct investments held at cost.

The Components of Onex’ US$7.5 billion of Third-Party Assets
under Management at December 31, 2009

Onex Credit Partners 7%

ONCAP 4%

Onex Partners I 18%

Onex Partners II 26%

Onex Partners III 45%

Throughout this report, all amounts are in Canadian dollars unless otherwise indicated.

2 Onex Corporation December 31, 2009

MANAGEMENT ’S DISCUSSION AND ANALYSIS

The Management’s Discussion and Analysis (“MD&A”) provides a review of how Onex Corpo ration (“Onex”)
performed in 2009 and assesses future prospects. The ﬁnancial condition and results of operations are ana-
lyzed noting the signiﬁcant changes in the consolidated statements of earnings, consolidated balance sheets
and consolidated statements of cash ﬂows of Onex. As such, this MD&A should be read in conjunction with
the audited annual consolidated ﬁnancial statements and notes thereto of this report. The MD&A and the
Onex consolidated ﬁnancial statements have been prepared to provide information on Onex on a consoli-
dated basis and should not be considered as providing sufﬁcient information to make an investment deci-
sion in regard to any particular Onex operating company.

The following MD&A is the responsibility of management and is as of February 24, 2010. Prepa ra tion
of the MD&A includes the review of the disclosures on each business by senior managers of that business
and the review of the entire document by each ofﬁcer of Onex and by the Onex Disclosure Committee.
The Board of Directors carries out its responsibility for the review of this disclosure through its Audit and
Corpo rate Governance Committee, comprised exclusively of independent directors. The Audit and Corpo rate
Governance Committee has reviewed and recommended approval of the MD&A by the Board of Directors.
The Board of Directors has approved this disclosure.

The MD&A is presented in the following sections:

4 Onex Business Objective and Strategies

10
13
13
39
43
51
59
63
65
67

Industry Segments
Financial Review

Consolidated Operating Results

Fourth-Quarter Results

Consolidated Financial Position
Liquidity and Capital Resources
Transition to International Financial Reporting Standards
Disclosure Controls and Procedures and Internal Controls over Financial Reporting

Outlook
Risk Management

Onex Corporation’s ﬁnancial ﬁlings, including the 2009 MD&A and Financial Statements and interim quarterly reports,
Annual Information Form and Management Information Circular, are available on Onex’ website, www.onex.com, or on the
Canadian System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

Forward-Looking/Safe Harbour Statements

This MD&A may contain, without limitation, statements concerning possible or assumed future operations, performance or results preceded
by, followed by or that include words such as “believes”, “expects”, “potential”, “anticipates”, “estimates”, “intends”, “plans” and words of similar
connotation, which would constitute forward-looking statements. Forward-looking statements are not guarantees. The reader should not
place undue reliance on forward-looking statements and information because they involve risks and uncertainties that may cause actual
operations, performance or results to be materially different from those indicated in these forward-looking statements. Onex is under no obli-
gation to update any forward-looking statements contained herein should material facts change due to new information, future events or
other factors. These cautionary statements expressly qualify all forward-looking statements in this MD&A.

Cautionary Statement Regarding Use of Non-GAAP Accounting Measures

This MD&A makes reference to operating earnings. Onex uses operating earnings as a measure to evaluate each operating company’s per-
formance because it eliminates interest charges, which are a function of the operating company’s particular ﬁnancing structure, as well as
certain non-cash charges including stock-based compensation, amortization of intangible assets and any unusual or non-recurring charges.
Onex’ method of determining operating earnings may differ from other companies’ methods and, accordingly, operating earnings may not be
comparable to measures used by other companies. Operating earnings is not a performance measure under Canadian GAAP and should not
be considered either in isolation of, or as a substitute for, net earnings prepared in accordance with Canadian GAAP.

Onex Corporation December 31, 2009 3

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

ONEX BUSINESS OBJECTIVE AND STRATEGIES

OUR OBJECTIVE: Onex’ business objective is to create long-term value for shareholders and part-
ners and to have that value reﬂected in our share price. The discussion that follows outlines Onex’
strategies to achieve this objective and how we performed against those strategies during 2009.

OUR STRATEGY: Investing + Asset Management
Our strategy to deliver value to shareholders and partners is concentrated on investing and asset
management. Our investing focuses on our value-oriented and active ownership approach of
acquiring and building industry-leading businesses in partnership with talented management
teams. We also seek to maintain Onex as a ﬁnancially strong parent company to support our busi-
nesses. The objective of our asset management business is to manage and grow third-party capital,
which earns management fees for Onex and enhances our overall returns through carried interest.
The availability of committed third-party capital enables Onex to be efﬁcient and responsive to
acquisition opportunities.

INVESTING IN HIGH-QUALITY BUSINESSES: Acquire, Build and Grow Value
Onex seeks to acquire attractive businesses, build them into industry leaders and grow their value.
We are committed to maintaining substantial ﬁnancial strength and having capital available to grow
through acquiring new businesses and facilitating the growth of our existing businesses.

2009 Performance
1) Acquire attractive businesses
2009 was a slow year for private equity activity due to fewer attractive acquisition opportunities
and tighter credit markets. During 2009, many vendors of attractive businesses deferred the possi-
ble sale of their companies believing that they would not receive what they viewed as sufﬁcient
value for their businesses. This may in part have been based on the expectation that earnings,
and therefore sale price, would improve in 2010. The improvement in the equity markets in the
latter part of 2009 likely also contributed to the slow investing activity. Some companies that
may have otherwise required capital were able to issue equity. In addition, the tight credit markets
that existed in the ﬁrst half of 2009 made ﬁnancing for acquisitions difﬁcult to obtain. We began to
see credit markets recover during the second half of 2009, with some ﬁnancing being available for
mid-sized acquisitions and selectively for larger transactions, albeit at higher costs and on more
stringent credit terms.

In this challenging environment, Onex completed the acquisition of Tropicana Las Vegas
Hotel and Casino, one of the best-known casinos in Las Vegas. This acquisition was completed
during a cyclical low for the gaming sector, an industry that Onex had focused on through its partner-
ship with Alex Yemenidjian, former President of gaming giant MGM Mirage. Tropicana Las Vegas
was a distressed-for-control opportunity that Onex identiﬁed in 2008. During 2008 and 2009,
Onex acquired the majority of the debt of the business and successfully worked with other lenders to

4 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

prepare a reorganization plan that enabled the company to emerge from bankruptcy protection
under Onex’ control. This acquisition was the ﬁrst investment made through Onex Partners III LP.
Onex, Onex Partners III, Onex management and Onex’ partner, Mr. Yemenidjian, invested a total
of $225 million (US$205 million) in Tropicana Las Vegas during 2009, of which Onex’ share was
$49 million (US$45 million).

Onex’ strategy for acquiring attractive businesses begins with identifying an industry
that has good growth opportunities. Today, Onex has a focus on several industries, including
healthcare, aerospace, business services and gaming. We continue to evaluate other industries.

2) Build our businesses into industry leaders
During 2009, Onex’ operating companies faced difﬁcult industry conditions with the global
economic downturn. Our companies worked to re-align their cost structures to the current busi-
ness volumes in order to continue to operate proﬁtably. We believe that these leaner cost structures
will position the companies well as volumes increase with an economic recovery. In addition,
Emergency Medical Services Corporation (“EMSC”) and Skilled Healthcare completed follow-on
acquisitions valued at approximately $86 million to build their businesses. Our companies retired
close to US$1.2 billion in debt during the year, strengthening their ﬁnancial position. Today many
of our businesses are clear leaders in their markets. We believe these businesses have the manage-
ment expertise, quality of products or services and ﬁnancial capital to continue as industry leaders.

3) Grow the value of our businesses
While many of our industrial companies experienced a difﬁcult economic environment in 2009, there
were events at certain of our businesses during the year that showed the value that has been created:
(cid:129) EMSC completed two secondary share offerings at an average of approximately 6.3 times Onex’
original cost. Onex sold a portion of its ownership in EMSC in those offerings, receiving US$310 mil-
lion in net proceeds, including carried interest, compared to a cost of US$46 million.

(cid:129) Carestream Health paid a second dividend to its shareholders of US$72 million, of which Onex’
share was US$28 million. This is in addition to the US$72 million dividend (Onex’ share was
US$28 million) distributed in 2008.

(cid:129) In late December 2009, The Warranty Group distributed its third dividend to shareholders
in the amount of US$42 million, of which Onex received US$13 million; this is in addition to
the US$88 million of total dividends distributed in 2008 and 2007, of which Onex’ share was
US$27 million.

(cid:129) After more than 10 years of building a strong theatre exhibition business, Onex sold its remaining
13 million trust units of Cineplex Galaxy Income Fund through a secondary offering for approxi-
mately $175 million of net proceeds. This sale brought to a close an investment platform that
Onex established in 1998 with Galaxy Entertainment. Over more than a decade, Onex completed a
number of acquisitions in the theatre exhibition industry, investing US$355 million and ultimately
realized total proceeds of approximately US$900 million.

Onex Corporation December 31, 2009 5

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

(cid:129) Onex sold approximately 11 million subordinate voting shares of Celestica in a secondary
bought deal offering for net proceeds of $104 million. Since our acquisition of Celestica in 1996
we have realized $939 million and, combined with the value of our remaining ownership interest
of $177 million at the end of 2009, have beneﬁted from a total value of $1.1 billion compared to
our original cost of $199 million.

Excluding the effect of realizations, the value of our public companies in the Onex Partners Funds
increased 41 percent from the end of 2008. Much of that growth was driven by the 48 percent
and 95 percent growth in share price at EMSC and Spirit AeroSystems, respectively. The overall
value of the private companies in the Onex Partners Funds was up by approximately 14 percent at
December 31, 2009 from last year.

4) Maintain substantial ﬁnancial strength
Onex’ ﬁnancial strength comes from its own capital, as well as that of its third-party limited part-
ners in the Onex Partners and ONCAP families of Funds.
(cid:129) Onex: During 2009, cash at Onex, the parent company, grew 89 percent to $890 million following

the Company’s realizations on Cineplex and a portion of its ownership in EMSC and Celestica.

(cid:129) It has been Onex’ policy to maintain a debt-free parent company and not guarantee any of the debt

of its operating companies. Onex, the parent company, remains debt-free at Decem ber 31, 2009.

(cid:129) Onex Partners Funds: Onex closed its third large-cap private equity fund, Onex Partners III,
during 2009 with US$3.5 billion of third-party capital. Including Onex’ US$800 million commit-
ment to Onex Partners III, the total fund is US$4.3 billion. At year end, third-party uncalled
committed capital through the Onex Partners Funds totalled US$3.8 billion for future Onex-
sponsored investments, compared to US$3.5 billion at the end of 2008.

(cid:129) ONCAP Funds: ONCAP has third-party committed, uncalled capital of $127 million at December 31,

2009 for future ONCAP-sponsored investments.

6 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

ASSET MANAGEMENT: Manage and Grow Third-Party Capital
Our management of third-party capital provides substantial value for Onex shareholders through
the management fees we earn and the carried interest opportunity. We seek to grow assets under
management and create new asset classes where we believe we can invest third-party capital to
provide appropriate returns. We invest that third-party capital alongside Onex’ capital. The table
that follows summarizes assets under management, Onex’ invested capital and uncalled third-
party capital for the years ended December 31, 2009 and 2008.

($ millions)

At December 31

Funds

Assets Under Management
(Onex and Limited Partners)

Onex’ Invested Capital(a)

Uncalled Third-Party Capital

2009

2008

2009

2008

2009

2008

Onex Partners

ONCAP II

Onex Credit Partners

US$9,218

$ 491

US$ 782

US$8,573

$ 476

US$ 253

US$1,807

$ 161

US$ 218(b)

US$1,756

US$3,766

US$3,500

$ 141

US$ 58

$ 127

n/a

$ 156

n/a

(a) Onex’ invested capital represents the fair market value in the respective year and excludes Onex’ potential participation in the carried interest.

(b)

Includes US$130 million of near-cash items.

2009 Performance
1) Good growth in third-party capital under management
(cid:129) During 2009, Onex achieved its fundraising target of US$3.5 billion of third-party capital and held
the ﬁnal close for its third large-cap private equity fund, Onex Partners III, despite a difﬁcult
fundraising environment. This Fund, which represents an approximate 75 percent increase in the
amount of third-party capital raised relative to Onex Partners II, includes commitments from
both our long-standing partners and new investors from around the world.

(cid:129) Onex Credit Partners, Onex’ credit investing platform, raised $208 million of third-party capital
through the initial public offering of its Canadian retail fund, OCP Credit Strategy Fund (TSX:
OCS.UN), during 2009. This new fund is invested in Onex Credit Partners ﬂagship debt oppor -
tunity strategy.

(cid:129) In the future, we will look to attract third-party capital for our real estate investing platform.

2) Signiﬁcant income from managing third-party capital
(cid:129) Onex earned US$88 million in management fees in 2009 from the Onex Partners and ONCAP
Funds, which is up from US$71 million in 2008. During 2009, Onex received a full year of man-
agement fees on capital commitments to Onex Partners III.

(cid:129) During 2009, Onex received carried interest of US$19 million from the two EMSC secondary
offerings. This was net of an offset of US$7 million due to the loss on Cosmetic Essence, Inc.
At December 31, 2009, there was approximately US$49 million of unrealized carried interest
allocable to Onex based on the public companies held at market value in Onex Part ners I.

Onex Corporation December 31, 2009 7

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

OUR OBJECTIVE: Have the Value Created from Investing and Asset Management Reﬂected
in our Share Price

2009 Performance
Onex’ Subordinate Voting Shares closed 2009 at $23.60, a 30 percent increase from the end of 2008.
This compares to a 35 percent increase in the TSX and a 19 percent increase in the DJIA. The
improvement in the market value of certain of our public companies, the results of many
of our private businesses, the realizations achieved in 2009, as well as the positive effect of the
increase in assets under management, are factors that contributed to the share value increase. We
will continue to work in 2010 to have the Onex share price reﬂect the underlying value of our busi-
nesses and growth prospects. We do not believe it is there yet.

ONEX’ ABILITY TO CONTINUE TO DELIVER RESULTS
Onex has a 25-year history of delivering results. Employing a value-oriented and active ownership
investment approach in acquiring and building industry-leading businesses, Onex has generated
3.4 times the capital it has invested and managed on realized and publicly traded investments. Onex
has an experienced management team and signiﬁcant ﬁnancial resources to continue to acquire and
build businesses. The interests of Onex, the Onex management team, investors and shareholders are
all aligned to continue to build value and deliver results.

Value-oriented active ownership approach to acquiring and building businesses
Onex has always adhered to the following basic investing principles:
(cid:129) Maintain purchase discipline;
(cid:129) Employ prudent ﬁnancial leverage; and
(cid:129) Pursue unique opportunities: Onex has extensive experience with corporate carve-outs of mission-
critical supply divisions from large multinationals, distressed-for-control investing and restruc -
turings. These types of transactions tend to be complex in nature, require lengthy due diligence and
negotiations and therefore a level of expertise to successfully complete.

In the past, Onex has acquired subsidiaries or divisions of IBM, Boeing, Raytheon, GM, Kodak,
Ameri can Airlines and others. In 2009, we acquired the Tropicana Las Vegas Hotel and Casino,
a distressed-for-control opportunity in the gaming sector. We believe the current economic
environment will provide similar opportunities where we can acquire businesses at reasonable
purchase prices and create value through earnings growth.

Onex differentiates itself through the active ownership of its businesses, as it primarily seeks to im -
prove the competitive position and ﬁnancial performance of its businesses rather than rely on ﬁnan-
cial leverage or market timing to create value. Onex’ active ownership approach is characterized by:
(cid:129) Onex typically acquiring a control position in its businesses, which enables it to exercise the
rights of ownership, particularly the ability to make strategic decisions. Onex does not get
involved in the daily operating decisions of the business.

8 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

(cid:129) Onex works in partnership with great management teams to build long-term value. We also look

to have the managers of the business be owners in their business alongside Onex.

(cid:129) Onex’ approach focuses on creating long-term value by building businesses into highly efﬁcient,
proﬁtable and industry-leading enterprises. We also look to grow our businesses through strate-
gic acquisitions.

Experienced and stable management team
Onex has an experienced and stable management team. Our managing directors have an average
tenure of 16 years. There are close to 55 specialized investment professionals to evaluate opportu-
nities and work with our current businesses. This team is supported by a group of 30 people with
expertise in accounting, tax and legal due diligence matters.

Substantial ﬁnancial resources available for future growth
The Onex parent company remains debt-free with over $1 billion of cash and near-cash items at
December 31, 2009 to support future acquisitions and the growth of existing businesses. In addi-
tion, at that date, there was US$3.9 billion of uncalled committed third-party capital in the Onex
Partners and ONCAP Funds for Onex-sponsored acquisitions.

Management alignment
There is signiﬁcant alignment of the interests of Onex, Onex shareholders, our third-party investors
and Onex management. For 25 years, Onex has had a distinctive ownership culture that requires its
management team to invest meaningfully in each business acquired and to have a signiﬁcant owner-
ship in Onex. In particular:
(cid:129) The Onex management team is the largest shareholder in Onex, with a combined holding of over

28 million shares.

(cid:129) The management team members directly invest their own money in each Onex business with no

“cherry picking” of investments permitted.

(cid:129) Onex management con tinues to acquire more Onex shares by reinvesting 25 percent of any carry
distributions received in shares until they individually have an ownership of at least one million
Onex shares. These so acquired shares must be held until the individual’s retirement.

(cid:129) The Onex stock option plan has a hurdle such that vested options are only exercisable when the

market share value is at least 25 percent above the exercise price.

We believe that our superior track record is a direct result of this strong alignment of interests
between Onex and our shareholders, partners and management team.

In sum, we believe we have the operating philosophy, human resources, ﬁnancial resources,
track record and structure to enable Onex to continue to execute on its strategy and deliver results.

Onex Corporation December 31, 2009 9

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

INDUSTRY SEGMENTS

At December 31, 2009, Onex had seven reportable industry segments. A description of our oper-
ating companies by industry segment, and the managed, economic and voting ownership of Onex in
those businesses, is presented below.

Industry
Segments

Companies

Electronics
Manufacturing
Services

Celestica Inc. (TSX/NYSE: CLS), a global provider of electronics manufacturing
services (website: www.celestica.com).

Onex shares held: 17.7 million

Onex’
Economic/
Voting
Ownership

Onex
Manages(a)

–

8%(b)/69%

Aerostructures Spirit AeroSystems, Inc. (NYSE: SPR), the world’s largest independent designer and

23%

6%(b)/76%

manufacturer of aerostructures (website: www.spiritaero.com).

Onex shares held: 8.6 million
Onex Partners I shares subject to a carried interest: 17.2 million

Healthcare

Emergency Medical Services Corporation (NYSE: EMS), the leading provider of emer-
gency medical services in the United States (website: www.emsc.net).

32%

11%(b)/82%

Onex shares held: 4.8 million
Onex Partners I shares subject to a carried interest: 7.0 million

Center for Diagnostic Imaging, Inc., a U.S. provider of diagnostic and therapeutic radi-
ology services (website: www.cdiradiology.com).

81%

19%/100%

Total Onex, Onex Partners I and Onex management investment at cost:
$88 million (US$73 million)

Onex portion: $21 million (US$17 million)
Onex Partners I portion subject to a carried interest: $64 million (US$53 million)

Skilled Healthcare Group, Inc. (NYSE: SKH), an organization of skilled nursing and
assisted living facilities operators in the United States (website: www.skilledhealth -
caregroup.com).

40%

9%/89%

Onex shares held: 3.5 million
Onex Partners I shares subject to a carried interest: 10.7 million

Carestream Health, Inc., a global provider of medical and dental imaging and health-
care information technology solutions (website: www.carestreamhealth.com).

97%

38%/100%

Total Onex, Onex Partners II and Onex management investment at cost:
$521 million (US$471 million)

Onex portion: $206 million (US$186 million)
Onex Partners II portion subject to a carried interest: $292 million (US$266 million)

Res-Care, Inc.(c) (NASDAQ: RSCR), the largest U.S. provider of residential, training,
educational and support services for people with disabilities and special needs (web-
site: www.rescare.com).

25%

6%/(d)

Onex shares held: 2.0 million
Onex Partners I shares subject to a carried interest: 6.2 million

(a) “Onex manages” represents the economic ownership collectively held by Onex and the third-party limited partners of the Onex Partners Funds.

(b) Onex’ economic ownership percentage excludes shares held in connection with the Management Investment Plan.

(d) Onex exerts significant inﬂuence over this equity-accounted investment through its right to appoint members to the Board of Directors of the entity.

10 Onex Corporation December 31, 2009

Companies

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Onex’
Economic/
Voting
Ownership

Onex
Manages(a)

The Warranty Group, Inc., the world’s largest provider of extended warranty contracts
(web site: www.thewarrantygroup.com).

94%

29%/100%

Total Onex, Onex Partners I, Onex Partners II and Onex management investment at cost:
$556 million (US$488 million)

Onex portion: $175 million (US$154 million)
Onex Partners I portion subject to a carried interest: $204 million (US$178 million)
Onex Partners II portion subject to a carried interest: $155 million (US$137 million)

Sitel Worldwide Corporation, a global provider of outsourced customer care services
(website: www.sitel.com).

–

66%/88%

Onex investment at cost: $340 million (US$251 million)

Tube City IMS Corporation, an outsourced services provider to steel mills (website:
www.tubecityims.com).

91%

36%/100%

Total Onex, Onex Partners II and Onex management investment at cost: $297 million
(US$249 million)

Onex portion: $117 million (US$98 million)
Onex Partners II portion subject to a carried interest: $168 million (US$140 million)

Industry
Segments

Financial
Services

Customer
Support
Services

Metal
Services

Other
Businesses

• Aircraft &

Aftermarket

Hawker Beechcraft Corporation(b), the largest privately owned designer and manufac-
turer of business jet, turboprop and piston aircraft (website: www.hawkerbeechcraft.com).

49%

19%/(c)

Total Onex, Onex Partners II and Onex management investment at cost: $564 million
(US$485 million)

Onex portion: $223 million (US$191 million)
Onex Partners II portion subject to a carried interest: $319 million (US$274 million)

• Commercial
Vehicles

Allison Transmission, Inc.(b), the world leader in the design and manufacture of auto-
matic transmissions for on-highway trucks and buses, off-highway equipment and mili-
tary vehicles (website: www.allisontransmission.com).

49%

15%/(c)

Total Onex, Onex Partners II, certain limited partners and Onex management
investment at cost: $805 million (US$763 million)
Onex portion: $250 million (US$237 million)
Onex Partners II portion subject to a carried interest: $357 million (US$339 million)

• Injection
Molding

Husky Injection Molding Systems Ltd., the leading global supplier of injection molding
equipment and services to the PET plastics industry (website: www.husky.ca).

98%

36%/100%

Total Onex, Onex Partners I, Onex Partners II and Onex management investment
at cost: $626 million (US$622 million)

Onex portion: $226 million (US$225 million)
Onex Partners I portion subject to a carried interest: $97 million (US$96 million)
Onex Partners II portion subject to a carried interest: $278 million (US$276 million)

• Gaming

Tropicana Las Vegas, Inc., located directly on the Las Vegas Strip, is one of the best-
known casinos in Las Vegas (www.troplv.com).

71%

15%/71%

Total Onex, Onex Partners III and Onex management investment at cost:
$225 million (US$205 million)

Onex portion: $49 million (US$45 million)
Onex Partners III portion subject to a carried interest: $159 million (US$144 million)

(a) “Onex manages” represents the economic ownership collectively held by Onex and the third-party limited partners of the Onex Partners Funds.

(b) These investments are accounted for on an equity basis in Onex’ audited annual consolidated financial statements.

(c) Onex exerts significant inﬂuence over these equity-accounted investments through its right to appoint members to the Board of Directors of each

of the entities.

Onex Corporation December 31, 2009 11

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Industry
Segments

Other
Businesses
(cont’d)

• Building
Products

Companies

RSI Home Products, Inc.(b), a leading manufacturer of kitchen, bathroom and home
organization cabinetry sold through home centre retailers, independent kitchen and
bath dealers and other distributors (www.rsiholdingcorp.com).

Total Onex, Onex Partners II and Onex management investment at cost: $338 million
(US$318 million)

Onex portion: $133 million (US$126 million)
Onex Partners II portion subject to a carried interest: $190 million (US$179 million)

Onex’
Economic/
Voting
Ownership

Onex
Manages(a)

50%

20%/50%(c)

• Mid-cap

Opportunities

ONCAP, a private equity fund focused on acquiring and building the value of mid-capital-
ization companies based in North America (website: www.oncap.com). ONCAP II
actively manages investments in CSI Global Education Inc., EnGlobe Corp. (TSX: EG),
Mister Car Wash, CiCi’s Pizza and Caliber Collision Centers.

Total Onex, ONCAP II and Onex management investment at cost: $265 million

Onex portion: $117 million
ONCAP II portion: $132 million

• Real Estate

Onex Real Estate Partners, a platform dedicated to acquiring and improving real estate
assets in North America.

Onex investment in Onex Real Estate transactions at cost: $207 million (US$193 million) (d)

• Credit

Securities

Onex Credit Partners, a credit investing platform focused on generating attractive risk-
adjusted returns through the purchase of undervalued credit securities.

Onex investment in Onex Credit Partners’ funds at market: $229 million (US$218 million),
of which $137 million (US$130 million) is in an Onex Credit Partners’ unleveraged senior
secured loan portfolio that purchases assets with greater liquidity

–

44%/100%

86%/100%

50%(e)/50%(e)

(a) “Onex manages” represents the economic ownership collectively held by Onex and the third-party limited partners of the Onex Partners Funds.

(b) This investment is accounted for on an equity basis in Onex’ audited annual consolidated financial statements.

(c) Onex exerts significant inﬂuence over these equity-accounted investments through its right to appoint members to the Board of Directors of each

of the entities.

(d) Investment at cost in Onex Real Estate excludes Onex’ investment in Town and Country properties as Town and Country has been substantially

realized and has returned all of Onex’ invested capital.

(e) This represents Onex’ share of the Onex Credit Partners’ platform.

12 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

FINANCIAL REVIEW

This section discusses the significant changes in Onex’ consolidated statements of earnings,
consolidated balance sheets and consolidated statements of cash flows for the fiscal year ended
December 31, 2009 compared to those for the year ended December 31, 2008 and, in selected
areas, to those for the year ended December 31, 2007.

C O N S O L I D A T E D O P E R A T I N G R E S U L T S

Impairment tests of goodwill, intangible assets

and long-lived assets

This section should be read in conjunction with Onex’

Goodwill in an accounting context represents the cost of

audited annual consolidated statements of earnings and

investments in operating companies in excess of the fair

corresponding notes thereto.

Critical accounting policies and estimates
Onex prepares its ﬁnancial statements in accordance

value of the net identiﬁable assets acquired. Essentially all

of the goodwill amount that appears on Onex’ audited

annual consolidated balance sheets at December 31, 2009

and 2008 was recorded by the operating companies.

with Canadian generally accepted accounting principles

Goodwill is not amortized, but is assessed for impairment

(“GAAP”). The preparation of these ﬁnancial statements in

at the reporting unit level annually, or sooner if events or

conformity with Canadian GAAP requires management of

changes in circumstances or market conditions indicate

Onex and management of the operating companies to make

that the carrying amount could exceed fair value. The test

estimates and assumptions that affect the reported amounts

for goodwill impairment used by our operating companies

of assets and liabilities, disclosures of contingent assets

is to assess the fair value of each reporting unit within an

and liabilities, and the reported amounts of revenues and

operating company and determine if the goodwill asso -

expenses for the period of the consolidated ﬁnancial state-

ciated with that unit is less than its carrying value. This

ments. Signiﬁcant accounting policies and methods used in

assessment takes into consideration several factors,

the preparation of the ﬁnancial statements are described in

including, but not limited to, future cash ﬂows and market

note 1 to the December 31, 2009 audited annual consoli-

conditions. If the fair value is determined to be lower than

dated ﬁnancial statements. Onex and its operating compa-

the carrying value at an individual reporting unit, then

nies evaluate their estimates and assumptions on a regular

goodwill is considered to be impaired and an impairment

basis based on historical experience and other relevant fac-

charge must be recognized. Each operating company has

tors. Included in Onex’ consolidated ﬁnancial statements

developed its own internal valuation model to determine

are estimates used in determining the allowance for doubt-

fair value. These models are subjective and require man-

ful accounts, inventory valuation, the valuation of deferred

agement of the particular operating company to exercise

taxes, intangible assets and goodwill, the useful lives of

judgement in making assumptions about future results,

property, plant and equipment and intangible assets, rev-

including revenues, operating expenses, capital expendi-

enue recognition under contract accounting, pension and

tures and discount rates.

post-employment beneﬁts, losses and loss adjustment

The impairment test for intangible assets and long-

expenses reserves, restructuring costs and other matters.

lived assets with limited lives is similar to that of goodwill.

Actual results could differ materially from those estimates

There were impairments in goodwill, intangible

and assumptions.

assets and long-lived assets recorded by certain operating

The assessment of goodwill, intangible assets and

companies in 2009. These are reviewed on page 36 and note 21

long-lived assets for impairment, the determination of

to the audited annual consolidated ﬁnancial statements.

income tax valuation allowances, contract accounting and

losses and loss adjustment expenses reserves require the

use of judgements, assumptions and estimates. Due to the

material nature of these factors, they are discussed here in

greater detail.

Onex Corporation December 31, 2009 13

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Income tax valuation allowance

using individual case-basis valuations and statistical analy-

An income tax valuation allowance is recorded against

ses. These estimates are subject to the effects of trends in

future income tax assets when it is more likely than not that

loss severity and frequency and claims reporting patterns

some portion or all of the future income tax assets recog-

of The Warranty Group’s third-party administrators. While

nized will not be realized prior to their expiration. The rever-

there is considerable variability inherent in these esti-

sal of future income tax liabilities, projected future taxable

mates, management of The Warranty Group believes the

income, the character of income tax assets, tax planning

reserves for losses and loss adjustment expenses are ade-

strategies and changes in tax laws are some of the factors

quate and appropriate, and it continually reviews and

taken into consideration when determining the valuation

adjusts those reserves as necessary as experience develops

allowance. A change in these factors could affect the esti-

or new information becomes known.

mated valuation allowance and income tax expense. During

2009, Onex, the parent company, reduced its future income

tax liability by $146 million and recorded a corresponding

New accounting policies in 2009
Goodwill and intangible assets

amount as a recovery in income tax. This reduction resulted

On January 1, 2009, Onex adopted the Canadian Institute

from the enactment of lower income tax rates and those

of Chartered Accountants Handbook (“CICA Handbook”)

rates being applied to the recorded future income tax liabili-

Section 3064, “Goodwill and Intangible Assets”, which

ties to bring the liability in line with the current income tax

replaces existing standards. This revised standard estab-

rates. Note 14 to the audited annual consolidated ﬁnancial

lishes guidance for the recognition, measurement and dis-

statements provides additional disclosure on income taxes.

closure of goodwill and intangible assets, including

Contract accounting

internally generated intangible assets. The adoption of this

standard did not have a signiﬁcant effect on Onex’ audited

The aerostructures segment recognizes revenue using

annual consolidated ﬁnancial statements.

the contract method of accounting since a signiﬁcant

portion of Spirit AeroSystems Inc.’s (“Spirit AeroSystems”)

Credit risk and fair value of ﬁnancial assets

revenues is under long-term, volume-based contracts,

requiring delivery of products over several years. Revenues

and ﬁnancial liabilities
In January 2009, Onex adopted the Emerging Issues Com -

from each contract are recognized in accordance with the

mittee Abstract 173, “Credit Risk and the Fair Value of Finan -

percentage-of-completion method of accounting, using the

cial Assets and Financial Liabilities” (“EIC-173”). EIC-173

units-of-delivery method. As a result, contract accounting

states that an entity’s own credit risk and the credit risk of

uses various estimating techniques to project costs to

the counterparty should be taken into account in deter-

completion and estimates of recoveries asserted against

mining the fair value of ﬁnancial assets and ﬁnancial liabil-

the customer for changes in speciﬁcations. These estimates

ities, including derivative instruments. The adoption of this

involve assumptions of future events, including the quan-

standard did not have a signiﬁcant effect on Onex’ audited

tity and timing of deliveries and labour performance

annual consolidated ﬁnancial statements.

and rates, as well as projections relative to material

and overhead costs. Contract estimates are re-evaluated

Financial instruments – disclosures

periodically and changes in estimates are reﬂected in the

In June 2009, the CICA issued an amendment to CICA

current period.

Handbook Section 3862, “Financial Instruments – Disclo -

sures”. This amend ment requires enhanced disclosures on

Losses and loss adjustment expenses reserves

liquidity risk of ﬁnancial instruments and new disclosures

The Warranty Group, Inc. (“The Warranty Group”) records

on fair value measurements of ﬁnancial instruments. Notes 1

losses and loss adjustment expenses reserves, which rep re -

and 26 to the audited annual consolidated ﬁnancial state-

sent the estimated ultimate net cost of all reported and

ments provide the additional disclosures on liquidity risk of

unreported losses on warranty contracts. The reserves for

ﬁnancial instruments, as well as the new disclosure on fair

unpaid losses and loss adjustment expenses are estimated

value measurements of ﬁnancial instruments.

14 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Variability of results
Onex’ audited annual consolidated operating results may

Acquisitions and dispositions
The following paragraphs describe the signiﬁcant acquisi-

vary substantially from year to year for a number of reasons,

tion and dispositions in 2009.

including some of the following: the current economic envi-

ronment; acquisitions or dispositions of businesses by

Sale of shares of Emergency Medical Services

Onex, the parent company; the volatility of the exchange

In early August 2009, EMSC completed a secondary offer-

rate between the Canadian dollar and certain foreign cur-

ing of 9.2 million shares at a price of US$40.00 per share,

rencies, primarily the U.S. dollar; the change in market

before underwriter commissions. Onex, Onex Partners I and

value of stock-based compensation for both the parent

certain limited partners of Onex Partners I sold shares in

company and its operating companies; changes in the

this offering for net cash proceeds of $381 million and

market value of Onex’ publicly traded operating com -

recorded a pre-tax gain of $275 million. The shares sold

panies; and activities at Onex’ operating companies. These

represented 29 percent of the selling shareholders’ initial

activities may include the purchase or sale of businesses;

ownership in EMSC. EMSC did not issue any new shares as

ﬂuctuations in customer demand and in materials and

part of this offering. Onex received net cash proceeds of

employee-related costs; changes in the mix of products

$148 million on its sale of 3.5 million shares in this offering

and services produced or delivered; impairments of good-

and recorded a pre-tax gain of $90 million on the sale of its

will, intangible assets or long-lived assets; and charges to

shares. Onex’ share of the gain and net proceeds include

restructure operations.

$5 million of carried interest received as a result of the

proceeds distributed to third-party limited partners of Onex

U.S. dollar to Canadian dollar exchange rate movement

Partners I on this realization. Onex’ share of the carried

Since most of Onex’ operating companies report in U.S.

interest received reﬂected an $8 million reduction as a

dollars, the upward or downward movement of the U.S.

result of the loss on the Cosmetic Essence, Inc. (“CEI”)

dollar to Canadian dollar exchange rate for the year com-

investment realized earlier in 2009 by the third-party lim-

pared to last year will affect Onex’ reported consolidated

ited partners.

results of operations. During 2009, the average U.S. dollar

to Canadian dollar exchange rate was 1.1415 Canadian

In November 2009, EMSC completed an additional
secondary offering of 9.2 million shares at a price of

dollars, approximately 7 percent higher compared to 1.0671

US$48.31 per share, before underwriter commissions. Onex,

Canadian dollars for 2008.

2009 market environment

Onex Partners I and certain limited partners of Onex Part -

ners I sold shares in this offering for net cash proceeds of

$446 million and recorded a pre-tax gain of $320 million.

The economic downturn that began in 2008 continued in

The shares sold represented 29 percent of the selling share-

2009. Onex’ operating companies have not been immune to

holders’ initial ownership in EMSC. EMSC did not issue any

the slowdown, which has been reﬂected in decreased rev-

new shares as part of this offering. Onex received net cash

enues for many of our businesses. The global credit markets

proceeds of $183 million on its sale of 3.5 million shares in

are improving but it is still difﬁcult to raise ﬁnancing for sig-

this offering and recorded a pre-tax gain of $104 million on

niﬁcant acquisitions, which also has the effect of damp -

the sale of its shares. Onex’ share of the gain and net pro-

ening opportunities for realizations. However, during the

ceeds include $15 million of carried interest received as a

second half of 2009, we began to see an improvement in the

result of the proceeds distributed to third-party limited

equity markets creating the opportunity for initial and sec-

partners of Onex Partners I on this realization.

ondary equity offerings. This enabled Onex to realize on a

Onex, Onex Partners I and certain limited partners

portion of its investments in Emergency Medical Services

of Onex Partners I continue to own 13.7 million shares of

Cor poration (“EMSC”) and Celestica in 2009.

EMSC at December 31, 2009, which represents an ap prox -

imate 32 percent equity interest, and continue to retain an

82 percent voting interest in the company. Onex’ portion of

the EMSC shares held at December 31, 2009 is 5.2 million

shares for a 12 percent equity interest.

Onex Corporation December 31, 2009 15

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Sale of shares of Celestica

US$13 million. After Tropicana Las Vegas emerged from

In early October 2009, Onex completed the sale of 11 million

bankruptcy, a valuation was performed that assigned an

subordinate voting shares of Celestica Inc. (“Celestica”) to

enterprise value of US$230 million to the equity of

a syndicate of underwriters at a gross price of $10.30

Tropicana Las Vegas, prior to the rights offering.

per share. Onex received net proceeds of $104 million

Tropicana Las Vegas is the ﬁrst investment made

and recorded a pre-tax accounting gain of $6 million. The

through Onex Partners III. Including the aforementioned

accounting gain is based on the difference between the

rights offering, Onex, Onex Partners III and Onex manage-

proceeds and the book value for the portion sold, which

ment’s investment in the new company at December 31,

includes prior dilution gains and Onex’ share of annual net

2009 was $225 million for a 71 percent ownership interest.

earnings or loss since the acquisition in 1996. Onex contin-

This includes Mr. Yemenidjian’s 3 percent ownership inter-

ues to own an 8 percent equity interest and a 69 percent

est. Onex’ portion of this investment is $49 million, which

voting interest in Celestica at December 31, 2009.

represents a 15 percent ownership interest. Tropicana Las

Vegas was consolidated in Onex’ audited annual ﬁnancial

Acquisition of Tropicana Las Vegas

statements beginning in the third quarter of 2009.

In May 2008, Tropicana Entertainment, LLC and its Las

Located directly on the Las Vegas Strip, Tropicana

Vegas subsidiaries (collectively, “Tropicana”) ﬁled for relief

Las Vegas is one of the best-known and most storied casinos

under Chapter 11 of the U.S. Bankruptcy Code. Since Trop -

in the United States. The 34-acre property is located at

icana’s ﬁling, Onex and Onex Partners III, through a special

perhaps the busiest pedestrian intersection in Las Vegas,

purpose entity, acquired a majority of the company’s

Tropi cana Avenue and Las Vegas Boulevard. Tropicana Las

US$440 million secured term loan, which had its Las Vegas

Vegas has more than 1,700 hotel rooms and an approximate

hotel and casino property pledged as security for the loan.

50,000-square-foot casino. In January 2010, Tropi cana Las

The debt was purchased at various discounts and ﬁnanced

Vegas initiated a second rights offering for up to US$75 mil-

through a credit facility established for the purpose of mak-

lion of additional capital. While not yet ﬁnalized, Onex and

ing the purchases. In late May 2009, the credit facility was

Onex Partners III expect to contribute their pro-rata share of

repaid by the equity capital contributed by Onex, Onex

the offering, plus additional amounts should certain third-

Partners III and Alex Yemenidjian, former President of MGM

party investors not participate. Of the total Onex and Onex

Mirage and Onex’ partner. Onex worked with Tropi cana and

Partners III investment, Onex would contribute its share

the other debt holders on a restructuring plan that provided

based on its commitment level to Onex Partners III at the

for Onex’ control of the Las Vegas property upon emergence

time of the initial Tropicana Las Vegas investment.

from bankruptcy.

On May 5, 2009, the U.S. Bankruptcy Court con -

Sale of Cineplex Entertainment

ﬁrmed Tropicana’s plan of reorganization for the Las Vegas

In April 2009, Onex sold its remaining approximately 13 mil-

property. The plan provided for the secured creditors,

lion trust units of Cineplex Galaxy Income Fund through a

including Onex, to receive 100 percent of the equity in

secondary offering at a gross price of $14.25 per trust unit.

the Las Vegas property, and for Alex Yemenidjian to be

Onex realized approximately $175 million of net proceeds

appointed Chief Executive Ofﬁcer of the company. On July 1,

and recorded a pre-tax gain of $160 million on this sale. This

2009, the new company, now operating as Tropicana Las

sale brings to a close an investment platform in the theatre

Vegas, Inc. (“Tropicana Las Vegas”), emerged from bank-

exhibition industry that Onex established in 1998 with

ruptcy with no debt. In addition, as part of the plan of reor-

Galaxy Entertainment. Over the course of 10 years, Onex

ganization, the secured creditors were given the opportunity

invested US$355 million and realized total proceeds of

to subscribe to a US$75 million rights offering of preferred

approximately US$900 million from its theatre exhibition

shares of Tropicana Las Vegas that would fund renovations

businesses. Onex’ investment in Cineplex Enter tainment

of the company’s facilities. In August 2009, the company

was accounted for on an equity basis in Onex’ audited

called capital from rights offering subscribers. Onex, Onex

annual consolidated ﬁnancial statements up to the end of

Partners III and Alex Yemenidjian’s investment under this

the ﬁrst quarter of 2009.

rights offering was US$60 million, of which Onex’ share was

16 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Disposition of CEI

At the end of 2008, CEI was in violation of certain of its debt

Consolidated revenues and cost of sales
Consolidated revenues were $24.8 billion in 2009, down

covenants. In 2009, CEI discussed a restructuring of its debt

8 percent from $26.9 billion in 2008, and up 6 percent from

with its lenders but was unable to reach an agreement.

$23.4 billion in 2007. Consolidated cost of sales was $19.5 bil-

Therefore, in early May 2009, Onex contributed its owner-

lion in 2009, a decrease of 10 percent from $21.7 billion in

ship in CEI’s securities to an entity controlled by CEI’s

2008 and up 2 percent from $19.1 billion in 2007.

lenders, who agreed to provide additional liquidity to CEI. At

The reported revenues and cost of sales of Onex’

that time, Onex and Onex Partners I ceased to have an equity

U.S.-based operating companies in Canadian dollars may

ownership in the business. Onex’ and Onex Part ners I’s origi-

not reﬂect the true nature of the operating results of those

nal December 2004 investment in CEI was $138 million, of

operating companies due to the translation of those

which Onex’ portion was $32 million. As a result of previ-

amounts and the associated ﬂuctuation of the U.S. dollar

ously recorded losses of CEI, Onex’ investment in the com-

to the Canadian dollar exchange rate. In table 1 below,

pany had a negative carrying value of $20 million. Therefore,

revenues and cost of sales by industry segment are pre-

Onex recorded a non-cash ac counting gain of $20 million in

sented in Canadian dollars as well as in the functional cur-

the second quarter of 2009 arising from the disposition of its

rency of the companies for the

ownership interest in CEI.

Review of December 31, 2009
Consolidated Financial Statements
The discussions that follow identify those material factors

years ended December 31, 2009,

2008 and 2007. The percentage

change in revenues and cost of

sales in Canadian dollars and

in the functional currency of

that affected Onex’ operating segments and Onex’ audited

the companies for these peri-

annual consolidated results for 2009. We will review the

ods is also shown. The discus-

major line items to the consolidated ﬁnancial statements

sions of revenues and cost of

T O TA L R E V E N U E S

A N D C O S T O F S A L E S

($ millions)

26,881

24,831

23,433

21,719

19,468

19,133

by segment.

sales by industry segment that

follow are in the companies’

functional currencies in order

to eliminate the impact of for-

eign currency translation on

those revenues and cost of sales.

Revenues
Cost of Sales

Revenues and Cost of Sales by Industry Segment for the Years Ended December 31, 2009 and 2008

Revenues

TABLE 1

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2009

2008

Change (%)

2009

2008

Change (%)

Electronics Manufacturing Services

$ 6,909

$ 8,220

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other (a)

Total

4,641

6,590

1,359

1,780

1,472

2,080

3,965

6,152

1,388

1,856

3,112

2,188

$ 24,831

$ 26,881

(16)%

17 %

7 %

(2)%

(4)%

(53)%

(5)%

(8)%

US$ 6,092

US$ 4,080

US$ 5,795

US$ 1,192

US$ 1,559

US$ 1,298

C$ 2,080

US$ 7,678

US$ 3,772

US$ 5,758

US$ 1,302

US$ 1,748

US$ 2,983

C$ 2,188

(21)%

8 %

1 %

(8)%

(11)%

(56)%

(5)%

Results are reported in accordance with Canadian generally accepted accounting principles. These results may differ from those reported by the individual operating companies.

(a) 2009 other includes CEI (up to May 2009), Husky, Tropicana Las Vegas, ONCAP II and the parent company. 2008 other includes CEI, Husky, Radian, ONCAP II and the

parent company.

Onex Corporation December 31, 2009 17

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Revenues and Cost of Sales by Industry Segment for the Years Ended December 31, 2009 and 2008 (cont’d)

Cost of Sales

TABLE 1

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2009

2008

Change (%)

2009

2008

Change (%)

Electronics Manufacturing Services

$ 6,319

$ 7,556

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other (a)

Total

3,946

4,766

656

1,140

1,329

1,312

3,215

4,504

665

1,197

2,932

1,650

$ 19,468

$ 21,719

(16)%

23 %

6 %

(1)%

(5)%

(55)%

(20)%

(10)%

US$ 5,572

US$ 3,474

US$ 4,188

US$ 574

US$ 999

US$ 1,173

C$ 1,312

US$ 7,061

US$ 3,055

US$ 4,219

US$ 624

US$ 1,129

US$ 2,813

C$ 1,650

(21)%

14 %

(1)%

(8)%

(12)%

(58)%

(20)%

Results are reported in accordance with Canadian generally accepted accounting principles. These results may differ from those reported by the individual operating companies.

(a) 2009 other includes CEI (up to May 2009), Husky, Tropicana Las Vegas, ONCAP II and the parent company. 2008 other includes CEI, Husky, Radian, ONCAP II and the

parent company.

Revenues and Cost of Sales by Industry Segment for the Years Ended December 31, 2008 and 2007

TABLE 1

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2008

2007

Change (%)

2008

2007

Change (%)

Revenues

Electronics Manufacturing Services

$ 8,220

$ 8,617

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other (a)

Total

3,965

6,152

1,388

1,856

3,112

2,188

4,147

4,826

1,399

1,868

1,676

900

$ 26,881

$ 23,433

US$ 7,678

US$ 3,772

US$ 5,758

US$ 1,302

US$ 1,748

US$ 2,983

C$ 2,188

US$ 8,070

US$ 3,861

US$ 4,573

US$ 1,304

US$ 1,748

US$ 1,575

C$ 900

(5)%

(2)%

26 %

–

89 %

143 %

(5)%

(4)%

27 %

(1)%

86 %

143 %

15 %

Cost of Sales

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2008

2007

Change (%)

2008

2007

Change (%)

Electronics Manufacturing Services

$ 7,556

$ 8,079

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other (a)

Total

3,215

4,504

665

1,197

2,932

1,650

3,344

3,659

674

1,205

1,529

643

$ 21,719

$ 19,133

(6)%

(4)%

23 %

(1)%

92 %

157 %

14 %

US$ 7,061

US$ 3,055

US$ 4,219

US$ 624

US$ 1,129

US$ 2,813

C$ 1,650

US$ 7,563

US$ 3,112

US$ 3,455

US$ 628

US$ 1,128

US$ 1,437

C$ 643

(7)%

(2)%

22 %

(1)%

–

96 %

157 %

Results are reported in accordance with Canadian generally accepted accounting principles. These results may differ from those reported by the individual operating companies.

(a) 2008 other includes CEI, Husky, Radian, ONCAP II and the parent company. 2007 other includes Cineplex Entertainment, CEI, Radian, ONCAP II, Onex Real Estate and the

parent company.

18 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Electronics Manufacturing Services
Celestica delivers innovative supply chain solutions to origi-

Cost of sales declined 21 percent to US$5.6 billion

in 2009 (2008 – US$7.1 billion). This is consistent with the

nal equipment manufacturers in the consumer, enterprise

decline in revenues. Gross proﬁt for 2009 declined 16 per-

computing, communications, industrial, aerospace and

cent to US$520 million (2008 – US$617 million). However,

defence and healthcare markets. These solutions include

gross margin as a percentage of revenues improved in

design, logistics, manufacturing, engineering, order ful -

2009 compared to 2008 due primarily to continued opera-

ﬁllment and aftermarket ser vices. During 2009, Celestica’s

tional improvements.

operations were impacted by weak end-market demand

Celestica reported a 5 percent decline in revenues

primarily driven by the global eco-

to US$7.7 billion in 2008 (2007 – US$8.1 billion). The rev-

E L E C T R O N I C S

nomic downturn. The company

enue decline was due primarily to lower volumes associ-

M A N U FA C T U R I N G S E R V I C E S

(US$ millions)

experienced declines in all its end-

ated with weaker demand in Celestica’s servers, enterprise

8,070

markets and its forward visibility

communications and storage end-markets, as well as

7,563

into end-market demand remains

the impact of customer disengagements primarily in the

7,678

7,061

6,092

5,572

Revenues
Cost of Sales

limited. In addition, Celes tica’s cus-

enterprise communications end-market. These factors

tomers continue to adjust their

more than offset the increase in revenue from customers

strategies in this difﬁcult environ-

in the company’s consumer, telecommunications and

ment, and accordingly, the com-

industrial end-markets.

pany has experienced increased

Cost of sales was down 7 percent to US$7.1 billion in

pricing pressure and other compe -

2008 (2007 – US$7.6 billion). This compares to a 5 percent

titive pressures. Although Celestica

decline in revenues. Gross proﬁt for 2008 was US$617 million,

has operated relatively well, the

up US$110 million from 2007 due primarily to operational

company expects that this environ-

improvements in Mexico and Europe. Celes tica continued

ment will continue to impact rev-

to beneﬁt from cost reductions, restructuring actions, the

enues and operating earnings.

impact of renegotiating or exiting unproﬁtable accounts

Celestica reported a 21 percent decline in rev-

and the streamlining and simplifying of processes through-

enues to US$6.1 billion in 2009 (2008 – US$7.7 billion).

out the company.

Celestica’s revenue and operating results vary from year to

year depending on the level of demand and seasonality in

each of its end-markets, the mix and complexity of the

products being manufactured, as well as the impact asso-

ciated with program wins or losses with new, existing or

disengaging customers, among other factors. During 2009,

the decline in Celestica’s reported revenue was due to

lower production volumes in most of the company’s end-

markets. This was driven by the slower economic environ-

ment in 2009 compared to 2008.

Onex Corporation December 31, 2009 19

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Aerostructures
Spirit AeroSystems is an aircraft parts designer and manu-

September and October 2008. As well, there were higher

than forecasted costs on blocks completed in December

facturer of commercial aero structures. Aerostructures are

2009, higher than expected costs on the Sikorsky CH-53K

A E R O S T R U C T U R E S

(US$ millions)

4,080

3,474

3,772

3,861

structural components, such as

program, and the transition to a new ERP system that

fuselages, propulsion systems

reduced operating efﬁciencies at Spirit AeroSystems’ Wichita

and wing systems, for commer-

facility during 2009.

cial, military and business jet

Revenues at Spirit AeroSystems were down 2 per-

aircraft. The company’s revenues

cent to US$3.8 billion in 2008 (2007 – US$3.9 billion). The

3,055

3,112

are primarily derived through

decrease in revenues was due primarily to the decrease in

long-term supply agreements

ship set deliveries to Boeing on its B737, B747, B767 and

with Boeing and requirements

B777 programs as a result of the strike at Boeing in 2008,

contracts with Air bus. The down-

which lasted for eight weeks. Partially offsetting this was a

turn in the economy did not drive

change in product mix, volume-based pricing adjustments

major declines in 2009 in the pro-

and an increase in ship set deliveries to Airbus on its A320,

duction rates of large commercial

A330/A340 and A380 programs. During 2008, Boeing ship

aircraft at Boeing and Airbus due

set deliveries decreased 7 percent, while ship set deliveries

to long lead times on orders of

to Airbus increased 5 percent.

new aircraft as well as signiﬁcant

Cost of sales declined 2 percent, or US$57 million,

Revenues
Cost of Sales

order backlogs.
Spirit AeroSystems’ revenues were up 8 percent

to US$3.1 billion in 2008 from 2007. This compares to a

2 percent decline in revenues in 2008. Cost of sales as a

to US$4.1 billion in 2009 (2008 – US$3.8 billion). The

percentage of revenues in the company’s functional cur-

increase is primarily attributable to higher ship set deliv-

rency was 81 percent in both 2008 and 2007.

eries for large commercial aircraft in 2009 compared to

lower deliveries in 2008 that resulted from a strike at

Boeing. Ship set deliveries to Boeing were up 13 percent

Healthcare
The healthcare segment revenues

in 2009 over 2008. Ship set deliveries for Airbus were up

and cost of sales consist of the

10 percent in 2009 over 2008. Deliveries to other cus-

operations of Emergency Medical

tomers were down. Ap proximately 96 percent of 2009 rev-

Services Corporation (“EMSC”),

enues were from Boeing and Airbus.

Center for Diagnostic Imaging,

Cost of sales, however, was up 14 percent to

Inc. (“CDI”), Skilled Healthcare

US$3.5 billion in 2009 (2008 – US$3.1 billion). A signiﬁcant

portion of the increase was due to the higher sales volume. In

Group, Inc. (“Skilled Healthcare”)
Inc.
and Carestream Health,

addition, there were certain unusual charges. The company

(“Care stream Health”). Res-Care,

recorded a pre-tax charge of US$93 million during the

Inc. (“ResCare”) is accounted for

second quarter of 2009 to recognize a forward-loss on the

on an equity basis and, accord-

company’s Gulfstream G-250 business jet program. Spirit

ingly, that company’s revenues

Aero Systems believes that this contract is in a loss situation

and cost of sales are not consol -

due to signiﬁcant overruns in expected development costs.

idated. The healthcare segment

Also included in 2009 cost of sales were unfavourable cumu-

reported a 1 percent increase in

H E A LT H C A R E

(US$ millions)

5,795

5,758

4,573

4,188

4,219

3,455

Revenues
Cost of Sales

lative catch-up adjustments of US$61 million related to

consolidated revenues to US$5.8 billion in 2009 (2008 –

periods prior to 2009 that were driven by the post-strike pro-

US$5.8 billion). Cost of sales decreased 1 percent to

duction ramp-up that resulted from the strike at Boeing in

US$4.2 billion in 2009 (2008 – US$4.2 billion).

20 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Table 2 provides revenues and cost of sales by operating company in the healthcare segment for the years ended

Decem ber 31, 2009, 2008 and 2007 in both Canadian dollars and the companies’ functional currencies.

Healthcare Revenues and Cost of Sales for the Years Ended December 31, 2009 and 2008

Revenues

TABLE 2

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2009

2008

Change (%)

2009

2008

Change (%)

Emergency Medical Services

$ 2,928

$ 2,574

Center for Diagnostic Imaging

Skilled Healthcare

Carestream Health

160

868

2,634

144

784

2,650

14 %

11 %

(1)%

US$ 2,570

US$ 141

US$ 760

US$ 2,324

US$ 2,410

US$ 135

US$ 733

US$ 2,480

Total

$ 6,590

$ 6,152

7 %

US$ 5,795

US$ 5,758

7 %

4 %

(6)%

1 %

Cost of Sales

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2009

2008

Change (%)

2009

2008

Change (%)

Emergency Medical Services

$ 2,530

$ 2,235

Center for Diagnostic Imaging

Skilled Healthcare

Carestream Health

728

1,456

638

1,583

13 %

8 %

14 %

(8)%

US$ 2,220

US$

US$ 639

US$ 1,283

US$ 2,094

US$ 44

US$ 597

US$ 1,484

Total

$ 4,766

$ 4,504

6 %

US$ 4,188

US$ 4,219

6 %

3 %

7 %

(14)%

(1)%

Results are reported in accordance with Canadian generally accepted accounting principles. These results may differ from those reported by the individual operating companies.

Onex Corporation December 31, 2009 21

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Healthcare Revenues and Cost of Sales for the Years Ended December 31, 2008 and 2007

Revenues

TABLE 2

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2008

2007

Change (%)

2008

2007

Change (%)

Emergency Medical Services

$ 2,574

$ 2,262

Center for Diagnostic Imaging

Skilled Healthcare

Carestream Health

144

784

2,650

123

678

1,763(a)

Total

$ 6,152

$ 4,826

14%

17%

16%

50%

27%

US$ 2,410

US$ 135

US$ 733

US$ 2,480

US$ 2,107

US$ 115

US$ 635

US$ 1,716(a)

US$ 5,758

US$ 4,573

14%

17%

15%

45%

26%

Cost of Sales

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2008

2007

Change (%)

2008

2007

Change (%)

Emergency Medical Services

$ 2,235

$ 1,972

Center for Diagnostic Imaging

Skilled Healthcare

Carestream Health

638

1,583

520

1,128(a)

Total

$ 4,504

$ 3,659

13%

23%

40%

23%

US$ 2,094

US$

US$ 597

US$ 1,484

US$ 1,838

US$ 36

US$ 486

US$ 1,095(a)

US$ 4,219

US$ 3,455

14%

22%

23%

36%

22%

Results are reported in accordance with Canadian generally accepted accounting principles. These results may differ from those reported by the individual operating companies.

(a) Carestream Health’s financial results are from the date of acquisition on April 30, 2007 to December 31, 2007.

Emergency Medical Services

During 2009, revenues at EMSC were up

EMSC is a leading provider of emergency medical services in

the United States. The company operates its business and

US$160 million, or 7 percent, to US$2.6 billion (2008 –
US$2.4 billion). EmCare reported US$218 million of revenue

markets its services under the American Medical Response

growth due primarily to 53 net new hospital contracts as

(“AMR”) and EmCare brands. AMR provides ambulance

well as higher patient visits to hospitals with existing con-

transport services and EmCare provides outsourced hospital

tracts. During the second half of 2009, part of the increase

emergency department stafﬁng and management services,

in volume of patient visits to hospitals year-over-year was

as well as facility-based services for hospitalist/inpatient,

driven by the H1N1 ﬂu pandemic. Par tially offsetting

radiology and anesthesiology departments. EMSC’s oper -

EmCare’s revenue growth was lower reported revenues at

ating results are impacted by the number of patients the

AMR of US$58 million. Much of the decline year-over-year

company treats and transports, as well as by the costs

at AMR was due to a higher level of revenues earned from

incurred to provide the necessary care and transportation

the company’s FEMA contract in 2008 (US$107 million).

for each patient. In addition, AMR’s results may be impacted

Excluding the impact of the 2008 FEMA hurricane rev-

year-over-year by revenues generated under the company’s

enues, AMR reported a 7 percent, or US$82 million,

Federal Emergency Management Agency (“FEMA”) national

increase in net revenues per weighted transport from

contract. This contract provides ambulance, para-transit,

increased reimbursement rates that became effective

and rotary and ﬁxed-wing ambulance transportation ser -

January 1, 2009 and growth in the company’s managed

vices to supplement federal and military responses to disas-

transportation business. This was partially offset by a

ters, acts of terrorism and other public health emergencies.

3 percent (US$33 million) decline in weighted transport

The difﬁcult economic environment did not materially
impact EMSC due to the nature of its services.

volume at AMR.

22 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Cost of sales was up 6 percent to US$2.2 billion in

CDI reported a 17 percent, or US$20 million,

2009 (2008 – US$2.1 billion). This was in line with the

increase in revenues to US$135 million in 2008 (2007 –

growth in revenues in 2009. Cost of sales as a percentage of

US$115 million). Approximately US$16 million of the rev-

revenues was 86 percent in 2009 (2008 – 87 percent).

enue growth was from new centres acquired in 2008, and the

During 2008, EMSC’s

revenues

increased

balance was from higher revenues at existing centres. Cost

US$303 million, or 14 percent, to US$2.4 billion (2007 –

of sales at CDI was US$44 million in 2008, up US$8 million,

US$2.1 billion). AMR recorded US$183 million of EMSC’s

or 22 percent (2007 – US$36 million). The increase in cost of

revenue growth with a signiﬁcant portion of that resulting

sales was due primarily to the increase in revenues associ-

from increases in revenue earned from contracts with

ated with new centres.

FEMA (US$97 million). During the third and early fourth

quarters of 2008, AMR dispatched an unprecedented num-

Skilled Healthcare

ber of ground, rotary and ﬁxed-wing air ambulances, and

Skilled Healthcare has two revenue segments: long-term

patient transport vehicles to assist people affected by hur-

care services and ancillary services. During 2009, approxi-

ricanes Gustav and Ike in three Gulf Coast states. The bal-

mately 88 percent of its revenues were from long-term

ance of the growth in revenue from AMR in 2008 was

care services, which include skilled nursing care and inte-

associated with higher transport revenue (US$86 million)

grated rehabilitation therapy services to residents in the

driven by increased volumes and rates on existing con-

company’s network of skilled nursing facilities. In addi-

tracts. EmCare accounted for US$120 million of EMSC’s

tion, the company earns ancillary service revenue by pro-

revenue growth in 2008 due primarily to 79 net new con-

viding related healthcare services, such as rehabilitation

tracts (US$65 million) and an increase in patient encoun-

therapy services to third-party facilities and hospice care.

ters and revenue per encounter under existing contracts

Revenues from its skilled nursing facilities are generated

(US$31 million).

from Medicare, Medicaid, managed care providers, insur-

Cost of sales at EMSC was US$2.1 billion in 2008,

ers, private pay and other services, while revenues from

up 14 percent (2007 – US$1.8 billion). Cost of sales as a per-

its assisted living facilities are generated primarily from

centage of revenues was 87 percent in both 2008 and 2007.

private pay sources, with a small portion earned from

Center for Diagnostic Imaging

Medicaid or other state-speciﬁc programs. To increase its

revenues, Skilled Healthcare focuses on acquiring and

CDI operates 54 diagnostic imaging centres in 10 states in

developing new facilities and improving its skilled mix,

the United States, providing imaging services such as mag-

which is the percentage of its skilled nursing patient popu-

netic resonance imaging (“MRI”), computed tomography

lation that is eligible to receive Medicare and managed

(“CT”), diagnostic and therapeutic injection procedures

care reimbursements. Medicare and managed care payors

and other procedures such as PET/CT, conventional x-ray,

typically provide higher reimbursements than other pay-

mammography and ultrasound. The difﬁcult economic

ors because patients in these programs typically require

environment had a softening effect on industry revenue

a greater level of care and service. The challenging eco-

growth and has impacted discretionary procedures in

nomic environment and competitive pressures impacted

2009. However, the company was able to grow same centre

the company’s skilled mix, resulting in a decrease in the

volumes, add additional centres and strengthen its bal-

average length of stay for its skilled patients, as well as

ance sheet in 2009. The company continues to generate

lower acute-care admissions in 2009 compared to 2008.

signiﬁcant cash ﬂow and is well positioned to capitalize on

Skilled Healthcare’s revenues grew 4 percent to

market consolidation opportunities.

US$760 million in 2009 (2008 – US$733 million). Revenues

CDI reported a 4 percent increase in revenues to

from the long-term care services segment were up 4 per-

US$141 million in 2009 (2008 – US$135 million) due pri-

cent, or US$24 million, primarily from higher rates from

marily to higher revenues from existing centres and new

Medicare, Medicaid and managed care pay sources, as well

centres acquired in 2008. Cost of sales increased 3 percent

as revenues from acquisitions completed in 2008. Partially

to US$46 million in 2009 (2008 – US$44 million). The in -

offsetting these increases was the effect of a decline

crease in cost of sales was slightly lower than revenues.

in occupancy. Ancillary revenues increased 3 percent, or

Onex Corporation December 31, 2009 23

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

US$3 million, from 2008. All of the growth in ancillary rev-

radiography and digital radiography equipment, picture

enues in 2009 resulted from an increase in rehabilitation

archiving and communications systems, radiology informa-

therapy services.

tion systems, information management solutions, dental

During 2009, cost of sales at Skilled Healthcare

practice management software and services, as well as tra-

increased 7 percent to US$639 million (2008 – US$597 mil-

ditional medical products, including x-ray ﬁlm, equipment,

lion) compared to a 4 percent increase in revenues in the

chemistry and services. The company’s revenues are in ﬁve

year. Included in cost of sales for 2009 was a one-time

reportable segments: Medical Film and Printing Solutions

charge of US$14 million associated with a restatement

(47 percent of total revenue), Dental (23 percent of total

from prior periods of the company’s reserves for accounts

revenue), Digital Capture Solutions (21 percent of total rev-

receivable. Receivable reserves were understated in prior

periods due to the improper dating of accounts by a for-

enue), Healthcare Information Solutions (8 percent of total
revenue) and Other (1 percent of total revenue).

mer ofﬁcer of Skilled Healthcare’s long-term care segment.

Excluding that one-time charge, cost of sales was up 5 per-

Carestream Health reported a 6 percent, or
US$156 million, decrease in revenues to US$2.3 billion in

cent, slightly above the increase in revenue. The net after-

2009 (2008 – US$2.5 billion). The decrease was anticipated

tax effect of this charge was US$8 million, of which Onex’

as revenue declined in its Medical Film and Printing Solu -

share was US$1 million.

tions segment due to the ongoing transition from tradi-

Revenues at Skilled Healthcare were up 15 per-

tional ﬁlm used in medical and dental imaging procedures

cent to US$733 million in 2008 (2007 – US$635 million).

to digital technologies, compounded by the movement in

Long-term care services accounted for US$88 million of

foreign exchange rates on revenues from outside the United

the revenue growth due primarily to revenues associated

States. The decline in Medical Film and Printing Solu tions

with acquisitions completed in New Mexico in September

was 13 percent, or US$167 million, while Dental declined

2007 and Kansas in April 2008 (US$64 million), increased

1 percent, or US$5 million. Included in the revenue decline

reimbursement rates from Medicare, Medicaid and man-

was US$62 million due to lower foreign exchange rates on

aged care pay sources (US$21 million), as well as a higher

its non-U.S.-dollar-denominated revenues compared to

patient acuity mix. Ancillary services increased US$10 mil-

2008, with most of that decline from a weakening of the

lion in 2008 over 2007 due primarily to increased hospice

euro. Partially offsetting the revenue decline in the Medical

business and rehabilitation therapy services revenue.

Film and Printing Solutions and Dental segments was a

Skilled Healthcare’s cost of sales was up 23 percent

US$20 million increase in revenues from the Digital Cap -

to US$597 million in 2008 (2007 – US$486 million). Long-

ture Solutions segment due to new product launches in

term care services accounted for US$68 million of the

2009, as well as the shift from traditional ﬁlm business as

increase due primarily to the acquisitions (US$50 million)

previously discussed.

and increased labour costs (US$13 million). Labour costs

Cost of sales was down 14 percent to US$1.3 bil-

increased due largely to a 5 percent increase in average

lion in 2009 (2008 – US$1.5 billion), a greater percentage

hourly rates and additional stafﬁng primarily in the nursing

than the decline in revenue in 2009. Gross proﬁt in 2009

area to respond to the increased mix of high-acuity

was up slightly to US$1,041 million (2008 – US$996 mil-

patients. Cost of sales from ancillary services increased

lion) due to the favourable impact of lower materials cost,

US$16 million in 2008 due primarily to higher revenues.

primarily silver and polyester, and increased productivity

across Carestream Health’s businesses.

Carestream Health

Carestream Health reported a 45 percent, or

Carestream Health provides products and services for the

US$764 million, increase in revenues to US$2.5 billion in

capture, processing, viewing, sharing, printing and storing

2008 (2007 – US$1.7 billion). Cost of sales reported a simi-

of images and information for medical and dental applica-

lar increase of 36 percent to US$1.5 billion in 2008 (2007 –

tions. The company also has a non-destructive testing busi-

US$1.1 billion). The inclusion of a full 12 months of results

ness, which sells x-ray ﬁlm and digital radiology products to

in 2008 compared to eight months in 2007 is the primary

the non-destructive testing market. Carestream Health sells

reason for the increase in revenues and cost of sales.

digital products, including printers and media, computed

24 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Financial Services
The Warranty Group’s revenues consist of warranty rev-

Customer Support Services
Sitel Worldwide Corporation (“Sitel Worldwide”) is one of

enues, insurance premiums and administrative and mar-

the world’s largest and most diversiﬁed providers of cus-

keting fees earned on warranties and service contracts for

tomer care outsourcing services. The company offers its

manufacturers, retailers and distributors of consumer

clients a wide array of services, including customer service,

electronics, appliances, homes and

technical support and customer

F I N A N C I A L S E R V I C E S

(US$ millions)

autos, as well as credit card en -

acquisition, retention and rev-

hancements and travel and leisure

enue generation. Substantially

1,302

1,304

programs through a global orga -

all of Sitel Worldwide’s customer

nization. The Warranty Group’s cost

care ser vices are inbound and

of sales consists primarily of the

delivered over the phone. In

change in reserves for future war-

addition, the company offers

C U S T O M E R

S U P P O R T S E R V I C E S

(US$ millions)

1,748

1,559

1,129

1,128

ranty and insurance claims, current

outbound services, usually for

999

claims payments and underwriting

short-term marketing campaigns

proﬁt sharing payments.

and selected back ofﬁce services,

Revenues at The War -

such as receivables management

ranty Group declined US$110 mil-

and payment and order pro -

lion to US$1.2 billion (2008 –

cessing. The company’s solutions

US$1.3 billion). The 8 percent de -

encompass the entire customer

cline was due primarily to lower

lifecycle, from the acquisition

earned premiums and administra-

of its clients’ customers to the

Revenues
Cost of Sales

1,192

574

624

628

Revenues
Cost of Sales

tive fees attributable to higher credit and underwriting

ser vice, growth and retention of those customers. Sitel

standards in Europe, currency translation of European rev-

Worldwide’s clients include many large and well-known

enues with a weakening in the value of both the British

brands. Sitel World wide’s operating results are impacted by

pound and the euro relative to the U.S. dollar, a decline in

the demand for the products of its customers. As a result,

U.S. auto sales and an overall decline in consumer spending

during 2009 Sitel Worldwide experienced lower call volumes

and conﬁdence. In addition, net investment income was

and revenues from its customers as they were impacted by

lower in 2009 compared to 2008 due to a decline in short-

the slowdown in the economy. This slowdown in volumes

term interest rates. Cost of sales was down 8 percent to

and revenues also caused certain customers to bring services

US$574 million in 2009 (2008 – US$624 million) due primar -

back in-house to ﬁll internal capacity while others shifted

ily to the same factors that affected revenues.

For the year ended December 31, 2008, The

their business between customer support service providers
based on pricing concessions.

Warranty Group reported revenues and cost of sales of

Revenues at Sitel Worldwide declined US$189 mil-

US$1.3 billion and US$624 million, respectively. This com-

lion, or 11 percent, to US$1.6 billion in 2009 (2008 –

pares to US$1.3 billion and US$628 million, respectively, in

US$1.7 billion) while cost of sales had a corresponding

2007. Approximately US$1.0 billion of total revenues was

decline of 12 percent to US$1.0 billion (2008 – US$1.1 bil-

from premiums earned on warranty contracts in 2008 and

lion). During 2009, the strengthening of the U.S. dollar

the balance, approximately US$0.3 billion, in 2008 was

against other currencies contributed US$86 million of the

from contract fees and other income, which were essen-

revenue decline in the year. Throughout 2009, Sitel World -

tially unchanged from 2007.

wide’s customers continued to be affected by the economic

slowdown, which resulted in lower call volumes, delays in

out sourcing decisions and ramping up of new programs, as

well as some selective customer disengagements, particu-

larly in Sitel Worldwide’s European operations. Lower cost of

sales was primarily driven by the lower revenues, as well as

the beneﬁt of restructuring programs initiated in 2008 and

Onex Corporation December 31, 2009 25

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

2009 in response to lower call volumes and the selective dis-

The vast majority of the decline in 2009 was attrib-

engagements of contracts that provided inadequate margins.

utable to lower sales in the raw materials business, where

Sitel Worldwide reported revenues of US$1.7 bil-

the cost of sales is passed through to Tube City IMS’ cus-

lion in each of 2008 and 2007. Revenues in 2008 included an

tomers. The balance was attributable to lower levels of steel

additional month of operations related to the late January

production affecting the services business. Tube City IMS’

2007 acquisition of SITEL Corporation (US$95 million).

service revenues are largely driven by the volume of raw

Excluding these additional revenues, Sitel Worldwide would

steel produced. The decline in steel production resulted

have reported a decline in revenues in 2008 due primarily to

in a 19 percent decline in Tube City IMS’ service revenues

lower call volumes as existing customers curtailed new

in 2009. Lower steel production also resulted in a decrease

product launches and promotional offers in response to the

in demand for the raw materials Tube City IMS procures for

economic downturn. This decline was partially offset by

its customers. Decreases in both the volume of raw mate -

new customer volumes in 2008. Cost of sales was US$1.1 bil-

rials sold and the selling prices of those materials resulted

lion in 2008, essentially the same as 2007. The year 2008

in a decrease in revenue from raw materials sales of 62 per-

included an additional month of operations compared to

cent in 2009. Cost of sales for the raw materials business

2007 associated with the late January 2007 acquisition of

decreased 63 percent in 2009. The decline in cost of sales

SITEL Corporation (US$62 million). Cost of sales as a per-
centage of revenue was 65 percent for both 2008 and 2007.

Metal Services
Tube City IMS Corporation (“Tube City IMS”) has two rev-

for the raw materials business in 2009 was generally con-

sistent with the decline in raw materials revenues since the

vast majority of raw materials purchased by Tube City IMS

are sold to its customers on a pass-through basis.

In the services business, management responded

enue categories: service revenue and revenue from the sale

swiftly to the decline in raw steel production by reducing

of materials. Service revenue is generated from scrap man-

site-level costs by 22 percent from the level experienced

agement, scrap preparation, raw materials optimization,

in 2008, which is a little better than the reduction in ser-

metal recovery and sales, material handling or product han-

vice revenues. Speciﬁc actions taken included meaningful

dling, slag or co-product processing, and metal recovery

reductions in the company’s workforce, as well as signiﬁ-

M E TA L S E R V I C E S

(US$ millions)

2,983

2,813

1,575

1,437

1,298

1,173

Revenues
Cost of Sales

services and surface conditioning.

cant reductions in maintenance expenditures and selling,

Revenue from the sale of materials

general and administrative expenses. As a result of these

is mainly generated by the com-

actions, the company has largely been able to maintain its

pany’s raw mate rials procurement

overall service margins (measured on the basis of revenues

business, but also includes rev-

after the cost of raw materials shipments).

enue from two locations of Tube
City IMS’ materials handling busi-
ness. During 2009, economic con-

Tube City IMS reported US$3.0 billion in revenues

for 2008 (2007 – US$1.6 billion). The signiﬁcant increase in

revenues in 2008 was primarily driven by strong North

ditions resulted in a sharp de cline

American steel production and demand for raw materials

in the volume of raw steel pro-

during the ﬁrst nine months of 2008, which resulted in

duced worldwide. While produc-

higher prices for scrap and other materials. However, dur-

tion has gradually increased from

ing the fourth quarter of 2008, Tube City IMS’ revenues

its lowest point, steel pro duction

experienced a signiﬁcant decline due to the dramatic drop

remains well below 2008 lev els.

in North American and global steel production that

During 2009, North Amer ican steel

reduced demand for scrap and lowered scrap pricing.

production capacity uti li zation, a

Revenue from the sale of materials was up 110 percent, or

key statistic used to mea sure raw steel production, averaged

US$1.4 billion to US$2.6 billion of total revenues in 2008

51 percent, compared to 81 percent in 2008.

(2007 – US$1.2 billion). The increase was due primarily to

During 2009, Tube City IMS reported a 56 percent

an increase in underlying scrap prices during the ﬁrst nine

decline in revenues to US$1.3 billion (2008 – US$3.0 bil-

months of 2008. Service revenue totalled US$387 million in

lion). Cost of sales had a similar decline of 58 percent to

2008, up 15 percent (2007 – US$338 million). This was due

US$1.2 billion in 2009 (2008 – US$2.8 billion).

26 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

primarily to the company’s acquisition of Hanson Re -

sales in 2008. This was partially offset by the global down-

sources Management (US$12 million), new sites, increased

turn in the fourth quarter of 2008 that resulted in a signiﬁ-

volumes at existing sites and increases in prices that were

cant drop in North American steel production and demand

partially offset by price escalators.

for raw materials.

Cost of sales in 2008 was up 96 percent, or

US$1.4 billion, to US$2.8 billion (2007 – US$1.4 billion).

Tube City IMS procures scrap metal on behalf of its cus-

Other Businesses
The other businesses segment primarily includes the rev-

tomers and much of its cost of sales is associated with

enues of Husky Injection Molding Systems, Ltd. (“Husky”),

that activity. Therefore, the increase in the purchase cost of

Tropicana Las Vegas and the ONCAP II companies – CSI

scrap metal increased cost of sales in 2008. The cost of

Global Education Inc. (“CSI”), EnGlobe Corp. (“EnGlobe”),

scrap metal is passed on to Tube City IMS’ customers and

Mister Car Wash, CiCi’s Pizza and Caliber Collision Centers

thus drove a similar increase in revenues. In addition, since

(“Caliber Collision”). Table 3 provides revenues and cost of

Onex purchased Tube City IMS in late January 2007, the

sales by operating company in the other businesses segment

inclusion of a full year of results in 2008 compared to

for 2009, 2008 and 2007 in both Canadian dollars and the

11 months in 2007 further augmented revenues and cost of

companies’ functional currencies.

Other Businesses Revenues and Cost of Sales for the Years Ended December 31, 2009 and 2008

Revenues

TABLE 3

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2009

2008

Change (%)

2009

2008

Change (%)

Husky

ONCAP II companies

Tropicana Las Vegas(a)

Other(b)

Total

$ 1,137

$ 1,290

839

601

–

297

$ 2,080

$ 2,188

(12)%

40 %

–

(77)%

(5)%

US$ 994

US$ 734

US$ 34

C$ 68

US$ 1,228

US$ 559

–

C$ 297

(19)%

31 %

–

(77)%

Cost of Sales

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2009

2008

Change (%)

2009

2008

Change (%)

Husky

ONCAP II companies

Tropicana Las Vegas(a)

Other(b)

Total

$ 781

$ 1,026

483

359

–

265

$ 1,312

$ 1,650

(24)%

35 %

–

(83)%

(20)%

US$ 681

US$ 423

US$ 3

C$ 44

US$ 975

US$ 334

–

C$ 265

(30)%

27 %

–

(83)%

Results are reported in accordance with Canadian generally accepted accounting principles. These results may differ from those reported by the individual operating companies.

(a) Tropicana Las Vegas’ financial results are from the date of acquisition on July 1, 2009 to December 31, 2009.

(b) 2009 other includes CEI (up to May 2009) and the parent company. 2008 other includes CEI, Radian and the parent company.

Onex Corporation December 31, 2009 27

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Other Businesses Revenues and Cost of Sales for the Years Ended December 31, 2008 and 2007

Revenues

TABLE 3

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

Husky(a)

ONCAP II companies(b)

Other(c)

Total

2008

$ 1,290

601

297

$ 2,188

2007

Change (%)

2008

2007

Change (%)

$ –

396

504

$ 900

–

52 %

(41)%

143 %

US$ 1,228

US$ 559

C$ 297

–

US$ 377

C$ 504

–

48 %

(41)%

Cost of Sales

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

Husky(a)

ONCAP II companies(b)

Other(c)

Total

2008

$ 1,026

359

265

$ 1,650

2007

Change (%)

2008

2007

Change (%)

$ –

222

421

$ 643

–

62 %

(37)%

157 %

US$ 975

US$ 334

C$ 265

–

US$ 211

C$ 421

–

58 %

(37)%

Results are reported in accordance with Canadian generally accepted accounting principles. These results may differ from those reported by the individual operating companies.

(a) Husky’s financial results for the few days from its date of acquisition in mid-December 2007 to December 31, 2007 were not significant to Onex’ consolidated results.

Accordingly, the company’s revenues and costs of sales for those few days were not included in Onex’ audited annual consolidated statement of earnings for the year ended

December 31, 2007.

(b) 2008 ONCAP II companies include CSI, EnGlobe, Mister Car Wash, CiCi’s Pizza and Caliber Collision. 2007 ONCAP II companies include CSI, EnGlobe, Mister Car Wash and

CiCi’s Pizza.

Husky

on euro-denominated revenues (US$18 million), and the

Husky provides highly engineered manufacturing systems

company’s decision to discontinue certain product lines

and services for the plastics injection molding equipment

(US$20 million). Cost of sales at Husky declined 30 per-

industry. The company engineers and manufactures com-

cent, or US$294 million, to US$681 million in 2009 (2008 –

plete system solutions that are comprised of injection mold-

US$975 million). The percentage decline in cost of sales

ing machines, molds, hot runners, temperature controllers

in 2009 was more than the decrease in revenues due to

and auxiliary equipment. Husky’s revenues are derived from

additional cost reductions in the year from the company’s

the sale of machines and complete systems, hot runners for

transformation plan initiated in 2008 and a US$91 million

systems and parts and aftermarket services. While Husky

one-time inventory charge recorded by Husky in 2008 origi-

signiﬁcantly improved its margins in 2009, sales were lower

nating from the 2007 acquisition. Accounting principles for

pri marily due to the global economic recession.

acquisitions require that inventory be stepped up in value to

Revenues at Husky declined 19 percent to

the selling price of the inventory less the direct cost to com-

US$1.0 billion in 2009 (2008 – US$1.2 billion) due primar ily

plete and sell the product. This had the effect of reducing

to the effect of the economic downturn in 2009 on the

margins in 2008 on the subsequent sale of inventory on

demand for the company’s products. Revenues were down

hand at the date of acquisition.

in North America (23 percent), Europe (31 percent) and Asia

Husky reported revenues of US$1.2 billion and

(3 percent), partially offset by a 13 percent increase in sales

cost of sales of US$975 million for the year ended Decem -

in Latin America. In addition, revenues at Husky in 2009

ber 31, 2008. During 2008, Husky reported strong revenues

were impacted by unfavourable foreign currency changes

in Asia Paciﬁc and Latin America but lower revenues in

28 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Europe and North America. As noted earlier, included in

company’s particular ﬁnancing structure, as well as certain

Husky’s cost of sales in 2008 were charges of US$91 million

non-cash charges including stock-based compensation,

originating from the acquisition accounting step-up in

amortization of intangible assets and any unusual or non-

value of inventory on the company’s balance sheet at the

recurring charges. Operating earnings is not a deﬁned mea -

date of acquisition. There are no comparative revenues or

sure under Canadian GAAP. The term operating earnings, as

cost of sales for 2007 since the company’s operating ﬁnan-

used here, is deﬁned as earnings before interest expense,

cial results for the few days from its mid-December 2007

amor tization of intangible assets and deferred charges, and

acquisition date to December 31, 2007 were not signiﬁcant

income taxes. Onex also excludes from oper ating earnings

to Onex’ consolidated results.

ONCAP II companies

accounting mea sures that do not reﬂect the actual operating

performance of the business, such as earnings (loss) from

equity-accounted investments, foreign exchange gains

The ONCAP II companies – CSI, EnGlobe, Mister Car Wash,

(loss), stock-based compensation recovery (expense), non-

CiCi’s Pizza and Caliber Collision – reported a 31 percent

recurring items such as gains on dispositions of operating

increase in revenues to US$734 million in 2009 (2008 –

investments, acquisition and restructuring charges, other

US$559 million). Cost of sales had a corresponding increase

income (expense), writedown of goodwill, intangible assets

of 27 percent to US$423 million in 2009 (2008 – US$334 mil-

and long-lived assets, as well as non-controlling interests

lion). Essentially all of the revenue and cost of sales growth

and discontinued operations.

in the year resulted from the inclusion of the operations of

Table 4 provides a reconciliation of the audited

Caliber Collision following ONCAP II’s purchase of that busi-

annual consolidated statements of earnings to operating

ness in October 2008.

earnings for the years ended December 31, 2009 and 2008.

During 2008, the ONCAP II companies’ revenues

increased US$182 million to US$559 million (2007 –

Operating Earnings Reconciliation

US$377 million) and cost of sales were US$334 million in

2008, up US$123 million from US$211 million in 2007.

TABLE 4

($ millions)

2009

2008

During 2008, the growth in revenues and cost of sales was

Earnings before the undernoted items

$ 2,544

$ 2,418

due to ONCAP II’s acquisition of Caliber Collision in late

Amortization of property, plant

October 2008, as well as the inclusion of a full year of

and equipment

results of Mister Car Wash and CiCi’s Pizza, acquired in

Interest income

(636)

(624)

April and June 2007, respectively.

Operating earnings

$ 1,961

$ 1,829

Tropicana Las Vegas

Amortization of intangible assets

Tropicana Las Vegas is one of the best-known and most

and deferred charges

storied casinos in Las Vegas located directly on the Las

Vegas Strip. Tropicana Las Vegas is a new business acquired

Interest expense of operating companies

Loss from equity-accounted investments

by Onex on July 1, 2009. This acquisition is described

Foreign exchange gains (loss)

earlier on page 16. The company contributed revenues of

US$34 million and cost of sales of US$3 million in 2009 for

the six-month period of Onex’ ownership.

Stock-based compensation recovery (expense)

Other income (expense)

Gains on dispositions of operating investments

(364)

(495)

(497)

(90)

(161)

783

Operating earnings
Management at Onex reviews the performance of individual

Acquisition, restructuring and other expenses

(219)

Writedown of goodwill, intangible assets

and long-lived assets

(370)

(1,584)

operating companies based on an operating earnings mea -

Earnings (loss) before income taxes, non-controlling

sure. Onex uses operating earnings as a measure to evaluate

interests and discontinued operations

$ 645

$ (1,061)

each operating company’s performance because it elimi-

nates interest charges, which are a function of the operating

Onex Corporation December 31, 2009 29

(366)

(550)

(322)

142

(77)

(220)

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Table 5 provides operating earnings (loss) by industry segment in Canadian dollars and the companies’ functional

currencies for the years ended December 31, 2009 and 2008.

Operating Earnings (Loss) by Industry Segment

TABLE 5

($ millions)

Canadian Dollars

Functional Currency

Year ended December 31

2009

2008

Change ($)

2009

2008

Change ($)

Electronics Manufacturing Services

$ 280

$ 309

$ (29)

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other (a)

Total

374

860

181

140

465

732

251

(49)

(91)

128

(70)

(15)

189

$ 1,961

$ 1,829

$ 132

US$ 252

US$ 324

US$ 760

US$ 160

US$ 85

US$ 26

C$ 140

US$ 284

US$ 450

US$ 677

US$ 231

US$ 72

US$ 44

C$ (49)

US$ (32)

US$ (126)

US$ 83

US$ (71)

US$ 13

US$ (18)

C$ 189

Results are reported in accordance with Canadian generally accepted accounting principles. These results may differ from those reported by the individual operating companies.

(a) 2009 other includes CEI (up to May 2009), Husky, Tropicana Las Vegas, ONCAP II and the parent company. 2008 other includes CEI, Husky, Radian, ONCAP II and

the parent company.

Consolidated operating earnings were up 7 percent to

$2.0 billion in 2009 (2008 – $1.8 billion). Much of the

Partially offsetting the above mentioned operating earnings
growth factors in 2009 were:

increase in operating earnings in 2009 resulted from a

(cid:129) a US$32 million decline in operating earnings at Celes tica

higher average U.S. dollar to Canadian dollar exchange

due primarily to lower volume of business, partially offset

rate compared to 2008. In addition, the following factors

by continued operational improvements and increased

affected the growth in operating earnings in 2009:
(cid:129) a US$48 million increase in operating earnings at Care -
stream Health resulting from the favourable impact of

productivity;

(cid:129) Skilled Healthcare’s US$18 million decline in operating

earnings due primarily to the unusual and one-time

productivity across all businesses, lower material costs for

charge to cost of sales for the allowance for doubtful

silver and polyester, and from the company’s restructuring

accounts in 2009, as previously discussed under Rev -

actions initiated in 2008, which focused on optimizing the

enues and Cost of Sales;

company’s cost structure as a stand-alone entity;

(cid:129) lower operating earnings of US$71 million in the ﬁnan-

(cid:129) EMSC’s operating earnings growth of US$47 million due

cial services segment at The Warranty Group; much of

primarily to the growth at EmCare, as discussed under

the decline was due to reduced margins on the com-

Revenues and Cost of Sales;

pany’s European credit business and the effect of lower

(cid:129) Higher operating earnings of US$13 million at Sitel

revenues;

World wide resulting from the beneﬁts of cost-saving

(cid:129) a decline in operating earnings of US$126 million at

initiatives implemented in 2008 and 2009; and

Spirit AeroSystems in 2009, reported in the aerostruc-

(cid:129) a US$97 million increase in operating earnings at Husky,

tures segment, due primarily to several charges to cost

as 2008 included a one-time reduction in margins by

of sales associated with losses on certain contracts, as

US$91 million originating from the acquisition account-

previously discussed under Revenues and Cost of Sales;

ing increase in the valuation of inventory on the com-

and

pany’s balance sheet at the time of acquisition in late

(cid:129) a US$18 million decrease in operating earnings at Tube

2007, which subsequently reduced operating earnings in

City IMS generally driven by a decline in raw steel pro-

2008 when the inventory was sold.

duction by its customers.

30 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Interest expense of operating companies
New investments are structured with the company having

Partially offsetting these factors was a US$8 million increase

in interest expense in 2009 resulting from the inclusion of

sufﬁcient equity to enable it to self-ﬁnance a signiﬁcant

Caliber Collision for a full year in 2009 following ONCAP II’s

portion of its acquisition cost with a prudent amount of

purchase of the business in October 2008. In addition, Sitel

debt. The level of debt is commensurate with the operating

Worldwide recorded higher interest expense of US$9 million

com pany’s available cash ﬂow, including consideration of

due primarily to higher debt and interest rates in 2009 com-

funds required to pursue growth opportunities. It is the

pared to 2008.

responsibility of the acquired operating company to ser -

vice its own debt obligations.

Consolidated interest expense was down 10 per-

Loss from equity-accounted investments
Loss from equity-accounted investments for the year

cent to $495 million in 2009 (2008 – $550 million). Ex -

ended December 31, 2009 was $497 million (2008 – $322 mil-

cluding the impact of foreign currency, Celestica’s interest

lion). This represents Onex’ and/or Onex Partners’ portion

expense declined by approximately US$18 million due pri-

of the earnings (loss) of Allison Transmission, Inc. (“Allison

marily to the repurchase of US$150 million in the principal

Transmission”); Hawker Beechcraft Corporation (“Hawker

value of its 2011 senior subordinated notes in the ﬁrst quar-

Beechcraft”); ResCare; RSI Home Products, Inc. (“RSI”);

ter of 2009 and an additional repurchase of US$339 million

the manager of Onex Credit Partners; Cypress Insurance

in the principal value of those notes in the fourth quarter

Group (“Cypress”); and Onex Real Estate’s investments.

of 2009. In addition, Care stream Health’s results reﬂected

Table 6 details the earnings (loss) from equity-accounted

a US$35 million decline in interest expense due primarily

investments by company, as well as Onex’ share of these

to lower interest rates in 2009 and the company’s debt

earnings (loss) for 2009 and 2008.

principal repayments from operating cash during the year.

Earnings (Loss) from Equity-accounted Investments

TABLE 6

($ millions)

Hawker Beechcraft

Allison Transmission

Onex Real Estate

Other (b)

Total

2009

2008

Net
Earnings

(Loss)(a)

Onex’ Share
of Net
Earnings
(Loss)

Net
Earnings

(Loss)(a)

Onex’ Share
of Net
Earnings
(Loss)

$ (237)

$ (95)

$ (80)

$ (32)

(181)

(97)

(58)

(82)

(198)

(68)

(63)

(61)

$ (497)

$ (223)

$ (322)

$ (142)

(a) The net earnings (loss) represent Onex’ and/or Onex Partners’ share of the net earnings (loss) in those businesses.

(b) 2009 other includes Cypress, Onex Credit Partners, ResCare and RSI. 2008 other includes Cineplex Entertainment, Cypress, Onex Credit Partners, ResCare and RSI.

Onex Corporation December 31, 2009 31

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Hawker Beechcraft

Allison Transmission

The $237 million loss (of which Onex’ share was $95 million)

A signiﬁcant portion of the loss reported by Allison Trans -

for Hawker Beechcraft in 2009 was due largely to the com-

mission in 2009 was due to the company recording a

pany recording signiﬁcant impairment charges in the third

US$190 million writedown of certain intangible assets that

quarter of 2009 related to goodwill, intangible and other

were determined to be impaired in the second quarter of

assets, primarily in Hawker Beechcraft’s business and gen-

2009. In addition, the company wrote down certain long-

eral aviation segment. During the third quarter of 2009,

term receivables and established reserves for other matters

Hawker Beechcraft completed a review of the carrying value

that the company had with General Motors Cor po ration

of its business and general aviation segment compared

(“GM”) as a result of the GM bankruptcy. The net charge for

to its fair value in light of the current decline in demand

Allison Transmission from these GM items was US$37 mil-

for new business aircraft. The company recorded a total of

lion. These matters relate to agreements with GM to share

US$726 million in impairment and other charges in the

future estimated costs between the two companies and, in

quarter. A component of these charges was a US$521 million

particular, for certain employee post-retirement healthcare

impairment charge for its business and general aviation seg-

obligations that stem from the 2007 acquisition of Allison

ment, which included an impairment charge of US$340 mil-

Transmission from GM.

lion for the full amount of the goodwill associated with this

segment. The other component was charges of US$205 mil-

Onex Real Estate

lion that were necessary to reduce the carrying value of

Onex Real Estate’s investments in the Camden properties,

other assets in this segment, as well as increased reserves for

Flushing Town Center, Urban Housing Platform, Town and

losses on certain aircraft programs and potential supplier

Country and NY Credit contributed $97 million of the loss

claims. These charges were the result of the company’s

on equity-accounted investments in 2009 compared to a

updated expectations as to the timing of a general aviation

$68 million loss in 2008. Onex’ share of Onex Real Estate’s

market recovery, the resulting reduced production volumes

losses was $82 million in 2009 compared to $61 million in

and pricing pressure on new aircraft sales.

2008. The majority of the loss in Onex Real Estate resulted

In addition, during the second quarter of 2009, the

from provisions established against the carrying value of

company recorded a one-time charge of US$31 million asso-

a number of Onex Real Estate investments as a result of

ciated with the restatement of the company’s fourth-quarter

current economic conditions.

2008 and ﬁrst-quarter 2009 results due to an error that

Hawker Beechcraft management identiﬁed in its calculation

of a deferred tax valuation reserve, which caused the com-

pany to understate its provisions for income taxes in those

prior periods. Onex’ share of this charge was US$6 million,

which was recorded in the third quarter of 2009. Partially

offsetting the above charges in 2009 was a US$352 million

gain by Hawker Beechcraft on its purchase of US$497 mil-

lion of its debt securities at a signiﬁcant discount in the

ﬁrst half of 2009.

32 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Foreign exchange gains (loss)
Foreign exchange gains (loss) reﬂect the impact of changes

In addition, Carestream Health, reported in the

healthcare segment, and Sitel Worldwide, reported in the

in foreign currency exchange rates. A consolidated foreign

customer support services segment, recorded foreign

exchange loss of $90 million was recorded for the year

exchange losses of $6 million and $10 million, respectively,

ended December 31, 2009 compared to a consolidated

in 2009 primarily as a result of the decline in value of the

foreign exchange gain of $83 million in 2008. Table 7 pro-

euro relative to the U.S. dollar.

vides a breakdown of and the change in foreign currency

gains (loss) by industry segment for the years ended De -

cem ber 31, 2009 and 2008.

Foreign Exchange Gains (Loss) by Industry Segment

TABLE 7

($ millions)

2009

2008

Change ($)

Electronics Manufacturing

Services

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other (a)

Total

$ (2)

$ (19)

(6)

(10)

(1)

(75)

(6)

(9)

–

107

(20)

(1)

(182)

$ (90)

$ 83

$ (173)

Stock-based compensation recovery (expense)
During 2009, Onex recorded a consolidated stock-based

compensation expense of $161 million compared to a stock-

based compensation recovery of $142 million in 2008. Table 8

provides a breakdown of and the change in stock-based

compensation by industry segment for the years ended

De cember 31, 2009 and 2008.

Stock-based Compensation Recovery (Expense)

by Industry Segment

TABLE 8

($ millions)

2009

2008

Change ($)

Electronics Manufacturing

Services

Aerostructures

Healthcare

$ (43)

$ (25)

$ (18)

(12)

(7)

(1)

(98)

(17)

(5)

(1)

190

(2)

–

(288)

$ (161)

$ 142

$ (303)

Results are reported in accordance with Canadian generally accepted accounting

Financial Services

principles. These results may differ from those reported by the individual

operating companies.

(a) 2009 other includes CEI (up to May 2009), Husky, ONCAP II and the parent com-

pany. 2008 other includes CEI, Husky, Radian, ONCAP II and the parent company.

Other (a)

Total

Much of the change in foreign exchange year-over-year was

principles. These results may differ from those reported by the individual

due to the movement of the U.S. dollar relative to the Cana -

operating companies.

Results are reported in accordance with Canadian generally accepted accounting

dian dollar, which primarily impacted Onex, the parent

company. Onex, the parent company, holds a signiﬁcant

portion of its cash in U.S. dollars as it anticipates that future

(a) 2009 other includes CEI (up to May 2009), Husky, Tropicana Las Vegas, ONCAP II

and the parent company. 2008 other includes CEI, Husky, Radian, ONCAP II and

the parent company.

acquisitions it enters into will be primarily funded with U.S.

Onex, the parent company, accounted for $93 million of the

dollars. Onex, the parent company, recorded $76 million of

expense in 2009 due to the change in its stock-based com-

foreign exchange loss in 2009, which is included in the other

pensation liability. Approximately $64 million of the expense

segment in table 7. The value of the U.S. dollar relative to

was due to the required revaluation of the liability for stock

the Canadian dollar declined to 1.0510 Cana dian dollars at

options and deferred share units based on changes in the

Decem ber 31, 2009 from 1.2180 Cana dian dollars at Decem -

market value of Onex shares. The increase in Onex’ share

ber 31, 2008. This compares to a foreign exchange gain

price to $23.60 per share at December 31, 2009 from $18.19

of $105 million recorded by Onex, the parent company, in

per share at December 31, 2008 resulted in an upward revalu-

2008 due to the increase in value of the U.S. dollar from

ation of the liability for stock options. The remaining amount

0.9913 Cana dian dollars at December 31, 2007.

relates to the revaluation of the potential liability under the

Management Investment Plan (the “MIP”) as described on

page 56. This compares to a $179 million stock-based com-

pensation recovery recorded in 2008 due to the 48 percent

decline in the market value of Onex shares at December 31,

2008 from $34.99 per share at December 31, 2007.

Onex Corporation December 31, 2009 33

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Other income (expense)
Consolidated other income totalled $97 million in 2009

and valuation allowances have been established against

the beneﬁt of all of these losses in the audited annual con-

compared to a $77 million expense in 2008. During 2009,

solidated ﬁnancial statements. As such, Onex does not

Onex, the parent company, accounted for $103 million of

expect to generate sufﬁcient taxable income to fully utilize

other income due primarily to a $93 million favourable

these losses in the foreseeable future. In connection with

mark-to-market and foreign exchange adjustment on the

this transaction, Onex obtained a tax ruling from Canada

Tropicana Las Vegas debt held by Onex and Onex Part-

Revenue Agency, and Deloitte & Touche LLP, an indepen -

ners III. Onex’ share of this income was $20 million. This

dent accounting ﬁrm retained by Onex’ Audit and Corpo -

adjustment was necessary to bring the carrying value of

rate Governance Committee, provided an opinion that

the Tropicana Las Vegas investment to the fair value of the

the value received by Onex for the tax losses was fair.

equity received in Tropicana Las Vegas on July 1, 2009.

The transaction was unanimously approved by Onex’ Audit

During 2008, other expense included a $65 million unfavour -

and Corporate Governance Committee, all the members of

able mark-to-market adjustment on the Tropicana Las Vegas

which are independent directors.

debt, of which Onex’ share was $15 million.

Partially offsetting the other income in 2009 was

In March 2009, Onex sold an entity, the sole assets

$16 million of other expense recorded by Carestream

of which were certain tax losses, to a public company

Health due to the settlement with Kodak of acquisition-

controlled by Mr. Gerald W. Schwartz, who is also Onex’

related working capital adjustments.

controlling shareholder. Onex received approximately

$3 million in cash for tax losses of approximately $23 mil-

lion. The entire $3 million was recorded as a gain in other

Gains on dispositions of operating investments
Gains on dispositions of operating investments totalled

income of Onex, the parent company, in 2009. Onex has sig-

$783 million in 2009 (2008 – $4 million). Table 9 details the

niﬁcant Canadian non-capital and capital losses available

nature of these gains.

Gains on Dispositions of Operating Investments

TABLE 9

($ millions)

Gains on:

Sale of Cineplex Entertainment

Disposition of CEI

Sale of shares of EMSC

Sale of shares of Celestica

Other, net

Total

Total
Gains
2009

Onex’
Share of
Gains
2009

Total
Gains
2008

Onex’
Share of
Gains
2008

$ 160

$ –

595

194

–

$ 783

$ 382

$ 4

Sale of Cineplex Entertainment

Disposition of CEI

In April 2009, Onex sold its remaining approximately 13 mil-

At the end of 2008, CEI was in violation of certain of its

lion trust units of Cineplex Galaxy Income Fund. Onex

debt covenants. In 2009, CEI discussed a restructuring of

received approximately $175 million of net proceeds on this

its debt with its lenders but was not able to reach an agree-

sale and recorded a $160 million pre-tax gain on this trans-

ment. As a result, in early May 2009, Onex contributed its

action in the second quarter of 2009.

ownership in securities of CEI to an entity controlled by

CEI’s lenders that agreed to provide additional liquidity to

34 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

CEI. As a result of this transfer, Onex and Onex Partners I

ceased to have an equity ownership in the business. Onex’

Acquisition, restructuring and other expenses
Acquisition, restructuring and other expenses are generally

investment in the company had a negative carrying value

considered to be costs incurred by the operating companies

of $20 million due to previously recorded losses of CEI.

to realign organizational structures or restructure manufac-

Therefore, Onex recorded a non-cash accounting gain of

turing capacity to obtain operating synergies critical to

$20 million in the second quarter of 2009 on the disposi-

building the long-term value of those businesses. Acquisi -

tion of CEI.

Sale of shares of EMSC

tion, restructuring and other expenses totalled $219 million

in 2009, down slightly from $220 million in 2008. Table 10

provides a breakdown of and the change in acquisition,

In August 2009, EMSC completed a secondary public

restructuring and other expenses by operating company for

offering. Onex, Onex Partners I and certain limited partners

the years ended Decem ber 31, 2009 and 2008.

sold 9.2 million shares in the offering for net proceeds of

$381 million. Onex’ portion of the shares sold was 3.5 mil-

Acquisition, Restructuring and Other Expenses

lion shares for net proceeds of $148 million. A $275 million

pre-tax gain on the sale of EMSC shares was recorded in the

TABLE 10

($ millions)

third quarter of 2009, of which Onex’ portion was $90 mil-

Celestica

lion. This included Onex’ net carried interest of $5 million

Carestream Health

on the realized gain on EMSC by third-party limited part-

Husky

ners. Onex’ share of the carried interest received reﬂected

Sitel Worldwide

an $8 million reduction as a result of the loss on the CEI

Other

2009

$ 92

2008

Change ($)

$ 39

$ 53

(48)

(11)

(15)

investment realized by the third-party limited partners.

In November 2009, EMSC completed an addi-

tional secondary public offering of 9.2 million shares.

EMSC did not issue any shares in this offering. All the

shares sold in the offering were by Onex, Onex Partners I

and certain limited partners of Onex Partners I for net cash

proceeds of $446 million. Onex sold 3.5 million of the total

shares sold in the offering for net proceeds of $183 million.

A pre-tax gain on the sale of EMSC shares of $320 million

was recorded in the fourth quarter of 2009. Onex’ share of

the pre-tax gain was $104 million, which included $15 mil-

lion of carried interest on the realized gain by third-party

limited partners of Onex Partners I.

Sale of shares of Celestica

In early October 2009, Onex completed the sale of 11 mil-

lion subordinate voting shares of Celestica, which included

shares held under the MIP, to a syndicate of underwriters at

a gross price of $10.30 per share. Onex realized $104 million

of net proceeds and recorded a pre-tax gain of $6 million.

Total

$ 219

$ 220

$ (1)

Celestica reported an increase of $53 million in restruc -

turing expenses in 2009 due primarily to the company’s

restruc turing initiatives to improve capacity utilization

principally in Celestica’s North American and European

regions. In early 2008, the company had announced a

range of between US$50 million and US$75 million of

restructuring charges to be recorded throughout 2008 and

2009. During 2009, in light of the continuing uncertain eco-

nomic envi ronment, Celestica determined that further

restructuring charges were required to maintain the com-

pany’s operational leverage and improve its overall utiliza-

tion. In mid-2009, Celes tica announced additional charges

in the range of US$75 million to US$100 million. Com bined,

Celestica expects to incur total restructuring charges of

between US$150 million and US$175 million associated with

this program, of which US$118 million has been recorded

during 2009 and 2008. The company expects to complete

these restruc turing activities by the end of 2010.

Restructuring costs at Carestream Health declined

in 2009 due primarily to charges included in 2008 associ-

ated with the company’s transition to a stand-alone entity.

Restructuring expenses at Husky increased $20 mil-

lion in 2009 due primarily to costs associated with the com-

pany’s transformation plan to lower Husky’s cost structure.

Onex Corporation December 31, 2009 35

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Sitel Worldwide recorded a decline in restruc -

to the $129 million writedown of goodwill and trademarks

turing expenses of $11 million in 2009 resulting primarily

in 2008. The goodwill was primar ily associated with the

from 2008 expenses incurred associated with initiatives

purchase of SITEL Corporation in January 2007 and that

taken to streamline the company’s operations related to the

impairment was due primarily to the shift of customers

January 2007 acquisition of SITEL Corporation, as well as

from Europe to other regions.

addressing the softness in certain markets in which Sitel

During the second quarter of 2009, Tube City

Worldwide operates.

IMS performed an analysis of the carrying value of its

goodwill compared to its fair value by reporting unit. The

Writedown of goodwill, intangible assets
and long-lived assets
Writedown of goodwill, intangible assets and long-lived

company determined that the goodwill in one of its

re porting units was impaired due to changes in the long-

term outlook for certain customers and contracts. As

assets totalled $370 million in 2009 (2008 – $1.6 billion).

a result, the company recorded a $62 million goodwill

Table 11 provides a breakdown of the writedown of good-

impairment charge in 2009.

will, intangible assets and long-lived assets by operating

ONCAP’s operating company CiCi’s Pizza recorded

company for the years ended December 31, 2009 and 2008.

a non-cash impairment charge of $44 million to its intangi-

Writedown of Goodwill, Intangible Assets

its annual impairment test. The impairment was due pri -

ble assets in the fourth quarter of 2009 as determined during

and Long-lived Assets

TABLE 11

($ millions)

Celestica

Skilled Healthcare

Sitel Worldwide

Tube City IMS

CiCi’s Pizza

Cosmetic Essence

Carestream Health

Other(a)

Total

2009

$ 14

180

–

2008

$ 1,061

–

129

–

206

142

$ 370

$ 1,584

marily to an increase in the discount rate used this year in

the calculation of fair value as a result of market risks asso-

ciated with the current economic environment.

During the fourth quarter of 2009, Celestica con-

ducted its annual recoverability review of long-lived

assets. This review concluded that there was a $14 million

impairment charge in its long-lived assets in 2009 (2008 –

$11 million) primarily associated with its property, plant

and equipment.

During 2008, Celestica recorded a $1.1 billion

goodwill impairment charge, which was the company’s

entire value of goodwill on its balance sheet. The goodwill

was associated with its Asia reporting unit and was estab-

(a) 2009 other includes Husky. 2008 other includes EnGlobe and Husky.

lished primarily from an acquisition in 2001. Celestica com-

pleted its annual impairment testing during the fourth

Skilled Healthcare completed its impairment analysis at the

quarter of 2008. Celestica used a combination of valuation

reporting unit level in the fourth quarter of 2009. Due to a

approaches, including a market capitalization approach, a

reduction in the expected future growth rates for Medi-

multiples approach and discounted cash ﬂow, as a ﬁrst step

care and Medicaid coverages and their effect on expected

in determining any impairment in its goodwill. This analy-

future cash ﬂows, the company revised its estimates with

sis indicated a potential impairment in its Asia reporting

respect to net revenues and gross margins, which negatively

unit, corroborated by a combination of factors, including a

im pacted its cash ﬂow forecasted for the long-term care

signiﬁcant and sustained decline in Celestica’s market capi-

reporting unit. As a result, the company recorded a goodwill

talization, which was signiﬁcantly below its book value,

impairment charge for that reporting unit of $180 million.

and the then deterio rating global economic environment,

Sitel Worldwide reported a $64 million writedown

which resulted in a decline in expected future demand. The

of goodwill associated primarily with its European opera-

company then calculated the implied fair value of goodwill,

tions due to revenue erosion driven by the economic down-

determined in a manner similar to the purchase price allo-

turn, especially among telecom customers. This compares

cation, and compared the residual amount to the carrying

36 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

amount of goodwill. Based on that analysis, Celestica

Non-controlling Interests in Net Earnings (Loss)

concluded that the entire goodwill balance was impaired.

of Operating Companies by Industry Segment

The goodwill impairment charge was non-cash in nature

and did not affect Celestica’s liquidity, cash ﬂows from

TABLE 12

($ millions)

2009

2008

Change ($)

operating activities or the company’s compliance with

Net earnings (loss) of non-controlling

debt covenants.

interests in:

During the fourth quarter of 2008, CEI performed

Electronics Manufacturing

its annual goodwill impairment test and concluded that

Services

goodwill of $206 million was impaired and should be written

Aerostructures

off in its entirety. The impairment was driven by a combina-

Healthcare

tion of factors, including signiﬁcant end-market deteriora-

Financial Services

tion and economic uncertainties impacting expected future

Customer Support Services

demand. During 2009, Onex disposed of its investment in

CEI as previously discussed.

Metal Services

Other(a)

During 2008, Carestream Health performed an

Total

analysis of the carrying value of its goodwill compared to

$ 54

192

(59)

$ (791)

$ 845

245

(34)

(5)

(531)

(53)

(18)

–

(54)

625

$ 361

$ (1,021)

$ 1,382

its fair value by each reporting unit. It determined that the

(a) 2009 other includes Cineplex Entertainment (up to March 31, 2009), CEI (up to

goodwill in its Carestream Molecular Imaging business was

impaired. As a result, during the fourth quarter of 2008,

May 2009), Husky, Hawker Beechcraft, Allison Transmission, RSI, Tropicana

Las Vegas, ONCAP II, Onex Real Estate and the parent company. 2008 other

includes Cineplex Entertainment, CEI, Husky, Hawker Beechcraft, Allison

Carestream Health recorded a $142 million writedown of

Transmission, RSI, Radian, ONCAP II, Onex Real Estate and the parent company.

goodwill and intangible assets.

Income taxes
Onex reported a consolidated income tax provision of

$172 million in 2009 compared to a $252 million consoli-

dated income tax provision in 2008. During 2009, Onex, the

parent company, reduced its future income tax liability by

$146 million and recorded a corresponding amount as a

recovery in income tax. This reduction was the result of

lower newly enacted income tax rates being applied to

future income tax liabilities to bring the liability in line with

enacted future income tax rates.

Non-controlling interests in net earnings (loss)
of operating companies
In the audited annual consolidated statements of earnings,

the non-controlling interests amount represents the inter-

ests of shareholders other than Onex in the net earnings or

losses of Onex’ operating companies. During 2009, the non-

controlling interests share of Onex’ operating companies net

earnings was $361 million compared to a share of net losses

of $1.0 billion in 2008. Table 12 shows the net earnings (loss)

by industry segment attributable to non-controlling share-

holders in Onex’ operating companies for the years ended

December 31, 2009 and 2008.

During 2009, Celestica, included in the electronics manu-

facturing segment, accounted for $845 million of the

change in non-controlling interests amount. Much of the

change was due to other shareholders’ share of the losses

in 2008 resulting from Celestica’s $1.1 billion writedown of

goodwill, intangible assets and long-lived assets in the

fourth quarter of 2008 as previously discussed.

Spirit AeroSystems, included in the aerostruc-

tures segment, accounted for $53 million of the change in

non-controlling interests amount in 2009 due to other

shareholders’ share of the lower net earnings at Spirit Aero -

Sys tems in 2009.

The healthcare segment accounted for $37 mil-

lion of the change in non-controlling interests amount in

2009. The change was primarily driven by the non-control-

ling interests’ share of the 2008 writedown of goodwill and

intangible assets recorded by Carestream Health.

The metal services segment reported a $54 million

change in non-controlling interests amount in 2009 due

primarily to other shareholders’ share of the $62 million

writedown of goodwill taken in the second quarter of 2009

as previously discussed.

Onex Corporation December 31, 2009 37

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

The other segment reported a $625 million change

For the year ended December 31, 2007, the $119 mil-

in non-controlling interests. The signiﬁcant components of

lion of earnings from discontinued operations were primar -

the change are detailed in table 13.

ily from the sale of WIS International and CMC Electronics.

Other businesses non-controlling interests
in net earnings (loss)
The following describes the signiﬁcant changes in the

per share) in 2009 compared to a consolidated net loss of

$283 million ($2.30 per share) in 2008 and net earnings of

$228 million ($1.78 per share) in 2007. Table 14 identiﬁes the

other segment of non-controlling interests.

net earnings (loss) by industry segment.

Consolidated net earnings were $112 million ($0.92

Other Businesses Non-controlling Interests

in Net Earnings (Loss)

TABLE 13

($ millions)

2009

2008

Change ($)

Net earnings (loss) of non-controlling

Consolidated Earnings (Loss) from
Continuing Operations and Net Earnings (Loss)
by Industry Segment

TABLE 14

($ millions)

2009

2008

2007

$ (4)

$ (185)

$ 181

continuing operations:

Earnings (loss) from

interests in:

CEI

Husky

Allison Transmission

Hawker Beechcraft

Gains on sales of EMSC shares

by limited partners

Other

Total

(123)

(142)

401

(48)

(45)

(135)

(48)

–

(118)

(94)

401

$ 94

$ (531)

$ 625

The other shareholders in CEI participated in the loss in

2008 caused by the write-off of goodwill by the company.

CEI was disposed of in 2009.

In the third quarter of 2009 Hawker Beechcraft

recorded goodwill and other asset impairment charges

Electronics Manufacturing

Services

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other(a)

Net earnings (loss) from

$ 6

$ (119)

(3)

(126)

(31)

181

(62)

(170)

(2)

(10)

(19)

(4)

continuing operations

$ 112

$ (292)

Discontinued operations

–

$ 109

119

Net earnings (loss)

$ 112

$ (283)

$ 228

associated with its business and general aviation segment.

(a) 2009 other includes Cineplex Entertainment (up to March 31, 2009), CEI (up to

The interests of the other shareholders in Hawker Beech -

craft were impacted by this loss.

In the third and fourth quarters of 2009 EMSC

completed secondary offerings of shares, in which Onex

May 2009), Husky, Hawker Beechcraft, Allison Transmission, RSI, Tropicana

Las Vegas, Radian, ONCAP II, Onex Real Estate, Onex Credit Partners and the

parent company. 2008 other includes Cineplex Entertainment, CEI, Husky,

Hawker Beechcraft, Allison Transmission, RSI, Radian, ONCAP II, Onex Real

Estate, Onex Credit Partners and the parent company. 2007 other includes

Cineplex Entertainment, CEI, Hawker Beechcraft, Allison Transmission,

and Onex Partners I sold some of their EMSC shares. The

Radian, ONCAP II, Onex Real Estate and the parent company.

gain of $401 million is primarily the third-party limited

partners’ portion of the gain on their EMSC shares sold.

Earnings (loss) from continuing operations
and consolidated net earnings (loss)
Onex’ consolidated earnings from continuing operations

were $112 million ($0.92 per share) in 2009 compared to a

loss from continuing operations of $292 million ($2.37 per

share) in 2008 and earnings of $109 million ($0.85 per

share) in 2007. Table 14 details the earnings (loss) from

continuing operations by industry segment before discon-

tinued operations for 2009, 2008 and 2007.

38 Onex Corporation December 31, 2009

Table 15 presents the earnings (loss) per share from con-

tinuing operations, discontinued operations and net

earnings (loss).

Earnings (Loss) per Subordinate Voting Share

TABLE 15

($ per share)

2009

2008

2007

Basic and Diluted:

Continuing operations

Discontinued operations

Net earnings (loss)

$ 0.92

$ –

$ 0.92

$ (2.37)

$ 0.07

$ (2.30)

$ 0.85

$ 0.93

$ 1.78

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

F O U R T H - Q U A R T E R R E S U L T S

Table 16 presents the statements of earnings (loss) for the fourth quarters ended December 31, 2009 and 2008.

Fourth-Quarter Statements of Earnings (Loss)

TABLE 16

($ millions)

Revenues

Cost of sales

Selling, general and administrative expenses

Earnings before the undernoted items

Amortization of property, plant and equipment

Interest income (expense)

Operating earnings

Amortization of intangible assets and deferred charges

Interest expense of operating companies

Loss from equity-accounted investments

Foreign exchange gains (loss)

Stock-based compensation recovery (expense)

Other income (expense)

Gains on dispositions of operating investments

Acquisition, restructuring and other expenses

Writedown of goodwill, intangible assets and long-lived assets

Earnings (loss) before income taxes and non-controlling interests

Provision for income taxes

Non-controlling interests

Earnings (Loss) for the Period

2009

$ 6,153

(4,823)

(673)

$ 657

(153)

$ 513

(83)

(97)

(68)

(17)

(9)

323

(49)

(255)

$ 265

(69)

(156)

2008

$ 6,774

(5,435)

(701)

$ 638

(177)

(6)

$ 455

(96)

(171)

(266)

(87)

(74)

(1,571)

$ (1,659)

(25)

1,336

$ (348)

Fourth-quarter consolidated revenues were $6.2 billion, down 9 percent, or $621 million, from the same quarter of 2008.

Onex Corporation December 31, 2009 39

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Operating earnings were $513 million in the fourth quarter of 2009, up 13 percent from $455 million in the fourth

quarter of 2008. Table 17 provides a breakdown and change in fourth-quarter revenues and operating earnings by industry

segment in Canadian dollars and the functional currency of the operating companies.

Fourth-Quarter Revenues and Operating Earnings by Industry Segment

Revenues

TABLE 17

($ millions)

Canadian Dollars

Functional Currency

Quarter ended December 31

2009

2008

Change ($)

2009

2008

Change ($)

Electronics Manufacturing Services

$ 1,758

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other(a)

Total

1,139

1,624

330

415

379

508

$ 2,356

784

1,748

386

483

475

542

$ (598)

355

(124)

(56)

(68)

(96)

(34)

US$ 1,664

US$ 1,079

US$ 1,539

US$ 312

US$ 394

US$ 358

C$ 508

US$ 1,935

US$ 646

US$ 1,441

US$ 318

US$ 399

US$ 395

C$ 542

US$ (271)

US$ 433

US$ 98

US$ (6)

US$ (5)

US$ (37)

C$ (34)

$ 6,153

$ 6,774

$ (621)

($ millions)

Canadian Dollars

Functional Currency

Operating Earnings

Quarter ended December 31

Electronics Manufacturing Services

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other(a)

Total

2009

248

2008

Change ($)

2009

2008

Change ($)

$ 103

(8)

241

(6)

(44)

(48)

(1)

US$

US$ 234

US$ 41

US$ 19

US$ 11

C$ 2

US$ 83

US$ 41

US$ 197

US$ 74

US$ 16

US$ (5)

C$ (44)

US$ 8

US$ 45

US$ 37

US$ (33)

US$ 3

US$

C$ 46

513

$ 455

Results are reported in accordance with Canadian generally accepted accounting principles. These results may differ from those reported by the individual operating companies.

(a) 2009 other includes Husky, Tropicana Las Vegas, ONCAP II and the parent company. 2008 other includes CEI, Husky, Radian, ONCAP II and the parent company.

40 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Part of the decline in fourth-quarter revenues was due to

During the fourth quarter of 2009, gains on dis -

the ﬂuctuation of the U.S. dollar to the Canadian dollar

positions of operating investments totalled $323 million

exchange rate. During the fourth quarter of 2009, the aver-

compared to $4 million for the three months ended Decem -

age U.S. dollar to Canadian dollar exchange rate was

ber 31, 2008. The 2009 fourth-quarter gains included:

1.0563 Canadian dollars compared to 1.2125 Canadian dol-

(cid:129) a $320 million pre-tax gain on the sale of a portion of

lars in the fourth quarter of 2008. Excluding the impact of

shares in EMSC by Onex, Onex Partners I and certain

foreign currency translation, many of Onex’ operating

limited partners in that company’s secondary offering

companies reported lower revenues quarter-over-quarter

in November 2009 (Onex’ portion of that pre-tax gain

due primarily to the economic downturn. Celestica re -

was $104 million); and

ported a US$271 million decline in revenues during the

(cid:129) a $6 million pre-tax gain on the sale of a portion of

fourth quarter of 2009 compared to last year reﬂecting

Celes tica shares by Onex.

primarily the impact of weaker end-market demand.

Spirit AeroSystems reported a US$433 million

During the fourth quarter of 2009, there was $255 million

increase in revenue in the fourth quarter of 2009 over the

of writedowns of goodwill, intangible assets and long-lived

same quarter in 2008. The 2008 results reﬂect the decreased

assets recorded by Onex’ operating companies, compared

deliveries to Boeing given the strike at Boeing that took

to $1.6 billion for the three months ended December 31,

place during much of that quarter.

2008. A detailed discussion of these writedowns by com-

A foreign exchange loss of $17 million was re -

pany is provided on page 36 of this report.

corded in the fourth quarter of 2009 compared to $58 mil-

lion of foreign exchange gains in the same quarter last

Fourth-Quarter Cash Flow

year. Onex, the parent company, recorded $12 million of

Table 18 presents the major components of cash flow for

the loss due primarily to the revaluation of its U.S. cash

the fourth quarter.

held at a lower U.S. dollar exchange rate. For the fourth

quarter of 2009, the value of the U.S. dollar relative to the

TABLE 18

($ millions)

2009

2008

Canadian dollar decreased to 1.0510 Canadian dollars at

Cash from operating activities

December 31, 2009 compared to 1.0707 Canadian dollars

Cash from (used in) financing activities

at September 30, 2009.

Cash from (used in) investing activities

During the fourth quarter of 2009, Onex recorded a

Consolidated cash and cash equivalents

$ 562

$ (685)

$ 129

$ 3,206

$ 384

$ 20

$ (350)

$ 2,921

consolidated stock-based compensation expense of $9 mil-

lion compared to a recovery of $89 million for the same

Cash from operating activities totalled $562 million in the

quarter of 2008. Celestica recorded a stock-based compen-

fourth quarter of 2009 compared to cash from operating

sation expense of $18 million during the fourth quarter of

activities of $384 million in 2008. The increase in cash

2009. This was partially offset by Onex, the parent company,

from operating activities was due primarily to higher

which recorded a stock-based compensation recovery of

operating earnings at many of Onex’ operating companies,

$12 million for the fourth quarter of 2009 due to the change

as shown in table 17 of this report, as well as less cash

in its stock-based compensation liability. Onex is required

invested in working capital.

to revalue its stock option liability based on changes in the

Cash used in ﬁnancing activities was $685 mil-

market value of Onex shares. The decrease in Onex’ share

lion in the fourth quarter of 2009 compared to cash from

price to $23.60 per share at December 31, 2009 from $26.24

ﬁnancing activities of $20 million in 2008. Cash used in

per share at Sep tember 30, 2009 resulted in the downward

ﬁnancing activities in the quarter primarily included:

revaluation of the liability for stock options and the recov-

(cid:129) $263 million of cash distributed by Onex Partners I to its

ery in stock-based compensation.

limited partners, other than Onex, for their portion of the

proceeds from the sale of EMSC shares in that company’s

Novem ber 2009 secondary offering;

Onex Corporation December 31, 2009 41

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

(cid:129) $18 million of cash distributed by Onex Part ners to its

During the fourth quarter of 2008, cash used in

limited partners, other than Onex, from a dividend paid

investing activities totalled $350 million due primarily to

by The Warranty Group in December 2009;

$62 million of cash used in the acquisition of Caliber Colli -

(cid:129) US$346 million of cash used by Celestica in November

sion by ONCAP II and $338 million of cash used for the

2009 to redeem its remaining 7.875 percent senior subor-

investment in RSI by Onex, Onex Partners II and manage-

dinated notes due 2011; and

ment in October 2008.

(cid:129) $35 million of cash used by Onex, the parent company,

Consolidated cash at December 31, 2009 totalled

on repurchases of 1,471,300 Subordinate Voting Shares

$3.2 billion. Onex, the parent company, accounted for

under its Normal Course Issuer Bid.

$890 million of the cash on hand. Table 19 provides a recon-

ciliation of the change in cash at Onex, the parent company,

Cash from investing activities totalled $129 million in the

from September 30, 2009 to December 31, 2009.

fourth quarter of 2009 due primarily to $446 million of cash

proceeds received by Onex and Onex Partners I on the sale

Change in Cash at Onex, the Parent Company

of a portion of their shares in the EMSC secondary offering

in November 2009 and Onex’ sale of a portion of its shares

TABLE 19

($ millions)

in Celestica for proceeds of $104 million. This was partially

Cash on hand at September 30, 2009

offset by the $137 million of cash invested in December 2009

Proceeds on sales of EMSC shares

by Onex, the parent company, in an unleveraged se nior

Proceeds on sale of Celestica shares

secured loan portfolio managed by Onex Credit Partners. In

addition, operating companies invested $193 million in the

purchase of property, plant and equipment in the fourth

quarter, primarily by Spirit AeroSystems ($82 million).

The Warranty Group dividend

Management fees received

Investment managed by Onex Credit Partners

Onex share repurchase

Exchange loss on the value of USD cash held

Other, net, including dividends paid

Cash on hand at December 31, 2009

$ 770

183

104

(137)

(35)

(18)

(45)

$ 890

S U M M A R Y Q U A R T E R L Y I N F O R M A T I O N

Table 20 summarizes Onex’ key consolidated ﬁnancial information for the last eight quarters.

TABLE 20

($ millions except per share amounts)

2009

2008

Dec.

Sept.

June

Mar.

Dec.

Sept.

June

Mar.

Revenues

$ 6,153

$ 6,078

$ 6,131

$ 6,469

$ 6,774

$ 7,066

$ 6,815

$ 6,226

Earnings (loss) from continuing operations

$ (180)

$ 83

$ 169

$ (348)

$ 34

(18)

$ 40

Net earnings (loss)

$ (180)

$ 169

$ (348)

$ 38

(18)

$ 45

Earnings (loss) per Subordinate Voting Share

Basic and Diluted:

Continuing operations

Net earnings (loss)

$ 0.33

$ (1.48)

$ 0.68

$ 1.38

$ (2.85)

$ 0.26

$ (0.14)

$ 0.32

$ 0.33

$ (1.48)

$ 0.68

$ 1.38

$ (2.85)

$ 0.30

$ (0.14)

$ 0.36

Onex’ quarterly consolidated ﬁnancial results do not follow any speciﬁc trends due to the acquisitions or dispositions

of businesses by Onex, the parent company; the volatility of the exchange rate between the U.S. dollar and the Canadian

dollar; and varying business activities and cycles at Onex’ operating companies.

42 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

C O N S O L I D A T E D F I N A N C I A L P O S I T I O N

2009 was due to the currency translation of U.S.-based

assets with the weakening of the U.S. dollar relative to the

This section should be read in conjunction with the au -

Canadian dollar. The underlying currency for most of Onex’

dited annual consolidated balance sheets and the corre-

consolidated assets is the U.S. dollar as almost all of Onex’

sponding notes thereto.

operating companies report in U.S. dollars. The closing U.S.

dollar to Canadian dollar exchange rate decreased 14 per-

Consolidated assets
Consolidated assets totalled $25.5 billion at December 31,

cent to 1.0510 Canadian dollars at December 31, 2009 from

1.2180 Canadian dollars at December 31, 2008. In addition,

2009 compared to $29.7 billion at December 31, 2008 and

approximately $128 million of the decline in assets from

$26.2 billion at December 31, 2007. A signiﬁcant portion of

December 31, 2008 was due to the disposition of CEI in the

the decrease in Onex’ consolidated assets at December 31,

second quarter of 2009.

Asset Diversiﬁcation by Industry Segment

CHART 1 ($ millions)

E L E C T R O N I C S

A E R O -

H E A LT H C A R E

M A N U FA C T U R I N G

S T R U C T U R E S

F I N A N C I A L

S E R V I C E S

4,612

4,419

4,821

6,660

5,616

5,745

6,095

5,536

5,206

C U S T O M E R

S U P P O R T

S E R V I C E S

M E TA L

S E R V I C E S

1,020 1,039

1,026

891

881

O T H E R (a)

T O TA L

5,498

5,307

4,937

29,732

25,481

26,199

3,265

3,272

745

(a) 2009 other includes Husky, Tropicana Las Vegas, ONCAP II and the parent company. 2008 other includes Husky, CEI, Radian, ONCAP II and the parent company.

2007 other includes Husky, CEI, Radian, ONCAP II, Onex Real Estate and the parent company.

The pie charts below show the percentage breakdown of total consolidated assets by industry segment as at December 31,

2009, 2008 and 2007.

Segmented Total Consolidated Assets Breakdown

20 09

20 0 8

2 0 0 7

a. 13%
b. 19%

c. 22%

d. 20%
e. 3%
f. 4%
x. 19%

a. 16%
b. 16%

c. 23%

d. 20%
e. 3%
f. 3%
x. 19%

a. Electronics Manufacturing Services
b. Aerostructures
c. Healthcare
d. Financial Services
e. Customer Support Services
f. Metal Services
x. Other (1)

a. 17%
b. 13%

c. 22%

d. 21%
e. 4%
f. 3%
x. 20%

(1) 2009 other includes Husky, Tropicana Las Vegas, ONCAP II and the parent company. 2008 other includes Husky, CEI, Radian, ONCAP II and the parent company.

2007 other includes Husky, CEI, Radian, ONCAP II, Onex Real Estate and the parent company.

Onex Corporation December 31, 2009 43

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Consolidated long-term debt,
without recourse to Onex
It has been Onex’ policy to preserve a ﬁnancially strong

in ﬁnancial markets and economic conditions generally,

may result in non-compliance with certain covenants by

that operating company.

parent company that has funds available for new acqui -

Total long-term debt (consisting of the current and

sitions and to support the growth of its operating com -

long-term portions of long-term debt, net of deferred

panies. This policy means that all debt ﬁnancing is within

charges) was $5.9 billion at December 31, 2009 compared

our operating companies and each company is required

to $7.7 billion at December 31, 2008 and $6.4 billion at

to support its own debt without recourse to Onex or other

De cem ber 31, 2007. The decrease was due to two factors.

Onex operating companies.

Certain of the operating companies paid down debt, with

The ﬁnancing arrangements of each operating

most of that occurring in 2009. This is described in the para-

company typically contain certain restrictive covenants,

graphs that follow. As well, since Onex reports in Canadian

which may include limitations or prohibitions on additional

dollars, but the majority of its operating companies report in

indebtedness, payment of cash dividends, redemption of

U.S. dollars, a portion of the decrease in total long-term debt

capital, capital spending, making of investments, and acqui-

was caused by currency translation due to the weakening of

sitions and sales of assets. In addition, the operating compa-

the U.S. dollar relative to the Canadian dollar. Table 21 sum-

nies that have outstanding debt must meet certain ﬁnancial

marizes consolidated long-term debt by industry segment in

covenants. Changes in business conditions relevant to an

Canadian dollars and U.S. dollars for 2009, 2008 and 2007.

operating company, including those resulting from changes

Consolidated Long-term Debt, Without Recourse to Onex

TABLE 21

($ millions)

Electronics Manufacturing Services

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other(a)

Portion of long-term debt of CEI, reclassified as current

Current portion of long-term debt of operating companies

Canadian Dollars

2009

2008

2007

$ 234

902

2,792

203

660

401

738

5,930

–

(425)

$ 892

697

3,367

237

796

519

1,167

7,675

(138)

(394)

$ 752

567

2,835

194

688

380

960

6,376

–

(217)

Total

$ 5,505

$ 7,143

$ 6,159

(a) 2009 other includes Husky, Radian and ONCAP II. 2008 other includes CEI, Husky, Radian, ONCAP II and Onex Partners. 2007 other includes CEI, Radian, ONCAP II and

Onex Real Estate.

44 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Consolidated Long-term Debt, Without Recourse to Onex (cont’d)

TABLE 21

($ millions)

Electronics Manufacturing Services

Aerostructures

Healthcare

Financial Services

Customer Support Services

Metal Services

Other(a)

Portion of long-term debt of CEI, reclassified as current

Current portion of long-term debt of operating companies

Total

U.S. Dollars

2008

2007

$ 732

572

2,764

195

654

426

958

$ 759

572

2,860

196

694

383

968

2009

$ 223

858

2,657

193

628

381

702

$ 5,642

$ 6,301

$ 6,432

–

(404)

(113)

(323)

–

(219)

$ 5,238

$ 5,865

$ 6,213

(a) 2009 other includes Husky, Radian and ONCAP II. 2008 other includes CEI, Husky, Radian, ONCAP II and Onex Partners. 2007 other includes CEI, Radian, ONCAP II and

Onex Real Estate.

Celestica’s total debt declined to US$223 million at Decem -

through to June 2010, when it steps down to US$409 million

ber 31, 2009 from US$732 million at December 31, 2008.

through to June 2012. At December 31, 2009, no amounts

This decline was due primarily to: (i) the company’s repur-

were drawn under the facility. On Sep tember 30, 2009, Spirit

chase of US$150 million in the principal amount of its 2011

AeroSystems completed an offering of US$300 million

senior subordinated notes during the ﬁrst quarter of 2009;

aggregate principal amount of 7.5 percent senior notes due

and (ii) Celestica’s redemption in November 2009 of its

2017. The offering price to purchasers of the notes was

remaining 2011 senior subordinated notes (US$339 million).

97.804 percent of par to yield 7.875 percent to maturity.

Celestica renewed its revolving credit facility on generally

A portion of the net proceeds of the notes offering was used

similar terms and conditions and reduced the size to

to repay US$200 million in borrowings under Spirit Aero -

US$200 million from US$300 million in April 2009. No

Systems’ existing senior secured revolving credit facility,

amounts were drawn under this facility at December 31,

without any reduction of the lenders’ commitment there -

2008 or December 31, 2009. This credit facility matures in

under, and the remaining net proceeds were used for gen-

April 2011. Under the terms of the renewed facility, bor -

eral corporate purposes and to pay fees and expenses

rowings bear a higher interest rate than the previous

incurred in connection with the offering of the notes. The

terms and Celestica is required to comply with certain

notes bear interest at a rate of 7.5 percent per year, payable

ﬁnancial cove nants related to indebtedness, interest cov-

semi-annually, commencing April 1, 2010.

erage and liquidity. In January 2010, Celestica announced

In the healthcare segment, in 2009 Carestream

its intention to redeem its outstanding 2013 senior subor-

Health paid US$92 million of its US$1.8 billion of debt from

dinated notes, with a principal amount of US$223 million,

cash ﬂow generated from operations. This represents the

in the ﬁrst quarter of 2010.

majority of the decrease in debt in the healthcare segment.

In June 2009, Spirit AeroSystems entered into an

In 2009 Onex disposed of its interest in CEI as

amendment of its existing credit agreement. The amendment

discussed on page 34. CEI was included in the other seg-

extends the maturity of the company’s revolving credit facil-

ment in 2008 with debt in the amount of US$202 million at

ity from June 2010 to June 2012. It also increases the re volving

that time, of which US$80 million was held by the Company.

credit facility to US$729 million from US$650 million

Onex Corporation December 31, 2009 45

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Despite the economic slowdown in 2009, each of

in U.S. dollars as the debt of most of Onex’ operating com -

Onex’ operating companies closed the year within its

panies is denominated in U.S. dollars. Below that, we have

covenant requirements. Table 22 details the aggregate debt

converted the amounts to Cana dian dollars at the Decem-

maturities for Onex’ consolidated operating companies and

ber 31, 2009 exchange rate. As can be seen from the fol -

equity-accounted operating companies for each of the years

lowing tables, most of the maturities are in years 2013 and

up to 2014 and in total thereafter. As equity-accounted busi-

2014. Note 10 to the audited annual consolidated ﬁnancial

nesses are included in the table, the total amount is in excess

statements provides further disclosure of the long-term debt

of the reported consolidated debt. The table is presented

at each of our operating companies.

Debt Maturity Amounts by Year

TABLE 22

($ millions)

U.S. Dollars

Consolidated operating companies(a)

$ 404

$ 291

$ 1,219

$ 2,138

$ 1,043

$ 838

$ 5,933

Equity-accounted operating companies

167

430

4,169

1,455

6,356

Total

$ 571

$ 379

$ 1,266

$ 2,568

$ 5,212

$ 2,293

$ 12,289

2010

2011

2012

2013

2014

Thereafter

Total

($ millions)

Above Table Converted to Canadian Dollars

Consolidated operating companies(a)

$ 425

$ 306

$ 1,281

$ 2,247

$ 1,096

$ 881

$ 6,236

Equity-accounted operating companies

176

452

4,382

1,529

6,680

Total

$ 601

$ 398

$ 1,330

$ 2,699

$ 5,478

$ 2,410

$ 12,916

2010

2011

2012

2013

2014

Thereafter

Total

(a)

Includes amounts held by Onex, the parent company, and are gross of deferred financing fees.

Warranty reserves and unearned premiums
Warranty reserves and unearned premiums represent The

casualty reserves and provided guarantees on all of those

reserves at December 31, 2008. In August 2009 the sub-

Warranty Group’s gross warranty and property and casualty

sidiary was sold to National Indem nity Company. As part of

reserves, as well as gross warranty unearned premiums.

the sale, National Indem nity Com pany became the primary

At December 31, 2009, gross warranty reserves and unearned

re-insurer for 42 percent of the non-warranty property and

premiums (consisting of the current and long-term por-

casualty reserves and provided guarantees on all of those

tions) totalled $3.4 billion compared to $4.3 billion at

reserves at December 31, 2009.

December 31, 2008. Gross warranty and property and casu-

The Warranty Group’s liability for gross warranty

alty reserves are approximately $936 million (2008 – $1.3 bil-

and property and casualty unearned premiums totalled

lion) of the total, which represent the estimated case and

$2.5 billion (2008 – $2.9 billion). All of the unearned premi-

incurred but not reported reserves on warranty contracts

ums are warranty business related and represent the por-

and property and casualty insurance policies. The Warranty

tion of the revenue received that has not yet been earned

Group has ceded 100 percent of the property and casualty

as revenue by The Warranty Group on extended warranty

reserves component of $716 million (2008 – $1.1 billion) to

products sold through multiple distribution channels.

third-party re-insurers, which therefore has created a ceded

Typi cally, there is a time delay between when the warranty

claims recoverable asset. A subsidiary of Aon Corporation,

contract starts to earn and the contract effective date. The

the former parent of The War ranty Group, was the primary
re-insurer for 44 percent of the non-warranty property and

contracts generally commence earning after the original

manufacturer’s warranty on a product expires. Note 12 to the

46 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

audited annual consolidated ﬁnancial statements provides

The decrease in the non-controlling interests balance was

details of the gross warranty and property and casualty

driven primarily by:

reserves for loss and loss adjustment expenses and warranty

(cid:129) $514 million of distributions to limited partners on the

unearned premiums as at December 31, 2009 and 2008.

sales of a portion of their interests in EMSC’s secondary

offerings;

Non-controlling interests
The non-controlling interests liability in Onex’ audited

(cid:129) $62 million of distributions to the limited partners of

Onex Partners for their share of the dividends paid by

annual consolidated balance sheet as at December 31, 2009

Carestream Health in September 2009 and The Warranty

primarily represents the ownership interests of sharehold-

Group in December 2009; and

ers, other than Onex, in Onex’ consolidated operating com-

(cid:129) $825 million of other comprehensive loss driven primar ily

panies and equity-accounted investments. At December 31,

by a 14 percent decline in the value of the U.S. dollar rela-

2009, the non-controlling interests balance decreased to

tive to the Canadian dollar. The value of the U.S. dollar

$6.4 billion from $6.6 billion at December 31, 2008. Table 23

was 1.0510 Canadian dollars at December 31, 2009 com-

details the change in the non-controlling interests balance

pared to 1.2180 Canadian dollars at December 31, 2008.

from December 31, 2008 to December 31, 2009.

Change in Non-controlling Interests

(cid:129) the $361 million of non-controlling interests’ share of

Partially offsetting these decreases were:

TABLE 23

($ millions)

operating companies’ net earnings in 2009; approxi-

mately $401 million of those earnings were from the

Non-controlling interests as at December 31, 2008

$ 6,624

gains on the shares sold by other limited partners in the

Non-controlling interests in 2009:

Gains on sales of operating investments

Operating companies’ net loss

Investments by shareholders other than Onex in:

Tropicana Las Vegas

By Onex Partners III

By other investors

New shareholders’ purchase of Onex’ and

Onex Partners I’s shares of EMSC sold in the

public offering

New shareholders’ purchase of Onex’ shares

of Celestica sold in the public offering

Other Onex operating companies

Distributions to limited partners on the sales of

EMSC shares

Distributions to limited partners of Onex Partners for the

Carestream Health and The Warranty Group dividends

Other comprehensive loss

401

(40)

196

104

214

100

172

(514)

(62)

(825)

Non-controlling interests as at December 31, 2009

$ 6,370

offerings of EMSC;

(cid:129) $196 million in investments by limited partners of Onex

Partners III, other than Onex, primarily for the invest-

ment in Tropicana Las Vegas completed on July 1, 2009

and the subsequent rights offering;

(cid:129) new shareholders’ purchase of shares sold by Onex and

Onex Partners I in EMSC’s secondary offerings, which

added $214 million to non-controlling interests;

(cid:129) new shareholders’ purchase of shares sold by Onex in

Celestica’s secondary offering, which added $100 million

to non-controlling interests; and

(cid:129) $276 million of investments by shareholders, other than

Onex Partners, in Onex’ operating companies, of which

$104 million was in Tropicana Las Vegas.

Onex Corporation December 31, 2009 47

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Shareholders’ equity
Shareholders’ equity totalled $1.7 billion at December 31,

Onex also has 100,000 Multiple Voting Shares outstanding,

which have a nominal paid-in value, and 176,078 Series 1

2009 compared to $1.6 billion at December 31, 2008. The

Senior Preferred Shares, which have no paid-in amount

change in shareholders’ equity in 2009 was due primarily to

reﬂected in Onex’ audited annual consolidated ﬁnancial

the $112 million in net earnings reported in the year. Table 24

statements. Note 15 to the audited annual consolidated

provides a reconciliation of the change in shareholders’

ﬁnancial statements provides additional information on

equity from December 31, 2008 to Decem ber 31, 2009.

Onex’ share capital. There was no change in the Multiple

Voting Shares and Series 1 Senior Preferred Shares out-

Change in Shareholders’ Equity

standing during 2009.

TABLE 24

($ millions)

Shareholders’ equity as at December 31, 2008

$ 1,553

Regular dividends declared

Shares repurchased and cancelled

Net earnings

Other comprehensive income for 2009

(13)

(41)

112

Shareholders’ equity as at December 31, 2009

$ 1,659

Cash dividends
During 2009, Onex declared dividends of $0.11 per Sub -

ordinate Voting Share, which were paid quarterly at a rate

of $0.0275 per Subordinate Voting Share. The dividends are

payable on or about January 31, April 30, July 31 and Octo -

ber 31 of each year. The dividend rate remained unchanged

from that of 2008 and 2007. Total payments for dividends

have decreased with the repurchase of Subor dinate Voting

Shares under the Normal Course Issuer Bids as discussed

Onex’ audited annual consolidated statements of share-

on page 49.

holders’ equity and comprehensive loss also show the

changes to the components of shareholders’ equity for the

years ended December 31, 2009 and 2008.

Shares outstanding
At January 31, 2010, Onex had 120,218,778 Subordinate

Dividend Reinvestment Plan
Onex’ Dividend Reinvestment Plan (the “Plan”) enables

Canadian shareholders to reinvest cash dividends to

acquire new Subordinate Voting Shares of Onex at a mar-

ket-related price at the time of reinvestment. During 2009,

Voting Shares issued and outstanding. Table 25 shows the

Onex issued 3,060 Subordinate Voting Shares at an average

change in the number of Subordinate Voting Shares out-

cost of $20.61 per Subordinate Voting Share, creating cash

standing from December 31, 2008 to January 31, 2010.

savings of less than $1 million.

Change in Subordinate Voting Shares Outstanding

Shares under the Plan at an average cost of $29.48 per

During 2008, Onex issued 6,279 Subordinate Voting

TABLE 25

Subordinate Voting Shares outstanding

Subordinate Voting Share, creating cash savings of less than

$1 million. During 2007, 3,952 Subordinate Voting Shares

were issued under the Plan at an average cost of $34.67 per

at December 31, 2008

122,098,985

Subordinate Voting Share, creating cash savings of less than

Shares repurchased and cancelled under Onex’

$1 million.

Normal Course Issuer Bid

Issue of shares – Dividend Reinvestment Plan

(1,883,900)

3,693

In January 2010, Onex issued an additional 633 Sub-

ordinate Voting Shares under the Plan at an average cost of

Subordinate Voting Shares outstanding

at January 31, 2010

120,218,778

$24.88 per Subordinate Voting Share.

48 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Stock Option Plan
Onex, the parent company, has a Stock Option Plan in place

During 2008, 702,500 options were granted with an

exercise price of $15.95 and which vest over ﬁve years. In

that provides for options and/or share appreciation rights to

addition, 538,550 options were surrendered in 2008 at a

be granted to Onex directors, ofﬁcers and employees for the

weighted average exercise price of $14.97 for aggregate cash

acquisition of Subordinate Voting Shares of the Com pany for

consideration of $9 million and 10,000 options expired. In

a term not exceeding 10 years. The options vest equally over

2007, 803,000 options were granted at a weighted average

ﬁve years with the exception of the 774,500 remaining

exercise price of $35.16. Furthermore, 1,090,600 options

options granted in December 2007, which vest over six

were surrendered in 2007 for total cash paid of $26 million

years. The price of the options issued is at the market value

and 30,000 options expired.

of the Subordinate Voting Shares on the business day pre-

ceding the day of the grant. Vested options are not exercis-

able unless the average ﬁve-day market price of Onex

Normal Course Issuer Bids
Onex had Normal Course Issuer Bids (the “Bids”) in place

Subor dinate Voting Shares is at least 25 percent greater

during 2009 that enable it to repurchase up to 10 percent

than the exercise price at the time of exercise.

of its public ﬂoat of Subordinate Voting Shares during the

At December 31, 2009, Onex had 13,450,050 options

period of the relevant Bid. Onex believes that it is advanta-

outstanding to acquire Subordinate Voting Shares, of which

geous to Onex and its shareholders to continue to repur-

11,464,617 options were vested, and 10,338,950 of those

chase Onex’ Subordinate Voting Shares from time to time

vested options were exercisable. Table 26 provides informa-

when the Subordinate Voting Shares are trading at prices

tion on the activity during 2009 and 2008.

that reﬂect a signiﬁcant discount to their intrinsic value.

Change in Stock Options Outstanding

TABLE 26

Number
of Options

Outstanding at December 31, 2007

12,777,500

Granted

Surrendered

Expired

702,500

(538,550)

(10,000)

Outstanding at December 31, 2008

12,931,450

Granted

Surrendered

Expired

727,500

(197,900)

(11,000)

Weighted
Average
Exercise
Price

$ 18.07

$ 15.95

$ 14.97

$ 34.00

$ 18.07

$ 23.35

$ 20.20

$ 20.76

Outstanding at December 31, 2009

13,450,050

$ 18.33

During 2009, 727,500 options were granted with an exercise

price of $23.35 and which vest over ﬁve years. In addition,

197,900 options were surrendered in 2009 at a weighted

average exercise price of $20.20 for aggregate cash consid-

eration of $1 million and 11,000 options expired.

On April 14, 2009, Onex renewed its Normal Course

Issuer Bid (“NCIB”) following the expiry of its previous

NCIB on April 13, 2009. At March 31, 2009, Onex had issued

and outstanding 122,099,689 Subordinate Voting Shares and

a public ﬂoat of 92,574,885 Subordinate Voting Shares.

Under the new NCIB, Onex will be permitted to purchase

up to 10 percent of its public ﬂoat of its Subordinate Voting

Shares, or 9,257,488 Subordinate Voting Shares. Onex may

purchase up to 62,634 Subordinate Voting Shares during

any trading day, being 25 percent of its average daily trading

volume for the six-month period ended March 31, 2009.

Onex may also purchase Subor dinate Voting Shares from

time to time under the Toronto Stock Exchange’s block

purchase exemption, if available, under the new NCIB. The

new NCIB commenced on April 14, 2009 and will conclude

on the earlier of the date on which purchases under the

NCIB have been completed and April 13, 2010. A copy of the

Notice of Intention to make the Normal Course Issuer Bid

ﬁled with the Toronto Stock Exchange is available at no

charge to shareholders by contacting Onex.

Under the previous NCIB that expired on April 13,

2009, Onex repurchased 1,788,281 Subordinate Voting

Shares at a total cost of $48 million, or an average pur-

chase price of $26.70 per share.

Onex Corporation December 31, 2009 49

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

During 2009, Onex, the parent company, repur-

Onex’ objectives in managing capital are to:

chased 1,784,600 Subordinate Voting Shares under its Nor -

(cid:129) preserve a ﬁnancially strong parent company with

mal Course Issuer Bids at an average cost per share of

appropriate liquidity and no, or a limited amount of,

$23.04 for a total cost of $41 million. Under similar Bids,

debt so that it has funds available to pursue new acqui-

Onex repurchased 3,481,381 Subordinate Voting Shares at a

sitions and growth opportunities, as well as support the

total cost of $101 million during 2008 and 3,357,000 Sub -

building of its existing businesses. Onex does not gener-

ordinate Voting Shares at a total cost of $113 million in 2007.

ally have the ability to draw cash from its operating

Accumulated other comprehensive
earnings (loss)
Accumulated other comprehensive earnings (loss) repre-

companies. Accordingly, maintaining adequate liquidity

at the parent company is important;

(cid:129) achieve an appropriate return on capital invested com-

mensurate with the level of risk taken on;

sent the accumulated unrealized gains or losses, all net of

(cid:129) build the long-term value of its operating companies;

income taxes, related to certain available-for-sale securi-

(cid:129) control the risk associated with capital invested in any

ties, cash ﬂow hedges and foreign exchange gains or losses

particular business or activity. All debt ﬁnancing is

on the net investment in self-sustaining operations.

within the operating companies and each company is

At December 31, 2009, accumulated other compre-

required to support its own debt. Onex does not guaran-

hensive loss was $113 million compared to an accumulated

tee the debt of the operating companies and there are

loss of $161 million at the end of 2008. Table 27 provides a

no cross-guarantees of debt between the operating com-

breakdown of other comprehensive earnings (loss) for 2009

panies; and

compared to 2008.

(cid:129) have appropriate levels of committed third-party capital

Other Comprehensive Earnings (Loss)

TABLE 27

($ millions)

2009

2008

Other comprehensive earnings (loss),

net of income taxes:

available to invest along with Onex’ capital. This enables

Onex to respond quickly to opportunities and pursue

acquisitions of businesses it could not achieve using

only its own capital. The management of third-party

capital also provides management fees to Onex and the

ability to enhance Onex’ returns by earning a carried

Currency translation adjustments

$ (74)

$ 382

interest on the proﬁts of third-party participants.

Change in fair value of derivatives

designated as hedges

Other

109

(122)

(12)

At December 31, 2009, Onex, the parent company, had

$890 million of cash on hand and $148 million of near-cash

Other comprehensive earnings

$ 48

$ 248

Management of capital
Onex considers the capital it manages to be the amounts

items at market value. Onex, the parent company, has a con-

servative cash management policy that limits its cash invest-

ments to short-term, high-rated money market instru ments.

This policy is driven toward maintaining liquid ity and pre-

serving prin cipal in all of the money market investments.

it has in cash and near-cash investments, and the invest-

At December 31, 2009, Onex had access to

ments made by it in the operating companies, Onex Real

US$3.9 billion of uncalled committed third-party capital

Estate Partners and Onex Credit Partners. Onex also man-

for acquisitions through the Onex Partners and ONCAP

ages the third-party capital invested in the Onex Partners

Funds. This includes approximately US$3.4 billion of com-

and ONCAP Funds.

mitted third-party capital for Onex Partners III.

The strategy for risk management of capital did

not change in 2009.

50 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

L I Q U I D I T Y A N D C A P I T A L R E S O U R C E S

Cash generated from operations excludes changes in non-

This section should be read in conjunction with the au -

premiums and other liabilities. The increase in cash gener-

dited annual consolidated statements of cash ﬂows and

ated from operations for the year ended December 31, 2009

the corresponding notes thereto. Table 28 summarizes the

compared to 2008 was due to higher operating earnings,

major consolidated cash ﬂow components.

changes in deferred costs at The Warranty Group and lower

cash working capital items, warranty reserves and un earned

Major Cash Flow Components

TABLE 28

($ millions)

2009

2008

interest costs.

Non-cash working capital items increased cash

by $48 million in 2009. This compares to a decrease of

$293 million in 2008. The change in cash from non-cash

Cash from operating activities

$ 1,340

$ 1,339

working capital items in 2009 was due to:

Cash from (used in) financing activities

$ (857)

$ 9

(cid:129) a $381 million decrease in accounts receivable, primarily

Cash from (used in) investing activities

Consolidated cash and cash equivalents

$ 223

$ 3,206

$ (1,402)

$ 2,921

at Celestica. The decrease in receivables at Celestica was

due primarily to lower revenues and continued strong

Cash from operating activities
Table 29 provides a breakdown of cash from operating

activities by cash generated from operations and non-cash

working capital items, warranty reserves and unearned

premiums and other liabilities for the years ended Decem -

ber 31, 2009 and 2008.

Components of Cash from Operating Activities

TABLE 29

($ millions)

2009

2008

Cash generated from operations

$ 1,715

$ 1,296

Changes in non-cash working capital items

Accounts receivable

Inventories

Other current assets

Accounts payable, accrued liabilities

381

(166)

202

(311)

156

collections;

(cid:129) a $166 million increase in inventory, primarily at Spirit

AeroSystems, which continued to build up inventory

associated with its B787, Gulfstream and other general

aviation programs. Partially offsetting this increase was

lower inventory at Celestica ($127 million); and

(cid:129) a $225 million decrease in accounts payable, accrued lia-

bilities and other current liabilities, primarily at Celes tica,

which reduced its accounts payable consistent with lower

business levels.

Cash from (used in) ﬁnancing activities
Cash used in ﬁnancing activities totalled $857 million in

2009 compared to cash from ﬁnancing activities of $9 mil-

lion in 2008. Cash used in ﬁnancing activities in 2009 was

primar ily due to:

(cid:129) $576 million of cash distributed by Onex Partners to lim-

ited partners, other than Onex, from the sales of EMSC

and other current liabilities

(225)

(340)

shares in that company’s secondary offerings and divi-

Increase (decrease) in cash due to changes

in non-cash working capital items

$ 48

$ (293)

Increase (decrease) in warranty reserves and

unearned premiums and other liabilities

(423)

336

dends paid by Carestream Health and The Warranty

Group in 2009;

(cid:129) the $143 million repayment of the credit facility that was

established for the purchase of Tropicana Las Vegas debt

from cash received from the limited partners of Onex

Cash from operating activities

$ 1,340

$ 1,339

Partners III, other than Onex;

(cid:129) US$496 million of cash used by Celestica to repurchase

all of its 2011 senior subordinated notes; and

(cid:129) a US$200 million debt repayment by Spirit AeroSystems

of its revolving credit facility from proceeds on the com-

pany’s offering of US$300 million aggregate principal

amount of 7.5 percent senior notes due 2017, as previ-

ously discussed under Consolidated Long-term Debt.

Onex Corporation December 31, 2009 51

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Partially offsetting these were:

Property, Plant and Equipment Expenditures

(cid:129) $179 million of cash received primarily from the limited

by Industry Segment

partners of Onex Partners III, other than Onex, for the

acquisition of Tropicana Las Vegas completed on July 1,

TABLE 30

($ millions)

2009; and

Electronics Manufacturing Services

(cid:129) Spirit AeroSystems’ offering of US$300 million aggregate

Aerostructures

principal amount of 7.5 percent senior notes.

Healthcare

Financial Services

Cash from (used in) investing activities
Cash from investing activities totalled $223 million in

Customer Support Services

Metal Services

2009 compared to $1.4 billion of cash used in investing

activities in 2008. Included in cash from investing activi-

Other(a)

Total

ties in 2009 was:

2009

$ 69

235

163

2008

$ 124

299

225

$ 613

$ 859

(cid:129) cash proceeds of $175 million received by Onex, the par-

(a) 2009 other includes CEI (up to May 2009), Husky, ONCAP II, Onex Real Estate,

ent company, on the sale of its remaining trust units of

Cineplex Galaxy Income Fund;

(cid:129) $827 million of cash proceeds received by Onex and

Onex Partners I on the sales of a portion of their shares

in EMSC’s secondary offerings in August and November

2009; and

(cid:129) $104 million of cash proceeds received by Onex, the

parent company, on the sale of a portion of its shares in

Celes tica in October 2009.

Partially offsetting these proceeds was US$130 million of

cash invested in an unleveraged senior secured loan port -

folio managed by Onex Credit Partners in the fourth quarter

of 2009. In addition, there was $613 million of cash used

for the purchase of property, plant and equipment by

Onex’ operating companies (2008 – $859 million). Table 30

details property, plant and equipment expenditures by

industry segment.

Onex Credit Partners, Tropicana Las Vegas and the parent company. 2008 other

includes CEI, Husky, Radian, ONCAP II, Onex Real Estate, Onex Credit Partners

and the parent company.

Celestica used $69 million of cash on capital expenditures

in 2009 (2008 – $124 million) primarily for machinery, equip-

ment and facilities in lower-cost geographies to support

new customer programs.

During 2009, Spirit AeroSystems invested $235 mil-

lion in property, plant and equipment, as well as software

and program tooling, primarily associated with the com-

pany’s programs with Boeing.

Skilled Healthcare spent $45 million in capital

ex penditures in 2009. These expenditures consisted of

the construction of new healthcare facilities, the expan-

sion of the company’s Express Recovery Unit program, and

routine capital expenditures.

For the year ended December 31, 2008, acquisi-

tions completed by CDI, EMSC, Sitel Worldwide, Skilled

Healthcare, Tube City IMS and ONCAP II in 2008 ac counted

for $209 million of cash used in investing activities. In addi-

tion, other investing activities included $338 million of cash

used by Onex and Onex Partners II for their investment in

RSI. The balance of cash used in investing activities in 2008

was primarily from cash spent on property, plant and

equipment expenditures by Onex’ operating companies

($859 million), as shown in table 30.

52 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Consolidated cash resources
At December 31, 2009, consolidated cash was $3.2 billion,

10 percent higher than the level at December 31, 2008. The

Change in Cash at Onex, the Parent Company

TABLE 31

($ millions)

major components at Decem ber 31, 2009 were:

Cash on hand at December 31, 2008

(cid:129) $890 million of cash on hand at Onex, the parent com-

Proceeds on sales of EMSC shares

pany; and

(cid:129) $1.0 billion of cash at Celestica.

Onex believes that maintaining a strong ﬁnancial position

at the parent company with appropriate liquidity enables

the Company to pursue new opportunities to create long-

term value and support Onex’ existing operating compa-

nies. In addition to the approximately $890 million of cash

at the parent company at December 31, 2009, there was

$148 million of near-cash items, of which $137 million is an

Proceeds on Cineplex Entertainment sale

Proceeds on sale of Celestica shares

Carestream Health dividend

The Warranty Group dividend

Management fees received

Investment managed by Onex Credit Partners

Investment in Tropicana Las Vegas

Onex share repurchases

Exchange loss on value of USD cash held

Other, net, including dividends paid

investment in a segregated unleveraged fund managed by

Cash on hand at December 31, 2009

$ 470

331

175

104

100

(137)

(55)

(41)

(76)

(23)

$ 890

Onex Credit Partners. The investments are focused on liquid

senior debt securities. Table 31 provides a reconciliation

of the change in cash at Onex, the parent company, from

Decem ber 31, 2008 to December 31, 2009.

C O N T R A C T U A L O B L I G A T I O N S

The following table presents the contractual obligations of Onex’ consolidated operating companies as at December 31, 2009:

Contractual Obligations

TABLE 32

($ millions)

Total

Less than 1 year

1–3 years

4–5 years

After 5 years

Payments Due by Period

Long-term debt, without recourse to Onex(a)

Capital and operating leases

Purchase obligations

Pension plan obligations(b)

$ 6,236

1,178

383

$ 425

$ 1,587

$ 3,343

$ 881

267

298

349

–

190

–

372

–

Total contractual obligations

$ 7,830

$ 1,023

$ 1,956

$ 3,540

$ 1,311

(a)

Includes amounts held by Onex, the parent company, and are gross of deferred financing fees.

(b) The pension plan obligations are those of the Onex operating companies with significant defined benefit pension plans.

Onex Corporation December 31, 2009 53

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

A breakdown of long-term debt by industry segment is

a trust for the purpose of providing liquidity sufﬁcient to

provided in table 21. In addition, notes 10 and 11 to the

pay beneﬁt obligations. Spirit AeroSystems’ U.S. deﬁned

audited annual consolidated ﬁnancial statements provide

beneﬁt pension plans remained overfunded by approxi-

further disclosure on long-term debt and lease commit-

mately $180 million at December 31, 2009 de spite the

ments. All our operating companies currently believe they

volatility in the equity markets in 2008 and 2009. Therefore,

have adequate cash from operations, cash on hand and

required and discretionary contributions to those plans are

borrowings available to them to meet anticipated debt

not expected in 2010. In addition, Spirit Aero Systems had a

service requirements, capital expenditures and working

U.K. deﬁned beneﬁt pension plan with expected contribu-

capital needs. There is, however, no assurance that our

tions of US$8 million in 2010.

operating companies will generate sufﬁcient cash ﬂow

At December 31, 2009, Celestica’s deﬁned beneﬁt

from operations or that future borrowings will be available

pension plans were in a net unfunded position of $31 mil-

to enable them to grow their business, service all indebt-

lion. Celestica’s pension funding policy is to contribute

edness or make anticipated capital expenditures.

amounts sufﬁcient to meet minimum local statutory fund-

ing requirements that are based on actuarial calculations.

Commitments
At December 31, 2009, Onex and its operating companies

The company may make additional discretionary contri-

butions based on actuarial assessments. Celestica esti-

had total commitments of $527 million (2008 – $666 mil-

mates a minimum funding requirement of US$22 million

lion). Commitments by Onex and its operating companies

for its deﬁned beneﬁt pension plans in 2010 based on the

provided in the normal course of business include com-

most recent actuarial valuations. Continued volatility in

mitments for corporate investments and letters of credit,

the capital markets will impact the future asset values of

letters of guarantee, and surety and performance bonds.

Celestica’s multiple deﬁned beneﬁt pension plans. There -

Approximately $467 million of the total commitments in

fore, a signiﬁcant deterioration in the asset values could

2009 (2008 – $547 million) were for contingent liabilities in

lead to higher than expected future contributions; how-

the form of letters of credit, letters of guarantee, and surety

ever, Celestica does not expect this will have a material

and performance bonds provided by certain operating

adverse impact on its cash ﬂows or liquidity.

companies to various third parties, including bank guar-

Carestream Health’s deﬁned beneﬁt pension plans

antees. These guarantees are without recourse to Onex.

were in an unfunded position of approximately $47 million

As part of the Carestream Health purchase from

at December 31, 2009. The company’s pension plans are

Kodak in 2007, the acquisition agreement provided that if

broadly diversiﬁed in equity and debt securities, as well as

Onex and Onex Partners II realize an internal rate of return in

other investments. Carestream Health expects to contribute

excess of 25 percent on their investment in Carestream

approximately US$2 million in 2010 to its deﬁned beneﬁt

Health, Kodak will receive payment equal to 25 percent of

pension plans, and it does not believe that future pension

the excess return up to US$200 million. As of December 31,

contributions will materially impact its liquidity.

2009 no liability was recorded.

Onex, the parent company, has no pension plan

and has no obligation to the pension plans of its oper-

Pension plans
Six of Onex’ operating companies have deﬁned beneﬁt

ating companies.

pension plans, of which the more signiﬁcant plans are those

of Spirit AeroSystems, Carestream Health and Celes tica. At

Debt of operating companies
Onex does not guarantee the debt on behalf of its operating

December 31, 2009, the deﬁned beneﬁt pension plans of

companies, nor are there any cross-guarantees between

the six Onex operating companies had combined assets of

operating companies. Onex may hold debt as part of its

$1.4 billion against combined obligations of $1.3 billion,

investment in certain operating companies, which amounted

with a net surplus of $93 million.

to $197 million at December 31, 2009 compared to $247 mil-

Spirit AeroSystems has several U.S. deﬁned beneﬁt

lion at December 31, 2008. Note 10 to the audited annual

pension plans that were frozen at the date of Onex’ acquisi-

consolidated ﬁnancial statements provides information on

tion of Spirit AeroSystems, with no future service beneﬁts

the debt of operating companies held by Onex.

being earned in these plans. Pension assets are placed in

54 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

S O U R C E S O F C A S H

Private equity funds
Onex has additional sources of cash from its private equity

During 2006, Onex raised its second large-cap

Fund, Onex Partners II, a US$3.45 billion private equity

fund, including committed capital from Onex of US$1.4 bil-

lion. Onex Partners II has completed seven investments or

Funds. Private equity Funds provide capital to Onex-spon-

acquisitions, investing US$2.9 billion of equity in those

sored acquisitions that are not related to Onex’ operating

transactions. At December 31, 2009, Onex Partners II has

companies that existed prior to the formation of the

concluded its investment period but has uncalled third-

Funds. The Funds provide a substantial pool of committed

party committed capital of approximately US$291 million,

capital, which enables Onex to be more ﬂexible and timely

which is largely reserved for possible future funding for any

in responding to investment opportunities.

of Onex Partners II’s existing businesses.

At December 31, 2009, the third-party limited

During 2009, Onex completed fundraising for its

partners in the Onex Partners and ONCAP Funds had

third large-cap private equity fund, Onex Partners III,

remaining commitments to provide funding for future

a US$4.3 billion private equity fund. Onex had initially

Onex-sponsored acquisitions as follows:

committed US$1.0 billion to this Fund; this amount could

be either increased or decreased by US$500 million with

Private Equity Funds Uncalled Third-party

six months’ notice. On December 31, 2008, Onex notiﬁed

Committed Capital

TABLE 33

($ millions)

Onex Partners I

Onex Partners II

Onex Partners III

ONCAP II

(a)

Includes amounts from Onex management and directors.

Available Uncalled
Committed Capital

(Excluding Onex)(a)

US$

US$ 291

US$ 3,389

127

its limited partners in Onex Partners III that it would be

reducing its commitment to the Fund to approximately

US$500 million effective July 1, 2009. Any transaction com-

pleted prior to July 1, 2009 was funded at Onex’ original

US$1.0 billion commitment to Onex Partners III. As a

result of the increase in Onex’ cash position during 2009,

Onex was in a position to increase its commitment to

Onex Partners III. In December 2009, Onex noti ﬁed its lim-

ited partners in Onex Partners III that it would be increas-

ing its commitment up to US$800 million. This would

The committed amounts by the third-party limited part-

become effective for new acquisitions completed after

ners are not included in Onex’ consolidated cash and will

be funded as acquisitions are made.

June 16, 2010. This commitment may be increased up to
US$1.5 billion at the option of Onex but cannot be decreased.

During 2003, Onex raised its ﬁrst large-cap Fund,

Onex’ mid-cap private equity Fund, ONCAP II,

Onex Partners I, with US$1.655 billion of committed capital,

has total committed capital of $574 million, of which Onex

including committed capital from Onex of US$400 million.

had committed $252 million. ONCAP II has completed ﬁve

Since 2003, Onex Partners I has completed 10 investments

acquisitions, putting $265 million of equity to work. At

or acquisitions with US$1.5 billion of equity being put

December 31, 2009, this Fund has uncalled committed

to work. While Onex Partners I has concluded its invest-

third-party capital of $127 million available for future

ment period, the Fund still has uncalled third-party com-

acquisitions.

mitted capital of US$86 million, which is largely reserved

for possible future funding for any of Onex Partners I’s

existing businesses.

Onex Corporation December 31, 2009 55

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Related party transactions
Related party transactions are primarily investments by the management of Onex and of the operating companies in the

equity of the operating companies acquired.

The various investment programs are described in detail in the following pages and certain key aspects are sum-

marized in table 34.

Investment Programs

TABLE 34

Management
Investment Plan

Carried Interest
Participation

Minimum Stock
Price Appreciation/
Return Threshold

15%
Compounded
Return

8%
Compounded
Return

Vesting

Associated Investment by Management

• personal “at risk” equity investment required
• 25% of gross proceeds to be reinvested in Subordinate Voting Shares or

Management DSUs until 1,000,000 shares or DSUs owned

• corresponds to participation in minimum 1% “at risk” management team

equity investment

• 25% of gross proceeds to be reinvested in Subordinate Voting Shares or

Management DSUs until 1,000,000 shares or DSUs owned

6 years
(4 years prior to
November 2007)

4 years
(Onex Partners I)

5 years
(Onex Partners II)

6 years
(Onex Partners III)

Stock Option Plan

25%
Price Appreciation

5 years
(6 years for 2007)

• satisfaction of exercise price (market value at grant date)

Management
DSU Plan

Director
DSU Plan

n/a

Period of
employment

Period of
directorship

• investment of elected portion of annual compensation in Management DSUs
• value reflects changes in Onex’ share price
• units not redeemable while employed

• investment of elected portion of annual directors’ fees in Director DSUs
• value reflects changes in Onex’ share price
• units not redeemable until retirement

Management Investment Plan

amended for investments completed after November 7,

Onex has a Management Investment Plan (the “MIP”) in

place that requires its management members to invest in

each of the operating companies acquired by Onex. The

2007. For those investments, the investment rights to
acquire the remaining 5⁄6ths vest equally over six years.
Under the MIP, the investment rights related to a particular

aggregate investment by management members under the

acquisition are exercisable only if Onex earns a minimum

MIP is limited to 9 percent of Onex’ interest in each acqui-

15 percent per annum compound rate of return for that

sition. The form of the investment is a cash purchase for
1⁄6th (1.5 percent) of the MIP’s share of the aggregate
investment, and investment rights for the remaining 5⁄6ths
(7.5 percent) of the MIP’s share at the same price. Amounts

acquisition after giving effect to the investment rights.

The funds required for investments under the MIP

are not loaned to the management members by Onex or the

operating companies. During 2009, there were investments

invested under the 1 percent investment requirement

made of $1 million under the MIP (2008 – $2 million). These

in Onex Part ners transactions are allocated to meet the

amounts exclude amounts invested under the Onex Part -

1.5 percent in vestment requirement under the MIP. For

ners’ 1 percent investment requirement. Man age ment mem -

investments completed prior to November 7, 2007, the
investment rights to acquire the remaining 5⁄6ths vest
equally over four years with the investment rights vesting

bers received $20 million under the MIP in 2009 (2008 –

less than $1 million). Notes 1 and 24 to the audited annual

consolidated ﬁnancial statements provide additional details

in full if Onex disposes of 90 percent or more of an in-

on the MIP.

vestment before the ﬁfth year. During 2007, the MIP was

56 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

The Onex Partners Funds

Carried Interest

The structure of the Onex Partners Funds requires Onex

management to invest a minimum of 1 percent in all

acquisitions. This structure applies to Onex Partners I, II

TABLE 35

(US$ millions)

and III. Onex Partners I completed its investment period

Carried interest – 2003

in 2006. For Onex Partners II and III, Onex management

Carried interest – 2004

and directors have committed an additional 2 per cent of

Carried interest – 2005

the total capital to be invested by those Funds for the year

ending December 31, 2010.

The total amount invested in 2009 by Onex man-

agement and directors in acquisitions and investments

Carried interest – 2006

Carried interest – 2007

Carried interest – 2008

Carried interest – 2009

completed through the Onex Partners Funds was US$5 mil-

Total

lion (2008 – US$14 million).

Cash
Carried
Interest
Received

Carried
Interest
Recognized
in Income

$ 1

–

$ 172

$ 118

Carried interest participation

The General Partners of the Onex Partners Funds and

ONCAP Funds, which are controlled by Onex, are entitled

to a carried interest of 20 percent on the realized gains of

third-party limited partners in each Fund, subject to an

8 percent compound annual preferred return to those lim-

ited partners on all amounts contributed in each particular

Fund. Onex, as sponsor of the Onex Partners Funds, is enti-

tled to 40 percent of the carried interest and the Onex man-

agement team is entitled to 60 percent. Under the terms of

the partnership agreements, Onex may receive carried inter-

est as realizations occur. The ultimate amount of carried

interest earned will be based on the overall performance of

each of Onex Partners I, II, III and ONCAP I and II, inde-

pendently, and includes typical catch-up and clawback

provisions within each Fund but not between Funds.

During 2009, Onex, the parent company, received

US$19 million of carried interest on the two realizations by

third-party limited partners’ sale of shares of EMSC. This

was reduced by approximately US$7 million due to the

requirement to offset the effect of the loss on CEI. There

was no carried interest earned in 2008. Table 35 shows a

reconciliation of carried interest received by Onex, the

parent company, and recognized into income by year.

At December 31, 2009, Onex, the parent company, had

US$54 million of carried interest that had been received as

cash but deferred from inclusion in income. This amount is

reported as deferred revenue on the consolidated balance

sheet. There is also US$49 million of unrealized carried

interest to Onex based on the market value of public com-

pany holdings in Onex Partners I. This value is not recog-

nized in Onex’ consolidated ﬁnancial statements.

Stock Option Plan

Onex, the parent company, has a Stock Option Plan in

place that provides for options and/or share appreciation

rights to be granted to Onex directors, ofﬁcers and em -

ployees for the acquisition of Subordinate Voting Shares

of the Company for a term not exceeding 10 years. The

options vest equally over ﬁve years with the exception of

the options granted in December 2007, which vest over six

years. The price of the options issued is at the market value

of the Subordinate Voting Shares on the business day pre-

ceding the day of the grant. Vested options are not exercis-

able unless the average ﬁve-day market price of Onex

Subordinate Voting Shares is at least 25 percent greater

than the exercise price at the time of exercise. Table 26 on

page 49 of this MD&A provides details of the change in the

stock options outstanding at December 31, 2009 and 2008.

Management Deferred Share Unit Plan

Effective December 2007, a Management Deferred Share

Unit Plan (“MDSU Plan”) was established as a further

means of encouraging personal and direct economic inter-

ests by the Company’s senior management in the perfor -

mance of the Subordinate Voting Shares. Under the MDSU

Plan, the members of the Company’s senior management

Onex Corporation December 31, 2009 57

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

team are given the opportunity to designate all or a por-

Director Deferred Share Unit Plan

tion of their annual compensation to acquire MDSUs

Onex, the parent company, established a Director Deferred

based on the market value of Onex shares at the time in

Share Unit Plan (“DSU Plan”) in 2004, which allows Onex

lieu of cash. MDSUs vest immediately but are redeemable

directors to apply directors’ fees to acquire Deferred Share

by the participant only after he or she has ceased to be an

Units (“DSUs”) based on the market value of Onex shares at

ofﬁcer or employee of the Company, or an afﬁliate, for a

the time. Grants of DSUs may also be made to Onex direc-

cash payment equal to the then current market price of

tors from time to time. Holders of DSUs are entitled to

Subordinate Voting Shares. Additional units are issued

receive, for each DSU upon redemption, a cash payment

equivalent to the value of any cash dividends that would

equivalent to the market value of a Subordinate Voting

have been paid on the Subordinate Voting Shares. To

Share at the redemption date. The DSUs vest immediately,

hedge Onex’ exposure to changes in the trading price of

are only redeemable once the holder retires from the Board

Onex shares associated with the MDSU Plan, the Company

of Directors and must be redeemed by the end of the year

enters into forward agreements with a counterparty ﬁnan-

following the year of retirement. Additional units are issued

cial institution for all grants under the MDSU Plan. The

equivalent to the value of any cash dividends that would

annual costs of those arrangements are borne entirely by

have been paid on the Subordinate Voting Shares. Onex,

participants in the MDSU Plan. MDSUs are redeemable

the parent company, has recorded a liability for the future

only for cash and no shares or other securities of Onex will

settlement of DSUs at the balance sheet date by reference

be issued on the exercise, redemption or other settlement

to the value of underlying shares at that date. The liability

thereof. In early 2009, 68,601 MDSUs were issued to man-

is adjusted up or down for the change in the market value of

agement, having an aggregate value, at the date of grant,

the underlying Subordinate Voting Shares, with the corre-

of $1 million in lieu of cash compensation for the Com -

sponding amount reﬂected in the consolidated statements

pany’s 2008 ﬁscal year. In early 2010, 119,967 MDSUs were

of earnings.

issued to management having an aggregate value, at the

During 2009, Onex granted 40,000 DSUs to its direc -

date of grant, of $3 million in lieu of cash compensation

tors at a cost of approximately $1 million (2008 – 45,000 DSUs

for the Company’s 2009 ﬁscal year. Forward agreements

at a cost of approximately $2 million), recorded as stock-

were entered into to hedge Onex’ exposure to changes in

based compensation expense. In addition, 31,662 additional

the value of the MDSUs. Table 36 reconciles the changes

DSUs (2008 – 26,443 DSUs) were issued to directors in lieu

in MDSUs outstanding at December 31, 2009 from Decem -

of cash paid directors’ fees and cash dividends and no DSUs

ber 31, 2007.

Change in Outstanding Deferred Share Units

TABLE 36

Outstanding at December 31, 2007

Granted

Additional units issued in lieu of compensation and cash dividends

Outstanding at December 31, 2008

Granted

Additional units issued in lieu of compensation and cash dividends

Outstanding at December 31, 2009

were redeemed in 2009 (2008 – no DSUs) for cash consider-

ation. Table 36 reconciles the changes in the DSUs out-

standing at December 31, 2009 from December 31, 2007.

Director DSU Plan

Management DSU Plan

Number of
DSUs

Weighted
Average Price

Number of
DSUs

Weighted
Average Price

225,914

45,000

26,443

297,357

40,000

31,662

369,019

$ 32.54

$ 24.30

$ 22.98

$ 20.01

–

202,902

–

69,978

272,880

$ –

$ 30.96

$ –

$ 18.62

58 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Investment in Onex shares and acquisitions

Onex is now entitled to a management fee of

In 2006, Onex adopted a program designed to further align

1.75 percent on the committed capital of the third-party

the interests of the Company’s senior management and

limited partners of Onex Partners III. This management fee

other investment professionals with those of Onex share-

will be earned during the investment period of Onex

holders through increased share ownership. Under this pro-

Partners III for a period of up to ﬁve years. Thereafter, a

gram, members of senior management of Onex are required

1 percent management fee is payable to Onex based on

to invest at least 25 percent of all amounts received under

invested capital.

the MIP and carried interest in Onex Subor dinate Voting

Management fees earned by Onex on the Onex Part -

Shares and/or Management DSUs until they individually

ners and ONCAP Funds totalled approximately US$88 mil-

hold at least 1,000,000 Onex Sub ordinate Voting Shares

lion in 2009 (2008 – US$71 million).

and/or Management DSUs. Under this program, during

2009 Onex management reinvested approximately $2 mil-

lion (2008 – $2 million) in the purchase of Subordinate

Voting Shares.

T R A N S I T I O N T O I N T E R N A T I O N A L
F I N A N C I A L R E P O R T I N G S T A N D A R D S

Members of management and the Board of Direc -

In February 2008, the Canadian Accounting Standards Board

tors of Onex can invest limited amounts in partnership

conﬁrmed that the use of International Financial Reporting

with Onex in all acquisitions outside the Onex Partners

Standards (“IFRS”) would be required for Cana dian publicly

Funds at the same time and cost as Onex and other out-

accountable enterprises for years beginning on or after

side investors. During 2009, approximately $8 million in

January 1, 2011. Onex is working to adopt IFRS as the basis

investments (2008 – $11 million) were made by Onex man-

for preparing its consolidated ﬁnancial statements effective

agement and Onex Board members.

January 1, 2011. For the ﬁrst quarter ended March 31, 2011,

Management fees

Onex will issue its ﬁnancial results prepared on an IFRS

basis with comparative data on an IFRS basis.

Onex receives management fees from Onex Partners I, II,

In order to meet the new IFRS reporting, Onex,

III and ONCAP Funds.

the parent company, developed a transition plan during

Onex Partners I completed its investment period

2008. Onex continued to execute that plan during 2009

in 2006, and for the remainder of the life of this Fund,

and will continue through 2010. By December 31, 2009,

Onex will receive a 1 percent annual management fee

decisions on the selection of signiﬁcant IFRS accounting

based on invested capital. During the investment period of

policies had been reached at both the parent company

Onex Partners II, Onex received a management fee of

and oper ating companies. A description of signiﬁcant IFRS

2 percent on the committed capital of the Fund provided

policies to be adopted is provided below. These policies

by third-party investors. Thereafter, a 1 percent manage-

are based on the IFRS as issued at December 31, 2009.

ment fee is payable based on the invested capital. Toward

Onex has not yet quantiﬁed the ﬁnancial impact of these

the end of 2008, the initial fee period for Onex Partners II

policies. Onex will update the policies as required based

was concluded when Onex began to receive a manage-

on any new standards issued in 2010 and effective for the

ment fee from Onex Partners III. Onex, therefore, earns a

year ended December 31, 2011.

1 percent management fee on Onex Partners II’s invested

There are a number of signiﬁcant IFRS accounting

capital. The management fee on Onex Partners I and II will

policies that are currently under review by the Inter national

decline over time as realizations occur.

Accounting Standards Board, including the application

of consolidation to controlled entities. The impact, if any,

of such accounting policy revisions cannot be predicted at

this time.

Onex Corporation December 31, 2009 59

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

IFRS 1 (First-time adoption of IFRS)
IFRS 1 requires that an entity apply all IFRS effective at the

Borrowing costs

IAS 23, Borrowing Costs, requires an entity to capitalize the

end of its ﬁrst IFRS reporting period retrospectively. How -

borrowing costs related to all qualifying assets. Onex plans

ever, IFRS 1 does provide certain mandatory exceptions and

to adopt IAS 23 prospectively. Accordingly, borrowing costs

limited optional exemptions in speciﬁc areas of certain

related to qualifying assets on or after January 1, 2010 will

standards that will not require retroactive application of

be capitalized.

IFRS. The following are the exceptions and exemptions

under IFRS 1 that are signiﬁcant to us and that we will apply

Leases

in preparing our ﬁrst ﬁnancial statements under IFRS:

International Financial Reporting Interpretations Com mit -

Business combinations

tee (“IFRIC”) 4, Determining Whether an Arrangement Con -

tains a Lease, requires a company to assess all arrangements

IFRS 1 allows for the guidance under IFRS 3 (revised), Busi -

to determine if they are, or contain, a lease. Onex will elect

ness Combinations, to be applied either retrospectively or

to use the IFRS 1 exemption so IFRIC 4 need only be applied

prospectively. Onex has elected to adopt IFRS 3 (revised)

to those arrangements that had not previously been assessed

prospectively. Accordingly, all business combinations on or

under similar Canadian GAAP requirements.

after January 1, 2010 will be accounted for in accordance

with IFRS 3 (revised).

Employee beneﬁts

Hedge accounting

IFRS 1 requires hedge accounting to be applied prospec-

tively from the date of transition to transactions that satisfy

IFRS 1 provides the option to retrospectively apply either the

the hedge accounting criteria at that date in accordance with

corridor approach under International Accounting Standard

IAS 39, Financial Instruments: Reco gni tion and Measure -

(“IAS”) 19, Employee Beneﬁts, for the recognition of actuarial

ment. Only hedging relationships that satisfy the hedge

gains and losses, or recognize all cumulative gains and

accounting criteria as of its date of transition (January 1,

losses deferred under Canadian GAAP in opening retained

2010) will be reﬂected as hedges in Onex’ results under

earnings at the date of transition. Onex will elect to recog-

IFRS. Any derivatives not meeting the IAS 39 criteria for

nize all cumulative actuarial gains and losses that existed at

hedge accounting will be recorded at fair value in the state-

the date of transition in opening retained earnings for all

ment of ﬁnancial position as a non-hedging derivative

employee beneﬁt plans at the operating companies.

ﬁnancial instrument.

Cumulative translation differences

Estimates

IAS 21, The Effects of Changes in Foreign Exchange Rates,

Hindsight is not to be used to create or revise estimates.

requires an entity to determine the translation differences

The estimates previously made by Onex under Canadian

in accordance with IFRS from the date on which a sub-

GAAP will not be revised for application of IFRS except

sidiary was formed or acquired. IFRS 1 allows cumulative

where necessary to reﬂect any difference in accounting

translation differences for all foreign operations to be

policies between IFRS and Canadian GAAP.

deemed zero at the date of transition to IFRS, with future

gains or losses on subsequent disposal of any foreign

IFRS to Canadian GAAP differences

operations to exclude translation differences arising from

In addition to the exemptions and exceptions discussed

periods prior to the date of transition to IFRS. Onex will

above, the following discussion explains the signiﬁ-

deem all cumulative translation differences to be zero on

cant accounting policy differences between Canadian

transition to IFRS.

GAAP and IFRS as they apply to Onex’ consolidated ﬁnan-

cial statements.

60 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Business combinations and non-controlling interests
Canadian GAAP – Under Onex’ application of Canadian
GAAP, transaction costs are capitalized as part of the cost of

Actuarial gains and losses
Canadian GAAP – Actuarial gains and losses that arise in
calculating the present value of the deﬁned beneﬁt obliga-

the acquisition, when applicable. In addition, the non-con-

tion and the fair value of plan assets are recognized on a

trolling interests’ share of net assets is recognized as a sepa-

systematic and consistent basis, subject to a minimum

rate line item on the balance sheet, outside of equity and

required amortization based on a “corridor” approach. The

the non-controlling interests’ share of earnings is recorded

“corridor” is 10 percent of the greater of the accrued

on the statement of net earnings, above net earnings.

beneﬁt obligation at the beginning of the year and the fair

Additionally, when Onex divests a portion of an operating

value of plan assets at the beginning of the year. This

company, but retains control, a gain or loss is recorded in

excess of 10 percent is amortized as a component of pen-

the statement of income for the difference between the

sion expense on a straight-line basis over the expected

carrying value for the portion sold and the proceeds.

average service life of active participants. Actuarial gains

and losses below the 10 percent corridor are deferred.

IFRS – Under IFRS, all transaction costs relating to acquisi-
tions are expensed as incurred. In addition, the non-con-

trolling interests’ share of the net assets is considered a

IFRS – Onex will elect to recognize all actuarial gains and
losses immediately in a separate statement of comprehen-

component of equity. As a result, the non-controlling inter-

sive income without recognition to the income statement

ests’ share of earnings is recorded as an allocation after

in subsequent periods. As a result, actuarial gains and

arriving at net earnings. Also, when a divestiture is made of

losses are not amortized to the income statement but

a portion of a subsidiary and control is retained, the result-

rather are recorded directly to comprehensive income at

ing change is recorded in the statement of equity, outside of

the end of each reporting period. As a result, Onex’ oper -

the statement of net earnings.

ating companies will adjust their pension expense to
remove the amortization of actuarial gains and losses.

Equity-accounted investments
Canadian GAAP – Under Canadian GAAP, investments over
which Onex exercises signiﬁcant inﬂuence are accounted

for using the equity-accounted method. As a result, Onex

Cash-settled share based payments
Canadian GAAP – A liability for cash-settled share based
payments is accrued based on the intrinsic value of the

records its proportionate share of earnings or loss from

award, with changes recognized in the income statement

the investment.

each period.

IFRS – For certain investments over which Onex holds sig-
niﬁcant inﬂuence, but not control, IFRS allows the invest-

IFRS – An entity must measure the liability incurred at fair
value by applying an option pricing model. Until the liabil-

ments to be recorded at fair value. As a result, changes in

ity is settled, the fair value of the liability is re-measured at

the fair value of the investments will be in the statement of

each reporting date, with changes in fair value recognized

earnings. Onex expects to record at fair value certain of its

as the awards vest. Changes in fair value of vested awards

equity-accounted investments, including Hawker Beech -

are recognized immediately in earnings. As a result, Onex’

craft, Allison Transmission, RSI and ResCare.

operating companies will adjust expenses associated with

cash-settled share based payments to reﬂect the changes

Employee future beneﬁts

of the fair values of these awards.

As previously stated, Onex’ businesses will elect to recog-

nize all cumulative actuarial gains and losses that existed

at the date of transition in opening retained earnings for

all of their employee beneﬁt plans.

Onex Corporation December 31, 2009 61

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Impairments of intangible and long-lived assets,

excluding goodwill

IFRS – Previously unrecognized deferred tax assets of an
acquired company are recognized as part of the cost of the

Recoverable amount
Canadian GAAP – A recoverability test is performed by ﬁrst
comparing the undiscounted expected future cash ﬂows to

acquisition if realization is more likely than not as a result

of the business combination. If an unrecognized deferred

tax asset becomes realizable subsequent to the acquisition

be derived from the asset to its carrying amount. If an asset’s

date, such beneﬁt is recognized in the consolidated state-

undiscounted expected future cash ﬂows do not exceed its

ment of earnings and a corresponding amount of goodwill

carrying value, an impairment loss is calculated as the

is recognized as an operating expense. The acquirer recog-

excess of the asset’s carrying amount over its fair value.

nizes deferred tax assets of its own that become realizable

IFRS – A recoverability test is performed by comparing the
carrying amount to the asset’s recoverable amount. The

impairment loss is calculated as the excess of the asset’s

as a result of the acquisition through earnings. As a result,

Onex will recognize deferred tax assets that become realiz-

able as a result of future acquisitions in earnings.

carrying amount over its recoverable amount. The recover-

able amount is deﬁned as the higher of the asset’s fair value

less costs to sell and its value-in-use. Under the value-in-

Accounting for uncertainty in income tax positions
Canadian GAAP – Beneﬁts for uncertain tax positions are
determined by reference to a two-step process. First, the

use calculation, the expected future cash ﬂows from the

company determines whether it is more likely than not that

asset are discounted to their net present value. As a result of

an uncertain tax position will be sustained upon examina-

the change in measurement methodology, impairments

tion. Where the position meets that criterion of likelihood,

under IFRS may be recognized sooner than under Canadian

the amount of provision is measured as the largest amount

GAAP and the impairment amounts may differ.

of provision that is greater than 50 percent likely to be real-

ized. Where the criterion of likelihood is not met, no provi-

Reversal of impairments of intangible

sion is recognized for the uncertain tax position.

and long-lived assets, excluding goodwill
Canadian GAAP – Reversal of impairment losses is not
permitted.

IFRS – Reversal of impairment losses is required if the cir-
cumstances that led to the impairment no longer exist.

Income taxes

Deferred tax assets not previously recognized
Canadian GAAP – Previously unrecognized deferred tax
assets of an acquired company are recognized as part of the

IFRS – The provision for uncertain tax positions is a best
estimate of the amount expected to be paid based on a

qualitative assessment of all relevant factors. As a result,

Onex will recalculate its provision under IFRS.

Accounting for uncertainty in income taxes

in business combinations
Canadian GAAP – Changes to provisions for uncertain tax
positions relating to pre-acquisition periods are adjusted

through the purchase price allocation, ﬁrst reducing good-

cost of the acquisition when such assets are more likely than

will and intangible assets associated with the business

not to be realized as a result of a business combination. If an

combination and, only after exhausting those amounts,

unrecognized deferred tax asset becomes realizable subse-

reducing income tax expense.

quent to the acquisition date, such beneﬁt is also recognized

through goodwill. The acquirer recognizes deferred tax

assets of its own that become realizable as a result of the

IFRS – Changes to pre-acquisition provisions for uncertain
tax positions beyond 12 months of the acquisition date are

acquisition as part of the cost of the acquisition.

recorded to the income statement. As a result, Onex may be

required to adjust its tax expense to reflect this difference.

62 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Presentation reclassiﬁcations for IFRS
Tax reclassiﬁcation – Deferred tax
Canadian GAAP – Future taxes are split between current
and non-current components on the basis of either (1) the

underlying asset or liability or (2) the expected reversal of

items when not related to an asset or liability.

IFRS – All deferred tax assets and liabilities will be clas-
siﬁed as non-current.

Non-controlling interests
Canadian GAAP – Non-controlling interests in the equity of
a consolidated subsidiary are classiﬁed as a separate com-

D I S C L O S U R E C O N T R O L S A N D
P R O C E D U R E S A N D I N T E R N A L C O N T R O L S
O V E R F I N A N C I A L R E P O R T I N G

Disclosure controls and procedures
National Instrument 52-109, Certiﬁcation of Disclosure in

Issuers’ Annual and Interim Filings, issued by the Cana dian

Securities Administrators requires Chief Execu tive Ofﬁcers

(“CEOs”) and Chief Financial Ofﬁcers (“CFOs”) to certify that

they are responsible for establishing and maintaining disclo-

sure controls and procedures for the issuer, that disclosure

controls and procedures have been de signed and are effec-

tive in providing reasonable assurance that material infor-

ponent between liabilities and equity in the statement

mation relating to the issuer is made known to them, that

of ﬁnancial position and as a component of net earnings

they have evaluated the effectiveness of the issuer’s disclo-

within the income statement.

IFRS – Non-controlling interests will be classiﬁed as a
component of equity separate from the equity of the parent

sure controls and procedures, and that their conclusions

about the effectiveness of those disclosure controls and pro-

cedures at the end of the period covered by the relevant

annual ﬁlings have been disclosed by the issuer.

and will not be included in net earnings, but rather will be

Under the supervision of and with the participation

presented as an allocation of net earnings and comprehen-

of management, including the CEO and CFO, we have evalu-

sive earnings.

Discontinued operations
Canadian GAAP – To qualify as a discontinued operation an
entity may not have any signiﬁcant continuing involvement

ated the design and effectiveness of the Company’s disclo-

sure controls and procedures as at December 31, 2009 and

have concluded that those disclosure controls and proce-

dures were effective in ensuring that information required to

be disclosed by the Company in its corporate ﬁlings is

in the operations of the entity after the disposal transaction.

recorded, processed, summarized and reported within the

Additionally, dispositions are classiﬁed as discontinued

required time period for the year then ended.

operations if certain criteria are met.

A control system, no matter how well conceived

and operated, can provide only reasonable, not absolute,

IFRS – Continuing involvement with a sold entity does not
preclude presentation as a discontinued operation. Addi -

assurance that its objectives are met. Due to inherent limi-

tations in all such systems, no evaluations of controls can

tionally, only disposals of signiﬁcant operations meet the

provide absolute assurance that all control issues, if any,

IFRS requirements to present the results as discontinued

within a company have been detected. Accordingly, our

disclosure controls and procedures are effective in provid-

ing reasonable, not absolute, assurance that the objectives

of our disclosure control system have been met.

operations.

Information technology systems
and internal controls
During 2008 and 2009, Onex, the parent company, began

to identify and assess IFRS differences that will require

changes to the ﬁnancial systems. As a result, an informa-

tion technology solution is currently being implemented

at Onex, the parent company, that will accommodate

accounting under IFRS for 2010. In addition, Onex will be

documenting its internal control processes surrounding its

IFRS reporting concurrently with the implementation.

Onex Corporation December 31, 2009 63

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Internal controls over ﬁnancial reporting
National Instrument 52-109 also requires CEOs and CFOs to

accordance with Canadian generally accepted accounting

principles. While no changes occurred during the last quarter

certify that they are responsible for establishing and main-

of 2009 that, in the view of Onex management, have materi-

taining internal controls over ﬁnancial reporting for the

ally affected or are reasonably likely to materially affect

issuer, that those internal controls have been designed and

Onex’ internal control over ﬁnancial reporting, the Company

are effective in providing reasonable assurance regarding

regularly acquires new businesses, many of which were pri-

the reliability of ﬁnancial reporting and the preparation of

vately owned or were divisions of larger organizations prior

ﬁnancial statements in accordance with Canadian generally

to their acquisition by Onex. The Com pany continues to

accepted accounting principles, and that the issuer has dis-

assess the design and effectiveness of internal controls over

closed any changes in its internal controls during its most

ﬁnancial reporting in its most recently acquired businesses.

recent interim period that has materially affected, or is rea-

Under the supervision of and with the participa-

sonably likely to materially affect, its internal control over

tion of management, including the CEO and CFO, we have

ﬁnancial reporting.

evaluated the internal controls over ﬁnancial reporting as

During 2009, Onex management evaluated the

at December 31, 2009 and have concluded that those inter-

Com pany’s internal controls over ﬁnancial reporting to

nal controls were effective in providing reasonable assur-

ensure that they have been designed and are effective in pro-

ance regarding the reliability of ﬁnancial reporting and the

viding reasonable assurance regarding the reliability of ﬁnan-

preparation of ﬁnancial statements in accordance with

cial reporting and the preparation of ﬁnancial statements in

Canadian generally accepted accounting principles.

64 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

OUTLOOK

Looking back at 2009, we are pleased that, for the most

Allison Transmission’s industry leadership posi-

part, our operating companies are conservatively capital-

tion, the diversity of its end-markets, its signiﬁcant number

ized. As business activity improves for many of our oper -

of customers and broad geographic reach enabled it to per-

ating companies, they are focused on maintaining their

form better than others in its industry. Sales demand is

leaner cost structures with the goal of improving margins

linked to the number of commercial vehicles built by its

and strengthening their leadership positions within their

customers, which depends on general economic conditions

respective industries. Those efforts help frame our expec-

and, to a lesser extent, the level of demand for military vehi-

tations for our major businesses as we enter 2010.

cles. In the coming year, the company anticipates resuming

As we highlighted last quarter, we expect that

growth, albeit at a slow pace. Allison Trans mission made

Hawker Beechcraft’s markets will be slower to improve than

adjustments to its cost structure during 2009 that should

others. Although the company is partially insulated due to

allow it to beneﬁt from any growth in volumes.

its signiﬁcant aftermarket, military and government busi-

Sitel Worldwide is one of the largest customer care

nesses, the reduced demand for business jets will affect

providers in the world, operating 126 facilities in 27 coun-

2010 results. During this challenging period, the company

tries. This enables Sitel Worldwide to provide a full range of

has done a very good job of aggressively man aging its costs,

customer care solutions for its clients as they seek to adjust

working capital and capital expenditures.

costs or services. Volume growth with many of its existing

In our healthcare portfolio, we expect that EMSC

customers is dependent on a pick-up in consumer acti vity.

will continue to grow by adding new contracts for its ambu-

Sitel Worldwide’s management continues to assess its cost

lance transport services and in its services for faci lity-based

structure in areas that are not generating adequate margins

physician services. EMSC growth may also be achieved

and to actively solicit new customers.

through selective acquisitions. Carestream Health will con-

The Warranty Group’s volume of new business in

tinue to build its digital imaging business, while we expect

the U.S. is signiﬁcantly dependent not only on consumer

volumes of traditional ﬁlm x-ray products to continue to

purchases of autos, major appliances and electronics but

gradually decline as medical and dental imaging continues

also on these customers purchasing associated extended

to migrate to digital capturing. Overall, proposed healthcare

warranty products. While new vehicle sales in the U.S.

reform in the United States has created some uncertainty for

reported year-over-year growth in the fourth quarter of

our healthcare businesses, in particular surrounding the

2009, the overall level of sales for 2009 was at historic

Medi care and Medicaid reimbursement rates.

lows. Retail spending in the U.S. on major appliances and

Global economic uncertainty continues to affect

electronics is not yet showing much growth and will con-

Celestica customers. While there have been recent

tinue to be affected by high unemployment levels. Overall,

demand increases in some end-markets, there is limited

the company does not contemplate U.S. demand for its

overall visibility on future demand. Celestica has strong

products and services dropping from 2009 levels and has

relationships with existing customers and is actively pur-

targeted areas for growth. In its European and Latin Amer -

suing new customers to expand end-market penetration

i can markets, The Warranty Group is seeing some signs of

and diversify its end-market mix. The company believes it

economic improvement, which should be positive for the

is well-positioned to compete effectively in the EMS

company. Further, interest income rates are expected to

industry given its ﬁnancial strength and its position as one

remain low for the ﬁrst half of 2010, which would curtail

of the major EMS providers worldwide.

any increase in returns on the company’s investment port-

Our industrial businesses, including Tube City IMS

folio. The Warranty Group, by the nature of the industry,

and Allison Transmission, will be affected by the cycles in

has a large block of business that was booked in prior

their industries. Tube City IMS made signiﬁcant progress in

years and is amortized to income over the duration of the

2009 reducing its cost structure in line with the lower level of

contracts. This works to moderate the impact on earnings

activity. Further improvement in proﬁtability will be signiﬁ-

of higher or lower new volumes of business written in any

cantly dependent on the overall level of steel production.

particular period.

Onex Corporation December 31, 2009 65

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Spirit AeroSystems has a healthy order backlog as

Onex is in excellent ﬁnancial condition with over

it enters 2010. Demand for the commercial aerostructures

$1 billion of its own cash and near-cash items at the end

Spirit AeroSystems produces is highly correlated to demand

of January 2010, no debt at the parent company and approx -

for new aircraft. From 2005 to 2008, Boeing and Airbus

imately US$3.9 billion of third-party uncalled capital for

experienced an unprecedented order intake and backlog

acquisitions through Onex Part ners and ONCAP Funds.

growth. Despite a signiﬁcant slowdown in new aircraft

We were encouraged by the tremendous interest

orders in 2009, high order backlog levels are expected to

in the new Onex Credit Partners Credit Strategy Fund,

continue to drive stable production and delivery forecasts

a publicly traded Canadian retail fund that raised over

in the near-term from Boeing and Airbus, which account for

$200 million in the Fall. We believe this is a testament to

the substantial portion of Spirit AeroSystems’ revenues.

our credit team, its track record and the strength of the

We remain optimistic that there will be attractive

Onex brand. We will continue to evaluate future opportu-

acquisition prospects for Onex in this environment. Many of

nities to raise funds for our platforms – private equity,

the potential transactions we are currently considering are

credit investing and real estate.

proprietary and are the result of our industry focus and our

We believe we have built a portfolio of excellent

reputation for complex corporate carve-outs from large

businesses that we expect will create long-term value for

multinationals. We are working to ﬁnd similar opportunities

Onex, our shareholders and our limited partners.

where we can acquire businesses at reasonable purchase

prices and create value through earnings growth.

The swift rebound of the capital markets has been

both beneﬁcial and detrimental to trans action activity. The

ongoing recovery of the equity markets has created an

appetite for public offerings. If the markets continue to be

receptive, this may provide an opportunity for some of

Onex’ businesses to pursue equity offerings. Conversely,

sellers’ pricing expectations appear to be ahead of their

businesses’ current perfomance, making it difﬁcult for

value investors like Onex to ﬁnd attractive acquisition

opportunities. As well, with debt more readily available,

struggling companies may be able to turn to reﬁnancing

options rather than sale alternatives.

66 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

RISK MANAGEMENT

As managers, it is our responsibility to identify and manage business risk. As shareholders, we
require an appropriate return for the risk we accept.

Managing risk
Onex’ general approach to the management of risk is to

long-term growth in value. Finally, Onex invests in ﬁnan-

cial partnership with management. This strategy not only

apply common-sense business principles to the manage-

gives Onex the beneﬁt of experienced managers but also is

ment of the Company, the ownership of its operating com-

designed to ensure that an operating company is run

panies and the acquisition of new businesses. Each year,

entrepreneurially for the beneﬁt of all shareholders.

detailed reviews are conducted of many opportunities to

Onex maintains an active involvement in its oper-

purchase either new businesses or add-on acquisitions for

ating companies in the areas of strategic planning, ﬁnan-

existing businesses. Onex’ primary interest is in acquiring

cial structures, and negotiations and acquisitions. In the

well-managed companies with a strong position in growing

early stages of ownership, Onex may provide resources for

industries. In addition, diversiﬁcation among Onex’ oper-

business and strategic planning and ﬁnancial reporting

ating companies enables Onex to participate in the growth

while an operating company builds these capabilities in-

of a number of high-potential industries with varying busi-

house. In almost all cases, Onex ensures there is oversight

ness cycles.

of its investment through representation on the acquired

As a general rule, Onex attempts to arrange as

company’s board of directors. Onex does not get involved

many factors as practical to minimize risk without hamper-

in the day-to-day operations of acquired companies.

ing its opportunity to maximize returns. When a purchase

Operating companies are encouraged to reduce

opportunity meets Onex’ criteria, for example, typically

risk and/or expand opportunity by diversifying their cus-

a fair price is paid, though not necessarily the lowest

tomer bases, broadening their geographic reach or product

price, for a high-quality business. Onex does not commit

and service offerings and improving productivity. In certain

all of its capital to a single acquisition and has equity part-

instances, we may also encourage an operating company

ners with whom it shares the risks and rewards of owner-

to seek additional equity in the public markets in order to

ship. The Onex Partners and ONCAP Funds streamline

continue its growth without eroding its balance sheet. One

Onex’ process of sourcing and drawing on commitments

element of this approach may be to use new equity invest-

from such equity partners.

ment, when ﬁnancial markets are favourable, to prepay

An acquired company is not burdened with more

existing debt and absorb related penalties. Some of the

debt than it can likely sustain, but rather is structured so

strategies and policies to manage business risk at Onex and

that it has the ﬁnancial and operating leeway to maximize

its operating companies are discussed in this section.

Onex Corporation December 31, 2009 67

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Business cycles
Diversiﬁcation by industry and geography is a deliberate

industry leaders with extensive international operations

reduces the ﬁnancial impact of economic downturns in

strategy at Onex to reduce the risk inherent in business

speciﬁc regions. As shown on the industry diversiﬁcation

cycles. Onex’ practice of owning companies in various

chart that follows, Onex is well diversiﬁed among various

industries with differing business cycles reduces the risk of

industries, with no single industry representing more than

holding a major portion of Onex’ assets in just one or two

16 percent of its net asset base and no single business repre-

industries. Similarly, the Company’s focus on building

senting more than 8 percent of its net asset base.

Industry Diversification of Onex

Mid-cap Opportunities 3%

– ONCAP II

Injection Molding 6%

– Husky

Commercial Vehicles 6%

– Allison Transmission

Financial Services 5%

– The Warranty Group

Other Industries 9%

– RSI
– Tube City IMS
– Tropicana Las Vegas

Customer Support
Services 5%

– Sitel Worldwide

Credit Securities 3%

– Onex Credit Partners

Healthcare 16%
– EMSC
– CDI
– Skilled Healthcare
– Carestream Health
– ResCare

Aerospace 11%
– Spirit AeroSystems
– Hawker Beechcraft

Real Estate 3%
– Onex Real Estate Partners

Electronics Manufacturing
Services 5%
– Celestica

Cash and Near-cash Items 28%

Private investments are valued at cost and publicly traded investments are valued at market as at December 31, 2009.

Operating liquidity
It is Onex’ view that one of the most important things Onex

A large portion of the purchase price for new

acquisitions is generally funded with debt provided by

can do to control risk is to maintain a strong parent com-

third-party lenders. This debt, sourced exclusively on the

pany with an appropriate level of liquidity. Onex needs to be

strength of the acquired company’s ﬁnancial condition

in a position to support its operating companies when and if

and prospects, is a debt of the acquired company at clos-

it is appropriate and reasonable for Onex, as an equity

ing and is without recourse to Onex, the parent company,

owner with paramount duties to act in the best interests of

or to its other operating companies or partnerships. The

Onex shareholders, to do so. Maintaining liquidity is also

foremost consideration, however, in developing a ﬁnanc-

important to fund Onex’ portion of the investment in new

ing structure for an acquisition is identifying the appropri-

acquisitions. Onex, as a holding company, generally does

ate amount of equity to invest. In Onex’ view, this should

not have guaranteed sources of meaningful cash ﬂow and

be the amount of equity that maximizes the risk/reward

cannot predict the timing of realizations. The approximate

equation for both shareholders and the acquired company.

US$88 million in management fees that Onex expects to

In other words, it allows the acquired company not only to

earn in 2010 as the general partner of the Onex family of

manage its debt through reasonable business cycles but

private equity funds will be used to offset the ongoing costs

also to have sufﬁcient ﬁnancial latitude for the business to

of running the parent company.

vigorously pursue its growth objectives.

68 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Onex’ largest acquisitions over the period from

In order to improve the efﬁciency of Onex’ inter-

2005 to 2007 were purchased at an average purchase price

nal processes on both auction and exclusive acquisition

multiple of 6.4 times EBITDA, which was notably less than

processes, and so reduce the risk of missing out on high-

the industry average of more than 9.3 times EBITDA. Over

quality opportunities, during 2003 we created Onex Part -

the same timeframe, the leverage associated with those

ners LP (“Onex Partners I”), a US$1.655 billion pool of

acquisitions was 3.6 times while the industry average was

capital raised from Onex and major institutional investors.

5.6 times. This shows that Onex generally paid less for busi-

The investment period for Onex Partners I was substan-

nesses and applied less leverage than the industry norm.

tially completed in 2006. Onex raised a second fund, Onex

While Onex seeks to optimize the risk/reward

Part ners II LP (“Onex Partners II”), in 2006, a US$3.45 bil-

equation in all acquisitions, there is always the risk that

lion pool of capital. Onex determined that Onex Partners II

the acquired company will not generate sufﬁcient proﬁt -

was effectively fully invested in December 2008. In late 2009,

ability or cash ﬂow to service its debt requirements and/or

Onex completed the ﬁnal close on its third fund, Onex Part -

meet related debt covenants or to provide adequate ﬁnan-

ners III LP (“Onex Partners III”), a US$4.3 billion pool of

cial ﬂexibility for growth. In such circumstances, addi-

third-party capital and capital committed from Onex.

tional investment by the equity partners, including Onex,

may be appropriate. In severe circumstances, the recovery

of Onex’ equity and any other investment in that operating

company is at risk.

Financial risks
In the normal course of business, Onex and its operating

companies may face a variety of risks related to ﬁnancial

management. In dealing with these risks, it is a matter of

Timeliness of investment commitments
Onex’ ability to create value for shareholders is dependent

Company policy that neither Onex nor its operating com-

panies engages in speculative derivatives trading or other

in part on its ability to successfully complete large acquisi-

speculative activities.

tions. Our preferred course is to complete acquisitions on

Default on known credit As previously noted, new

an exclusive basis. However, we also participate in acquisi-

investments generally include a meaningful amount of

tions through an auction or bidding process with multiple

third-party debt. Those lenders typically require that the

potential purchasers. Bidding is often very competitive for

acquired company meet ongoing tests of ﬁnancial perfor -

the large-scale acquisitions that are Onex’ primary interest,

mance as deﬁned by the terms of the lending agreement,

and the ability to make knowledgeable, timely investment

such as ratios of total debt to operating income (“EBITDA”)

commitments is a key component in successful purchases.

and the ratio of EBITDA to interest costs. It is Onex’ practice

In such instances, the vendor often establishes a relatively

not to burden acquired companies with levels of debt that

short timeframe for Onex to re spond deﬁnitively.

might put at risk their ability to generate sufﬁcient levels of

proﬁtability or cash ﬂow to service their debts – and so meet

their related debt covenants – or which might hamper their

ﬂexibility to grow.

At year end, all of Onex’ operating companies had

satisﬁed their debt covenants.

As we look forward to 2010, Sitel Worldwide projects

that it will be close to meeting a performance covenant

related to its debt. We believe the company has a number of

alternatives to address that situation should it arise.

Onex Corporation December 31, 2009 69

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Financing risk The severe tightening of global

Onex, the parent company, has some exposure to

credit markets from the fourth quarter of 2007 through the

interest rate changes primarily through its cash and cash

ﬁrst half of 2009 has made new large loans, even for credit

equivalents, which are held in short-term deposits and

worthy businesses, extremely difﬁcult or expensive to obtain.

commercial paper. A 0.25 percent increase (0.25 percent

While debt markets improved in the last half of 2009, the

decrease) in the interest rate, assuming no signiﬁcant

ability to reﬁnance debt at reasonable terms and cost repre-

changes in cash balance at the parent company, would

sents a risk to the ongoing viability of many otherwise

result in a $2 million increase ($2 million decrease) in

healthy businesses whose loans or operating lines of credit

annual interest income. In addition, The Warranty Group,

are up for renewal in the short term. None of Onex’ oper -

which holds substantially all of its investments in interest-

ating companies has any signiﬁcant reﬁnancing require-

bearing securities, would also have some exposure to inter-

ments until 2012, by which time Onex believes that the

est rate changes. A 0.25 percent change in the interest rate

credit markets will have returned to more normal levels of

would change the fair value of the investments held by The

liquidity and cost. The major portion of Onex’ operating

Warranty Group by US$11 million, with a corresponding

companies’ reﬁnancings will take place in 2013 and 2014.

change to other comprehensive earnings. However, as the

Table 22 on page 46 of this MD&A provides the aggregate

investments are reinvested, a 0.25 percent change in the

debt maturities for Onex’ consolidated operating compa-

interest rate would change the annual interest income

nies and equity-accounted operating companies for each

recorded by The Warranty Group by US$5 million.

year up to 2014 and in total thereafter.

Currency ﬂuctuations The majority of the activi-

Interest rate risk As noted earlier, new investments

ties of Onex’ operating companies were conducted outside

generally include a meaningful amount of third-party debt

Canada during 2009, primarily in the United States. Approxi -

taken on by the acquired operating company. An important

mately 37 percent of consolidated revenues were from out-

element in controlling risk is to manage, to the extent rea-

side North America; however, a substantial portion of that

sonable, the impact of ﬂuctuations in interest rates on the

business is actually based on U.S. currency. This makes the

debt of the operating company.

value of the Canadian dollar relative to the U.S. dollar the

Onex’ operating companies generally seek to ﬁx

primary currency relationship affecting Onex’ operating

the interest on some of their term debt or otherwise mini-

results. Onex’ operating companies may use currency deriv-

mize the effect of interest rate increases on a portion of

atives in the normal course of business to hedge against

their debt at the time of acquisition. This is achieved by

adverse ﬂuctuations in key operating currencies but, as

taking on debt at ﬁxed interest rates or entering into interest

noted above, speculative activity is not permitted.

rate swap agreements or ﬁnancial contracts to control the

Onex’ results are reported in Canadian dollars, and

level of interest rate ﬂuctuation on variable rate debt. At

ﬂuctuations in the value of the Canadian dollar relative to

December 31, 2009, approximately 66 percent (2008 – 70 per-

other currencies can have an impact on Onex’ reported con-

cent) of Onex’ operating companies’ long-term debt had a

solidated results and ﬁnancial position. During 2009, share-

ﬁxed interest rate or the interest rate was effectively ﬁxed by

holders’ equity reﬂected a $74 million decrease in the value

interest rate swap contracts. The risk inherent in such

of Onex’ net equity in its operating companies and equity-

a strategy is that, should interest rates decline, the beneﬁt

accounted investments that operate in U.S. currency.

of such declines may not be obtainable or may only be

Onex holds a substantial amount of cash and

achieved at the cost of penalties to terminate existing

marketable securities in U.S.-dollar-denominated securi-

arrangements. There is also the risk that the counterparty on

ties. The portion of securities held in U.S. dollars is based

an interest rate swap agreement may not be able to meet

on Onex’ view of funds it will require for future invest-

its commitments. Guidelines are in place that specify the

ments in the United States. Onex does not speculate on

nature of the ﬁnancial institutions that operating companies

the direction of exchange rates between the Canadian

can deal with on interest rate contracts.

dollar and the U.S. dollar when determining the balance

70 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

of cash and marketable securities to hold in each cur-

rency, nor does it use foreign exchange contracts to

Commodity price risk
Certain Onex operating companies are vulnerable to price

protect itself against translation loss. A 5 percent strength-

ﬂuctuations in major commodities. Individual operating

ening (5 percent weakening) of the Canadian dollar rela-

companies may use ﬁnancial instruments to offset the

tive to the U.S. dollar at Decem ber 31, 2009 would result

impact of anticipated changes in commodity prices related

in a $33 million decrease ($33 million increase) in net earn-

to the conduct of their businesses. Aluminum, titanium and

ings of Onex, the parent company. In addition, two Onex

raw materials such as carbon ﬁbres used to manufacture

operating com panies, Celes tica and Husky, have signiﬁcant

composites represent the principal raw materials used in

exposure to the U.S. dollar/Canadian dollar ex change rate.

Spirit AeroSystems’ manufacturing operations. Spirit Aero -

Other comprehensive earnings at Celes tica would increase

Systems has entered into long-term supply contracts with

US$10 million (decrease US$9 million) with a 5 percent

its key suppliers of raw materials, which limits the com-

strengthening (5 percent weakening) of the Canadian dol-

pany’s exposure to rising raw materials prices. Most of the

lar relative to the U.S. dollar at December 31, 2009. A 5 per-

raw materials purchased are based on a ﬁxed pricing or at

cent strengthening (5 percent weak ening) of the Canadian

reduced rates through Boeing’s or Airbus’ high-volume pur-

dollar relative to the U.S. dollar at Decem ber 31, 2009

chase contracts.

would result in a US$26 million increase (US$26 million

Diesel fuel is a key commodity used in Tube City

decrease) in other comprehensive earnings of Husky.

IMS’ operations. The company consumes approximately

Capital commitment risk The limited partners in

six million to 10 million gallons of diesel fuel annually. To

the Onex Partners and ONCAP Funds comprise a relatively

help mitigate the risk of price ﬂuctuations in fuel, Tube City

small group of high-quality, primarily institutional, inves -

IMS incorporates into substantially all of its contracts pric-

tors. To date, each of these investors has met its com -

ing escalators based on published price indices that would

mitments on called capital and Onex has received no

generally offset some portion of fuel price changes.

indi cations that any investors will be unable to meet its

Silver is a signiﬁcant commodity used in Care -

capital commitments in the future. While Onex’ experience

stream Health’s manufacture of x-ray ﬁlm. The company’s

with its limited partners suggests that commitments will be

management continually monitors movement and trends in

honoured, the current economic downturn raises the con-

the silver market and enters into forward agreements when

cern that a limited partner may not be able to meet its

considered appropriate to mitigate some of the risk of future

entire commitment over the life of a fund.

price ﬂuctuations generally for periods of up to a year.

Insurance claims The Warranty Group underwrites

and administers extended warranties and credit insurance

on a wide variety of consumer goods including automo-

biles, consumer electronics and major home appliances.

Unlike most property insurance risk, the risk associated

with extended warranty claims is non-catastrophic and

short-lived, resulting in predictable loss trends. The pre-

dictability of claims, which is enhanced by the large volume

of claims data in the company’s database, enables The

Warranty Group to appropriately measure and price risk.

Onex Corporation December 31, 2009 71

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Integration of acquired companies
An important aspect of Onex’ strategy for value creation is

government appropriations is a normal aspect of business

for these companies, and all seek to minimize the effect

to acquire what we consider to be “platform” companies.

of possible funding reductions through productivity im -

Such companies often have distinct competitive advan-

provements and other initiatives. It is not known what

tages in products or services in their respective industries

impact, if any, proposed healthcare reform in the United

that provide a solid foundation for growth in scale and

States will have on the companies.

value. In these instances, Onex works with company man-

agement to identify attractive add-on acquisitions that

may enable the platform company to achieve its goals

Signiﬁcant customers
Some of Onex’ major acquisitions have been divisions of

more quickly and successfully than by focusing solely on

large companies. As part of these purchases, the acquired

the development and/or diversiﬁcation of its customer

company has often continued to supply its former owner

base, which is known as organic growth. Growth by acqui-

through long-term supply arrangements. It has been Onex’

sition, however, may carry more risk than organic growth.

policy to encourage its operating companies to quickly

While as many of these risks as possible are considered in

diversify their customer bases to the extent practical in

the acquisition planning, oper ating companies undertaking

order to manage the risk associated with serving a single

these acquisitions also face such risks as unknown expenses

major customer.

related to the cost-effective amalgamation of operations,

Certain Onex operating companies have major

the retention of key personnel and customers, the future

customers that represent 10 percent or more of annual

value of goodwill, intangible assets and intellectual prop-

revenues. In particular, Spirit AeroSystems primarily relies

erty. There are also risk factors associated with the industry

on two major customers, Boeing and Airbus. The table in

and combined business more generally. Onex works with

note 23 to the audited annual consolidated ﬁnancial state-

company management to understand and attempt to miti-

ments provides information on the concentration of busi-

gate such risks as much as possible.

ness the oper ating companies have with major customers.

Dependence on government funding
Since 2005, Onex has acquired businesses, or interests in

Environmental considerations
Onex has an environmental protection policy that has

businesses, in various segments of the U.S. healthcare

been adopted by its operating companies; many of these

industry. Certain of the revenues of these companies are

operating companies have also adopted supplemental

partially dependent on funding from federal, state and local

policies appropriate to these industries or businesses.

government agencies, especially those responsible for U.S.

Senior ofﬁcers at each of these companies are ultimately

federal Medicare and state Medicaid funding. Budgetary

responsible for ensuring compliance with these policies.

pressures, as well as economic, industry, political and other

They are required to report annually to their company’s

factors, could inﬂuence governments to not increase or, in

board of directors and to Onex regarding compliance.

some cases, to decrease appropriations for the services

Environmental management by the operating com -

offered by Onex’ operating companies, which could reduce

panies is accomplished through the education of em ployees

their revenues materially. Future revenues may be affected

about environmental regulations and appropriate operating

by changes in rate-setting structures, methodologies or

policies and procedures; site inspections by environmental

interpretations that may be proposed or are under consider-

consultants; the addition of proper equipment or modiﬁ ca -

ation. While each of Onex’ operating companies in the U.S.

tion of existing equipment to reduce or eliminate environ -

healthcare industry is subject to reimbursement risk directly

men tal hazards; remediation activities as re quired; and

related to its particular business segment, it is unlikely that

ongoing waste reduction and recycling programs. Environ -

all of these companies would be affected by the same event,

mental consultants are engaged to advise on current and up -

or to the same extent, simultaneously. Ongoing pressure on

coming environmental regulations that may be applicable.

72 Onex Corporation December 31, 2009

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

Many of the operating companies are involved in

the remediation of particular environmental situations,

Other contingencies
Onex and its operating companies are or may become par-

such as soil contamination. In almost all cases, these situa-

ties to legal claims arising in the ordinary course of busi-

tions have occurred prior to Onex’ acquisition of those

ness. The operating companies have recorded liability

companies, and the estimated costs of remedial work and

provisions based upon their consideration and analysis of

related activities are managed either through agreements

their exposure in respect of such claims. Such provisions

with the vendor of the company or through provisions

are reﬂected, as appropriate, in Onex’ consolidated ﬁnan-

established at the time of acquisition. Manufacturing activi-

cial statements. Onex, the parent company, has not cur-

ties carry the inherent risk that changing environmental

rently recorded any further liability provision and we do not

regulations may require additional capital expenditures or

believe that the resolution of known claims would reason-

remedial work and associated costs.

ably be expected to have a material adverse impact on

Income taxes
The Company has investments in companies that operate in

outcome of outstanding, pending or future actions cannot

be predicted with certainty, and therefore there can be no

a number of tax jurisdictions. Onex provides for the tax on

assurance that their resolution will not have an adverse

undistributed earnings of its subsidiaries that are not per-

effect on our consolidated ﬁnancial position.

Onex’ consolidated ﬁnancial position. However, the ﬁnal

manently reinvested based on the expected future income

tax rates that are substantively enacted at the time of the

income/gain recognition events. Changes to the expected

future income tax rate will affect the provision for future

tax, both in the current year and in respect of prior year

amounts that are still outstanding, either positively or neg-

atively, depending on whether rates decrease or increase.

Changes to tax legislation or the application of tax legisla-

tion may affect the provision for future tax and the taxation

of deferred amounts.

Onex Corporation December 31, 2009 73

MANAGEMENT ’S RESPONSIBILITY

FOR FINANCIAL STATEMENTS

The accompanying consolidated ﬁnancial statements have been prepared by management, reviewed by the Audit and

Corporate Governance Committee and approved by the Board of Directors of the Company. Management is responsible for

the information and representations contained in these ﬁnancial statements.

The Company maintains appropriate processes to ensure that relevant and reliable ﬁnancial information is pro-

duced. The consolidated ﬁnancial statements have been prepared in accordance with Canadian generally accepted

accounting principles. The signiﬁcant accounting policies which management believes are appropriate for the Company are

described in note 1 to the consolidated ﬁnancial statements.

The Board of Directors is responsible for reviewing and approving the consolidated ﬁnancial statements and over-

seeing management’s performance of its ﬁnancial reporting responsibilities. An Audit and Corporate Governance Com mit tee

of three non-management independent Directors is appointed by the Board.

The Audit and Corporate Governance Committee reviews the consolidated ﬁnancial statements, adequacy of

internal controls, audit process and ﬁnancial reporting with management and with the external auditors. The Audit and

Corporate Governance Committee reports to the Directors prior to the approval of the audited consolidated ﬁnancial

statements for publication.

PricewaterhouseCoopers llp, the Company’s external auditors, who are appointed by the holders of Subordinate

Voting Shares, audited the consolidated ﬁnancial statements in accordance with Canadian generally accepted auditing stan-

dards to enable them to express to the shareholders their opinion on the consolidated ﬁnancial statements. Their report is set

out on the following page.

[signed]

Donald W. Lewtas
Chief Financial Oﬃcer

February 24, 2010

Christine M. Donaldson

Vice President Finance

74 Onex Corporation December 31, 2009

AUDITORS’ REPORT

To the Shareholders of Onex Corporation:

We have audited the consolidated balance sheets of Onex Corporation as at December 31, 2009 and 2008 and the consolidated

statements of earnings, shareholders’ equity and comprehensive earnings and cash ﬂows for the years then ended. These

consolidated ﬁnancial statements are the responsibility of the Company’s management. Our responsibility is to express an

opinion on these consolidated ﬁnancial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards

require that we plan and perform an audit to obtain reasonable assurance whether the ﬁnancial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial

statements. An audit also includes assessing the accounting principles used and signiﬁcant estimates made by management,

as well as evaluating the overall ﬁnancial statement presentation.

In our opinion, these consolidated ﬁnancial statements present fairly, in all material respects, the ﬁnancial position

of the Company as at December 31, 2009 and 2008 and the results of its operations and its cash ﬂows for the years then

ended in accordance with Canadian generally accepted accounting principles.

[signed]

PricewaterhouseCoopers LLP

Chartered Accountants, Licensed Public Accountants

Toronto, Canada

February 24, 2010

Onex Corporation December 31, 2009 75

CONSOLIDATED BALANCE SHEETS

As at December 31 (in millions of dollars)

2009

2008

$ 3,206

$ 2,921

636

3,062

3,085

1,384

11,373

3,759

3,255

2,696

2,086

2,312

842

4,014

3,471

1,695

12,943

4,066

3,897

3,125

2,755

2,946

$ 25,481

$ 29,732

$ 3,832

$ 4,617

992

425

1,410

6,680

5,505

2,034

1,955

1,237

17,452

6,370

1,659

1,196

532

1,698

8,068

7,143

2,561

2,287

1,450

21,555

6,624

1,553

$ 25,481

$ 29,732

Assets

Current assets

Cash and cash equivalents

Marketable securities

Accounts receivable

Inventories (note 4)

Other current assets (note 5)

Property, plant and equipment (note 6)

Investments (note 7)

Other long-term assets (note 8)

Intangible assets (note 9)

Goodwill

Liabilities and Shareholders’ Equity

Current liabilities

Accounts payable and accrued liabilities

Other current liabilities

Current portion of long-term debt, without recourse to Onex (note 10)

Current portion of obligations under capital leases,

without recourse to Onex (note 11)

Current portion of warranty reserves and unearned premiums (note 12)

Long-term debt of operating companies, without recourse to Onex (note 10)

Long-term portion of obligations under capital leases of operating companies,

without recourse to Onex (note 11)

Long-term portion of warranty reserves and unearned premiums (note 12)

Other liabilities (note 13)

Future income taxes (note 14)

Non-controlling interests

Shareholders’ equity

Commitments and contingencies are reported in notes 11 and 24.

Signed on behalf of the Board of Directors

[signed]

Director

[signed]

Director

76 Onex Corporation December 31, 2009

CONSOLIDATED STATEMENTS OF EARNINGS

Year ended December 31 (in millions of dollars except per share data)

Revenues

Cost of sales

Selling, general and administrative expenses

Earnings Before the Undernoted Items

Amortization of property, plant and equipment

Amortization of intangible assets and deferred charges

Interest expense of operating companies (note 16)

Interest income

Loss from equity-accounted investments (note 17)

Foreign exchange gains (loss)

Stock-based compensation recovery (expense) (note 18)

Other income (expense)

Gains on dispositions of operating investments (note 19)

Acquisition, restructuring and other expenses (note 20)

Writedown of goodwill, intangible assets and long-lived assets (note 21)

Earnings (loss) before income taxes, non-controlling interests

and discontinued operations

Provision for income taxes (note 14)

Non-controlling interests

Earnings (loss) from continuing operations

Earnings from discontinued operations (note 3)

Net Earnings (Loss) for the Year

Net Earnings (Loss) per Subordinate Voting Share (note 22)

Basic and Diluted:

Continuing operations

Discontinued operations

Net earnings (loss)

2009

$ 24,831

(19,468)

(2,819)

2,544

(636)

(364)

(495)

(497)

(90)

(161)

783

(219)

(370)

645

(172)

(361)

112

–

2008

$ 26,881

(21,719)

(2,744)

2,418

(624)

(366)

(550)

(322)

142

(77)

(220)

(1,584)

(1,061)

(252)

1,021

(292)

112

(283)

0.92

–

0.92

(2.37)

0.07

(2.30)

Onex Corporation December 31, 2009 77

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
AND COMPREHENSIVE EARNINGS

(in millions of dollars except per share data)

Balance – December 31, 2007

Dividends declared(a)

Purchase and cancellation of shares

Comprehensive Earnings (Loss)

Net loss for the year

Other comprehensive earnings (loss) for the year:

Currency translation adjustments

Change in fair value of derivatives designated as hedges

Other

Balance – December 31, 2008

Dividends declared(a)

Purchase and cancellation of shares

Comprehensive Earnings (Loss)

Net earnings for the year

Other comprehensive earnings (loss) for the year:

Currency translation adjustments

Change in fair value of derivatives designated as hedges

Other

Share
Capital
(note 15)

$ 529

–

(14)

–

515

–

(7)

–

Accumulated
Other
Comprehensive
Earnings (Loss)

Total
Shareholders’
Equity

$ (409)(b)

$ 1,703

Retained
Earnings

$ 1,583

(14)

(87)

(283)

–

1,199

(13)

(34)

112

–

382

(122)

(12)

(161)(c)

–

(74)

109

(14)

(101)

(283)

382

(122)

(12)

1,553

(13)

(41)

112

(74)

109

Balance – December 31, 2009

$ 508

$ 1,264

$ (113)(d)

$ 1,659

(a) Dividends declared per Subordinate Voting Share during 2009 totalled $0.11 (2008 – $0.11). In 2009, shares issued under the dividend reinvestment plan amounted to

less than $1 (2008 – less than $1).

(b) Accumulated Other Comprehensive Earnings (Loss) as at December 31, 2007 consisted of currency translation adjustments of negative $397, unrealized losses on the

effective portion of cash flow hedges of $20 and unrealized gains on available-for-sale financial assets and other of $8. Income taxes did not have a significant effect

on these items.

(c) Accumulated Other Comprehensive Earnings (Loss) as at December 31, 2008 consisted of currency translation adjustments of negative $15, unrealized losses on the

effective portion of cash flow hedges of $142 and unrealized losses on available-for-sale financial assets and other of $4. Income taxes did not have a significant effect

on these items.

(d) Accumulated Other Comprehensive Earnings (Loss) as at December 31, 2009 consisted of currency translation adjustments of negative $89, unrealized losses on the

effective portion of cash flow hedges of $33 and unrealized gains on available-for-sale financial assets and other of $9. Income taxes did not have a significant effect

on these items.

78 Onex Corporation December 31, 2009

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31 (in millions of dollars)

2009

2008

Operating Activities

Net earnings (loss) for the year

Earnings from discontinued operations

Items not affecting cash:

Amortization of property, plant and equipment

Amortization of intangible assets and deferred charges

Amortization of deferred warranty costs

Loss from equity-accounted investments (note 17)

Foreign exchange loss (gains)

Stock-based compensation expense (recovery) (note 18)

Gains on dispositions of operating investments (note 19)

Non-cash component of restructuring (note 20)

Writedown of goodwill, intangible assets and long-lived assets (note 21)

Non-controlling interests

Future income taxes (note 14)

Other

Changes in non-cash working capital items:

Accounts receivable

Inventories

Other current assets

Accounts payable, accrued liabilities and other current liabilities

Increase (decrease) in cash due to changes in working capital items

Increase (decrease) in warranty reserves and unearned premiums and other liabilities

Financing Activities

Issuance of long-term debt

Repayment of long-term debt

Cash dividends paid

Repurchase of share capital

Issuance of share capital provided by L.P. investors and operating companies

Distributions by operating companies and to L.P. investors

Increase (decrease) due to other ﬁnancing activities

Investing Activities

Acquisition of operating companies, net of cash in acquired

companies of $108 (2008 – $5) (note 2)

Purchase of property, plant and equipment

Proceeds from sales of operating investments

Decrease due to other investing activities

Cash from discontinued operations (note 3)

Increase (Decrease) in Cash for the Year

Increase (decrease) in cash due to changes in foreign exchange rates

Cash and cash equivalents, beginning of the year

Cash and Cash Equivalents

$ 1112

–

$ (283)

(9)

636

364

497

161

(783)

370

361

(104)

(66)

1,715

381

(166)

(225)

(423)

1,340

1,390

(1,962)

(13)

(41)

368

(576)

(23)

(857)

(90)

(613)

1,110

(184)

–

223

706

(421)

2,921

$ 3,206

624

366

(22)

322

(105)

(142)

(4)

1,584

(1,021)

(66)

1,296

202

(311)

156

(340)

(293)

336

1,339

1,047

(1,242)

(14)

(101)

458

(143)

(209)

(859)

–

(345)

(1,402)

(54)

513

2,462

$ 2,921

Onex Corporation December 31, 2009 79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of dollars except per share data)

Onex Corporation and its subsidiaries (collectively, the “Company”) is a diversified company whose businesses operate
autonomously. Throughout these statements, the term “Onex” refers to the parent company. The consolidated financial statements
have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP” or “GAAP”). All
amounts are in millions of Canadian dollars unless otherwise noted.

1. B A S I S O F P R E PA R AT I O N A N D S I G N I F I C A N T A C C O U N T I N G P O L I C I E S

B A S I S O F P R E PA R AT I O N

The consolidated ﬁnancial statements represent the accounts of Onex and its subsidiaries, including its controlled operating companies.

Onex also controls and consolidates the operations of Onex Partners LP (“Onex Partners I”), Onex Partners II LP (“Onex Partners II”) and

Onex Partners III LP (“Onex Partners III”), referred to collectively as “Onex Partners” (as described in note 24). All signiﬁcant intercompany

balances and transactions have been eliminated.

The principal operating companies and Onex’ economic ownership and voting interests in these entities are as follows:

December 31, 2009

December 31, 2008

Investments made through Onex

Celestica Inc. (“Celestica”)
Cineplex Entertainment(a)

Sitel Worldwide Corporation (“Sitel Worldwide”)

Investments made through Onex and Onex Partners I

Center for Diagnostic Imaging, Inc. (“CDI”)
Cosmetic Essence, Inc. (“CEI”)(a)

Emergency Medical Services Corporation (“EMSC”)

Res-Care, Inc. (“ResCare”)

Skilled Healthcare Group, Inc. (“Skilled Healthcare”)

Spirit AeroSystems, Inc. (“Spirit AeroSystems”)

Investments made through Onex and Onex Partners II

Allison Transmission, Inc. (“Allison Transmission”)

Carestream Health, Inc. (“Carestream Health”)

Hawker Beechcraft Corporation (“Hawker Beechcraft”)

RSI Home Products, Inc. (“RSI”)

Tube City IMS Corporation (“Tube City IMS”)

Investments made through Onex, Onex Partners I and Onex Partners II

Husky Injection Molding Systems Ltd. (“Husky”)

The Warranty Group, Inc. (“The Warranty Group”)

Investments made through Onex and Onex Partners III

Tropicana Las Vegas, Inc. (“Tropicana Las Vegas”)

Other investments

ONCAP II L.P.

Onex Real Estate Partners (“Onex Real Estate”)

(a) Disposed of in 2009 (see note 19).

Onex
Ownership

Voting

Onex
Ownership

–

66%

19%

–

12%

15%

38%

19%

20%

36%

29%

15%

44%

86%

69%

–

88%

100%

–

82%

(b)

89%

76%

(b)

100%

(b)
50%(b)

100%

71%

100%

13%

23%

66%

19%

21%

29%

15%

39%

20%

35%

36%

29%

–

44%

86%

Voting

79%

(b)

88%

100%

97%

(b)

89%

76%

(b)

100%

(b)
50%(b)

100%

–

100%

(b) Onex exerts significant influence over these equity-accounted investments through its right to appoint members to the Board of Directors (or Board of Trustees)

of each of the entities.

The ownership percentages are before the effect of any potential

through multiple voting rights attached to particular shares. In

dilution relating to the Management Investment Plans (the “MIP”)

certain circumstances, the voting arrangements give Onex the

as described in note 24(g). The voting interests include shares that

right to elect the majority of the board of directors.

Onex has the right to vote through contractual arrangements or

80 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

N E W LY A D O P T E D A C C O U N T I N G P R O N O U N C E M E N T S
Goodwill and Intangible Assets

S I G N I F I C A N T A C C O U N T I N G P O L I C I E S
Foreign currency translation

On January 1, 2009, the Company adopted the Canadian Institute

The Company’s operations conducted in foreign currencies,

of Chartered Accountants Handbook (“CICA Handbook”) Sec-

other than those operations that are associated with investment-

tion 3064, “Goodwill and Intangible Assets”, which replaced existing

holding subsidiaries, are considered to be self-sustaining. Assets

standards. This revised standard established guidance for the

and liabilities of self-sustaining operations conducted in foreign

recognition, measurement and disclosure of goodwill and intan-

currencies are translated into Canadian dollars at the exchange

gible assets, including internally generated intangible assets. The

rate in effect at the balance sheet date. Revenues and expenses are

adoption of this standard did not have a signiﬁcant effect on the

translated at average exchange rates for the year. Unrealized gains

consolidated ﬁnancial statements.

Credit Risk and the Fair Value of Financial Assets
and Financial Liabilities

or losses on translation of self-sustaining operations conducted in

foreign currencies are shown as currency translation adjustments,

a component of other comprehensive earnings.

The Company’s integrated operations, including invest-

In January 2009, the Company adopted the Emerging Issues Com -

ment-holding subsidiaries, translate monetary assets and liabili-

mittee Abstract 173 (“EIC-173”), “Credit Risk and the Fair Value of

ties denominated in foreign currencies at exchange rates in effect

Financial Assets and Financial Liabilities”. EIC-173 states that an

at the balance sheet date and non-monetary items at historical

entity’s own credit risk and the credit risk of the counterparty

rates. Revenues and expenses are translated at average exchange

should be taken into account in determining the fair value of

rates for the year. Gains and losses on translation are included in

ﬁnancial assets and ﬁnancial liabilities, including derivative

the income statement.

instruments. The adoption of this standard did not have a signiﬁ-

cant effect on the consolidated ﬁnancial statements.

Cash and cash equivalents

Financial Instruments – Disclosures

Cash and cash equivalents include liquid investments such as

term deposits, money market instruments and commercial paper

In December 2009, the Company adopted amendments to CICA

that mature in less than three months from the balance sheet

Handbook Section 3862, “Financial Instruments – Disclosures”,

date. The investments are carried at cost plus accrued interest,

which requires enhanced disclosures on liquidity risk of ﬁnancial

which approximates market value.

instruments and new disclosures on fair value measurements of

ﬁnancial instruments. The additional disclosures are included

Inventories

in note 26.

R E C E N T LY I S S U E D A C C O U N T I N G P R O N O U N C E M E N T S
International Financial Reporting Standards

Inventories are recorded at the lower of cost and replacement

cost for raw materials, and at the lower of cost and net realizable

value for work in progress and ﬁnished goods. For inventories in

the aerostructures segment, certain inventories in the healthcare

In February 2008, the Canadian Accounting Standards Board con -

segment and certain inventories in the metal services segment,

ﬁrmed that the use of International Financial Reporting Standards

inventories are stated using an average cost method. For sub -

(“IFRS”) would be required for Canadian publicly accountable

stantially all other inventories, cost is determined on a ﬁrst-in,

enterprises for years beginning on or after January 1, 2011. Onex is

ﬁrst-out basis.

working to adopt IFRS as the basis for preparing its consolidated

During the year ended December 31, 2009, $12,736 of

ﬁnancial statements effective January 1, 2011. For the quarter

inventory was expensed in cost of sales. In addition, inventory

ended March 31, 2011, Onex expects to issue its ﬁnancial results

writedowns of $71 were recorded, partially offset by inventory pro-

prepared on an IFRS basis with comparative data on an IFRS basis.

vision reversals of $70, for a net provision of $1.

Signiﬁcant IFRS policies are described in Management’s Discus -

sion and Analysis.

Property, plant and equipment

Property, plant and equipment are recorded at cost less accumu -

lated amortization and provision for impairments, if any. For

substantially all property, plant and equipment, amortization is

provided for on a straight-line basis over the estimated useful lives

of the assets: two to 45 years for buildings and up to 20 years

for machinery and equipment. The cost of plant and equipment is

reduced by applicable investment tax credits that are more likely

than not to be realized.

Onex Corporation December 31, 2009 81

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

1. B A S I S O F P R E PA R AT I O N A N D

S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( c o n t ’d )

Other assets
Acquisition costs relating to the financial services segment

Certain costs of acquiring warranty business, principally commis-

Leasehold improvements are amortized over the terms

sions, underwriting and sales expenses that vary and are primarily

of the leases.

related to the production of new business, are deferred and amor-

Leases that transfer substantially all the risks and bene -

tized as the related premiums and contract fees are earned. The

ﬁts of ownership are recorded as capital leases. Buildings and

possibility of premium deﬁciencies and the related recoverability

equipment under capital leases are amortized over the shorter of

of deferred acquisition costs is evaluated annually. Management

the term of the lease or the estimated useful life of the asset. Amor -

considers the effect of anticipated investment income in its evalu-

tization of assets under capital leases is on a straight-line basis.

ation of premium deﬁciencies and the related recoverability of

deferred acquisition costs.

Costs incurred to develop computer software for internal use

Certain arrangements with producers of warranty con-

The Company capitalizes the costs incurred during the application

tracts include proﬁt-sharing provisions whereby the underwriting

development stage, which include costs to design the software

proﬁts, after a ﬁxed percentage allowance for the company and an

conﬁguration and interfaces, coding, installation and testing.

allowance for investment income, are remitted to the producers

Costs incurred during the preliminary project stage, along with

on a retrospective basis. Unearned premiums subject to retro-

post-implementation stages of internal use computer software, are

spective commission agreements were approximately US$500 at

expensed as incurred.

December 31, 2009 (2008 – US$600).

Impairment of long-lived assets

Goodwill and intangible assets

Property, plant and equipment and intangible assets with limited

Goodwill represents the cost of investments in operating compa-

life are reviewed for impairment whenever events or changes in

nies in excess of the fair value of the net identiﬁable assets

circumstances suggest that the carrying amount of an asset may

acquired. Essentially all of the goodwill and intangible asset

not be recoverable. An impairment is recognized when the car -

amounts that appear on the consolidated balance sheets were

rying amount of an asset to be held and used exceeds the projected

recorded by the operating companies. The recoverability of good-

undiscounted future net cash ﬂows expected from its use and dis-

will and intangible assets with indeﬁnite lives is assessed annually

posal, and is measured as the amount by which the carrying

or whenever events or changes in circumstances indicate that the

amount of the asset exceeds its fair value.

carrying amount may not be recoverable. Impairment of goodwill

Assets must be classiﬁed as either held-for-use or held-

is tested at the reporting unit level by comparing the carrying

for-sale. Impairment losses for assets held-for-use are measured

value of the reporting unit to its fair value. When the carrying

based on fair value, which is measured by discounted cash ﬂows.

value exceeds the fair value, an impairment exists and is mea -

Held-for-sale assets are carried at the lower of carrying value and

sured by comparing the carrying amount of goodwill to its fair

expected proceeds less direct costs to sell.

value determined in a manner similar to a purchase price alloca-

In addition, equity-accounted investments are assessed

tion. Impairment of indeﬁnite-life intangible assets is determined

for impairment whenever events or changes in circumstances

by comparing their carrying values to their fair values.

suggest a decline in value. Equity-accounted investments are writ-

Intangible assets, including intellectual property, are

ten down when there is evidence of an other-than-temporary

re corded at their allocated cost at the date of acquisition of the

decline in value.

82 Onex Corporation December 31, 2009

related operating company. Amortization is provided for intangi-

ble assets with limited life, including intellectual property, on

a straight-line basis over their estimated useful lives of up to

25 years. The weighted average initial period of amortization at

Decem ber 31, 2009 was 10 years (2008 – 10 years).

Deferred financing charges

Deferred ﬁnancing charges consist of costs incurred by the oper -

ating companies relating to the issuance of debt and are deferred

and amortized over the term of the related debt or as the debt is

retired, if earlier. These deferred ﬁnancing charges are recorded

against the carrying value of the long-term debt, as described

in note 10.

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Losses and loss adjustment expenses reserves

The average remaining service period of active employees

Losses and loss adjustment expenses reserves relate to The

covered by the signiﬁcant pension plans is 15 years (2008 – 15 years),

Warranty Group and represent the estimated ultimate net cost of

and for those active employees covered by the other signiﬁcant

all reported and unreported losses incurred and unpaid through

post-retirement beneﬁt plans, the average remaining service period

December 31, 2009. The company does not discount losses and

is 16 years (2008 – 18 years).

loss adjustment expenses reserves. The reserves for unpaid losses

and loss adjustment expenses are estimated using individual

Income taxes

case-basis valuations and statistical analyses. Those estimates are

Income taxes are recorded using the asset and liability method of

subject to the effects of trends in loss severity and frequency and

income tax allocation. Under this method, assets and liabilities

claims reporting patterns of the company’s third-party adminis-

are recorded for the future income tax consequences attributable

trators. Although considerable variability is inherent in such esti-

to differences between the ﬁnancial statement carrying values of

mates, management believes the reserves for losses and loss

assets and liabilities and their respective income tax bases. These

adjustment expenses are adequate. The estimates are continually

future income tax assets and liabilities are recorded using sub-

reviewed and adjusted as necessary as experience develops or

stantively enacted income tax rates. The effect of a change in

new information becomes known; such adjustments are included

income tax rates on these future income tax assets or liabilities is

in current operations.

Warranty liabilities

included in income in the period in which the rate change occurs.

Certain of these differences are estimated based on the current

tax legislation and the Company’s interpretation thereof. The

Certain operating companies offer warranties on the sale of prod-

Company records a valuation allowance when it is more likely

ucts or services. A liability is recorded to provide for future war-

than not that the future tax assets will not be realized prior to

ranty costs based on management’s best estimate of probable

their expiration.

claims under these warranties. The accrual is based on the terms

of the warranty, which vary by customer and product or service

and historical experience. The appropriateness of the accrual is

evaluated at each reporting period.

Revenue recognition
Electronics Manufacturing Services

Revenue from the electronics manufacturing services segment

consists primarily of product sales, where revenue is recognized

Pension and non-pension post-retirement benefits

upon shipment, when title passes to the customer, receivables are

The operating companies accrue their obligations under employ-

reasonably assured of collection and customer speciﬁed test crite-

ee beneﬁt plans and related costs, net of plan assets. The costs

ria have been met. Celestica has contractual arrangements with

of deﬁned beneﬁt pensions and other post-retirement beneﬁts

certain customers that require the customer to purchase certain

earned by employees are accrued in the period incurred and are

inventory that Celestica has acquired to fulﬁll forecasted manu-

actuarially determined using the projected beneﬁt method pro-

facturing demand provided by that customer. Celestica accounts

rated on length of service, based on management’s best estimates

for raw material returns to such customers as reductions in inven-

of items, including expected plan investment performance, salary

tory and does not record revenue on these transactions.

escalation, retirement ages of employees and expected healthcare

costs. Plan assets are valued at fair value for the purposes of cal-

Aerostructures

culating expected returns on those assets. Past service costs from

A signiﬁcant portion of Spirit AeroSystems’ revenues is under long-

plan amendments are deferred and amortized on a straight-line

term volume-based pricing contracts requiring delivery of products

basis over the average remaining service period of employees

over several years. Revenue from these contracts is recognized under

active at the date of amendment.

the contract method of accounting. Revenues and proﬁts are recog-

Actuarial gains (losses) arise from the difference be -

nized on each contract in accordance with the percentage-of-com-

tween the actual long-term rate of return on plan assets and the

pletion method of accounting, using the units-of-delivery method.

expected long-term rate of return on plan assets for a period or

The contract method of accounting involves the use of various esti-

from changes in actuarial assumptions used to determine the

mating techniques to project costs at completion and includes esti-

beneﬁt obligation. Actuarial gains (losses) exceeding 10% of the

mates of recoveries asserted against the customer for changes in

greater of the beneﬁt obligation or the fair market value of plan

speciﬁcations. These estimates involve various assumptions and

assets are amortized on a straight-line basis over the average

projections relative to the outcome of future events, including the

remaining service period of active employees.

quantity and timing of product deliveries. Also included are assump-

Deﬁned contribution plan accounting is applied to multi-

tions relative to future labour performance and rates, and projec-

employer deﬁned beneﬁt plans, for which the operating companies

tions relative to material and overhead costs. These assumptions

have insufﬁcient information to apply deﬁned beneﬁt accounting.

involve various levels of expected performance improvements.

Onex Corporation December 31, 2009 83

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

1. B A S I S O F P R E PA R AT I O N A N D

The company has dealer obligor and administrator

S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( c o n t ’d )

obligor service contracts with the dealers or retailers to facilitate

the sale of extended warranty contracts. Dealer obligor service

The company periodically reevaluates its contract esti-

contracts result in sales of extended warranty contracts in which

mates and reﬂects changes in estimates in the current period, and

the dealer/retailer is designated as the obligor. Administrator

uses the cumulative catch-up method of accounting for revisions

obligor ser vice contracts result in sales of extended warranty con-

in estimates of total revenue, total costs or extent of progress on

tracts in which the company is designated as the obligor. For both

a contract.

dealer obligor and administrator obligor, premium and/or con-

For revenues not recognized under the contract method

tract fee revenue is recognized over the contractual exposure

of accounting, Spirit AeroSystems recognizes revenues from the

period of the contracts. Unearned premiums and contract fees on

sale of products at the point of passage of title, which is generally

single-premium insurance related to warranty agreements are

at the time of shipment. Revenues earned from providing main -

calculated to result in premiums and contract fees being earned

tenance services, including any contracted research and devel -

over the period at risk. Factors are developed based on historical

opment, are recognized when the service is complete or other

analyses of claim payment patterns over the duration of the poli-

contractual milestones are attained.

cies in force. All other unearned premiums and contract fees are

determined on a pro rata method.

Healthcare

Reinsurance premiums, commissions, losses and loss

Revenue in the healthcare segment consists primarily of EMSC’s

adjustment expenses are accounted for on bases consistent with

service revenue related to its healthcare transportation and facility-

those used in accounting for the original policies issued and the

based physician services businesses, CDI’s patient service and

terms of the reinsurance contracts. Premiums ceded to other

healthcare provider management service revenue, Skilled Health -

companies have been reported as a reduction of revenue. Expense

care’s patient service revenue and Carestream Health’s product

reimbursement received in connection with reinsurance ceded

sales revenue. Service revenue is recognized at the time of service

has been accounted for as a reduction of the related acquisition

and is recorded net of provisions for contractual discounts and esti-

costs. Reinsurance receivables and prepaid reinsurance premium

mated uncompensated care. Revenue from product sales is recog-

amounts are reported as assets.

nized when the following criteria are met: pervasive evidence of an

arrangement exists; delivery has occurred; the sales price is ﬁxed or

Customer Support Services

determinable; and collectibility is reasonably assured.

The customer support services segment generates revenue primar -

Financial Services

ily through its customer contact management services by providing

customer service and technical support to its clients’ customers

Financial services segment revenue consists of revenue on The

through phone, e-mail, online chat and mail. These services

Warranty Group’s warranty contracts primarily in North America

are generally charged by the minute or hour, per employee, per

and Europe. The company records revenue and associated

subscriber or user, or on a per item basis for each transaction

unearned revenue on warranty contracts issued by North Ameri -

processed, and revenue is recognized at the time services are per-

can obligor companies at the net amount remitted by the selling

formed. A portion of the revenue is often subject to performance

dealer or at retailer dealer cost. Cancellations of these contracts

standards. Revenue subject to monthly or longer performance

are typically processed through the selling dealer or retailer, and

standards is recognized when such performance standards are met.

the company refunds only the unamortized balance of the dealer

The company is reimbursed by clients for certain pass-

cost. However, the company is primarily liable on these contracts

through out-of-pocket expenses, consisting primarily of telecom-

and must refund the full amount of customer retail price if the

munication, postage and shipping costs. The reimbursement and

selling dealer or retailer cannot or will not refund its portion. The

related costs are reﬂected in the accompanying consolidated state-

amount the company has historically been required to pay under

ments of earnings as revenue and cost of services, respectively.

such circumstances has been negligible. The potentially refundable

excess of customer retail price over dealer cost at De cem ber 31,

Metal Services

2009 was approximately US$1,700 (2008 – US$1,800).

The metal services segment generates revenue primarily through

The company records revenue and associated unearned

raw materials procurement and slag processing, metal recovery

revenue on warranty contracts issued by statutory insurance com-

and metal sales.

panies domiciled in Europe at the customer retail price. The

Revenue from raw materials procurement represents

dif ference between the customer retail price and dealer cost is rec-

sales to third parties whereby the company either purchases scrap

ognized as commission and deferred as a component of de ferred

iron and steel from a supplier and then immediately sells the scrap

acquisition costs.

to a customer, with shipment made directly from the supplier to the

84 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

third-party customer, or the company earns a contractually deter-

The second type of plan is the MIP, which is described in

mined fee for arranging scrap shipments for a customer directly

note 24(g). The MIP provides that exercisable investment rights

with a vendor. The company recognizes revenue from raw materials

may be settled by issuance of the underlying shares or, in certain

procurement sales when title and risk of loss pass to the customer.

situations, by a cash payment for the value of the investment

Revenue from slag processing, metal recovery and metal

rights. Under the MIP, once the targets have been achieved for the

sales is derived from the removal of slag from a furnace and pro-

exercise of investment rights, a liability is recorded for the value of

cessing it to separate metallic material from other slag compo-

the investment rights by reference to the value of the underlying

nents. Metallic material is generally returned to the customer and

investments, with a corresponding expense recorded in the con-

the non-metallic material is generally sold to third parties. The

solidated statement of earnings.

company recognizes revenue from slag processing and metal

The third type of plan is the Director Deferred Share

recovery services when it performs the services and revenue from

Unit Plan. A Deferred Share Unit (“DSU”) entitles the holder to

co-product sales when title and risk of loss pass to the customer.

receive, upon redemption, a cash payment equivalent to the mar-

Other

ket value of a subordinate voting share at the redemption date.

The Director DSU Plan enables Onex directors to apply directors’

Other segment revenues consist of product sales and services.

fees earned to acquire DSUs based on the market value of Onex

Product sales revenue is recognized upon shipment, when title

shares at the time. Grants of DSUs may also be made to Onex

passes to the customer. Service revenue is recorded at the time

directors from time to time. The DSUs vest immediately, are

the services are performed.

redeemable only when the holder retires and must be redeemed

Depending on the terms under which the operating

within one year following the year of retirement. Additional units

companies supply product, they may also be responsible for some

are issued for any cash dividends paid on the subordinate voting

or all of the repair or replacement costs of defective products. The

shares. The Company has recorded a liability for the future settle-

companies establish reserves for issues that are probable and

ment of the DSUs by reference to the value of underlying subordi-

estimable in amounts management believes are adequate to cover

nate voting shares at the balance sheet date. On a quarterly basis,

ultimate projected claim costs. The ﬁnal amounts determined to

the liability is adjusted up or down for the change in the market

be due related to these matters could differ signiﬁcantly from

value of the underlying shares, with the corresponding amount

recorded estimates.

Research and development

reﬂected in the consolidated statement of earnings.

The fourth type of plan is the Management Deferred

Share Unit Plan (“Management DSU Plan”). The Management

Costs incurred on activities that relate to research and development

DSU Plan enables Onex management to apply all or a portion of

are expensed as incurred unless development costs meet certain

their annual compensation earned to acquire DSUs based on the

criteria for capitalization. During 2009, $234 (2008 – $219) in re -

market value of Onex shares at the time. The DSUs vest immedi-

search and development costs were expensed and $44 of develop-

ately, are redeemable only when the holder retires and must be

ment costs (2008 – $174) were capitalized. Capitalized development

redeemed within one year following the year of retirement.

costs relating to the aerostructures segment are included in deferred

Additional units are issued for any cash dividends paid on the

charges. The costs will be amortized over the anticipated number of

subordinate voting shares. The Company has recorded a liability

production units to which such costs relate.

for the future settlement of the DSUs by reference to the value of

Stock-based compensation

the underlying subordinate voting shares at the balance sheet

date. On a quarterly basis, the liability is adjusted up or down for

The Company follows the fair value-based method of accounting,

the change in the market value of the underlying shares, with the

which is applied to all stock-based compensation payments.

corresponding amount reﬂected in the consolidated statement of

There are ﬁve types of stock-based compensation plans.

earnings. To hedge the Company’s exposure to changes in the

The ﬁrst is the Company’s Stock Option Plan (the “Plan”) described

trading price of Onex shares associated with the Management

in note 15(e), which provides that in certain situations the

DSU Plan, the Company enters into forward agreements with a

Company has the right, but not the obligation, to settle any exer-

counterparty ﬁnancial institution for all grants under the Man -

cisable option under the Plan by the payment of cash to the option

age ment DSU Plan. As such, the change in value of the forward

holder. The Company has recorded a liability for the potential

agreements will be recorded to offset the amounts recorded as

future settlement of the value of vested options at the balance

stock-based compensation under the Management DSU Plan. The

sheet date by reference to the value of Onex shares at that date.

costs of those arrangements are borne entirely by participants in

The liability is adjusted up or down for the change in the market

the plan. Management DSUs are redeemable only for cash and no

value of the underlying shares, with the corresponding amount

shares or other securities of the Company will be issued on the

reﬂected in the consolidated statement of earnings.

exercise, redemption or other settlement thereof.

Onex Corporation December 31, 2009 85

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

1. B A S I S O F P R E PA R AT I O N A N D

During 2009, gains of $23 (2008 – losses of $14), which

S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( c o n t ’d )

exclude the impact of the debt investment in Tropicana Las Vegas,

a consolidated operating company, were recorded in the consoli-

The ﬁfth type of plan is employee stock option and

dated statement of earnings related to ﬁnancial assets desig nated

other stock-based compensation plans in place for employees

as held-for-trading. The 2009 gains and 2008 losses were due to

at various operating companies, under which, on payment of

market conditions.

the exercise price, stock of the particular operating company is

issued. The Company records a compensation expense for such

b) Available-for-sale

options based on the fair value over the vesting period.

Financial assets classiﬁed as available-for-sale are carried at fair

Earnings per share

value with changes in fair value recorded in other comprehensive

earnings. Securities that are classiﬁed as available-for-sale and do

Basic earnings per share is based on the weighted average number

not have a quoted price in an active market are recorded at cost.

of Subordinate Voting Shares outstanding during the year. Diluted

Available-for-sale securities are written down to fair value through

earnings per share is calculated using the treasury stock method.

earnings whenever it is necessary to reﬂect an other-than-tempo-

Use of estimates

rary impairment. Gains and losses realized on disposal of avail-

able-for-sale securities, which are calculated on an average cost

The preparation of consolidated ﬁnancial statements in conformity

basis, are recognized in earnings. Other-than-temporary impair-

with Canadian generally accepted accounting principles requires

ments are determined based on all relevant facts and circum-

management of Onex and its operating companies to make esti-

stances for each investment and recognized when appropriate.

mates and assumptions that affect the reported amounts of assets

and liabilities, the disclosure of contingent assets and liabilities at

c) Held-to-maturity

the date of the consolidated ﬁnancial statements and the reported

Securities that have ﬁxed or determinable payments and a ﬁxed

amounts of revenues and expenses during the reporting period.

maturity date, which the Company intends and has the ability to

This includes the liability for claims incurred but not yet reported

hold to maturity, are classiﬁed as held-to-maturity and accounted

for the Company’s healthcare and ﬁnancial services segments.

for at amortized cost using the effective interest rate method.

Actual results could differ from such estimates.

Investments classiﬁed as held-to-maturity are written down to fair

Comparative amounts

value through earnings whenever it is necessary to reﬂect an

other-than-temporary impairment. Other-than-temporary impair-

Certain amounts presented in the prior year have been reclas-

ments are determined based on all relevant facts and circum-

siﬁed to conform to the presentation adopted in the current year.

stances for each investment and recognized when appropriate.

Financial assets and financial liabilities

Derivatives and hedge accounting

Financial assets and ﬁnancial liabilities are initially recognized at

At the inception of a hedging relationship, the Company documents

fair value and are subsequently accounted for according to their

the relationship between the hedging instrument and the hedged

classiﬁcation as described below. The classiﬁcation depends on

item, its risk management objectives and its strategy for under -

the purpose for which the ﬁnancial instruments were acquired

taking the hedge. The Company also requires a documented assess-

and their characteristics. Except in very limited circumstances,

ment, both at hedge inception and on an ongoing basis, of whether

the classiﬁcation is not changed subsequent to initial recognition.

or not the derivatives that are used in the hedging transactions are

Financial assets purchased and sold, where the contract requires

highly effective in offsetting the changes attributable to the hedged

the asset to be delivered within an established timeframe, are

risks in the fair values or cash ﬂows of the hedged items.

recognized on a trade-date basis.

a) Held-for-trading

Derivatives that are not designated as effective hedging

relationships continue to be accounted for at fair value with

changes in fair value being included in other income in the con-

Financial assets and ﬁnancial liabilities that are purchased and

solidated statement of earnings.

incurred with the intention of generating proﬁts in the near term

When derivatives are designated as hedges, the Com pany

are classiﬁed as held-for-trading. Other instruments may be des-

classiﬁes them either as: (i) hedges of the change in fair value of

ignated as held-for-trading on initial recognition. These instru-

recognized assets or liabilities or ﬁrm commitments (fair value

ments are accounted for at fair value with changes in fair value

hedges); (ii) hedges of the variability in highly probable future cash

recognized in earnings.

ﬂows attributable to a recognized asset or liability or a forecasted

transaction (cash ﬂow hedges); or (iii) hedges of net investments in

a foreign self-sustaining operation (net investment hedges).

86 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

a) Fair value hedges

Capital disclosures

The Company’s fair value hedges principally consist of interest

Onex considers the capital it manages to be the amounts it has in

rate swaps that are used to protect against changes in the fair

cash, cash equivalents and near-cash investments, the invest-

value of ﬁxed-rate long-term ﬁnancial instruments due to move-

ments made by it in the operating companies, Onex Real Estate

ments in market interest rates.

and Onex Credit Partners. Onex also manages the third-party cap-

Changes in the fair value of derivatives that are desig-

ital invested in the Onex Partners and ONCAP funds.

nated and qualify as fair value hedging instruments are recorded

in the statement of earnings, along with changes in the fair value

Onex’ objectives in managing capital are to:

of the assets, liabilities or group thereof that are attributable to

(cid:129) preserve a ﬁnancially strong parent company with substantial

the hedged risk.

b) Cash flow hedges

liquidity and no, or a limited amount of, debt so that it can have

funds available to pursue new acquisitions and growth oppor-

tunities as well as support the growth of its existing businesses.

The Company is exposed to variability in future interest cash

Onex does not generally have the ability to draw cash from

ﬂows on non-trading assets and liabilities that bear interest at

its operating companies. Accordingly, maintaining adequate

variable rates or are expected to be reinvested in the future.

li quid ity at the parent company is important;

The effective portion of changes in the fair value of

(cid:129) achieve an appropriate return on capital commensurate with

derivatives that are designated and qualify as cash ﬂow hedges is

the level of risk taken on;

recognized in other comprehensive earnings. Any gain or loss in

(cid:129) build the long-term value of its operating companies;

fair value relating to the ineffective portion is recognized immedi-

(cid:129) control the risk associated with capital invested in any particu-

ately in the consolidated statement of earnings in other income.

lar business or activity. All debt ﬁnancing is within the oper -

Amounts accumulated in other comprehensive earnings

ating companies and each operating company is required to

are reclassiﬁed in the consolidated statement of earnings in the

support its own debt. Onex does not normally guarantee the

period in which the hedged item affects income. However, when

debt of the operating companies and there are no cross-guar-

the forecasted transaction that is hedged results in the recogni-

antees of debt between the operating companies; and

tion of a non-ﬁnancial asset or a non-ﬁnancial liability, the gains

(cid:129) have appropriate levels of committed third-party capital avail-

and losses previously deferred in other comprehensive earnings

able to invest along with Onex’ capital. This enables Onex to

are transferred from other comprehensive earnings and included

respond quickly to opportunities and pursue acquisitions of

in the initial measurement of the cost of the asset or liability.

businesses it could not achieve using only its own capital. The

When a hedging instrument expires or is sold, or when a

management of third-party capital also provides management

hedge no longer meets the criteria for hedge accounting, any

fees to Onex and the ability to enhance Onex’ returns by earning

cumulative gain or loss existing in other comprehensive earnings

a carried interest on the proﬁts of third-party participants.

at that time remains in other comprehensive earnings until the

forecasted transaction is eventually recognized in the consolidated

At December 31, 2009, Onex, the parent company, had approxi-

statement of earnings. When a forecasted transaction is no longer

mately $890 of cash and cash equivalents on hand and $148 of

expected to occur, the cumulative gain or loss that was reported

near-cash investments. Onex, the parent company, has a conserva-

in other comprehensive earnings is immediately transferred to

tive cash management policy that limits its cash investments to

the consolidated statement of earnings.

short-term high-rated money market products. At December 31,

c) Net investment hedges

2009, Onex had access to US$3,887 of uncalled committed third-

party capital for acquisitions through the Onex Partners funds and

Hedges of net investments in foreign operations are accounted for

ONCAP, which included US$3,389 of committed third-party capital

in a manner similar to cash ﬂow hedges. Any gain or loss on the

from Onex Partners III.

hedging instrument relating to the effective portion of the hedge

The strategy for risk management of capital has not

is recognized in other comprehensive earnings. The gain or loss

changed signiﬁcantly since December 31, 2008.

relating to the ineffective portion is recognized immediately in

the consolidated statement of earnings. Gains and losses accumu-

lated in other comprehensive earnings are included in the consol-

idated statement of earnings upon the reduction or disposal of

the investment in the foreign operation.

Onex Corporation December 31, 2009 87

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 . C O R P O R AT E I N V E S T M E N T S

During 2009 and 2008 several acquisitions, which were accounted for as purchases, were completed either directly by Onex or through

subsidiaries of Onex. Any third-party borrowings in respect of acquisitions are without recourse to Onex.

2 0 0 9 A C Q U I S I T I O N S

Details of the 2009 acquisitions are as follows:

Cash

Other current assets

Intangible assets with limited life

Goodwill

Property, plant and equipment and other long-term assets

Current liabilities

Long-term liabilities

Non-controlling interests in net assets

Interest in net assets acquired

Tropicana
Las Vegas(a)

EMSC(b)

Other(c)

Total

$ 107

–

267

386

(31)

–

355

(104)

(11)

(1)

–

$ 108

276

493

(42)

(1)

450

(104)

$ 251

$ 80

$ 15

$ 346

a) In May 2008, Tropicana Entertainment, LLC and its Las Vegas
subsidiaries (collectively, “Tropicana”) ﬁled for relief under

During the year ended December 31, 2009, Onex, Onex

Partners III and Onex management purchased investments in

Chapter 11 of the U.S. Bankruptcy Code. After Tropicana’s ﬁling,

Tropicana Las Vegas at a cash value of $107, of which Onex’ share

Onex and Onex Partners III acquired a majority of the principal of

is $22.

Tropicana’s US$440 term loan secured against its Las Vegas prop-

Onex, Onex Partners III and Onex management’s invest-

erty. The debt was purchased at various discounts to par value

ment in the common shares and the preferred rights offering,

and ﬁnanced through a credit facility established for the pur -

including the 2009 purchased investments as mentioned above,

chases. Amounts then outstanding on the credit facility were

totalled $225, of which Onex’ share is $49. Onex, Onex Part ners III

repaid in May 2009 using the equity capital contributed by Onex

and Onex management’s ownership on an as-converted basis at

and Onex Partners III.

December 31, 2009 is 71%, of which Onex’ share is 15%.

In May 2009, the U.S. Bankruptcy Court conﬁrmed Tropi -

In January 2010, Tropicana Las Vegas initiated a second

cana’s plan of reorganization, which became effective July 1, 2009.

rights offering for up to US$75 of additional capital. While not yet

The new company now operates as Tropicana Las Vegas, Inc. (“Tropi-

ﬁnalized, Onex and Onex Partners III expect to contribute their

cana Las Vegas”). Onex began consolidating Tropicana Las Vegas as

pro-rata share of the offering, plus additional amounts should

of the effective date. Under the plan, the secured creditors received

certain third-party investors not participate. Of the total Onex and

100% of the equity in the Las Vegas property, and Alex Yemeni djian,

Onex Partners III investment, Onex would contribute its share

former President of MGM Mirage and Onex’ partner, was appoint-

based on its commitment level to Onex Partners III at the time

ed the new Chief Executive Ofﬁcer of the property. In addition, as

of the initial Tropicana Las Vegas investment. The amount of the

part of the reorganization, creditors were given the opportunity to

second rights offering will be ﬁnalized in the ﬁrst quarter of 2010.

subscribe to a US$75 rights offering of preferred shares, with the

funds to be used to renovate the Tropicana Las Vegas facilities.

Upon emergence from bankruptcy, a valuation was performed that

b) In December 2009, EMSC completed the acquisitions of Pin -
nacle Consultants Mid-Atlantic and the management services

assigned an enterprise value of US$230 to Tropicana Las Vegas,

company of Pinnacle Anesthesia Consultants, P.A., anesthesiology

exclusive of the rights offering.

services providers in the United States. The total purchase price of

As Onex had previously written down the value of the

this acquisition was $79, which was ﬁnanced by EMSC.

investment in Tropicana Las Vegas based on transaction values at

In addition, EMSC completed two other acquisitions for

the time, the investment was written up to fair value determined

total consideration of $1.

at the time of emergence from bankruptcy, and non-cash income

of $92, including the effect of foreign exchange, has been included

in other income. Onex’ share of the income is $21.

88 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

c) Other includes acquisitions made by Skilled Healthcare and
Caliber Collision Centers (“Caliber Collision”).

party valuations of certain assets, which could result in further

reﬁnement of the fair-value allocation of certain purchase prices

and accounting adjustments could be recorded at that time. The

The purchase prices of the acquisitions described above were

results of operations for all acquired businesses are included in

allocated to the net assets acquired based on their relative fair val-

the consolidated statement of earnings and the consolidated

ues at the dates of acquisition. In certain circumstances where

statement of shareholders’ equity and comprehensive earnings of

estimates have been made, the companies are obtaining third-

the Company from their respective dates of acquisition.

2 0 0 8 A C Q U I S I T I O N S

Details of the 2008 acquisitions are as follows:

Cash

Other current assets

Intangible assets with limited life

Goodwill

Property, plant and equipment and other long-term assets

Current liabilities

Long-term liabilities

Non-controlling interests in net assets

Interest in net assets acquired

ONCAP II(a)

EMSC(b)

Healthcare(c)

Other(d)

Total

Skilled

115

288

(39)

(151)

(11)

–

(5)

–

(14)

(9)

(1)

141

171

444

(58)

(160)

226

(12)

$ 62

$ 24

$ 41

$ 214

a) In October 2008, Oncap II completed the acquisition of Caliber
Collision. Caliber Collision, headquartered in Irvine, California, is

The purchase prices of these acquisitions were allocated to the net

assets acquired based on their relative fair values at the dates of

a leading provider of auto collision repair services in Texas and

acquisition. In certain circumstances where estimates had been

Southern California. The Company’s investment of $67 was made

made a further reﬁnement of the fair-value allocation of certain

by Onex, ONCAP II and management for an initial controlling own-

purchase prices and accounting adjustments was recorded subse-

ership interest. Onex’ net investment in the acquisition was $30.

quent to the acquisition. The results of operations for all acquired

In the ﬁrst quarter of 2008, EnGlobe Corp. (“EnGlobe”)

businesses are included in the consolidated statement of earnings

acquired a ground remediation contractor with operating locations

and the consolidated statement of shareholders’ equity and com-

in the United Kingdom. In addition, during the year Mister Car

prehensive earnings of the Company from their respective dates

Wash purchased additional car wash locations in the United States.

of acquisition.

The total purchase price for these investments was $20.

b) During 2008, EMSC made ﬁve acquisitions for total considera-
tion of $62.

c) During 2008, Skilled Healthcare made two acquisitions for total
consideration of $24.

d) Other includes acquisitions made by CDI, Sitel Worldwide and
Tube City IMS, for total consideration of $41.

3 . E A R N I N G S F R O M D I S C O N T I N U E D O P E R AT I O N S

The 2008 earnings from discontinued operations consist of resid-

ual proceeds received relating to the 2007 sales of ONCAP I’s oper-

ating companies WIS International and CMC Electronics. The

2008 proceeds of $11 were recorded net of a tax provision of $2.

Onex Corporation December 31, 2009 89

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

4 . I N V E N T O R I E S

5 . O T H E R C U R R E N T A S S E T S

Inventories comprised the following:

Other current assets comprised the following:

As at December 31

Raw materials

Work in progress

Finished goods

2009

2008

As at December 31

2009

2008

920

$ 1,067

Current portion of ceded claims recoverable

1,785

380

1,834

570

$ 3,085

$ 3,471

held by The Warranty Group (note 12)

275

373

Current portion of prepaid premiums

of The Warranty Group

Current portion of deferred costs

of The Warranty Group (note 8)

Current future income taxes (note 14)

Other

218

187

262

442

259

252

255

556

$ 1,384

$ 1,695

6 . P R O P E R T Y , P L A N T A N D E Q U I P M E N T

Property, plant and equipment comprised the following:

As at December 31

Land

Buildings

Machinery and equipment

Construction in progress

2009

Cost

Accumulated
Amortization

398

1,500

3,832

456

–

399

2,028

–

Net

Cost

2008

Accumulated
Amortization

398

243

1,101

1,804

456

1,546

4,459

414

–

350

2,246

–

Net

243

1,196

2,213

414

$ 6,186

$ 2,427

$ 3,759

$ 6,662

$ 2,596

$ 4,066

The above amounts include property, plant and equipment under

capital leases of $100 (2008 – $257) and related accumulated amor-

a) In October 2008, the Company acquired an interest in RSI. RSI,
headquartered in Anaheim, California, is a leading manufacturer of

tization of $52 (2008 – $160).

cabinetry for the residential marketplace in North America. The

As at December 31, 2009, property, plant and equipment

Company’s investment of $338 was in the form of convertible pre-

included $49 (2008 – $48) of assets held-for-sale.

ferred shares and was made by Onex, Onex Partners II and Onex

management. The shares have a liquidation preference to the com-

mon shares and earn a preferred 10% return. The preferred shares

are convertible into 50% of the outstanding common shares of RSI.

Onex’ net investment in the acquisition was $133, for an initial 20%

equity ownership interest on an as-con verted basis. As a result of

Onex’ signiﬁcant inﬂuence over RSI, the investment is accounted

for using the equity-accounting method. In accordance with equity

accounting, the carrying value of this U.S. dollar investment has

been adjusted to account for the change in the foreign exchange

rate since its acquisition.

7. I N V E S T M E N T S

Investments comprised the following:

As at December 31

2009

2008

Equity-accounted investment in RSI(a)

334

388

Equity-accounted investment
in Hawker Beechcraft(b)

Equity-accounted investment in

Allison Transmission(c)

Equity-accounted investment in ResCare(d)
Other equity-accounted investments(e)
EMSC insurance collateral(f)

Long-term investments held by

The Warranty Group(g)

Investment in Onex Credit Partners funds(h)

Other

159

358

129

157

166

1,658

229

406

599

147

274

162

1,646

204

$ 3,255

$ 3,897

90 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

b) In March 2007, the Company, together with GS Capital Partners,
an afﬁliate of The Goldman Sachs Group, Inc., completed the

share of Allison Transmission’s earnings, the carrying value of this

U.S. dollar investment has been adjusted to account for the change

acquisition of Hawker Beechcraft. The equity investment of

in the foreign exchange rate since its acquisition.

US$1,040 was split equally between the Company and GS Capital

Partners. The Company’s investment of $605 was made by Onex,

Onex Partners II and management. Onex’ net investment in the

d) In June 2004, Onex and Onex Partners made an initial $114 equity
investment in ResCare. Onex’ portion of the investment was approx-

acquisition was $238. In accordance with equity accounting, in

imately $27. In accordance with equity accounting, in addition to

addition to Onex and Onex Partners’ share of Hawker Beechcraft’s

Onex and Onex Partners’ share of ResCare’s earnings, the carrying

earnings, the carrying value of this U.S. dollar investment has

value of this U.S. dollar investment has been adjusted to account for

been adjusted to account for the change in the foreign exchange

the change in the foreign exchange rate since its acquisition.

rate since its acquisition.

c) In August 2007, the Company, together with The Carlyle Group,
completed the acquisition of Allison Transmission. The equity

investment of US$1,525 was split equally between the Company and

e) Other equity-accounted investments include Cine plex Enter -
tainment (sold in 2009), Cypress Insurance Group (“Cy press”),

Onex Credit Partners and certain real estate partnerships.

The Carlyle Group. The Company’s investment of $805 was made by

Onex, Onex Partners II, certain limited partners and management.

f) EMSC insurance collateral consists primarily of government
and investment grade securities and cash deposits with third par-

Onex’ net investment in the acquisition was $250. In accordance

ties, and supports its insurance program and reserves.

with equity accounting, in addition to Onex and Onex Partners’

g) The table below presents the amortized cost and fair value of all investments in securities held by The Warranty Group at December 31:

U.S. government and agencies

States and political subdivisions

Foreign governments

Corporate bonds

Mortgage-backed securities

Other

Current portion(2)

Long-term portion

2009

2008

Amortized Cost(1)

Fair Value

Amortized Cost(1)

Fair Value

168

345

928

215

114

$ 1,855

(252)

$ 1,603

177

357

959

218

117

$ 1,914

(256)

$ 1,658

239

330

901

235

160

$ 1,949

(241)

$ 1,708

244

318

839

231

158

$ 1,881

(235)

$ 1,646

(1) Amortized cost represents cost plus accrued interest and accrued discount or premium, if applicable.

(2) The current portion is included in marketable securities on the consolidated balance sheet.

Fair values generally represent quoted market value prices for

The amortized cost and fair value of ﬁxed-maturity securities

securities traded in the public marketplace or analytically deter-

owned by The Warranty Group at December 31, 2009, by contrac-

mined values for securities not traded in the public marketplace.

tual maturity, are shown below:

Management believes that all unrecognized losses on

individual securities are the result of normal price ﬂuctuations due

to market conditions and are not an indication of other-than-tem-

porary impairment. Management further believes it has the intent

and ability to hold these securities until they fully recover in value.

These determinations are based on an in-depth analysis of individ-

ual securities.

Years to maturity:

One or less

After one through five

After five through ten

After ten

Mortgage-backed securities

Other

Amortized Cost

Fair Value

252

921

334

215

114

256

960

348

218

117

$ 1,855

$ 1,914

Onex Corporation December 31, 2009 91

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

7. I N V E S T M E N T S ( c o n t ’d )

9. I N TA N G I B L E A S S E T S

Intangible assets comprised the following:

As at December 31

2009

2008

Intellectual property with limited life,

net of accumulated amortization

of $50 (2008 – $237)

301

406

Intangible assets with limited life,

net of accumulated amortization

of $1,309 (2008 – $791)

Intangible assets with indefinite life

1,528

257

2,008

341

$ 2,086

$ 2,755

Intellectual property primarily represents the costs of certain intel-

lectual property and process know-how obtained in acquisitions.

Intangible assets include trademarks, non-competition

agreements, customer relationships, software and contract rights

obtained in the acquisition of certain facilities.

Expected maturities differ from contractual maturities because

borrowers may have the right to call or prepay obligations with or

without call or prepayment penalties.

At December 31, 2009, certiﬁcates of deposit, money

market funds and available-for-sale ﬁxed-maturity securities with

a carrying value of $36 (2008 – $39) were on deposit with various

insurance departments and regulators to satisfy various regula -

tory requirements.

h) Investments in Onex Credit Partners funds include a December
2009 investment of $137 (US$130) in an Onex Credit Partners

unleveraged senior secured loan fund. The investments in Onex

Credit Partners funds are classiﬁed as held-for-trading and are

recorded at fair value.

8 . O T H E R L O N G - T E R M A S S E T S

Other long-term assets comprised the following:

As at December 31

2009

2008

Deferred development charges

Future income taxes (note 14)

Deferred pension (note 25)

Long-term portion of ceded claims recoverable

held by The Warranty Group (note 12)

Long-term portion of prepaid premiums

of The Warranty Group

Long-term portion of deferred costs

of The Warranty Group(a)

Other

507

435

347

479

382

302

244

569

501

370

748

423

272

242

$ 2,696

$ 3,125

a) Deferred costs of The Warranty Group consist of certain costs
of acquiring warranty and credit business including commis-

sions, underwriting, and sales expenses that vary with, and are

primarily related to, the production of new business. These

charges are deferred and amortized as the related premiums and

contract fees are earned. At December 31, 2009, $489 (2008 –

$524) of costs were deferred, of which $187 (2008 – $252) have

been recorded as current (note 5).

92 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

10 . L O N G - T E R M D E B T O F O P E R AT I N G C O M PA N I E S , W I T H O U T R E C O U R S E T O O N E X

Long-term debt of operating companies, without recourse to Onex, is as follows:

As at December 31

Carestream Health(a)

Senior secured first lien term loan due 2013
Senior secured second lien term loan due 2013
Other

Celestica(b)

7.875% senior subordinated notes due 2011
7.625% senior subordinated notes due 2013

Center for Diagnostic Imaging(c)

Revolving credit facility and term loan due 2009 and 2010
Revolving credit facility and term loan due 2013
Other

Cosmetic Essence(d)

Revolving credit facility and term loans due 2013 and 2014
Subordinated secured notes due 2014

Emergency Medical Services(e)

Revolving credit facility and term loan due 2011 and 2012
Senior subordinated secured notes due 2015
Other

Husky(f)

Sitel Worldwide(g)

Skilled Healthcare(h)

Spirit AeroSystems(i)

Revolving credit facility and term loan due 2012

Revolving credit facility and term loans due 2013 and 2014
Mandatorily redeemable preferred shares
Other

Revolving credit facility and term loan due 2012
Senior subordinated notes due 2014
Other

Revolving credit facility and term loan due 2012 and 2013
Senior subordinated notes due 2017
Other

The Warranty Group(j)

Term loan due 2012

Tube City IMS(k)

Revolving borrowings and senior secured term loan due 2013 and 2014
Senior subordinated notes due 2015
Subordinated notes due 2020
Other

ONCAP II companies (l)

Revolving credit facility and term loans due 2012 to 2014
Subordinated notes due 2012 and 2014
Other

Other(m)

Other

Less: long-term debt held by the Company

Long-term debt, December 31
Less: deferred charges

Current portion of long-term debt of operating companies, without recourse to Onex

2009

$ 1,359
462
15

1,836

2008

$ 1,687
536
9

2,232

–
234

234

–
47
3

–
–

–

210
263
1

474

414

639
92
–

731

337
136
7

480

601
309
18

928

204

173
234
62
2

471

292
105
5

402

624
276

900

68
–
6

138
107

245

246
304
2

552

494

776
93
1

870

404
158
8

570

704
–
11

715

239

259
274
16
–

549

373
107
4

484

136

(197)

6,039
(109)

5,930
(425)

(247)

7,813
(138)

7,675
(532)

Consolidated long-term debt of operating companies, without recourse to Onex

$ 5,505

$ 7,143

Onex Corporation December 31, 2009 93

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

10 . L O N G - T E R M D E B T O F O P E R AT I N G C O M PA N I E S ,

ratios. Based on the required minimum ﬁnancial ratios, at Decem -

W I T H O U T R E C O U R S E T O O N E X ( c o n t ’d )

ber 31, 2009, Celestica had full access to its US$200 of available

debt incurrence. Celestica also has uncommitted bank overdraft

Onex does not guarantee the debt of its operating companies, nor

facilities available for operating requirements that total US$65 at

are there any cross-guarantees between operating companies.

December 31, 2009.

The ﬁnancing arrangements for each operating com pany

In March 2009, Celestica paid US$150, excluding accrued

typically contain certain restrictive covenants, which may include

interest, to repurchase a portion of its notes due in 2011, with prin-

limitations or prohibitions on additional indebtedness, payment of

cipal amounts of US$150 at maturity and a carrying value of

cash dividends, redemption of capital, capital spending, making of

US$159. In November 2009, Celestica paid US$346, excluding

investments and acquisitions and sale of assets. In addition, certain

accrued interest, to repurchase the remaining 2011 notes, with

ﬁnancial covenants must be met by the operating companies that

principal amounts of US$339 at maturity and a carrying value of

have outstanding debt.

US$356. Celestica recognized a gain of US$9 in the ﬁrst quarter of

Future changes in business conditions of an operating

2009 and a gain of US$10 in the fourth quarter of 2009 on the repur-

company may result in non-compliance with certain covenants

chase of the 2011 notes. Celestica also terminated interest rate

by the company. No adjustments to the carrying amount or clas-

swap agreements in the amount of US$500 related to the 2011

siﬁcation of assets or liabilities of any operating company have

notes. In connection with the termination of the swap agreements,

been made in the consolidated ﬁnancial statements with respect

Celestica discontinued fair value hedge accounting on the notes

to any possible non-compliance.

due in 2011 and recorded an expense of US$16. The net gain of

US$3 is recorded against interest expense in the audited annual

a) Carestream Health

consolidated statement of earnings.

In April 2007 Carestream Health entered into senior secured ﬁrst

Celestica’s senior subordinated notes due 2013 have an

and second lien term loans with an aggregate principal amount of

aggregate principal amount at December 31, 2009 of US$223

US$1,510 and US$440, respectively. Additionally, as part of the ﬁrst

(2008 – US$223) and a ﬁxed interest rate of 7.625%. In Janu ary

lien term loan, Carestream Health obtained a senior revolving

2010, Celestica announced its intention to redeem the 2013 notes,

credit facility with available funds of up to US$150. The ﬁrst and

as described in note 27(a); as such, the 2013 notes are classiﬁed

second lien term loans bear interest at LIBOR plus a margin of

as current.

2.00% and 5.25%, respectively, or at a base rate plus a margin of

1.00% and 4.25%, respectively.

c) Center for Diagnostic Imaging

The ﬁrst lien term loan matures in April 2013, with quar-

In July 2009, CDI entered into a new credit agreement. The new

terly instalment payments of US$18. The second lien term loan

agreement consists of a US$55 term loan and a US$15 revolving

matures in October 2013, with the entire balance due upon matu-

credit facility. The term loan and revolving credit facility bear

rity. The senior revolving credit facility, with nil outstanding at

interest at LIBOR, plus a margin of 4.5%, and mature in July 2013.

December 31, 2008 and 2009, matures in April 2012.

The term loan requires quarterly principal repayments beginning

At December 31, 2009, US$1,293 and US$440 (2008 –

in March 2010. The proceeds of the term loan were used to repay

US$1,385 and US$440) were outstanding under the senior secured

and terminate the previous credit agreement. At December 31,

ﬁrst and second lien term loans, respectively.

2009, US$45 was outstanding under the term loan and nil was

Substantially all of Carestream Health’s assets are pledged

outstanding under the revolving credit facility.

as collateral under the term loans.

CDI has entered into an interest rate swap agreement

In connection with the term loans, Carestream Health

that effectively ﬁxes the interest rate on a portion of the bor -

has four interest rate swap agreements that swap the variable rate

rowings under the credit agreement. The interest rate swap agree-

for a ﬁxed rate ranging from 2.8% to 4.0%. The agreements, with

ment has a notional amount of US$45 and expires in March 2010.

notional amounts totalling US$725, expire in 2010.

In November 2009, CDI entered into a two-year interest rate cap

b) Celestica

agreement in order to hedge a portion of its exposure to ﬂuctua-

tions in three-month LIBOR rates above 3.5%. The cap agreement

In April 2009, Celestica renewed its revolving credit facility on

begins in April 2010 and terminates in September 2012.

generally similar terms and conditions and reduced its size from

US$300 to US$200. This credit facility matures in April 2011. No

d) Cosmetic Essence

amounts were drawn on the facility at December 31, 2009.

At December 31, 2008, CEI was in violation of certain of its ﬁnancial

The facility has restrictive covenants relating to debt

convenants under its credit agreement. As a result, all amounts

incurrence and the sale of assets and also contains ﬁnancial

outstanding under the credit agreement were classiﬁed as current.

covenants that require Celestica to maintain certain ﬁnancial

The debt under the credit agreement was without recourse to Onex.

At December 31, 2008, US$80 and US$34 were outstanding on the

94 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

term loan and revolving line of credit, respectively. At December 31,

g) Sitel Worldwide

2008, CEI also had a promissory note outstanding in the amount of

In December 2008, Sitel Worldwide amended its credit facility.

US$88, of which US$80 was held by the Company.

The amendment included increases to the applicable interest

In May 2009, the Company ceased to have an ownership

rates and changes to the ﬁnancial covenants.

interest in CEI, as described in note 19(b).

Sitel Worldwide’s credit facility, as amended, consists of

e) Emergency Medical Services

a US$675 term loan, maturing in January 2014, and a US$85

revolving credit facility maturing in January 2013. As a result of

In February 2005, EMSC issued US$250 of senior subordinated

repayments and repurchases made in 2007 and 2008, no quarterly

notes and executed a US$450 credit agreement. The senior subor-

payments are due under the term loan until maturity. The term

dinated notes have a ﬁxed interest rate of 10%, payable semi-

loan and revolving credit facility bear interest at a rate of LIBOR

annually, and mature in February 2015.

plus a margin of up to 5.5% or prime plus a margin of 4.5%. Bor -

The credit agreement consists of a US$350 senior secured

rowings under the facility are secured by substantially all of Sitel

term loan and a US$100 senior secured revolving credit facility. The

Worldwide’s assets.

senior secured term loan matures in February 2012 and requires

At December 31, 2009, US$592 and US$16 (2008 – US$587

principal repayments of US$2 annually. The revolving facility

and US$50) were outstanding under the term loan and revolving

requires the principal to be repaid at maturity in February 2011.

credit facility, respectively.

Interest is determined by reference to a leverage ratio and can

Sitel Worldwide is required under the terms of the facil -

range from prime or LIBOR plus 1.0% to 2.0%. As at December 31,

ity to maintain certain ﬁnancial ratio covenants. The facility also

2009, US$200 and nil (2008 – US$202 and nil) were outstanding

contains certain additional requirements, including limitations or

under the senior secured term loan and the senior secured re -

prohibitions on additional indebtedness, payment of cash divi-

volving credit facility, respectively.

dends, redemption of stock, capital spending, investments, acqui-

Substantially all of EMSC’s assets are pledged as collat-

sitions and asset sales.

eral under the credit agreement.

f) Husky

Included in other long-term debt at December 31, 2009

is US$52 (2008 – US$46) of mandatorily redeemable Class B pre-

ferred shares, of which US$34 (2008 – US$30) was held by Onex.

In December 2007, Husky entered into a US$520 committed,

The mandatorily redeemable Class B preferred shares accrue

secured credit agreement comprised of a US$410 term loan and

annual dividends at a rate of 12% and are redeemable at the

a US$110 revolving credit facility. Borrowings under the credit

option of the holder on or before July 2014. Also included in other

agreement bear interest at LIBOR plus a margin of 3.00% or 3.25%

long-term debt at December 31, 2009 is US$36 (2008 – US$30) of

as determined by a consolidated leverage ratio. The term loan has

mandatorily redeemable Class C preferred shares, of which US$27

mandatory principal repayments of US$21 in 2010 and 2011 with

(2008 – US$23) is held by Onex. The mandatorily redeemable

the outstanding principal balance due in 2012. Additionally, 25%

Class C preferred shares accrue annual dividends at a rate of 16%

or 50% of excess cash ﬂows (as deﬁned in the credit agreement

and are redeemable at the option of the holder on or before May

and determined by a consolidated leverage ratio), if any, must be

2014. Outstanding amounts related to preferred shares at Decem -

used to prepay the loan annually. As a result, in 2010, Husky will

ber 31, 2009 include accrued dividends.

be required to repay an additional US$9 of its term loan. In 2008,

Husky entered into interest rate swap agreements that effectively

h) Skilled Healthcare

ﬁxed the interest rate on a portion of the borrowings under the

In December 2005, Skilled Healthcare issued unsecured senior

credit agreement. Outstanding agreements, with notional amounts

subordinated notes in the amount of US$200 due in 2014. In June

of US$339, expire in 2011 and 2012.

2007, using proceeds from its May 2007 initial public offering,

The revolving credit facility is available to Husky and its

Skilled Healthcare redeemed US$70 of the notes. The notes bear

key subsidiaries in Canada. At December 31, 2009, there were

interest at a rate of 11.0% per annum and are redeemable at the

US$7 in letters of credit issued under the credit facility, leaving

option of the company at various premiums above face value

US$103 in available borrowing capacity. The revolving credit facil-

beginning in 2009. At December 31, 2009, US$130 (2008 – US$129)

ity matures in December 2012.

was outstanding under the notes.

At December 31, 2009, US$394 and nil (2008 – US$406

Skilled Healthcare’s ﬁrst lien credit agreement consists

and nil) were outstanding under the term loan and revolving

of a US$260 term loan and a US$135 revolving loan. The term loan

credit facility, respectively.

is due in 2012, with annual principal instalments of US$3. In April

The credit agreement has restrictions on new debt

2009, Skilled Healthcare amended its credit agreement to extend

incurrence, the sale of assets, capital expenditures, and the main-

the maturity of the revolving loan commitment from June 15, 2010

tenance of certain ﬁnancial ratios. Substantially all of Husky’s

to June 15, 2012, while maintaining existing interest rates. The

assets are pledged as collateral under the credit agreement.

Onex Corporation December 31, 2009 95

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

10 . L O N G - T E R M D E B T O F O P E R AT I N G C O M PA N I E S ,

7.875% to maturity. The net proceeds were used to repay US$200

W I T H O U T R E C O U R S E T O O N E X ( c o n t ’d )

in borrowings under its existing revolving credit facility without

any reduction of the lenders’ commitment, with the remainder

revolving line of credit has a capacity of US$135 up to June 15,

to be used for general corporate purposes. Interest is payable

2010, reducing to US$124 until maturity. The term loan bears

semi-annually beginning in April 2010. The senior notes may be

interest at the prime rate plus an initial margin of 1.25% or LIBOR

redeemed prior to maturity at various premiums above face value.

plus an initial margin of 2.00%. The revolving loan bears interest

Additionally, if a change in control of Spirit AeroSystems occurs,

at the prime rate plus an initial margin of 1.75% or LIBOR plus an

the holders of the senior notes have the right to require Spirit

initial margin of 2.75%. The margin can be reduced by as much as

AeroSystems to repurchase the senior notes at a price of 101% plus

0.50% on the term loan, depending on the company’s credit rat-

accrued and unpaid interest. At December 31, 2009, the senior

ing. At December 31, 2009, US$248 and US$72 (2008 – US$251 and

notes, with US$300 outstanding, were recorded net of the unamor-

US$81) were outstanding under the term loan and revolving loan,

tized discount of US$6. The senior notes are subordinate to the

respectively. The ﬁrst lien credit agreement is secured by the real

senior secured credit facility.

property of Skilled Healthcare.

In December 2009, Skilled Healthcare entered into two

j) The Warranty Group

interest rate swap agreements with total notional amounts of

In November 2006, The Warranty Group entered into a US$225

US$245 expiring in December 2010. Under the interest rate swap

credit agreement consisting of a US$200 term loan and up to

agreements, the company swaps the variable portion (LIBOR) of

US$25 of revolving credit and swing line loans. The amounts

the rate with a ﬁxed rate of 0.6%.

i) Spirit AeroSystems

outstanding on the credit agreement bear interest at LIBOR plus a

margin based on The Warranty Group’s credit rating. The term

loan requires annual payments of US$2, with the balance due in

In June 2005, Spirit AeroSystems executed a US$875 credit agreement

2012. Revolving credit and swing line loans, if outstanding, are due

that consists of a US$700 senior secured term loan and a US$175

2011. At December 31, 2009, US$194 and nil (2008 – US$196 and

senior secured revolving credit facility. In November 2006, Spirit

nil) were outstanding on the term loan and revolving and swing

AeroSystems used a portion of the proceeds from its initial public

loans, respectively.

offering to permanently repay US$100 of the senior secured term

The debt is subject to various terms and conditions,

loan and amended its credit agreement. In March 2008, Spirit

including The Warranty Group maintaining a minimum credit

AeroSystems amended the agreement to increase the amount avail-

rating and certain ﬁnancial ratios relating to minimum capitaliza-

able under the senior revolving credit facility to US$650 and add a

tion levels.

provision allowing additional indebtedness of up to US$300. In June

2009, Spirit AeroSystems further amended its credit agreement to

k) Tube City IMS

extend the maturity of the revolving credit facility from June 2010 to

In January 2007 Tube City IMS entered into a senior secured asset-

June 2012 as well as increase the size of the facility to US$729 from

based revolving credit facility with an aggregate principal amount

US$650 through June 2010 before stepping down to US$409 through

of up to US$165, a senior secured term loan credit facility with an

June 2012. At December 31, 2009, US$572 and nil (2008 – US$578 and

aggregate principal amount of US$165 and a senior secured syn-

nil) were outstanding under the term loan and revolving facility,

thetic letter of credit facility of US$20. The credit facilities bear

respectively. The senior secured term loan requires quarterly princi-

interest at a base rate plus a margin of up to 2.50%.

pal instalments of US$1, with the balance due in four equal quar terly

The senior secured asset-based revolving credit facility

instalments of US$139 beginning Decem ber 2012. The revolving

is available through to January 2013. The maximum availability

credit facility requires the principal to be repaid at maturity.

under the revolving facility is based on speciﬁed percentages of

The borrowings under the credit agreement bear inter-

eligible accounts receivable and inventory. As at December 31,

est based on LIBOR or a base rate plus an interest rate margin of

2009, US$4 (2008 – US$46) was outstanding under the revolving

up to 4.0%, payable quarterly. In connection with the term loan,

facility. The obligations under the senior secured asset-based

Spirit AeroSystems entered into interest rate swap agreements on

lending facility are secured on a ﬁrst-priority lien basis by Tube

US$500 of the term loan. The agreements, which mature in 2010

City IMS’ accounts receivable, inventory and cash proceeds there-

and 2011, swap the ﬂoating interest rate with a ﬁxed interest rate

from and on a second-priority lien basis by substantially all of

that ranges between 3.2% and 4.4%.

Tube City IMS’ other property and assets, subject to certain

Substantially all of Spirit AeroSystems’ assets are pledged

exceptions and permitted liens.

as collateral under the credit agreement.

The senior secured term loan credit facility and senior

In September 2009, Spirit AeroSystems completed an

secured synthetic letter of credit facility are repayable quarterly,

offering of US$300 in aggregate principal amount of 7.5% senior

with annual payments of US$2, and mature in January 2014. The

notes due in 2017. The offering price was 97.804% of par to yield

facilities require Tube City IMS to prepay outstanding amounts

96 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

under certain conditions. At December 31, 2009, US$160 (2008 –

Certain ONCAP II investee companies have entered into

US$162) was outstanding under the term loan and there were

interest rate swap agreements to ﬁx a portion of their interest ex -

US$13 (2008 – US$17) of letters of credit outstanding relating to

pense. The total notional amount of these swap agreements at De -

the synthetic letter of credit facility. The obligations under the

cember 31, 2009 was $205, with portions expiring through to 2012.

senior secured term loan facility and senior secured synthetic

The senior debt is generally secured by substantially all

letter of credit facility are secured on a ﬁrst-priority lien basis by

of the assets of the respective company.

all of Tube City IMS’ property and assets (other than accounts

receivable and inventory and cash proceeds therefrom) and on a

m) Other

second-priority lien basis on all of Tube City IMS’ accounts receiv-

Other long-term debt at December 31, 2008 included US$97 of

able and inventory and cash proceeds therefrom, subject to cer-

amounts outstanding on a US$125 line of credit held by an entity

tain exceptions and permitted liens.

controlled by Onex Partners III. Amounts borrowed on the line of

In connection with the senior secured term loan credit

credit were used to purchase investment securities in Tropicana

facility, Tube City IMS entered into rate swap agreements that

Las Vegas. The line of credit was repaid in 2009. In addition,

swap the variable rate portion of the interest for a ﬁxed rate of

included in other long-term debt at December 31, 2009 was $10

4.7% through March 2010 and 2.3% thereafter. The agreements

(2008 – $16) outstanding relating to Radian.

have total notional amounts of US$120 to March 2010, reducing to

US$80 until March 2012.

The annual minimum repayment requirements for the next

In addition, Tube City IMS has US$225 of unsecured

ﬁve years on consolidated long-term debt are as follows:

senior subordinated notes outstanding, issued in 2007. The notes

bear interest at a rate of 9.75% and mature in February 2015. The

notes are redeemable at the option of the company at various pre-

miums above face value, beginning in 2011. At December 31, 2009,

notes of US$223 (2008 – US$225) were outstanding.

In December 2008 and the ﬁrst quarter of 2009, Tube

2010

2011

2012

2013

2014

City IMS issued subordinated notes in the amount of US$51, of

Thereafter

which US$49 are held by the Company. The notes are due in 2020

and bear interest at a rate of 15% in the ﬁrst year, 17.5% in the

second year and 20% in the third year and beyond. Cash interest

payments are required beginning in 2014. Tube City IMS may pre-

pay the notes, in whole or in part, without premium penalty or

discount, at any time. At December 31, 2009 US$59 (2008 – US$13)

was outstanding, including accrued interest, of which US$56

(2008 – US$12) was held by the Company.

l) ONCAP II companies

ONCAP II’s investee companies consist of EnGlobe, CSI, CiCi’s

Pizza, Mister Car Wash and Caliber Collision. Each has debt that is

included in the Company’s consolidated ﬁnancial statements.

There are separate arrangements for each of the investee compa-

nies with no cross-guarantees between the companies or by Onex.

Under the terms of the various credit agreements, com-

bined term borrowings of $272 are outstanding and combined

For the year:

2010

2011

2012

2013

2014

Thereafter

Total future minimum lease payments

Less: imputed interest

11. L E A S E C O M M I T M E N T S

Future minimum lease payments are as follows:

Capital
Leases

Operating
Leases

425

306

1,220

2,247

1,019

822

$ 6,039

242

182

141

104

363

$ 1,108

$ 25

$ 70

(8)

(21)

revolving credit facilities of $20 are outstanding. The available facili-

Balance of obligations under capital

ties bear interest at various rates based on a base ﬂoating rate plus a

leases, without recourse to Onex

margin. At December 31, 2009, interest rates ranged from 2.3% to

Less: current portion

7.5% on borrowings under the revolving credit and term facilities.

Long-term obligations under capital

The term loans have quarterly repayments and are due between

leases, without recourse to Onex

$ 41

2012 and 2014. The companies also have subordinated notes of $105,

due between 2012 and 2014, that bear interest at rates ranging from

Substantially all of the lease commitments relate to the operating

7.5% to 15.0%, of which the Company owns $69.

companies. Operating leases primarily relate to premises.

Onex Corporation December 31, 2009 97

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

12 . W A R R A N T Y R E S E R V E S A N D U N E A R N E D P R E M I U M S

The following describes the reserves and unearned premiums liabilities of The Warranty Group, which was acquired in November 2006.

Reserves

The following table provides a reconciliation of The Warranty Group’s beginning and ending reserves for losses and loss adjustment

expenses (“LAE”), net of ceded claims recoverable for the year ended December 31, 2009:

Current portion of reserves, December 31, 2008

Long-term portion of reserves, December 31, 2008

Gross reserve for losses and LAE, December 31, 2008(2)

Less current portion of ceded claims recoverable(1) (note 5)
Less long-term portion of ceded claims recoverable(1) (note 8)

Net reserve for losses and LAE, December 31, 2008

Benefits to policy holders incurred, net of reinsured amounts

Payments for benefits to policy holders, net of reinsured amounts

Other, including increase due to changes in foreign exchange rates

Net reserve for losses and LAE, December 31, 2009

Add current portion of ceded claims recoverable(1) (note 5)
Add long-term portion of ceded claims recoverable(1) (note 8)

Gross reserve for losses and LAE, December 31, 2009(2)

Current portion of reserves, December 31, 2009

Property and

Casualty(a)

Warranty(b)

Total
Reserves

334

$ 253

587

748

–

748

$ 1,082

$ 253

$ 1,335

(334)

(748)

–

239

477

716

(239)

(39)

–

214

(373)

(748)

214

$ 615

615

(627)

(20)

(627)

(20)

$ 182

182

220

(186)

275

479

936

(425)

Long-term portion of reserves, December 31, 2009

477

511

(1) Ceded claims recoverable represent the portion of reserves ceded to third-party reinsurers.

(2) Reserves for losses and LAE represent the estimated ultimate net cost of all reported and unreported losses incurred and unpaid through December 31, as described in note 1.

a) Property and casualty reserves represent estimated future losses
on property and casualty policies. The property and casualty

b) Warranty reserves represent estimated future losses on warranty
policies written by The Warranty Group. Due to the nature of the

reserves and the corresponding ceded claims recoverable were

warranty reserves, substantially all of the ceded claims recoverable

acquired on acquisition of The Warranty Group. The property and

and warranty reserves are of a current nature.

casualty business is being run off and new business is not being

booked. The reserves are 100% ceded to third-party reinsurers.

Unearned premiums

A subsidiary of Aon Corporation, the former parent of The War ranty

at December 31.

Group, was the primary reinsurer for 44% of the non-warranty

property and casualty reserves and provided guarantees on all of

those reserves at December 31, 2008. In August 2009, the subsidiary

Unearned premiums

was sold to National Indemnity Company. As part of the sale,

Current portion of unearned premiums

2009

2008

$ 2,508

(985)

$ 2,924

(1,111)

The following table provides details of the unearned premiums as

National Indemnity Company became the primary reinsurer for

42% of the non-warranty property and casualty reserves and pro-

vided guarantees on all of those reserves at December 31, 2009.

Long-term portion of unearned premiums

$ 1,523

$ 1,813

98 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

13 . O T H E R L I A B I L I T I E S

Other liabilities comprised the following:

As at December 31

Reserves(a)
Boeing advance(b)

Deferred revenue and other deferred items

Pension and non-pension post-retirement

benefits (note 25)

Stock-based compensation
Other(c)

2009

2008

197

724

358

206

138

332

239

1,077

377

211

331

b) Pursuant to Spirit AeroSystems’ 787 aircraft long-term supply
agreement with Boeing, Boeing made advance payments to Spirit

Aero Systems. As at December 31, 2009, advance payments of

US$1,111 (2008 – US$1,095) had been made, of which US$187 has

been recognized as revenue and US$924 will be settled against

future sales of Spirit AeroSystems’ 787 aircraft units to Boeing.

US$235 of the payments has been recorded as a current liability.

c) Other includes the long-term portion of acquisition and re -
structuring accruals, amounts for liabilities arising from indem-

niﬁcations, mark-to-market valuations of hedge contracts and

$ 1,955

$ 2,287

warranty provisions.

a) Reserves consist primarily of US$144 (2008 – US$139) estab-
lished by EMSC for automobile, workers compensation, general

liability and professional liability. This includes the use of an off-

shore captive insurance program.

14 . I N C O M E TA X E S

The reconciliation of statutory income tax rates to the Company’s eﬀective tax rate is as follows:

Year ended December 31

Income tax recovery (provision) at statutory rates

Change related to:

Increase in valuation allowance

Amortization of non-deductible items

Income tax rate differential of operating investments

Book to tax differences on property, plant and equipment and intangibles

Non-taxable gains

Foreign exchange

Other, including permanent differences

Provision for income taxes

Classified as:

Current

Future

Provision for income taxes

2009

$ (213)

2008

356

(10)

(88)

(36)

239

(36)

(124)

(116)

(39)

(361)

(85)

(58)

158

(107)

$ (172)

$ (252)

$ (276)

104

$ (172)

$ (318)

$ (252)

Onex Corporation December 31, 2009 99

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

14 . I N C O M E TA X E S ( c o n t ’d )

The Company’s future income tax assets and liabilities comprised the following:

As at December 31

Future income tax assets(1):

Net operating losses carried forward

Net capital losses carried forward

Accounting provisions not currently deductible

Property, plant and equipment, intangible and other assets

Share issue costs of operating investments

Acquisition and integration costs

Pension and non-pension post-retirement benefits

Deferred revenue

Scientific research and development

Other
Less valuation allowance(2)

Future income tax liabilities(1):

Property, plant and equipment, intangible and other assets

Pension and non-pension post-retirement benefits

Gains on sales of operating investments

Foreign exchange

Other

Future income tax liabilities, net

Classified as:

Current asset – other current assets

Long-term asset – other long-term assets

Current liability – accounts payable and accrued liabilities

Long-term liability – future income taxes

Future income tax liabilities, net

2009

2008

$ 1,071

$ 1,254

460

201

(2)

124

(1,376)

697

(496)

(98)

(571)

(141)

(1,303)

$ (606)

262

435

(66)

(1,237)

$ (606)

463

217

(3)

(1,438)

756

(600)

(81)

(684)

(138)

(1,479)

$ (723)

255

501

(29)

(1,450)

$ (723)

(1)

Income tax assets and liabilities relating to the same tax jurisdiction have been recorded on a gross basis in the consolidated balance sheets.

(2) Future tax assets are recorded based on their expected future tax value. The valuation allowance claimed against the future tax assets primarily relates to non-capital losses of

Celestica and Sitel Worldwide. A valuation allowance on non-capital losses is recorded where it is more likely than not that the non-capital losses will expire prior to utilization.

At December 31, 2009, Onex and its investment-holding compa-

amount of $3,240, of which $920 had no expiry, $703 were available

nies had $299 of non-capital loss carryforwards and $283 of capi-

to reduce future income taxes between 2010 and 2014, inclusive, and

tal loss carryforwards.

$1,617 were available with expiration dates of 2015 through 2029.

At December 31, 2009, certain operating companies in

Cash taxes paid during the year amounted to $268

Canada and the United States had non-capital loss carryforwards

(2008 – $313).

available to reduce future income taxes of those companies in the

100 Onex Corporation December 31, 2009

15 . S H A R E C A P I TA L

a) The authorized share capital of the Company consists of:

i) 100,000 Multiple Voting Shares, which entitle their holders to

elect 60% of the Company’s Directors and carry such number of

votes in the aggregate as represents 60% of the aggregate votes

attached to all shares of the Company carrying voting rights. The

Multiple Voting Shares have no entitlement to a distribution on

winding up or dissolution other than the payment of their nomi-

nal paid-up value.

ii) An unlimited number of Subordinate Voting Shares, which

carry one vote per share and as a class are entitled to 40% of the

aggregate votes attached to all shares of the Company carrying

voting rights; to elect 40% of the Directors; and to appoint the

auditors. These shares are entitled, subject to the prior rights of

other classes, to distributions of the residual assets on winding up

and to any declared but unpaid cash dividends. The shares are

entitled to receive cash dividends, dividends in kind and stock

dividends as and when declared by the Board of Directors.

The Multiple Voting Shares and Subordinate Voting

Shares are subject to provisions whereby, if an event of change

occurs (such as Mr. Schwartz, Chairman and CEO, ceasing to

hold, directly or indirectly, more than 5,000,000 Subordinate

Voting Shares or related events), the Multiple Voting Shares will

thereupon be entitled to elect only 20% of the Directors and

other wise will cease to have any general voting rights. The Sub or -

dinate Voting Shares would then carry 100% of the general voting

rights and be entitled to elect 80% of the Directors.

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

iii) An unlimited number of Senior and Junior Preferred Shares

issuable in series. The Directors are empowered to ﬁx the rights to

be attached to each series. There is no consolidated paid-in value

for these shares.

b) During 2009, under the Dividend Reinvestment Plan, the Com -
pany issued 3,060 (2008 – 6,279) Subordinate Voting Shares at a

total value of less than $1 (2008 – less than $1). In 2009 and 2008,

no Subordinate Voting Shares were issued upon the exercise of

stock options.

Onex renewed its Normal Course Issuer Bid in April

2009 for one year, permitting the Company to purchase on the

Toronto Stock Exchange up to 10% of the public ﬂoat of its Sub -

ordinate Voting Shares. The 10% limit represents approximately

9.3 million shares.

The Company repurchased and cancelled under Normal

Course Issuer Bids 1,784,600 (2008 – 3,481,381) of its Subordinate

Voting Shares at a cash cost of $41 during 2009 (2008 – $101).

The excess of the purchase cost of these shares over the average

paid-in amount was $34 (2008 – $87), which was charged to

retained earnings. As at December 31, 2009, the Company had the

capacity under the current Normal Course Issuer Bid to purchase

approximately 7.5 million shares.

c) At December 31, 2009, the issued and outstanding share capital
consisted of 100,000 (2008 – 100,000) Multiple Voting Shares,

120,317,445 (2008 – 122,098,985) Subordinate Voting Shares and

176,078 (2008 – 176,078) Series 1 Senior Preferred Shares. The

Series 1 Senior Preferred Shares have no paid-in amount reﬂected

in these consolidated ﬁnancial statements and the Multiple

Voting Shares have nominal paid-in value.

d) The Company has a Director Deferred Share Unit Plan (“Director
DSU Plan”) and a Management Deferred Share Unit Plan (“Man -

age ment DSU Plan”), as described in note 1.

Details of DSUs outstanding under the plans are as follows:

Outstanding at December 31, 2007

Granted

Additional units issued in lieu of compensation

and cash dividends

Outstanding at December 31, 2008

Granted

Additional units issued in lieu of compensation

and cash dividends

Outstanding at December 31, 2009

Director DSU Plan

Management DSU Plan

Number of DSUs

Weighted Average Price

Number of DSUs

Weighted Average Price

225,914

45,000

26,443

297,357

40,000

31,662

369,019

$ 32.54

$ 24.30

$ 22.98

$ 20.01

–

202,902

–

69,978

272,880

$ –

$ 30.96

$ –

$ 18.62

Onex Corporation December 31, 2009 101

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

15 . S H A R E C A P I TA L ( c o n t ’d )

e) The Company has a Stock Option Plan (the “Plan”) under which
options and/or share appreciation rights for a term not exceeding

its exercise price. Upon receipt of such a request, the Company has

the right to settle its obligation to the employee by the payment of

cash, the issuance of shares or a combination of cash and shares.

10 years may be granted to Directors, ofﬁcers and employees for

Details of options outstanding are as follows:

the acquisition of Subordinate Voting Shares of the Company at a

price not less than the market value of the shares on the business

day preceding the day of the grant. Under the Plan, no options or

Number
of Options

Weighted
Average
Exercise Price

share appreciation rights may be exercised unless the average

Outstanding at December 31, 2007

12,777,500

market price of the Subordinate Voting Shares for the ﬁve prior

business days exceeds the exercise price of the options or the share

appreciation rights by at least 25% (the “hurdle price”). At Decem -

Granted

Surrendered

Expired

702,500

(538,550)

(10,000)

ber 31, 2009, 15,612,000 (2008 – 15,612,000) Subordinate Voting

Outstanding at December 31, 2008

12,931,450

Shares were reserved for issuance under the Plan, against which

options representing 13,450,050 (2008 – 12,931,450) shares were

outstanding. The Plan provides that the number of options issued

Granted

Surrendered

Expired

727,500

(197,900)

(11,000)

$ 18.07

$ 15.95

$ 14.97

$ 34.00

$ 18.07

$ 23.35

$ 20.20

$ 20.76

to certain individuals in aggregate may not exceed 10% of the

Outstanding at December 31, 2009

13,450,050

$ 18.33

shares outstanding at the time the options are issued.

Options granted vest at a rate of 20% per year from the

During 2009, total cash consideration paid on options surren-

date of grant, with the exception of the 774,500 remaining options

dered was $1 (2008 – $9). This amount represents the difference

granted in December 2007, which vest at a rate of 16.7% per year.

between the market value of the Subordinate Voting Shares at the

When an option is exercised, the employee has the right to request

time of surrender and the exercise price, both as determined

that the Company repurchase the option for an amount equal to the

under the Plan.

difference between the fair value of the stock under the option and

Options outstanding at December 31, 2009 consisted of the following:

Number of
Outstanding Options

Exercise Price

Number of
Exercisable Options

Hurdle Price

Remaining Life
(years)

607,500

505,000

7,260,000

2,433,550

135,000

285,000

20,000

774,500

702,000

727,500

13,450,050

$ 20.50

$ 14.90

$ 15.87

$ 18.18

$ 19.25

$ 29.22

$ 33.40

$ 35.20

$ 15.95

$ 23.35

–

505,000

7,260,000

2,433,550

–

140,400

–

10,338,950

$ 25.63

$ 18.63

$ 19.84

$ 22.73

$ 24.07

$ 36.53

$ 41.75

$ 44.00

$ 19.94

$ 29.19

2.5

3.1

4.2

4.9

6.1

6.9

7.3

7.9

8.9

9.9

102 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

16 . I N T E R E S T E X P E N S E O F O P E R AT I N G C O M PA N I E S

18 . S T O C K - B A S E D C O M P E N S AT I O N

E X P E N S E ( R E C O V E R Y )

Year ended December 31

2009

2008

Year ended December 31

2009

2008

Interest on long-term debt

of operating companies

Interest on obligations under capital

leases of operating companies

Other interest of operating companies

483

513

Parent company(a)

Celestica

Spirit AeroSystems

Other

Interest expense of operating companies

495

550

(196)

161

(142)

Cash interest paid during the year amounted to $505 (2008 – $514).

a) Parent company includes an expense of $61 (2008 – recovery of
$176) relating to Onex’ stock option plan, as described in note 15(e),

17. E A R N I N G S ( L O S S ) F R O M E Q U I T Y - A C C O U N T E D

primarily due to the increase (2008 – decrease) in the market price

I N V E S T M E N T S

of Onex shares during the year.

Year ended December 31

2009

Hawker Beechcraft(a)
Allison Transmission(b)
Onex Real Estate(c)

Other

$ (237)

(181)

(97)

2008

(80)

(198)

(68)

$ (497)

(322)

a) During the third quarter of 2009, Hawker Beechcraft completed
a review of the value of its business and general aviation segment

in light of the current decline in demand for new business aircraft.

As a result of this review, Hawker Beechcraft recorded impairment

19. G A I N S O N D I S P O S I T I O N S O F O P E R AT I N G

I N V E S T M E N T S

Year ended December 31

2009

2008

Gain on sale of Cineplex Entertainment(a)
Gain on disposition of CEI(b)
Gain on partial sales of EMSC(c)
Gain on partial sale of Celestica(d)

Other

160

595

783

–

charges of US$521, which included an impairment of US$340 for

a) Cineplex Entertainment

the full amount of goodwill associated with this segment. In addi-

In March 2009, Onex entered into an agreement to sell all of its

tion, Hawker Beechcraft concluded that additional charges of

remaining units of Cineplex Galaxy Income Fund to a syndicate of

US$205 were necessary to reduce the carrying value of other

underwriters at a gross price of $14.25 per unit. The transaction

assets in this segment as well as to increase reserves for losses on

closed in April 2009 and Onex received net proceeds of approxi-

certain aircraft programs and potential supplier claims.

mately $175. As a result of this transaction, Onex recorded a pre-

Primarily as a result of these impairments and other

tax gain of $160 in the second quarter of 2009.

non-cash charges, the Company recorded a loss from equity-

accounted investments of $237 relating to its 49% interest in

b) CEI

Hawker Beechcraft, of which Onex’ share was $95.

At December 31, 2008, CEI was not in compliance with its debt

covenants. During the ﬁrst quarter of 2009, CEI was in discussions

b) A signiﬁcant portion of the 2009 loss from Allison Transmission is
due to a US$190 impairment of certain intangible assets. In addi-

with its lenders to achieve a restructuring of its debt. A mutually

agreeable restructuring and investment transaction was not

tion, Allison Transmission wrote down certain long-term receivables

achieved. Therefore, in May 2009 Onex contributed its debt secu-

and established reserves for other matters that the company had

rities in CEI’s parent to CEI’s parent company and transferred its

with General Motors Corporation (“GM”) as a result of the GM

shares to an entity controlled by CEI’s lenders, who agreed to pro-

bankruptcy. The net charge from the GM items was US$37.

vide additional liquidity to CEI. At that time, Onex and Onex

Primarily as a result of the impairment and GM charges,

Partners I ceased to have an equity ownership in the business.

the Company recorded a loss from equity-accounted investments

Onex’ and Onex Partners I’s original December 2004 investment

of $181 relating to its 49% interest in Allison Transmission, of

in CEI was $138, of which Onex’ portion was $32. As a result of

which Onex’ share was $58.

c) Onex Real Estate’s 2009 loss was primarily from provisions
established against the carrying value of a number of Onex Real

Estate investments as a result of the current economic conditions.

previously recorded losses, Onex’ investment had a negative car-

rying value of $20 at March 31, 2009. Therefore, Onex recorded a

non-cash accounting gain of $20 upon disposition in the second

quarter of 2009.

Onex Corporation December 31, 2009 103

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

19. G A I N S O N D I S P O S I T I O N S O F O P E R AT I N G

d) Celestica

I N V E S T M E N T S ( c o n t ’d )

c) EMSC

In the third quarter of 2009, under a secondary public offering of

EMSC, Onex, Onex Partners I and certain limited partners of Onex

Part ners I sold 9.2 million shares of EMSC, of which Onex’ portion

was approximately 3.5 million shares. The offering was completed

at a price of US$40.00 per share, before underwriter commissions

of US$1.90 per share. Onex’ cash cost for these shares was US$6.67

per share.

Total net cash proceeds received from the sale were $381,

resulting in a pre-tax gain of $275. Onex’ share of the net proceeds

In October 2009, Onex sold 11.0 million Subordinate Voting Shares

of Celestica, which included shares held under the MIP, to a syn -

dicate of underwriters at a gross price of $10.30 per share. Onex

received net proceeds of $104 from the transaction and Onex

recorded a pre-tax gain of $6 in the fourth quarter of 2009.

As a result of this transaction, Onex’ economic ownership

in Celestica was reduced to 8% and Onex’ voting interest was re -

duced to 69%. Onex continues to control and consolidate Celestica.

2 0 . A C Q U I S I T I O N , R E S T R U C T U R I N G A N D

O T H E R E X P E N S E S

and pre-tax gain was $148 and $90, respectively.

Year ended December 31

2009

2008

Amounts received on account of the carried interest

relating to the third-quarter transaction totalled $12. Consistent

Celestica

Carestream Health

with market practice and the terms of Onex Partners, Onex is allo-

Husky

cated 40% of the carried interest with 60% allocated to manage-

Sitel Worldwide

ment. Onex’ share of the carried interest received was $5 and is

Other

219

220

Acquisition, restructuring and other expenses are typically to pro-

vide for the costs of facility consolidations, workforce reductions

and transition costs incurred at the operating companies.

The operating companies record restructuring charges

relating to employee terminations, contractual lease obligations

and other exit costs when the liability is incurred. The recognition

of these charges requires management to make certain judge-

ments regarding the nature, timing and amounts associated with

the planned restructuring activities, including estimating sublease

income and the net recovery from equipment to be disposed of.

At the end of each reporting period, the operating companies

evaluate the appropriateness of the remaining accrued balances.

included in the net proceeds and the gain. Management’s share of

the carried interest was $7. As a result of the proceeds to the third-

party limited partners of Onex Partners I on this disposition, the

May 2009 loss on CEI will not give rise to any clawback of prior

carried interest distributions.

In the fourth quarter of 2009, under a secondary public

offering of EMSC, Onex, Onex Partners I and certain limited part-

ners of Onex Partners I sold 9.2 million shares of EMSC, of which

Onex’ portion was approximately 3.5 million shares. The offering

was completed at a price of US$48.31 per share, before underwriter

commissions of US$2.17 per share. Onex’ cash cost for these shares

was US$6.67 per share.

Total net cash proceeds received from the sale were $446,

resulting in a pre-tax gain of $320. Onex’ share of the net proceeds

and pre-tax gain was $183 and $104, respectively.

Amounts received on account of the carried interest re -

lating to the fourth-quarter transaction totalled $38. Consistent with

market practice and the terms of Onex Partners, Onex is allocated

40% of the carried interest with 60% allocated to management.

Onex’ share of the carried interest received was $15 and is included

in the net proceeds and the gain. Management’s share of the carried

interest was $23.

As a result of these transactions, Onex’ economic owner-

ship in EMSC was reduced to 12% and Onex’ voting interest was

reduced to 82%. Onex continues to control and consolidate EMSC.

104 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The tables below provide a summary of acquisition, restructuring and other activities undertaken by the operating companies, detailing

the components of the charges and movement in accrued liabilities. This summary is presented by the year in which the restructuring

Non-cash
Charges

424

412

Non-cash
Charges

–

Total

$ 1,505(a)
$ 1,446(b)

(96)

(8)

Total

120(a)
96(b)

(96)

(8)

activities were initiated.

Years Prior to 2008

Employee
Termination
Costs

Lease and Other
Contractual
Obligations

Facility Exit Costs
and Other

Total estimated expected costs

Cumulative costs expensed to date

Expense for the year ended

December 31, 2009

Reconciliation of accrued liability

Closing balance – December 31, 2008

Cash payments

Charges

Other adjustments

822

788

(75)

(3)

201

192

(17)

(5)

Closing balance – December 31, 2009

(a)

(b)

Includes Celestica $1,479.

Includes Celestica $1,435.

(4)

–

Initiated in 2008

Employee
Termination
Costs

Lease and Other
Contractual
Obligations

Facility Exit Costs
and Other

Total estimated expected costs

Cumulative costs expensed to date

Expense for the year ended

December 31, 2009

Reconciliation of accrued liability

Closing balance – December 31, 2008

Cash payments

Charges

Other adjustments

(33)

(8)

Closing balance – December 31, 2009

(a)

(b)

Includes Husky $73 and Carestream Health $31.

Includes Husky $53 and Carestream Health $31.

(7)

(56)

(1)

Employee
Termination
Costs

Lease and Other
Contractual
Obligations

Facility Exit Costs
and Other

Initiated in 2009

Total estimated expected costs

Cumulative costs expensed to date

Expense for the year ended

December 31, 2009

Reconciliation of accrued liability

Cash payments

Charges

Other adjustments

(19)

(1)

Closing balance – December 31, 2009

(a)

(b)

Includes Carestream Health $14 and Sitel Worldwide $26.

Includes Carestream Health $13 and Sitel Worldwide $24.

(1)

–

(15)

–

Non-cash
Charges

Total

62(a)
59(b)

(35)

(1)

Onex Corporation December 31, 2009 105

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 0 . A C Q U I S I T I O N , R E S T R U C T U R I N G A N D O T H E R E X P E N S E S ( c o n t ’d )

Total

Total estimated expected costs

Cumulative costs expensed to date

Expense for the year ended

December 31, 2009

Reconciliation of accrued liability:

Employee
Termination
Costs

888

843

133

Closing balance – December 31, 2008

Cash payments

Charges

Other adjustments

(127)

133

(12)

Lease and Other
Contractual
Obligations

Facility Exit Costs
and Other

215

206

(25)

(4)

159

139

(75)

(1)

Closing balance – December 31, 2009

Non-cash
Charges

425

413

Total

$ 1,687

$ 1,601

219

123

(227)

214

(17)

21. W R I T E D O W N O F G O O D W I L L , I N TA N G I B L E

A S S E T S A N D L O N G - L I V E D A S S E T S

Year ended December 31

Celestica(a)
Skilled Healthcare(b)
Sitel Worldwide(c)
Tube City IMS(d)
CiCi’s Pizza(e)
CEI(f)
Carestream Health(g)
Other(h)

2009

180

–

2008

$ 1,061

–

129

–

206

142

370

$ 1,584

a) In the fourth quarter of 2008, as a result of its annual goodwill
impairment test, Celestica recorded a non-cash charge relating to

goodwill associated with its Asia reporting unit. The impairment

was driven by a combination of factors including Celestica’s

declining market capitalization in 2008 as well as the signiﬁcant

end-market deterioration and the impact of economic uncertain-

ties on expected future demand. At December 31, 2008, the

remaining goodwill balance at Celestica was nil.

The goodwill impairment charge was non-cash in

nature and did not affect Celestica’s liquidity, cash ﬂows from

operating activities, or its compliance with debt covenants.

b) Due to a reduction in the expected future growth rates for Medi -
care and Medicaid and their effect on expected future cash ﬂows,

Skilled Health care recorded a non-cash goodwill impairment

charge of $180 in the fourth quarter of 2009.

106 Onex Corporation December 31, 2009

c) Sitel Worldwide’s 2009 writedowns consist primarily of a sec-
ond quarter non-cash goodwill impairment charge of $52, which

was a result of the loss of certain business contracts in its Euro -

pean region.

In the fourth quarter of 2008, as a result of its annual

goodwill and intangible asset impairment test, Sitel Worldwide

recorded non-cash impairment charges of goodwill and intangi-

ble assets primarily related to the purchase of SITEL Corporation

in January 2007. The impairment was due to the shift in customers

from Europe to other regions.

d) In the second quarter of 2009, Tube City IMS revised its long-
term outlook to reﬂect changes in expectations for certain cus-

tomers and contracts. As a result, Tube City IMS performed a

goodwill impairment test that resulted in a non-cash goodwill

impairment charge of $62.

e) In the fourth quarter of 2009, as a result of its annual intangible
asset impairment test, CiCi’s Pizza recorded non-cash impair-

ment charges. The impairment was caused primarily by an in -

crease in the discount rate used due to market risks associated

with the current economic environment.

f) In the fourth quarter of 2008, as a result of its annual goodwill
impairment test, CEI recorded a non-cash charge relating to

goodwill. The impairment was driven by a combination of factors

including signiﬁcant end-market deterioration and the impact of

economic uncertainties on expected future demand.

g) In the fourth quarter of 2008, as a result of its annual goodwill
and intangible asset impairment test, Carestream Health recorded

non-cash impairment charges on goodwill and intangible assets

relating to its Carestream Molecular Imaging business unit.

h) Other primarily consists of impairments of long-lived assets.

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 2 . N E T E A R N I N G S P E R S U B O R D I N AT E V O T I N G S H A R E

The weighted average number of Subordinate Voting Shares for the purpose of the earnings per share calculations is as follows:

Year ended December 31

Weighted average number of shares (in millions):

Basic

Diluted

2009

122

2008

123

2 3 . S I G N I F I C A N T C U S T O M E R S O F O P E R AT I N G C O M PA N I E S A N D C O N C E N T R AT I O N O F C R E D I T R I S K

A number of operating companies, by the nature of their businesses, individually serve major customers that account for a large portion of

their revenues. For each of these operating companies, the table below shows the number of signiﬁcant customers and the percentage

of revenues they represent.

Year ended December 31

CDI

Celestica

EMSC

Skilled Healthcare

Spirit AeroSystems

Tube City IMS

The Warranty Group

2009

Number of
Significant
Customers

Percentage
of Revenues

12%

17%

23%

67%

96%

25%

10%

2008

Number of
Significant
Customers

–

Percentage
of Revenues

11%

–

23%

68%

97%

39%

–

Accounts receivable from the above signiﬁcant customers at December 31, 2009 totalled $587 (2008 – $762).

Onex Corporation December 31, 2009 107

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 4 . C O M M I T M E N T S , C O N T I N G E N C I E S A N D

The Company and its operating companies also have

R E L AT E D PA R T Y T R A N S A C T I O N S

insurance to cover costs incurred for certain environmental mat-

ters. Although the effect on operating results and liquidity, if any,

cannot be reasonably estimated, management of Onex and the

operating companies believe, based on current information, that

these environmental matters should not have a material adverse

effect on the Company’s consolidated ﬁnancial condition.

d) In February 2004, Onex completed the closing of Onex Partners I
with funding commitments totalling approximately US$1,655.

Onex Partners I provided committed capital for Onex-sponsored

acquisitions not related to Onex’ operating companies at Decem -

ber 31, 2003 or to ONCAP. As at December 31, 2009, US$1,477 (2008 –

US$1,477) has been invested of the total approximately US$1,655

of capital committed. Onex has funded US$347 (2008 – US$347) of

its US$400 commitment. Onex controls the General Partner and

Manager of Onex Partners I. The total amount invested in Onex

Partners I’s remaining investments by Onex management and

directors at December 31, 2009 was US$33 (2008 – US$41).

Prior to November 2006, Onex received annual manage-

ment fees based on 2% of the capital committed to Onex Part ners I

by investors other than Onex and Onex management. The annual

management fee was reduced to 1% of the net funded commitments

at the end of the initial fee period in November 2006, when Onex

established a successor fund, Onex Partners II. A carried interest is

received on the overall gains achieved by Onex Partners I investors,

other than Onex and Onex management, to the extent of 20% of the

gains, provided that those investors have achieved a mini mum 8%

return on their investment in Onex Partners I over the life of Onex

Partners I. The investment by Onex Partners I investors for this pur-

pose takes into consideration management fees and other amounts

paid by Onex Partners I investors.

The returns to Onex Partners I investors, other than

Onex and Onex management, are based on all investments made

through Onex Partners I, with the result that the initial carried

interests achieved by Onex on gains could be recovered from

Onex if subsequent Onex Partners I investments do not exceed the

overall target return level of 8%. Consistent with market practice,

Onex, as sponsor of Onex Partners I, is allocated 40% of the car-

ried interest with 60% allocated to management. Onex defers all

gains associated with the carried interest until such time as the

potential for repayment of amounts received is remote. For the

year ended December 31, 2009, $20 (2008 – nil) has been received

by Onex as carried interest and recognized as income while man-

agement received $30 (2008 – nil) with respect to the carried inter-

est. At December 31, 2009, the total amount of carried interest that

has been deferred from income was $58 (2008 – $58).

a) Contingent liabilities in the form of letters of credit, letters of
guarantee and surety and performance bonds are primarily pro-

vided by certain operating companies to various third parties

and include certain bank guarantees. At December 31, 2009, the

amounts potentially payable in respect of these guarantees to -

talled $467.

The Company, which includes the operating companies,

has commitments in the total amount of approximately $60 with

respect to corporate investments. A signiﬁcant portion of this

amount is funded by third-party limited partners of the Onex funds.

The Company, which includes the operating companies,

has also provided certain indemniﬁcations, including those related

to businesses that have been sold. The maximum amounts from

many of these indemniﬁcations cannot be reasonably estimated at

this time. However, in certain circumstances, the Company and its

operating companies have recourse against other parties to miti-

gate the risk of loss from these indemniﬁcations.

The Company, which includes the operating companies,

has commitments with respect to real estate operating leases,

which are disclosed in note 11.

The aggregate commitments for capital assets at De cem-

ber 31, 2009 amounted to $383.

b) Onex and its operating companies are or may become parties
to legal claims, product liability and warranty claims arising from

the ordinary course of business. Certain operating companies, as

conditions of acquisition agreements, have agreed to accept cer-

tain pre-acquisition liability claims against the acquired compa-

nies. The operating companies have recorded liability provisions

based on their consideration and analysis of their exposure in

respect of such claims. Such provisions are reﬂected, as appropri-

ate, in Onex’ consolidated ﬁnancial statements. Onex, the parent

company, has not currently recorded any further liability provi-

sion and does not believe that the resolution of known claims

would reasonably be expected to have a material adverse impact

on Onex’ consolidated ﬁnancial position. However, the ﬁnal out-

come with respect to outstanding, pending or future actions

cannot be predicted with certainty, and therefore there can be no

assurance that their resolution will not have an adverse effect on

Onex’ consolidated ﬁnancial position.

c) The operating companies are subject to laws and regulations
concerning the environment and to the risk of environmental

liability inherent in activities relating to their past and present

operations. As conditions of acquisition agreements, certain oper-

ating companies have agreed to accept certain pre-acquisition

liability claims on the acquired companies after obtaining indem-

niﬁcation from prior owners.

108 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

e) In August 2006, Onex completed the closing of Onex Partners II
with funding commitments totalling approximately US$3,450.

June 30, 2009. On December 31, 2008, Onex gave notice to the

investors of Onex Partners III that Onex’ commitment would be

Onex Partners II provides committed capital for Onex-sponsored

decreasing to US$500 effective July 1, 2009. In December 2009,

acquisitions not related to Onex’ operating companies at Decem -

Onex notiﬁed the investors of Onex Partners III that it would be

ber 31, 2003 or to ONCAP or Onex Partners I. As at December 31,

increasing its commitment to US$800 effective June 16, 2010. This

2009, US$2,903 (2008 – US$2,903) has been invested of the total

commitment may be increased up to approximately US$1,500 at

approximately US$3,450 of capital committed. Onex has funded

the option of Onex but may not be decreased. Onex controls the

US$1,148 (2008 – US$1,148) of its US$1,407 commitment. Onex

Gen eral Partner and Manager of Onex Partners III. Onex manage-

controls the General Partner and Manager of Onex Partners II.

ment has com mitted, as a group, to invest a minimum of 1% of

Onex management has committed, as a group, to invest a mini-

Onex Partners III, which may be adjusted annually up to a maxi-

mum of 1% of Onex Partners II, which may be adjusted annually

mum of 6%. At Decem ber 31, 2009, management and directors had

up to a maximum of 4%. As at December 31, 2009, management

committed 3% (2008 – 3%). The total amount invested in Onex

and directors had committed approximately 3% (2008 – 4%). The

Partners III’s investments by Onex management and directors at

total amount invested in Onex Partners II’s investments by Onex

December 31, 2009 was US$5.

management and directors at December 31, 2009 was US$115, of

Onex receives annual management fees based on 1.75%

which nil (2008 – US$14) was invested in the year ended Decem-

of the capital committed to Onex Partners III by investors other

ber 31, 2009.

than Onex and Onex management. The annual management fee

Onex received annual management fees based on 2% of

is reduced to 1% of the net funded commitments at the earlier of

the capital committed to Onex Partners II by investors other than

the end of the commitment period, when the funds are fully

Onex and Onex management. The annual management fee was

invested, or if Onex establishes a successor fund. A carried inter-

reduced to 1% of the net funded commitments at the end of the

est is received on the overall gains achieved by Onex Partners III

initial fee period in November 2008, when Onex established a suc-

investors, other than Onex and Onex management, to the extent

cessor fund, Onex Partners III. A carried interest is received on the

of 20% of the gains, provided that those investors have achieved a

overall gains achieved by Onex Partners II investors, other than

minimum 8% return on their investment in Onex Partners III over

Onex and Onex management, to the extent of 20% of the gains,

the life of Onex Partners III. The investment by Onex Partners III

provided that those investors have achieved a minimum 8%

investors for this purpose takes into consideration management

return on their investment in Onex Partners II over the life of

fees and other amounts paid by Onex Partners III investors.

Onex Partners II. The investment by Onex Partners II investors for

The returns to Onex Partners III investors, other than

this purpose takes into consideration management fees and other

Onex and Onex management, are based on all investments made

amounts paid by Onex Partners II investors.

through Onex Partners III, with the result that the initial carried

The returns to Onex Partners II investors, other than

interests achieved by Onex on gains could be recovered from Onex if

Onex and Onex management, are based on all investments made

subsequent Onex Partners III investments do not exceed the overall

through Onex Partners II, with the result that the initial carried

target return level of 8%. Consistent with market practice and Onex

interests achieved by Onex on gains could be recovered from

Partners I and Onex Partners II, Onex, as sponsor of Onex Part-

Onex if subsequent Onex Partners II investments do not exceed

ners III, will be allocated 40% of the carried interest with 60%

the overall target return level of 8%. Consistent with market prac-

allocated to management. Onex defers all gains associated with the

tice and Onex Partners I, Onex, as sponsor of Onex Partners II, will

carried interest until such time as the potential for repayment of

be allocated 40% of the carried interest with 60% allocated to

amounts received is remote. As at December 31, 2009, no amount

management. Onex defers all gains associated with the carried

has been received as carried interest related to Onex Partners III.

interest until such time as the potential for repayment of amounts

received is remote. As at December 31, 2009, no amount has been

received as carried interest related to Onex Partners II.

g) Under the terms of the MIP, management members of the
Company invest in all of the operating entities acquired by

the Company.

f) In December 2009, Onex completed the closing of Onex
Partners III with funding commitments totalling approximately

US$4,300. Onex Partners III provides committed capital for

Onex-sponsored acquisitions not related to Onex’ operating com-

panies at Decem ber 31, 2003 or to ONCAP, Onex Partners I or Onex

Partners II. As at December 31, 2009, approximately US$195 (2008 –

The aggregate investment by management members

under the MIP is limited to 9% of Onex’ interest in each acquisi-
tion. The form of the investment is a cash purchase for 1⁄6th (1.5%)
of the MIP’s share of the aggregate investment, and investment
rights for the remaining 5⁄6ths (7.5%) of the MIP’s share at the
same price. Amounts invested under the minimum investment

nil) has been invested, of which Onex’ share was US$45. Onex had

requirement in Onex Partners transactions are allocated to meet

a US$1,000 commitment for the period from January 1, 2009 to

the 1.5% Onex investment requirement under the MIP. For invest-

Onex Corporation December 31, 2009 109

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 4 . C O M M I T M E N T S , C O N T I N G E N C I E S A N D

R E L AT E D PA R T Y T R A N S A C T I O N S ( c o n t ’d )

ments made prior to November 7, 2007, the investment rights to
acquire the remaining 5⁄6ths vest equally over four years with the
investment rights vesting in full if the Company disposes of 90%

or more of an investment before the ﬁfth year.

The MIP was amended in 2007. For investments made

subsequent to November 7, 2007, the vesting period for the invest-
ment rights to acquire the remaining 5⁄6ths increased from four to
six years, with the investment rights vesting in full if the Company

j) Certain operating companies have made loans to certain direc-
tors or ofﬁcers of the individual operating companies primarily

for the purpose of acquiring shares in those operating companies.

The total value of the loans outstanding as at December 31, 2009

was $13 (2008 – $16).

k) In connection with the 2007 purchase of Carestream Health
from Eastman Kodak Company (“Kodak”), if, upon the disposition

of Carestream Health, Onex and Onex Partners realize an internal

rate of return on its initial US$471 investment in excess of 25%,

Kodak is entitled to 25% of the excess return, up to US$200. At

disposes of all of an investment before the seventh year. Under

December 31, 2009, Onex and Onex Partners had received distri -

the MIP and amended MIP, the investment rights related to a par-

butions of US$142 from Carestream Health. No amount has been

ticular acquisition are exercisable only if the Company earns a

recorded for any potential payment to Kodak in the consolidated

minimum 15% per annum compound rate of return for that

ﬁnancial statements.

acquisition after giving effect to the investment rights.

Under the terms of the MIP, the total amount paid by

management members for the interest in the investments in 2009

l) In March 2009, Onex entered into a sale of an entity, whose sole
assets were certain tax losses, to a public company controlled by

was $1 (2008 – $2). Investment rights exercisable at the same price

Mr. Gerald W. Schwartz, who is also Onex’ controlling shareholder.

for 7.5% (2008 – 7.5%) of the Company’s interest in acquisitions

Onex received $3 in cash for tax losses of $23. The entire $3 was

were issued at the same time. Realizations under the MIP including

recorded as a gain and was included in other income in the consol-

the value of units distributed were $20 in 2009 (2008 – less than $1).

idated statement of earnings in the ﬁrst quarter of 2009. Onex has

h) Members of management and Directors of the Company
invested $8 in 2009 (2008 – $11) in Onex’ investments made out-

valuation allowances have been established against the beneﬁt

of all of these losses in the consolidated ﬁnancial statements.

side of Onex Partners at the same cost as Onex and other outside

As such, Onex does not expect to generate sufﬁcient taxable

investors. Those investments by management and Directors are

income to fully utilize these losses in the foreseeable future. In

signiﬁcant Canadian non-capital and capital losses available and

subject to voting control by Onex.

i) Each member of Onex management is required to reinvest 25% of
the proceeds received related to their share of the MIP and carried

connection with this transaction, Onex obtained a tax ruling from

the Canada Revenue Agency, and Deloitte & Touche LLP, an inde-

pendent accounting ﬁrm retained by Onex’ Audit and Corporate

Gover nance Committee, provided an opinion that the value

interest to acquire Onex shares in the market until the manage-

received by Onex for the tax losses was fair. Onex’ Audit and

ment member owns one million Onex Subordinate Voting Shares

Corporate Gov ernance Committee, all the members of which are

and/or management DSUs. During 2009, Onex management rein-

independent directors, unanimously approved the transaction.

vested $2 (2008 – $2) to acquire Onex shares.

110 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 5 . P E N S I O N A N D N O N - P E N S I O N P O S T - R E T I R E M E N T B E N E F I T S

The operating companies have a number of deﬁned beneﬁt and deﬁned contribution plans providing pension, other retirement and post-

employment beneﬁts to certain of their employees. The non-pension post-retirement beneﬁts include retirement and termination beneﬁts,

health, dental and group life. Onex, the parent company, does not provide pension, other retirement or post-employment beneﬁts to its

employees or to those of any of the operating companies.

The total costs during 2009 for deﬁned contribution pension plans were $142 (2008 – $142).

Accrued beneﬁt obligations and the fair value of the plan assets for accounting purposes are measured at December 31 of each

year. The most recent actuarial valuations of the largest pension plans for funding purposes were December 2008 to December 2009, and

the next required valuations will be during 2010.

In 2009, total cash payments for employee future beneﬁts, consisting of cash contributed by the operating companies to their

funded pension plans, cash payments directly to beneﬁciaries for their unfunded other beneﬁt plans and cash contributed to their

deﬁned contribution plans, were $183 (2008 – $177). Included in the total was $31 (2008 – $32) contributed to multi-employer plans.

For the deﬁned beneﬁt pension plans and non-pension post-retirement plans, the estimated present value of accrued beneﬁt

obligations and the estimated market value of the net assets available to provide these beneﬁts were as follows:

As at December 31

Accrued benefit obligations:

Opening benefit obligations

Current service cost

Interest cost

Contributions by plan participants

Benefits paid

Actuarial (gain) loss in year

Foreign currency exchange rate changes

Acquisitions

Plan amendments

Settlements/curtailments

Reclassification of plans

Other

Closing benefit obligations

Plan assets:

Opening plan assets

Actual return on plan assets

Contributions by employer

Contributions by plan participants

Benefits paid

Foreign currency exchange rate changes

Acquisitions

Settlements/curtailments

Reclassification of plans

Other

Pension Plans in
which Assets Exceed
Accumulated Benefits

Pension Plans in
which Accumulated
Benefits Exceed Assets

Non-Pension
Post-Retirement
Benefits

2009

2008

2009

2008

2009

2008

$ 919

789

$ 400

$ 390

$ 151

$ 128

–

(16)

(5)

(108)

–

(2)

–

(14)

–

139

–

(50)

(15)

(30)

(12)

(3)

(19)

(50)

(8)

(6)

–

(4)

(13)

–

(1)

–

(4)

–

(1)

–

$ 845

919

$ 420

$ 400

$ 153

$ 151

$ 1,008

$ 1,129

$ 282

$ 279

178

–

(16)

(128)

–

(3)

(10)

–

(221)

–

(14)

173

–

(59)

(4)

(15)

(22)

(12)

(1)

(55)

(19)

(14)

(6)

(5)

–

(4)

–

(4)

–

Onex Corporation December 31, 2009 111

Closing plan assets

$ 1,036

$ 1,008

$ 322

$ 282

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 5 . P E N S I O N A N D N O N - P E N S I O N P O S T - R E T I R E M E N T B E N E F I T S ( c o n t ’d )

Asset category

Equity securities

Debt securities

Real estate

Other

Percentage of Plan Assets

2009

52%

42%

100%

2008

46%

47%

100%

Equity securities do not include direct investments in the shares of the Company or its subsidiaries but may be invested indirectly as a

result of the inclusion of the Company’s and its subsidiaries’ shares in certain market investment funds.

The funded status of the plans of the operating subsidiary companies, excluding discontinued operations, was as follows:

As at December 31

Deferred benefit amount:

Plan assets, at fair value

Accrued benefit obligation

Plan surplus (deficit):

Unrecognized transitional obligation and past service costs

Unrecognized actuarial net loss

Reclassification of plans

Pension Plans in
which Assets Exceed
Accumulated Benefits

Pension Plans in
which Accumulated
Benefits Exceed Assets

Non-Pension
Post-Retirement
Benefits

2009

2008

2009

2008

2009

2008

$ 1,036

$ 1,008

322

(845)

(919)

(420)

$ 282

(400)

–

(153)

–

(151)

$ 191

–

109

–

240

(98)

$ (118)

$ (153)

$ (151)

(4)

(47)

(6)

(41)

(8)

–

(9)

–

Deferred benefit amount – asset (liability)

$ 347

$ 370

(76)

$ (77)

$ (130)

$ (134)

The deferred beneﬁt asset is included in the Company’s consolidated balance sheets under “Other long-term assets” (note 8). The deferred

beneﬁt liabilities are included in the Company’s consolidated balance sheets under “Other liabilities” (note 13).

The net expense for the plans is outlined below:

Year ended December 31

Net periodic costs:

Current service cost

Interest cost

Actual return on plan assets

Difference between expected return and actual return

on plan assets for period

Actuarial (gain) loss

Difference between actuarial (gain) loss recognized for period

and actual actuarial (gain) loss on the accrued benefit

obligation for period

Plan amendments (curtailment/settlement (gain) loss)

Difference between amortization of past service costs for period

and actual plan amendments for period

Pension Plans in
which Assets Exceed
Accumulated Benefits

Pension Plans in
which Accumulated
Benefits Exceed Assets

Non-Pension
Post-Retirement
Benefits

2009

2008

2009

2008

2009

2008

(178)

221

106

(6)

(307)

–

(11)

–

(42)

(30)

(1)

(75)

(48)

–

(7)

–

(1)

–

(1)

–

(1)

Net periodic costs (income)

(7)

(39)

112 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The following assumptions were used to account for the plans:

Year ended December 31

Accrued benefit obligation:

Weighted average discount rate

Weighted average rate of

compensation increase

Benefit cost:

Weighted average discount rate

Weighted average expected long-term

Pension Benefits

Non-Pension
Post-Retirement Benefits

2009

2008

2009

2008

4.56%–7.00%

4.10%–7.50%

4.00%–6.40%

5.50%–6.46%

0.00%–4.33%

0.00%–4.80%

0.00%–4.69%

0.00%–4.68%

5.32%–7.50%

4.10%–6.60%

4.00%–7.50%

5.60%–7.50%

rate of return on plan assets

4.29%–8.00%

5.00%–8.50%

n/a

Weighted average rate of

compensation increase

Assumed healthcare cost trend rates

Initial healthcare cost trend rate

Cost trend rate declines to

Year that the rate reaches the level it is assumed to remain at

0.00%–4.80%

0.00%–4.68%

0.00%–5.30%

2009

2008

3.50%–14.00%

3.50%–5.00%

3.50%–15.00%

3.50%–5.00%

Between 2010 and 2030

Between 2009 and 2019

Assumed healthcare cost trend rates have a signiﬁcant effect on the amounts reported for post-retirement medical beneﬁt plans. A 1% change

in the assumed healthcare cost trend rate would have the following effects:

Year ended December 31

Effect on total of service and interest cost components

Effect on the post-retirement benefit obligation

2009

1% Increase

2008

2009

(2)

$ (17)

1% Decrease

2008

(2)

$ (16)

Onex Corporation December 31, 2009 113

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 6 . F I N A N C I A L I N S T R U M E N T S A N D
FA I R VA L U E M E A S U R E M E N T S

Credit risk

Credit risk is the risk that the counterparty to a ﬁnancial instru-

ment will fail to perform its obligation and cause the Company to

incur a loss.

Substantially all of the cash, cash equivalents and mar-

ketable securities consist of investments in debt securities. In addi-

tion, the long-term investments of The Warranty Group and the

insurance collateral of EMSC, both included in the investments line

in the consolidated balance sheet, consist primar ily of investments

in debt securities. The investments in highly liquid debt instru-

ments are subject to credit risk. A description of the investments

Uncompensated care or doubtful account provisions

are related primarily to services provided to self-paying uninsured

patients and are estimated at the date of service based on histori-

cal write-off experience and other economic data.

The following table outlines EMSC’s accounts receivable

allowances, which have been deducted in arriving at EMSC’s net

receivables balance of $483 at December 31, 2009:

Allowance for
Uncompensated
Care

Allowance for
Contractual
Discounts

Balance at December 31, 2008

627

$ 1,078

Additions

Reductions

1,966

(1,992)

4,568

(4,594)

held by EMSC and The Warranty Group is included in note 7.

Balance at December 31, 2009

601

$ 1,052

At December 31, 2009, Onex, the parent company, held

$890 of cash and cash equivalents in short-term high-rated

Additions to the allowances consist primarily of provisions

money market instruments. In addition, Celestica had $986 of

against earnings and reductions to these accounts are primarily

cash and cash equivalents, comprised of cash (approximately

due to write-offs.

28%) and cash equivalents (approximately 72%). Celes tica’s cur-

rent portfolio consists of certiﬁcates of deposit and certain money

Liquidity risk

market funds that hold exclusively U.S. government securities.

Liquidity risk is the risk that Onex and its subsidiaries will have

The majority of Celestica’s and Onex’, the parent company’s, cash

insufﬁcient funds on hand to meet their respective obligations

and cash equivalents are held with ﬁnancial institutions, each of

as they come due. Accounts payable are primarily due within

which has a current Standard & Poor’s rating of A-1 or above.

90 days. The repayment schedules for long-term debt and capital

Accounts receivable are also subject to credit risk. At December 31,

and 11. Onex, the parent company, has no signiﬁcant debt and has

the aging of consolidated accounts receivable was as follows:

not guaranteed the debt of the operating companies.

leases of the operating companies have been disclosed in notes 10

Current

1–30 days past due

31–60 days past due

>60 days past due

2009

2008

Market risk

$ 2,700

$ 3,427

Market risk is the risk that the future cash ﬂows of a ﬁnancial

187

102

310

112

165

instrument will ﬂuctuate due to changes in market prices. The

Company is primarily exposed to ﬂuctuations in the foreign cur-

rency exchange rate between the Canadian and U.S. dollar and

$ 3,062

$ 4,014

ﬂuctuations in the LIBOR and U.S. prime interest rate.

At December 31, 2009, the provision for uncollectible accounts

Foreign currency exchange rates

totalled $1,726 (2008 – $1,791) and primarily relates to accounts

Onex’ operating companies operate autonomously as self-sus-

receivable at EMSC. Companies in the emergency healthcare

taining companies. In addition, the functional currency of sub-

industry maintain provisions for contractual discounts and for

stantially all of Onex’ operating companies is the U.S. dollar. As

uncompensated care or doubtful accounts. EMSC is contractually

investments in self-sustaining subsidiaries are excluded from the

required, in most circumstances, to provide care regardless of the

ﬁnancial instrument disclosure, the Company’s exposure on

patient’s ability to pay.

ﬁnancial instruments to the Canadian/U.S. dollar foreign currency

EMSC records gross revenue based on fee-for-service rate

exchange rate is primarily at the parent company through the

schedules that are generally negotiated with various contracting enti-

holding of U.S.-dollar-denominated cash and cash equivalents. A

ties, including municipalities and facilities. Fees are billed for all rev-

5% strengthening (5% weakening) of the Canadian dollar against

enue sources and to all payors under the gross fee schedules for that

the U.S. dollar at December 31, 2009 would result in a $33 de -

speciﬁc contract; however, reimbursement in the case of certain state

crease ($33 increase) in net earnings. As all of the U.S.-dollar-

and federal payors, including Medicare and Medicaid, will not change

denominated cash and cash equivalents at the parent company

as a result of the gross fee schedules. EMSC records the difference

are designated as held-for-trading, there would be no effect on

between gross fee schedule revenue and Medicare, Medicaid and

other comprehensive earnings.

other contracted payor reimbursement as a contractual provision.

114 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

In addition, two operating companies have signiﬁcant

effectively ﬁxed by interest rate swap contracts. The long-term debt

exposure to the U.S. dollar/Canadian dollar foreign currency

of the operating companies is without recourse to Onex.

exchange rate. A 5% strengthening (5% weakening) of the Cana -

In addition, The Warranty Group holds substantially all

dian dollar against the U.S. dollar at December 31, 2009 would

of its investments in interest-bearing securities, as described in

result in a US$10 increase (US$9 decrease) in other comprehen-

note 7. A 0.25% (25 basis point) increase in the interest rate would

sive earnings of Celestica. A 5% strengthening (5% weakening) of

decrease the fair value of the investments held by US$11 and re -

the Canadian dollar against the U.S. dollar at December 31, 2009

sult in a corresponding decrease to other comprehensive earnings

would result in a US$26 increase (US$26 decrease) in other com-

of The Warranty Group. However, as the investments are rein -

prehensive earnings of Husky.

Interest rates

vested, a 0.25% increase in the interest rate would increase the

annual interest income recorded by The Warranty Group by US$5.

The Company is exposed to changes in future cash ﬂows as a

Commodity risk

result of changes in the interest rate environment. The parent

Certain of Onex’ operating companies have exposure to commodi-

company is exposed to interest rate changes primarily through its

ties. In particular, aluminum, titanium and raw materials such as

cash and cash equivalents, which are held in short-term term

carbon ﬁbres used to manufacture composites are the principal

deposits and commercial paper. Assuming no signiﬁcant changes

raw materials for Spirit AeroSystems’ manufacturing operations. To

in cash balances held by the parent company from those at

limit its exposure to rising raw materials prices, Spirit Aero Systems

Decem ber 31, 2009, a 0.25% increase (0.25% decrease) in the inter-

has entered into long-term supply contracts directly with its key

est rate (including the Canadian and U.S. prime rates) would

suppliers of raw materials and collective raw materials sourcing

result in a $2 increase ($2 decrease) in annual interest income. As

contracts arranged through certain of its customers.

all of the U.S. dollar cash and cash equivalents at the parent com -

In addition, diesel fuel is a key commodity used in Tube

pany are designated as held-for-trading, there would be no effect

City IMS’ operations. To help mitigate the risk of changes in fuel

on other comprehensive earnings.

prices, substantially all of its contracts contain pricing escalators

The operating companies’ results are also affected by

based on published commodity or inﬂation price indices.

changes in interest rates. A change in the interest rate (including

Silver is a signiﬁcant commodity used in Carestream

LIBOR and the U.S. prime interest rate) would result in a change in

Health’s manufacture of x-ray ﬁlm. The company’s management

interest expense being recorded due to the variable-rate portion of

continually monitors movement and trends in the silver market

the long-term debt of the operating companies. At Decem ber 31,

and enters into forward agreements when considered appropriate

2009, approximately 66% (2008 – 70%) of the operating companies’

to mitigate some of the risk of future price ﬂuctu ations for periods

long-term debt had a ﬁxed interest rate or the interest rate was

generally of up to a year.

Financial instruments classification

Financial assets were classiﬁed as follows:

Held-for-trading(2)
Available-for-sale(3)
Held-to-maturity(4)

December 31, 2009

December 31, 2008

Carrying Value

Fair Value(1)

Carrying Value

Fair Value(1)

617

$ 2,017

617

$ 2,017

242

$ 2,008

242

$ 2,008

(1) The fair value of substantially all financial instruments is determined by using prices quoted in an active market.

(2) Amounts are included in marketable securities and investments in the consolidated balance sheet. At December 31, 2009 and 2008, these securities classified as

held-for-trading were optionally designated as such.

(3) Amounts are included in marketable securities, investments and other long-term assets in the consolidated balance sheet.

(4) Amounts are primarily included in investments in the consolidated balance sheet.

In addition to the above, at December 31, 2009, cash and cash equivalents of $3,206 (2008 – $2,921) have been primarily classiﬁed as held-

for-trading.

Long-term debt has not been designated as held-for-trading and therefore is recorded at amortized cost subsequent to initial

recognition.

Onex Corporation December 31, 2009 115

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 6 . F I N A N C I A L I N S T R U M E N T S A N D

quoted market prices for similar assets in active markets, quoted

FA I R VA L U E M E A S U R E M E N T S ( c o n t ’d )

market prices for identical assets in inactive markets, inputs

Fair Value Measurements

other than quoted market prices that are observable for the

asset, such as interest rates or yield curves, or other inputs

The Company’s estimates of fair value for ﬁnancial assets and

derived principally from other observable market information.

ﬁnancial liabilities are based on the framework established in the

When quoted market prices in active markets are not available,

fair value accounting guidance. The fair value hierarchy gives the

fair values are derived through matrix pricing, which is a math-

highest priority to quoted prices with readily available indepen dent

ematical technique used principally to value debt securities

data in active markets for identical assets or liabilities (Level 1) and

by relying on the securities’ relationship to other benchmark

the lowest priority to unobservable market inputs (Level 3). The

quoted securities and not by relying exclusively on quoted

three levels of the hierarchy are as follows:

market prices for speciﬁc securities.

(cid:129) Level 1 includes ﬁnancial instruments whose fair value is deter-

(cid:129) Level 3 includes ﬁnancial instruments whose fair value is deter-

mined based on observable unadjusted quoted market prices

mined from techniques in which one or more of the signiﬁ cant

for identical ﬁnancial assets or liabilities in active markets

inputs, such as assumptions about risk, are unobservable. Be -

which the Company has the ability to access at the measure-

cause Level 3 fair values contain unobservable market inputs,

ment date. This is the most reliable fair value measurement and

judgement must be used to determine fair values. Level 3 fair

includes, for example, active exchange-traded equity securities.

values represent the best estimate of an amount that could be

(cid:129) Level 2 includes ﬁnancial instruments whose fair value is deter-

realized in a current market exchange in the absence of actual

mined based on various inputs including, but not limited to,

market exchanges.

The table below summarizes the available-for-sale investments of The Warranty Group within the fair value hierarchy at December 31, 2009:

Fixed-maturity securities

Equity securities

Total

% of Total

Total

$ 1,883

$ 1,908

100.0%

Level 1

–

1.3%

Level 2

$ 1,881

$ 1,882

98.6%

Level 3

–

0.1%

The following table represents a summary of the changes in the

In addition, substantially all of Onex’ $229 investment in the Onex

fair value of The Warranty Group’s available-for-sale investments

Credit Partners funds is recorded at fair value using Signiﬁcant

measured on a recurring basis using Level 3, for the year ended

Other Observable Inputs (Level 2 in the fair value hierarchy).

December 31, 2009:

Balance, December 31, 2008

Purchases, issuances, settlements

Transfers in and/or out of Level 3

Foreign exchange

Balance, December 31, 2009

The carrying values of the consolidated balances for cash and

cash equivalents, accounts receivable, accounts payable and

accrued liabilities approximate their fair values due to the short

maturity of these ﬁnancial instruments. Consolidated long-term

debt at December 31, 2009 had a carrying value of $6,039 (2008 –

$7,813) and a fair value of $5,729 (2008 – $5,934).

$ 26

(15)

(7)

(2)

116 Onex Corporation December 31, 2009

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 7. S U B S E Q U E N T E V E N T

Certain operating companies may enter into agreements to

acquire or make investments in other businesses. These transac-

tions are subject to a number of conditions, many of which are

beyond the control of Onex or the operating companies. The

effect of such planned transactions, if completed, may be signiﬁ-

cant to the consolidated ﬁnancial position of Onex.

a) In January 2010, Celestica announced its intention to redeem all
of its outstanding 7.625% Senior Subordinated Notes due 2013. At

December 31, 2009, the outstanding principal on the notes was

US$223. In accordance with the terms of the notes, the redemption

will be at a price of 103.813% of the principal amount, together with

accrued and unpaid interest to the redemption date. Celestica

expects to complete the redemption in the ﬁrst quarter of 2010.

2 8 . I N F O R M AT I O N B Y I N D U S T R Y A N D

G E O G R A P H I C S E G M E N T

Onex’ reportable segments operate through autonomous compa-

nies and strategic partnerships. Each reportable segment offers

different products and services and is managed separately.

The Company had seven reportable segments in 2009

(2008 – seven): electronics manufacturing services; aerostructures;

healthcare; ﬁnancial services; customer support services; metal

services; and other. The electronics manufacturing services segment

consists of Celestica, which provides manufacturing services for

electronics original equipment manufacturers. The aerostructures

segment consists of Spirit AeroSys tems, which manufactures aero -

struc tures. The healthcare segment consists of EMSC, a leading

provider of ambulance transport services and outsourced hospital

emergency department physician stafﬁng and management ser -

vices in the United States; Carestream Health, a leading global

provider of medical imaging and healthcare information technology

solutions; CDI, which owns and operates diagnostic imaging cen-

tres in the United States; Skilled Healthcare, which operates skilled

nursing and assisted living facilities in the United States; and

ResCare, a leading U.S. provider of residential training, education

and support services for people with disabilities and special needs.

The ﬁnancial services segment consists of The Warranty Group,

which underwrites and administers extended warranties on a vari-

ety of consumer goods and also provides consumer credit and other

specialty insurance products primarily through automobile dealers.

The customer support services segment consists of Sitel Worldwide,

which provides services for telecommunications, consumer goods,

retail, technology, transportation, ﬁnance and utility companies.

The metal services segment consists of Tube City IMS, a leading

provider of outsourced services to steel mills. Other includes Husky,

one of the world’s largest suppliers of injection molding equipment

and services to the plastics industry; Tropicana Las Vegas, one of the

best-known and most storied casinos in Las Vegas; Allison Trans -

mission, a leading designer and manufacturer of automatic trans-

missions for on-highway trucks and buses, off-highway equipment

and military vehicles worldwide; Hawker Beechcraft, a leading

manufacturer of business jet, turboprop and piston aircraft; RSI,

a leading manufacturer of cabinetry for the residential marketplace

in North America; Cineplex Entertainment, Canada’s largest ﬁlm

exhibition company (sold in 2009); as well as CEI (disposed of in

2009), Onex Real Estate, ONCAP II and the parent company. The

operations of ResCare, Allison Transmission, Hawker Beechcraft,

RSI and Cine plex Entertainment (sold in 2009) are accounted for

using the equity-accounting method, as described in note 1.

Onex Corporation December 31, 2009 117

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 8 . I N F O R M AT I O N B Y I N D U S T R Y A N D G E O G R A P H I C S E G M E N T ( c o n t ’d )

2009 Industry Segments

Electronics
Manufacturing
Services

Aero-
structures

Healthcare

Financial
Services

Customer
Support
Services

Metal
Services

Other

Consolidated
Total

$ 6,909

$ 4,641

$ 6,590

$ 1,359

$ 1,780

$ 1,472

$ 2,080

$ 24,831

Revenues

Cost of sales

Selling, general and administrative expenses

(6,319)

(224)

(3,946)

(199)

(4,766)

(771)

Earnings before the undernoted items

366

496

1,053

(656)

(509)

194

(13)

(22)

(3)

–

(1)

–

(2)

–

154

(46)

(76)

–

(1,140)

(487)

153

(57)

(24)

(82)

–

(10)

–

(25)

(64)

(108)

(17)

(1)

(126)

–

(126)

745

660

–

124

(1,329)

(48)

(66)

(14)

(49)

–

(1)

–

(1,312)

(581)

(19,468)

(2,819)

187

2,544

(84)

(50)

(46)

(504)

(75)

(98)

104

783

(55)

(636)

(364)

(495)

(497)

(90)

(161)

783

(219)

(62)

(50)

(370)

(97)

(31)

–

(31)

149

126

(94)

181

–

181

645

(172)

(361)

112

–

112

891

$ 4,937

$ 25,481

401

–

252

738

$ 5,930

713

507

$ 2,312

(86)

(25)

(39)

–

(2)

(43)

–

(92)

(14)

(5)

(54)

–

(130)

(200)

(5)

(50)

–

(12)

–

(1)

(224)

(226)

(6)

(7)

(11)

–

(44)

–

(180)

313

(107)

(192)

–

169

(130)

(3)

–

Amortization of property, plant

and equipment

Amortization of intangible assets

and deferred charges

Interest expense of operating companies

Interest income

Earnings (loss) from equity-accounted

investments

Foreign exchange gains (loss)

Stock-based compensation expense

Other income (expense)

Gains on dispositions of operating investments

Acquisition, restructuring and other expenses

Writedown of goodwill, intangible assets

and long-lived assets

Earnings (loss) before income taxes,

non-controlling interests and

discontinued operations

Recovery of (provision for) income taxes

Non-controlling interests

Earnings (loss) from continuing operations

Earnings from discontinued operations

Net earnings (loss)

Total assets

Long-term debt (a)

Property, plant and equipment additions

Goodwill additions

Goodwill

(a) Long-term debt includes current portion, excludes capital leases and is net of deferred charges.

118 Onex Corporation December 31, 2009

$ 3,265

$ 4,821

$ 5,616

$ 5,206

234

–

902

$ 2,792

335

–

163

$ 1,065

203

–

361

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2008 Industry Segments

Electronics
Manufacturing
Services

Aero-
structures

Healthcare

Financial
Services

Customer
Support
Services

Metal
Services

Other

Consolidated
Total

8,220

3,965

6,152

1,388

1,856

3,112

2,188

$ 26,881

Revenues

Cost of sales

Selling, general and administrative expenses

(7,556)

(274)

(3,215)

(188)

(4,504)

(740)

Earnings before the undernoted items

390

562

908

(117)

(186)

(229)

(255)

(9)

(5)

(1)

–

(92)

Amortization of property, plant

and equipment

Amortization of intangible assets

and deferred charges

Interest expense of operating companies

Interest income (expense)

Earnings (loss) from equity-accounted

investments

Foreign exchange gains (loss)

Stock-based compensation recovery (expense)

Other income (expense)

Gains on dispositions of operating investments

(97)

(16)

(53)

–

(19)

(25)

–

Acquisition, restructuring and other expenses

(39)

Writedown of goodwill, intangible assets

and long-lived assets

(1,061)

Earnings (loss) before income taxes,

non-controlling interests and

discontinued operations

Recovery of (provision for) income taxes

Non-controlling interests

Earnings (loss) from continuing operations

Earnings from discontinued operations

Net earnings (loss)

Total assets

Long-term debt (a)

Property, plant and equipment additions

Goodwill additions

Goodwill

(904)

(6)

791

(119)

–

(119)

4,612

892

124

–

(5)

(42)

–

(6)

(17)

–

399

(137)

(245)

–

4,821

697

299

–

(665)

(460)

263

(12)

(19)

(9)

–

(1)

(16)

–

(7)

(1,197)

(520)

139

(64)

(19)

(69)

–

(36)

(2,932)

(71)

109

(65)

(13)

(41)

–

(1,650)

(491)

(83)

(65)

(81)

(13)

(335)

107

190

(64)

(46)

(21,719)

(2,744)

2,418

(624)

(366)

(550)

(322)

142

(77)

(220)

(142)

–

(129)

(1)

(251)

(1,584)

(108)

(62)

–

(62)

6,660

3,367

225

1,398

199

(65)

(94)

–

6,095

237

–

419

(166)

(3)

(1)

(170)

–

(170)

1,020

796

199

(11)

(2)

–

(2)

1,026

519

355

(590)

531

(1,061)

(252)

1,021

(292)

(283)

5,498

$ 29,732

1,167

572

7,675

859

171

2,946

(a) Long-term debt includes current portion, excludes capital leases and is net of deferred charges.

Onex Corporation December 31, 2009 119

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

2 8 . I N F O R M AT I O N B Y I N D U S T R Y A N D G E O G R A P H I C S E G M E N T ( c o n t ’d )

Geographic Segments

North
America

Europe

2009

Asia and
Oceania

Other

Total

North
America

Europe

2008

Asia and
Oceania

Other

Total

Revenue(1)

$ 15,570

$ 3,639

$ 4,934

$ 688

$ 24,831

$ 14,605

$ 4,412

$ 5,978

$ 1,886

$ 26,881

Property, plant and equipment

$ 2,954

$ 406

$ 350

$ 49

$ 3,759

$ 2,946

$ 506

$ 467

$ 147

$ 4,066

Intangible assets

$ 1,701

$ 293

$ 74

$ 18

$ 2,086

$ 2,198

$ 408

$ 108

$ 41

$ 2,755

Goodwill

$ 1,896

$ 269

$ 101

$ 46

$ 2,312

$ 2,436

$ 357

$ 117

$ 36

$ 2,946

(1) Revenues are attributed to geographic areas based on the destinations of the products and/or services.

North America revenue and assets are primarily in the United States. Other consists primarily of operations in Central and South America,

and Mexico. Signiﬁcant customers of operating companies are discussed in note 23.

120 Onex Corporation December 31, 2009

SHAREHOLDER INFORMATION

Year-end closing share price

As at December 31

Toronto Stock Exchange

2009

2008

2007

2006

2005

23.60

18.19

34.99

28.35

18.92

Registrar and Transfer Agent

Duplicate communication

Subordinate Voting Shares of

CIBC Mellon Trust Company

Registered holders of Onex Corporation

the Company are listed and traded

P.O. Box 7010

on the Toronto Stock Exchange.

Adelaide Street Postal Station

Toronto, Ontario M5C 2W9

(416) 643-5500

or call toll-free throughout

shares may receive more than one copy
of shareholder mailings. Every eﬀort
is made to avoid duplication, but when
shares are registered under diﬀerent
names and/or addresses, multiple

Share symbol

OCX

Dividends

Dividends on Subordinate Voting

Shares are payable quarterly on or

about January 31, April 30, July 31 and

Canada and the United States

mailings result. Shareholders who

1-800-387-0825

www.cibcmellon.ca
or inquiries@cibcmellon.ca (e-mail)

receive but do not require more than

one mailing for the same ownership are

requested to write to the Registrar and

Transfer Agent and arrangements will

October 31 of each year. At December 31,

All questions about accounts, stock

be made to combine the accounts for

2009 the indicated dividend rate for

certiﬁcates or dividend cheques

mailing purposes.

each Subordinate Voting Share was

should be directed to the Registrar

$0.11 per annum.

and Transfer Agent.

Shares held in nominee name

To ensure that shareholders whose

Shareholder Dividend
Reinvestment Plan

Investor Relations Contact

shares are not held in their name receive

Requests for copies of this report,

all Company reports and releases

The Dividend Reinvestment Plan provides

quarterly reports and other corporate

on a timely basis, a direct mailing list

shareholders of record who are resident

communications should be directed to:

is maintained by the Company. If you

in Canada a means to reinvest cash divi-

Investor Relations

dends in new Subordinate Voting Shares

Onex Corporation

would like your name added to this list,

please forward your request to Investor

of Onex Corporation at a market-related

161 Bay Street

Relations at Onex.

price and without payment of brokerage

P.O. Box 700

commissions. To participate, registered

Toronto, Ontario M5J 2S1

shareholders should contact Onex’ share

(416) 362-7711

registrar, CIBC Mellon Trust Company.

Non-registered shareholders who wish

to participate should contact their invest-

ment dealer or broker.

Corporate governance policies

A presentation of Onex’ corporate

governance policies is included in

the Management Information Circular

that is mailed to all shareholders

and is available on Onex’ website.

E-mail:
info@onex.com

Website:

www.onex.com

Auditors
PricewaterhouseCoopers llp
Chartered Accountants

Annual meeting of shareholders

Onex Corporation’s Annual Meeting

of Shareholders will be held on

May 6, 2010 at 10:00 a.m. (Eastern

Daylight Time) at Four Seasons Hotel,

Windows West Room, 32nd Floor,

21 Avenue Road, Toronto, Ontario.

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