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15730 Onex Q2

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15730 Onex Q2 Management’s Discussion and Analysis and Financial Statements Second Quarter Ended June 30, 2007 THE ONEX OPERATING COMPANIES Table of Contents 3 Management’s Discussion and Analysis 28 Consolidated Financial Statements 48 Shareholder Information ONEX CORPORATION Onex Corporation is one of Canada’s largest corporations with businesses that generate annual revenues of $33 billion, have assets of $37 billion and employ 227,000 people worldwide. A Leading Private Equity Investor and Alternative Asset Manager Founded in 1983, Onex is one of North America’s oldest and most successful private equity investors. The Company has completed more than 200 acquisitions valued at approximately $40 billion by employing a disciplined, active-ownership investment approach. These acquisitions have been in a variety of industries and our businesses currently operate in electronics manufac- turing services, aerospace, healthcare, financial services, automotive, metal services, customer support services, theatre exhibition and consumer products. Over its 24-year history, Onex has generated 3.1 times its invested capital, earning a 28% compound annual IRR. Onex, as an alternative asset manager, makes its private equity investments through the Onex Partners and ONCAP family of Funds. Through these Funds, the Company currently manages approximately $5 billion of third-party capital, on which it earns management fees and is enti- tled to a share of the profits on the third-party capital. Onex also has a Real Estate Fund and a Public Markets Fund. The Onex Funds Large-cap Private Equity Funds • Onex Partners LP, initiated November 2003 – US$1.655 billion • Onex Partners II LP, initiated November 2006 – US$3.45 billion Mid-cap Private Equity Funds • ONCAP L.P., initiated December 1999 – $400 million • ONCAP II L.P., initiated May 2006 – $574 million Real Estate Fund • Onex Real Estate Partners, initiated January 2005 – $350 million Public Markets Fund • Onex Capital Management, initiated February 2005 – $170 million Onex is a public company whose shares are traded on the Toronto Stock Exchange under the symbol OCX. Throughout this report, all amounts are in Canadian dollars unless otherwise indicated. Onex Corporation Second Quarter Report 2007 1 2007 SECOND-QUARTER HIGHLIGHTS Onex completed the $2.6 billion acquisition of Carestream Health, Inc., a leading global provider of medical and dental imaging and healthcare information technology solutions. Onex Partners II invested $521 million in the equity of Carestream Health. Spirit AeroSystems (NYSE: SPR) completed a $1.2 billion secondary offering. Onex Partners and Onex sold a portion of their ownership in Spirit AeroSystems in the offering. Onex realized proceeds of $361 million on the sale, including $42 million for its share of the carried interest. In May, Skilled Healthcare Group, Inc. (NYSE: SKH) completed an initial public offering for proceeds of approximately $325 million. Onex Partners and Onex sold a portion of their ownership in the offering. Onex realized proceeds of $43 million on the sale of a portion of its ownership, including $4 million of carried interest. In June, Onex entered into an agreement to acquire Allison Transmission in a transaction valued at $5.9 billion. Allison Transmission is the world leader in the design, manufacture and sale of commercial-duty automatic transmissions, hybrid propulsion systems, and related parts and services for on-highway trucks and buses, off-highway equipment and military vehicles. The purchase was completed in early August. Onex and The Carlyle Group jointly and equally acquired Allison Transmission, with Onex, Onex Partners II and certain limited partners investing approximately $813 million in the equity of this business. With the acquisition of Allison Transmission, Onex has now invested approximately 60 per- cent of the US$3.45 billion Onex Partners II Fund. The first acquisition of that Fund was in November 2006, the same month in which this Fund started operations. ONCAP II completed two acquisitions: • Mister Car Wash, the fourth-largest conveyor car wash business in the United States; and • CiCi’s Pizza, a leading franchisor of family-oriented “all you want” buffet-style restaurants. Onex reported strong financial results in the quarter: • Revenues increased 27 percent to $5.9 billion; • Operating earnings grew 33 percent to $356 million; • Net earnings were $166 million, up from $48 million last year; • Assets climbed to $25.4 billion. 2 Onex Corporation Second Quarter Report 2007 MANAGEMENT’S DISCUSSION AND ANALYSIS The Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations analyzes significant changes in the unaudited interim consolidated statements of earnings and comprehensive earnings, the unaudited interim consolidated balance sheet and the unaudited interim consolidated statements of cash flows of Onex Corporation (“Onex”). It should be read in conjunction with the unaudited interim consolidated financial statements and notes thereto. The MD&A and Onex’ unaudited interim consolidated financial statements have been prepared to provide information about Onex on a consolidated basis and should not be considered as providing sufficient information to make an investment decision in regard to any particular Onex operating company. The following MD&A is the responsibility of management and is as of August 9, 2007. The Board of Directors carries out its responsibility for the review of this disclosure through its Audit and Corporate Governance Committee, comprised exclusively of inde- pendent directors. The Audit and Corporate Governance Committee has reviewed and approved the disclosure. The MD&A is presented in the following sections: 4 Industry Segments 6 Financial Review 6 Significant Events for the Period Ended June 30, 2007 9 Consolidated Operating Results 23 Consolidated Financial Position 25 Liquidity and Capital Resources 27 Outlook Forward-Looking/Safe Harbour Statements This interim MD&A may contain, without limitation, statements concerning possible or assumed future results preceded by, followed by or that include words such as “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans” and words of similar connotation, which would constitute forward-looking statements. Forward-looking statements are not guarantees of future performance. They involve risks and uncertainties that may cause actual performance or results to be materially different from those anticipated in these forward- looking statements, including without limitation, those discussed on pages 6 through 8 of this interim MD&A. Onex is under no obliga- tion 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. Onex Corporation Second Quarter Report 2007 3 MANAGEMENT’S DISCUSSION AND ANALYSIS INDUSTRY SEGMENTS A description of our operating companies at June 30, 2007, and Onex’ economic and voting own- ership in those businesses, is presented below. Ownership Industry (Onex Owns/ Segments Companies Onex Votes) Electronics Celestica Inc. (TSX/NYSE: CLS), one of the world’s largest electronics manufac- 13%/79% Manufacturing turing services companies for original equipment manufacturers (“OEMs”). Services (website: www.celestica.com) Onex shares held: 27.3 million Aerostructures Spirit AeroSystems, Inc. (NYSE: SPR), the largest independent non-OEM 6%/76% designer and manufacturer of aerostructures in the world. (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), a leading provider of 29%/97% emergency medical services in the United States. (website: www.emsc.net) Onex shares held: 12.1 million Onex Partners I shares subject to a carried interest: 16.3 million Center for Diagnostic Imaging, Inc., a leading provider of diagnostic and thera- 19%/100% peutic radiology services in the United States. (website: www.cdiradiology.com) Total Onex and Onex Partners I investment at cost: $88 million Onex portion: $21 million Onex Partners I portion: $67 million Skilled Healthcare Group, Inc. (NYSE: SKH), a leading operator of skilled 9%/90% nursing and assisted living facilities in the United States, specifically in California, Texas, Kansas, Missouri and Nevada, that is focused on treating patients who require a high level of skilled nursing care and extensive reha- bilitation therapy. (website: www.skilledhealthcare.com) Onex shares held: 3.5 million Onex Partners I shares subject to a carried interest: 10.7 million Carestream Health, Inc., a leading provider of medical and dental 39%/100% imaging and healthcare information technology solutions. (website: www.carestreamhealth.com) Total Onex and Onex Partners II investment at cost: $521 million Onex portion: $206 million Onex Partners II portion: $315 million Res-Care, Inc.(1) (NASDAQ: RSCR), a leading U.S. provider of residential, training, 6%/26% educational and support services for people with disabilities and special needs. (website: www.rescare.com) Onex shares held: 2.0 million Onex Partners I shares subject to a carried interest: 6.2 million Financial Services The Warranty Group, Inc., one of the world’s largest providers of extended 31%/100% warranty contracts. (website: www.thewarrantygroup.com) Total Onex and Onex Partners I and II investment at cost:
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