Black Diamond Group Limited
TSX : BDI

Black Diamond Group Limited

August 13, 2015 07:00 ET

Black Diamond Reports Second Quarter 2015 Adjusted EBITDA of $23.3 Million

CALGARY, ALBERTA--(Marketwired - Aug. 13, 2015) - Black Diamond Group Limited ("Black Diamond", the "Company" or "we"), (TSX:BDI), a leading provider of workforce accommodation and modular workspace solutions, today announced its operating and financial results for the three and six month periods ended June 30, 2015. All financial figures are expressed in Canadian dollars.

"Weak pricing across almost all commodity classes is negatively impacting asset utilization and revenue," said Trevor Haynes, President and Chief Executive Officer of Black Diamond. "Despite the challenging market conditions, subsequent to the quarter, Black Diamond successfully negotiated a long-term renewal that is expected to generate $26 million in revenue over the next two years. We continue to have a strong balance sheet, we are actively picking up market share, and our modern rental fleet provides us with tremendous operational leverage for when the economic environment improves."

Second Quarter 2015 Financial Highlights:

Three months ended June 30 Six months ended June 30
(in thousands, except where noted) 2015 2014 Change 2015 2014 Change
$ $ % $ $ %
Revenue
Structures 43,557 50,847 (14 )% 101,186 118,835 (15 )%
Logistics 22,036 28,034 (21 )% 55,308 68,456 (19 )%
Energy Services 3,521 6,792 (48 )% 10,786 18,543 (42 )%
International 2,026 2,720 (26 )% 3,555 7,135 (50 )%
Total Revenue 71,140 88,393 (20 )% 170,835 212,969 (20 )%
Adjusted EBITDA (1) 23,254 34,900 (33 )% 53,882 77,283 (30 )%
Profit (loss) (843 ) 9,561 (109 )% 8,186 27,464 (70 )%
Earnings Per share - Basic (0.02 ) 0.23 (109 )% 0.20 0.65 (69 )%
- Diluted (0.02 ) 0.22 (109 )% 0.20 0.63 (68 )%
Capital expenditures 18,184 19,404 (6 )% 36,122 38,578 (6 )%
Dividends declared 9,862 9,616 3 % 19,723 19,147 3 %
Per share ($) 0.24 0.23 4 % 0.48 0.45 7 %
Payout ratio (1) 44 % 26 % 40 % 26 %
  1. Adjusted EBITDA and Payout ratio are supplemental non-GAAP measurements and do not have a standardized meaning prescribed by IFRS. Therefore, Adjusted EBITDA and Payout ratio may not be comparable to similar measures presented by other issuers. See "Non-GAAP Measures" for further details.

Operational Highlights:

  • Revenue for the Quarter was $71.1 million, down 20% or $17.3 million from a year ago primarily due to the impact of low commodity prices on utilization in the Structures, Energy Services and International business units.

  • Administrative expenses for the Quarter were $12.6 million, down 12% or $1.7 million primarily due to a decrease in bonus, commission costs and share based compensation costs. Savings from Black Diamond's strategic cost initiative are expected to be realized in 2016.

  • Adjusted EBITDA (see "Non-GAAP Measures") for the Quarter was $23.3 million, down 33% or $11.6 million from a year ago due to the impact of low commodity prices on business activity in western Canada and Australia.

  • Net loss for the Quarter was $0.8 million, down 109% or $10.4 million from a year ago. The loss for the Quarter was triggered by the 20% increase in the statutory corporate tax rate in Alberta and its impact on the Company's annual effective tax rate at a time when the economic environment is driving down revenues. Without this increased Alberta income tax rate, the Company would have reported a net profit of $2.6 million for the Quarter.

  • The Company continues to maintain a strong balance sheet. At June 30, 2015, the Net Debt to Adjusted EBITDA ratio rose to 1.59 compared with 1.26 at December 31, 2014 as a result of capital expenditures related to the Dawson Creek 1,244 bed camp.

  • The committed extendible revolving operating facility was extended and increased to $168.0 million on June 18, 2015 with a $100.0 million accordion. The facility contains amended covenants that further enhance Black Diamond's financial flexibility in the event of a prolonged downturn in commodity pricing.

  • On June 29, 2015 Black Diamond entered into a 24 month agreement for BOXX Modular workspace units with a producer's projects in the Montney basin. The contract, which is expected to generate $5.9 million in revenue over its term, is for 104 units spanning three different project sites. 40 of these units will be new builds, requiring $2.9 million in capital, which will be expended in the third quarter.

  • Contracted future revenue at the end of the Quarter (not including the contract renewal subsequent to the Quarter mentioned below) was $99.1 million, down 43% or $75.2 million from a year ago (Comparative Quarter - $174.3 million). For comparison, the contracted forward revenue for the first quarter of 2015 was $116.2 million. The decline is due to the overall market decline in the oil sector in western Canada.

  • Subsequent to the Quarter, Black Diamond renewed a workforce housing camp contract in the steam assisted gravity drainage ("SAGD") region of Alberta's oil sands which is expected to generate rental and logistics revenue of $26 million over its two year term (effective August 15, 2015). The contract includes a minimum guarantee of $16 million in revenue and an option to extend the term for one additional year (for a total of three years) at the same rates.

  • Subsequent to the Quarter, on July 15, 2015 Black Diamond entered into an agreement to sell its construction services operation to Northern Frontier Corp. ("Northern Frontier") for base consideration of approximately $9.8 million consisting of 4.5 million shares of Northern Frontier valued at approximately $2.4 million, representing approximately 19.5% of the current issued and outstanding shares in the capital of Northern Frontier and a promissory note of $7.4 million due October 31, 2018 bearing interest at 10% per annum. The agreement allows for $1.3 million of the promissory note to be replaced by a 5 year lease of Northern Frontier land to Black Diamond at zero rent once conditions are in place for such a lease to be executed. The agreement also included a potential earn out of $11.6 million which could increase total consideration to $21.4 million. The construction services operation, based out of Edmonton, AB, installed and dismantled remote workforce lodging and modular offices in western Canada, contributing to the non-rental revenue stream in Black Diamond's Structures business unit. Black Diamond will continue to offer construction and project management services to its customers but will now subcontract these services. The sale closed on July 31, 2015 and the gain on sale, which will be approximately equal to the base consideration, will be reflected in the Company's third quarter results. Trevor Haynes is the Chairman of the Board for both Black Diamond and Northern Frontier, and the President and Chief Executive Officer of Black Diamond. The parties undertook reasonable steps and procedures to maintain the independence of both parties, including the abstention by Mr. Haynes from all negotiations and approvals of the transaction.

Capital Spending

Capital expenditures for the Quarter were $18.2 million compared with $19.4 million a year ago. Capital expenditures for the Quarter were primarily related to the second phase of the 1,244 bed camp in Dawson Creek that went on rent in April. Black Diamond has $3.9 million in outstanding capital commitments as at June 30, 2015. Black Diamond's 2015 capital program, which does not contemplate any expenditures related to Canadian LNG projects, is $50 million.

Dividends and Payout Ratio

The payout ratio (see "Non-GAAP Measures") for the Quarter increased to 44% compared with 26% during the same period last year as the result of a dividend increase in August 12, 2014 and lower distributable cash flow.

Outlook

Operating levels will continue to be weak compared to historic norms until a catalyst event occurs. Catalysts for higher utilization could include a Canadian Liquefied Natural Gas ("LNG") project achieving a positive final investment decision ("FID"), a recovery in oil, gas and mined mineral pricing, or any other event that might trigger increased utilization or additional capital expenditures by customers in our end markets.

On June 11, 2015, the Pacific Northwest ("PNW") LNG project moved closer to becoming a reality, when the consortium announced it would move forward with a positive FID subject to:

  1. Approval of the Project Development Agreement by the Legislative Assembly of British Columbia, which subsequently occurred on July 21, 2015; and
  2. A positive regulatory decision on PNW LNG's environmental assessment from the Canadian Environmental Assessment Agency, which temporarily halted its review of PNW LNG's application on June 2, 2015 (day 263 of the 365-day process).

We remain optimistic that additional future demand for our products and services will be generated through a positive FID on PNW LNG, contract renewals for current camps, and new business in the Montney, Duvernay and Deep Basin regions of western Canada. We are also experiencing strengthened demand in our United States ("US") space rentals business.

Additional Information

A copy of the Company's unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2015 and related management's discussion and analysis have been filed with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and www.blackdiamondgroup.com.

Conference Call

Black Diamond will hold a conference call and webcast to discuss its results for the quarter at 11:00 a.m. Mountain Time (1:00 p.m. Eastern Time) today, Thursday, August 13, 2015.

To access the conference call by telephone dial toll free 1-866-696-5910. Callers from the Toronto area should use 416-340-2217 (Conference ID: 5332537). Please connect approximately 10 minutes prior to the beginning of the call.

Please log into the webcast 10 minutes before the start time at: http://www.gowebcasting.com/5895.

Slides to accompany the conference call can be accessed through https://join.me/BDI-Investors.

Following the conference call, an audio archive will be available in the Investor Events section of the Company's website at www.blackdiamondgroup.com.

Reader Advisory

Forward-Looking Statements

Certain information in this news release contains forward-looking statements including the amount of funds that will be expended on the 2015 capital budget, management's assessment of Black Diamond's future operations, business prospects and opportunities including that additional future demand for Black Diamond's products and services will be generated through a positive FID on PNW LNG, and management's future expectations regarding the financial performance of the Company and its business units. With respect to the forward-looking statements contained in this news release, Black Diamond has made assumptions, regarding among other things: that Black Diamond will continue to conduct its operations in a manner consistent with past operations, that counterparties to contracts will perform the contracts as written and that there will be no unforeseen material delays in contracted projects. Although Black Diamond believes that the expectations reflected in the forward-looking statements contained in this news release, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations or assumptions will prove to be correct. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Black Diamond's control including, without limitation, the impact of general economic conditions, industry conditions, fluctuation of commodity prices, fluctuation of exchange rates, environmental risks, industry competition, availability of qualified personnel and management, stock market volatility and timely and cost effective access to sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the forgoing list of factors is not exhaustive. Additional information on these and other factors that could affect Black Diamond's operations and financial results are included in Black Diamond's annual information form and other reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and at Black Diamond's website (www.blackdiamondgroup.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Black Diamond does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Non-GAAP Measures

In this news release, the following terms have been referenced: Adjusted EBITDA (adjusted earnings before interest, taxation, depreciation and amortization) and payout ratio. Readers are cautioned that these measures are not defined under International Financial Reporting Standards ("IFRS"). Readers are cautioned that these non-GAAP measures are not alternatives to measures under IFRS and should not, on their own, be construed as an indicator of the Company's performance or cash flows, a measure of liquidity or as a measure of actual return on the common shares of the Company. These Non-GAAP measures should only be used in conjunction with the consolidated financial statements of the Company. A reconciliation between these measures and measures defined under IFRS is included in management's discussion and analysis for the three and six month period ended June 30, 2015 filed on SEDAR.

About Black Diamond

Black Diamond rents and sells portable workforce accommodation and work space solutions to business customers in Canada, the United States and Australia. In addition to providing turnkey lodging and other support services related to remote workforce accommodation and workspaces, we also provide specialized field rentals to the oil and gas industries of Canada and the United States. From twenty locations around the world, we serve multiple sectors including oil and gas, mining, power, construction, engineering, military, government and education.

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