TORONTO, ONTARIO--(Marketwire - Nov. 5, 2012) - C.A. Bancorp Inc. ("C.A. Bancorp" or the "Company") (TSX:BKP) today announced its consolidated financial results for the three and nine months ended September 30, 2012.
In connection with the advancement of the Company's Realization Strategy effective October 1, 2010, the Company, in preparing its financial statements (i) applied Accounting Guideline 18 - Investment Companies ("AcG-18") and (ii) adopted the liquidation basis of accounting. As an Investment Company under AcG-18, C.A. Bancorp has received exemptive relief from the requirement to adopt International Financial Reporting Standards ("IFRS") until January 1, 2013.
Third Quarter 2012 Financial Highlights
For the three months ended September 30, 2012, the Company reported:
- Revenues of $0.4 million compared to $0.4 million in the third quarter of 2011;
- Net gain from results of investments of $nil compared to a net gain from results of investments of $1.1 million in the third quarter of 2011; and
- Net earnings of $0.0 million or $0.00 per share compared to net earnings of $1.1 million or $0.09 per share in the third quarter of 2011.
For the nine months ended September 30, 2012, the Company reported:
- Revenues of $1.3 million compared to $1.4 million in the same period of 2011;
- Net gain from results of investments of $1.3 million compared to a net gain from results of investments of $4.1 million in the same period of 2011; and
- Net earnings of $1.1 million or $0.09 per share compared to net earnings of $3.8 million or $0.31 per share in the same period of 2011.
As at September 30, 2012, the Company's:
- Cash and working capital was $25.3 million or $2.06 per share;
- Investments in private entities were fair valued at $16.7 million or $1.36 per share;
- Accrued liquidation costs were $1.0 million or $0.08 per share; and
- Net book value was $41.1 million or $3.35 per share.
Realization Strategy Update
The Realization Strategy has to date been successful. Since June 2010, the Company has (i) successfully completed the dispositions of a number of assets for aggregate cash proceeds of approximately $51 million, (ii) completed a $30 million issuer bid at a purchase price of $2.09 per share which was accretive to other shareholders, (iii) significantly reduced its operating expenses and eliminated all long term debt, and (iv) increased the Company's net book value from $2.33 per share as of September 30, 2010 to $3.35 as of September 30, 2012. During that time, the trading price of the Company's shares on the TSX has almost doubled. As at September 30, 2012, the Company had cash of approximately $25 million; $22 million of which was realized from asset dispositions subsequent to the December 2010 issuer bid.
The Company's Board of Directors (the "Board") and management team continue to believe (subject to their fiduciary duties) that distributing the net cash proceeds from asset dispositions to shareholders is in the best interests of the Company.
Proposed Cash Distribution to Shareholders
At the Company's 2012 annual and special meeting, shareholders approved a special resolution authorizing a reduction in stated capital, which facilitates the making of cash distributions to shareholders. Following that approval the Company re-initiated discussions with the tax authorities on a tax ruling which, if obtained and followed, would permit the Company to make cash distributions to shareholders generally on a more tax efficient basis.
Subject to the Company receiving comfort from the tax authorities that the proposed cash distribution will be treated as a return of capital for tax purposes, the Company currently intends to make an initial cash distribution to its shareholders in an amount between $1.50 per share and $1.60 per share, prior to December 31, 2012. The cash distribution will be comprised of cash realized from asset dispositions subsequent to the December 2010 issuer bid. The Board will determine the final amount and timing of the cash distribution taking into account present, future and contingent liabilities of the Company as well as maintaining a cash balance to support existing investments in the best interests of the Company.
There can be no assurance as to the timing or amount of any cash distribution, or as to its characterization. Details of the cash distribution, once determined, will be communicated by press release.
Completing the Realization Strategy
The Company's remaining investments consist of common shares in Blue Ant Media Inc. "Blue Ant"), subordinated debt and common share warrants in Salbro Bottle Group ("Salbro"), and the Company's most significant investment, its debt and equity interests in Digital Payment Technologies Corp. ("DPT").
Management is considering alternatives, which are at various stages of advancement, concerning the disposition of its interests in Blue Ant and Salbro, in the context of the Realization Strategy. The Company is continuously evaluating the benefits and costs of, and working to identify and develop, alternatives concerning its interests in Blue Ant and Salbro.
With respect to the Company's investment in DPT (the Company's most material asset), the Company has been managing and monitoring its interests with a view to maximizing their value in the context of the Realization Strategy, by among other things providing active support to DPT's management.
DPT has enjoyed success this year in winning a material number of new business accounts, resulting in DPT increasing its North American market share. The North American parking industry itself has been active in 2012, as the number and size of new sales opportunities in both the off-street and on-street markets has been greater than in previous years. These factors have had a positive impact on DPT's sales, size of its installed base of paystations and baseline recurring revenues generated from software as a service and after-sales support. The Company continues to be bullish about the market opportunities in the North American parking industry and is optimistic about the long-term prospects of DPT. These considerations factor in the ongoing management of the Company's investments in DPT and the timing of any realization event.
In anticipation of growth within the DPT business, DPT (subsequent to September 30, 2012) completed a refinancing resulting in a repayment to C.A. Bancorp of approximately $0.6 million in principal and interest owing under the promissory note. Subsequent to the refinancing, $0.25 million remains outstanding under the promissory note and $7.9 million under the debenture. As a condition of the refinancing at DPT, the Company agreed to extend the maturity date of the promissory note and debenture from September 30, 2012 to December 31, 2013. The Company continues to preserve its rights under the DPT shareholders' agreement, including its liquidity rights.
As the Company has only one remaining material asset (DPT), the Company is considering alternatives to reallocate its management resources, whereby those resources can provide greater time and effort to maximization of the value of the Company's investment in DPT. Any reorganization would preserve continuity to carry out the Realization Strategy. The financial objectives, at the time of monetizing the Company's investment in DPT, are to increase the net book value of the Company and the cash available for distribution to shareholders. The Company expects to be in a position to provide details of the reorganization of its operations in the near future.
Financial Results Discussion
| Statement of Operations and Earnings Highlights | ||||||||||||
| Three Months Ended Sept 30, |
Nine Months Ended Sept 30, |
|||||||||||
| In C$ millions except per share amounts | 2012 | 2011 | 2012 | 2011 | ||||||||
| Revenue | $ | 0.4 | $ | 0.4 | $ | 1.3 | $ | 1.4 | ||||
| Net results of investments | 0.0 | 1.1 | 1.3 | 4.1 | ||||||||
| Expenses and taxes | (0.4 | ) | (0.4 | ) | (1.5 | ) | (1.7 | ) | ||||
| Net earnings | $ | 0.0 | $ | 1.1 | $ | 1.1 | $ | 3.8 | ||||
| Net earnings per share | $ | 0.00 | $ | 0.09 | $ | 0.09 | $ | 0.31 | ||||
Consolidated revenues increased slightly for the three months ended September 30, 2012 compared to the same period in 2011 as the Company generated additional investment income from its investment in DPT. For the nine month period ended September 30, 2012, the Company's revenues declined compared to the same period in 2011 as the Company terminated its asset management agreements in connection with the sale of its interest in NorRock Realty Finance Corporation (formerly C.A. Bancorp Canadian Realty Finance Corporation) in the second quarter of 2011. This was partially offset by an increase in interest income related to the Company's investment in DPT.
Consolidated net results of investments for the three months ended September 30, 2012 yielded a net result of nil compared to a net gain from results of investments of $1.1 million related to the Company's previous investment in High Fidelity HDTV Inc. ("High Fidelity"). The net unrealized gain in the first nine months of 2012 was as a result of an unrealized gain related to the Company's investment in DPT compared to an unrealized gain related to the Company's previous investment in High Fidelity.
The Company's operating expenses for the three months ended September 30, 2012 compared to the same period in 2011 were effectively flat as the majority of headcount reductions occurred in the second quarter of 2011. The majority of the Company's operating expenses is related to being a public company and is generally fixed and recurs on an annual basis. The Company is continuously assessing different operating structures to further reduce or eliminate certain costs as the Company continues to execute the Realization Strategy.
| Balance Sheet Highlights | ||||||
| In C$ millions except per share amounts | September 30, 2012 |
December 31, 2011 |
||||
| Cash and liquid assets | $ | 25.5 | $ | 13.4 | ||
| Investments in private entities and loans receivable | 16.7 | 27.8 | ||||
| Other assets | 0.0 | 0.1 | ||||
| Total Assets | $ | 42.2 | $ | 41.3(1) | ||
| Total Liabilities | (1.1 | ) | (1.3)(1) | |||
| Total Shareholders' Equity | $ | 41.1 | $ | 39.9(1) | ||
| Number of shares outstanding (millions) | 12.3 | 12.3 | ||||
| Net book value per share | $ | 3.35 | $ | 3.26 | ||
| Closing market price per share | $ | 2.98 | $ | 2.25 | ||
| Market price discount to net book value | 11 | % | 31 | % | ||
| (1) Rounding. | ||||||
As at September 30, 2012, the Company had cash of approximately $25.4 million, no debt and total accrued liquidation costs of $1.0 million. The Company is required to make significant estimates and exercise judgment in determining accrued liquidation costs. The Company reviewed contractual commitments such as lease termination costs and professional fees to determine the estimated costs to be directly incurred through the Realization Strategy period. The Company has not accrued the ongoing operating costs that are anticipated to be incurred through the Realization Strategy period such as payroll and related expenses, general and administration costs and other corporate expenses.
Subsequent to September 30, 2012
On October 31, 2012, DPT completed a refinancing resulting in a payment to the Company of approximately $0.6 million in principal and interest owing under a promissory note. Subsequent to the refinancing, $0.25 million remained outstanding under the promissory note. As a condition of the refinancing, the Company agreed to extend the maturity date of the promissory note and debenture to December 31, 2013.
Company Adopts Advance Notice By-Law
The Company also announced today the approval and adoption by the Board of a by-law (the "By-Law") which includes provisions that require advance notice to the Company in circumstances where nominations of persons for election to the Board are made by shareholders of the Company other than pursuant to: (i) a requisition of a meeting of shareholders made pursuant to the provisions of the Business Corporations Act (Alberta) (the "Act"); or (ii) a shareholder proposal made pursuant to the provisions of the Act.
The purpose of the By-Law is to provide shareholders, directors and management of the Company with a clear framework for nominating directors. Among other things, the By-Law fixes a deadline by which holders of common shares of the Company must submit director nominations to the Company prior to any annual or special meeting of shareholders and sets forth the minimum information that a shareholder must include in the notice to the Company for the notice to be in proper written form.
In the case of an annual meeting of shareholders, notice to the Company must be made not less than 30 nor more than 60 days prior to the date of the annual meeting; provided, however, that in the event that the annual meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made, notice may be made not later than the close of business on the 10th day following such public announcement.
In the case of a special meeting of shareholders (which is not also an annual meeting), notice to the Company must be made not later than the close of business on the 15th day following the day on which the first public announcement of the date of the special meeting was made. The By-Law is effective as of the date it was approved by the Board and will be placed before shareholders for ratification at the next annual and special meeting of shareholders.
Financial Information
For a comprehensive review of the Company's results, shareholders are encouraged to read (i) the Company's third quarter 2012 unaudited consolidated financial statements and accompanying Interim Management's Discussion and Analysis and (ii) the Company's 2011 audited consolidated financial statements and accompanying Annual Management's Discussion and Analysis, copies of which will be available on the Company's website at www.cabancorp.com and on SEDAR at www.sedar.com.
C.A. Bancorp Inc.
C.A. Bancorp is a publicly traded Canadian merchant bank and alternative asset manager that provides investors with access to a range of private equity and other alternative asset class investment opportunities. C.A. Bancorp has historically focused on investments in small- and middle-capitalization public and private companies, with emphasis on the industrials, real estate, infrastructure and financial services sectors. The Company is currently executing its Realization Strategy.
Caution Regarding Forward-Looking Information
This release includes certain forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans" or "continue" or the negative thereof or variations thereon or similar terminology. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Without limiting the generality of the foregoing, there can be no assurance of any kind that the Realization Strategy will yield a value equal or close to the net book value per Company common share. These forward-looking statements are subject to a number of risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements. Reference should be made to the risk factors in the Company's Annual Information Form, in the Management's Discussion and Analysis for the three and nine months ended September 30, 2012 and the year ended December 31, 2011 and in the Directors' Circular dated June 4, 2010 and in our other filings with Canadian securities regulators. Additional important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, interest rates, tax related matters, loss of personnel, reliance on key personnel, ability of the Company to generate positive future returns for investors, ability of the Company to execute the Realization Strategy or any alternative strategy, Company's success in preserving capital, managing debt, maintaining liquidity and managing operating costs, the decision of the Board of Directors as to the timing and amount of any cash distribution, inability to secure a satisfactory tax ruling from the regulatory authority, negative performance of the parking industry, other changes that impact the ability of the Company to effect a reorganization and the timing thereof. This news release makes reference to the net book value per share which is a non-GAAP financial measure. The Company calculates the net book value per share as it believes it to be an important metric that shareholders use and frequently request and refer to because shareholders often view the Company as an holding company of investments in private entities. Net book value is a non-GAAP financial measure that does not have any standardized meaning prescribed by Canadian GAAP and therefore it is unlikely to be comparable to similar measures presented by other issuers. This classification is not a Canadian GAAP measure and should not be considered either in isolation of, or as a substitute for, measures prepared in accordance with Canadian GAAP.
Cautionary Statement Regarding the Valuation of Investments in Private Entities
In the absence of an active market for its investments in private entities, fair values are determined by management using the appropriate valuation methodologies after considering the history and nature of the business, operating results and financial conditions, the outlook and prospects, the general economic, industry and market conditions, capital market and transaction market conditions, contractual rights relating to the investment, public market comparables, private market transactions multiples and, where applicable, other pertinent considerations. The process of valuing investments for which no active market exists is inevitably based on inherent uncertainties and the resulting values may differ from values that would have been used had an active market existed . The amounts at which the Company's investments in private entities could be disposed of may differ from the fair value assigned and the differences could be material. Estimated costs of disposition are not included in the fair value determination.
| C.A. Bancorp Inc. |
| 401 Bay Street, Suite 1600 |
| Toronto, Ontario M5H 2Y4 |
| Telephone: (416) 214-5985 |
| Fax: (416) 861-8166 |
Contact Information:
Kurt Brands
Chief Executive Officer
1-866-388-5985
416-861-8166 (FAX)
info@cabancorp.com
www.cabancorp.com