Enterprise Group, Inc.
TSX : E

Enterprise Group, Inc.

November 12, 2014 19:12 ET

Enterprise Group Announces Record Third Quarter 2014 Revenues

ST. ALBERT, ALBERTA--(Marketwired - Nov. 12, 2014) - Enterprise Group, Inc. ("Enterprise," or "the Company") (TSX:E) is pleased to announce its financial results for the three month period ended September 30, 2014 ("the third quarter").

THIRD QUARTER HIGHLIGHTS AND SIGNIFICANT EVENTS

  • Quarterly revenue of $18.8 million, an increase of $8.8 million when compared to the prior year.
  • Quarterly EBITDAS of $4.5 million, an increase of $0.7 million when compared to the prior year.
  • On October 15, 2014, the Company completed its acquisition of Westar Oilfield Rentals Inc. ("Westar"), a privately held oilfield site service company, for a purchase price of approximately $13.5 million.
  • On October 2, 2014, the Company announced that Calgary Tunnelling & Horizontal Augering Ltd. ("CTHA") had taken delivery of the Direct Pipe® System ("Direct Pipe"), one of the most advanced tunnelling systems in the world.
Three months Three months Nine months Nine months
Consolidated: September 30, September 30, September 30, September 30,
2014 2013 2014 2013
Revenue $ 18,785,208 $ 10,002,040 $ 53,962,130 $ 23,737,273
Gross margin $ 6,934,298 $ 4,322,424 $ 22,989,799 $ 11,196,344
Gross margin % 37 % 43 % 43 % 47 %
EBITDAS $ 4,547,281 $ 3,886,648 $ 14,250,986 $ 7,792,812
Net Income $ 1,538,087 $ 3,948,137 $ 6,194,861 $ 5,572,096
EPS $ 0.01 $ 0.05 $ 0.05 $ 0.08
Total Assets $ 135,512,831 $ 58,907,687 $ 135,512,831 $ 58,907,687

Enterprise's third quarter results reflect both the continued positive impact of the Company's acquisitions and increasing demand for the Company's services. The benefit of these factors is highlighted by the Company's quarterly revenue of $18.8 million, which represents an 88% improvement when compared to prior year, and the Company's quarterly EBITDAS of $4.6 million, which represents a 17% improvement when compared to the prior year.

Enterprise recorded an EBITDAS margin of 24.2% during the third quarter, a decline of 14.7 percentage points when compared to the prior year. This decline can be primarily distributed to the high-level of demand for the Company's services, which was necessitated extensive use of third-party equipment during the third quarter. This metric is expected to improve moving forward, as subcontracted equipment will be partially replaced by the capital assets the Company purchased over the course of 2014.

On September 30, 2014, Enterprise announced that it had completed its $20.0 million of planned capital expenditures for 2014, and that all equipment purchased under the program had been both received and deployed. These capital expenditures are expected to create improvements in both the Company's revenue and operating margins.

"We are satisfied by Enterprise's results for the third quarter, which represent record quarterly revenues for our business," stated Leonard Jaroszuk, the Company's Chief Executive Officer. "These record revenues are testament to both the contributions of our acquisitions and the continued strong demand for our services.

"The acquisitions made since the beginning of 2013 have generated top line synergies, reflecting our continued integration efforts. We fully expect that Westar, our most recent addition, will continue this trend. Westar will be immediately accretive to Enterprise's business, facilitate several major new client relationships, and - perhaps most importantly - further establish our position as a key player within Western Canada's oilfield service industry.

"During the third quarter, demand continued to exceed our operating capacity. While we are obviously pleased by how this reflects upon the quality of our service, it has forced us to rely heavily upon third-party equipment, resulting in considerable pressure upon our operating margins. Fortunately, we expect that this pressure will be partially alleviated by the equipment purchased through our recently completed $20 million capital program.

"As Enterprise closes out 2014, we continue to experience strong demand driven in part by our expanding offering, and in part by the economics of the locations we service," concluded Mr. Jaroszuk. "The economics of these locations - particularly those sites in the Cardium, Duvernay, and Montney formations - have proven remarkably resilient, and we believe will remain so even if energy prices encounter further headwinds. We are thus confident that demand will remain high moving forward, including during the fourth quarter. This period will also reflect a full three months of contributions from both our new acquisition and our newly received Direct Pipe System, which we believe will provide our business with a major competitive advantage. As a result, I am very pleased with the Company's trajectory."

Utilities/Infrastructure Division

Utilities/ Infrastructure Construction: Three months
September 30,
Three months
September 30,
Nine months
September 30,
Nine months
September 30,
2014 2013 2014 2013
Revenue $ 12,039,727 $ 9,640,012 $ 28,828,687 $ 17,797,820
Increase $ 2,399,715 $ 11,030,867
EBITDAS $ 3,549,622 $ 5,398,454 $ 8,321,121 $ 7,825,295
Increase $ (1,848,832 ) $ 495,826
Total Assets $ 56,441,135 $ 17,305,836 $ 56,441,135 $ 17,305,836
Increase $ 39,135,299 $ 39,135,299

Enterprise's Utilities/Infrastructure Division generated third quarter revenue of $12.0 million, an increase of $2.4 million when compared to the prior year. This improvement can be attributed an increase in activity in the markets that Enterprise serves, the expansion and extension of projects from major customers, and the expansion of the service equipment fleet, which allowed the Company to increase its capacity. This division's EBITDAS margin of 29% reflects an increased use of third-party equipment necessitated by strong demand at T.C. Backhoe. This metric is expected to improve as recently purchased capital assets replace subcontracted equipment currently in use.

Equipment Rental Division

Three months Three months Nine months Nine months
Equipment Rental: September 30, September 30, September 30, September 30,
2014 2013 2014 2013
Revenue $ 6,745,481 $ 362,028 $ 25,133,443 $ 5,939,453
Increase $ 6,383,453 $ 19,193,990
EBITDAS $ 1,935,600 $ (456,714 ) $ 9,160,269 $ 2,865,328
Increase $ 2,392,314 $ 6,294,941
Total Assets $ 57,033,087 $ 34,990,220 $ 57,033,087 $ 34,990,220
Increase $ 22,042,867 $ 22,042,867

Enterprise's Equipment Rental Division generated third quarter revenue of $6.7 million, an increase of $6.4 million when compared to the prior year. This improvement was primarily due to the acquisition of Hart at the beginning of the first quarter of 2014. This division's EBITDAS margin of 29% reflects a change in revenue mix due to the acquisition of Hart, and is expected to improve as recently purchased capital assets replace subcontracted equipment currently in use.

Major and Subsequent Developments

Westar Acquisition

On October 15, 2014, Enterprise announced the completion of the acquisition of Westar Oilfield Rentals Inc., a privately held oilfield site service company, for an aggregate purchase price of $13.5 million. Westar's equipment fleet currently consists of nearly 400 owned pieces. The purchase price will be satisfied through a combination of $10.0 million in cash, $2.0 million in Enterprise shares (2.5 million shares at a price of $.80 per share), and $1.5 million in vendor take-back financing, which will be paid over the next two years.

Increased Credit Facility

On October 15, 2014, in conjunction with the acquisition of Westar, Enterprise announced that it had accepted a term sheet presented by PNC Bank Canada Branch to increase the Company's senior secured finance facility to $45.0 million. This facility, which carries an interest rate of prime plus 1.5%, was previously increased from $20.0 million to $35.0 million in November of 2013.

Direct Pipe® System

On October 2, 2014, Enterprise announced that its CTHA division had taken delivery of the Direct Pipe tunnelling system. Direct Pipe, is a sophisticated hybrid that incorporates the best features of both micro tunnelling and horizontal directional drilling. Management believes that the Direct Pipe System is recognized for its economic advantages, swift installations and significantly reduced environmental impact relative to alternative technologies. Enterprise also announced that, as a result of its Direct Pipe capabilities, CTHA had been awarded a significant waterway crossing project from a major Alberta based corporation. The Direct Pipe system will be employed to install a 42-inch pipe casing under the Bow River in the city of Calgary, Alberta. The value of this project, which the Company expects to complete within the fourth quarter of 2014, is approximately $2.5 million.

Conference Call Information

Enterprise will host a conference call for investors and analysts tomorrow, November 13, 2014, at 8:00 AM Pacific, in order to review the financial results for the period ended September 30, 2014. To participate in the conference call, please dial 416-340-2218, or toll free at 866-225-6564.

About Enterprise Group, Inc.

Enterprise Group, Inc. is a consolidator of construction services companies operating in the energy, utility and transportation infrastructure industries. The Company's focus is primarily construction services and specialized equipment rental. The Company's strategy is to acquire complementary service companies in Western Canada, consolidating capital, management, and human resources to support continued growth. Enterprise acquired of Artic Therm International Ltd. in September 2012, Calgary Tunnelling & Horizontal Augering Ltd. in June 2013, Hart Oilfield Rentals in January 2014, and Westar Oilfield Rentals Inc. in November 2014. More information is available at the Company's website, www.enterprisegrp.ca.

Forward Looking Information

Certain statements contained in this news release constitute forward-looking information. These statements relate to future events or the Company's future performance. The use of any of the words "could", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Company's current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. The Company disclaims any intention or obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

Non-IFRS Measures

The Company uses International Financial Reporting Standards ("IFRS"). EBITDAS is not a measure that has any standardized meaning prescribed by IFRS and is therefore referred to as a non-IFRS measure. This news release contains references to EBITDAS. This non-IFRS measure used by the Company may not be comparable to a similar measure used by other companies. Management believes that in addition to net income, EBITDAS is a useful supplemental measure as it provides an indication of the results generated by the Company's principal business activities prior to consideration of how those activities are financed or how the results are taxed. EBITDAS is calculated as net income excluding depreciation, amortization, interest, taxes and stock based compensation.

Contact Information

  • Enterprise Group, Inc.
    Investor Relations
    Candice Williams or Nathan Sellyn
    780-328-3863
    contact@enterprisegrp.ca

    Enterprise Group, Inc.
    Leonard Jaroszuk
    President & CEO
    780-418-4400

    Enterprise Group, Inc.
    Desmond O'Kell
    Senior Vice-President
    780-418-4400
    www.enterprisegrp.ca