Hartco Inc.

Hartco Inc.

May 07, 2014 09:27 ET

Hartco Announces 2014 First Quarter Results

MONTREAL, QUEBEC--(Marketwired - May 7, 2014) - Hartco Inc. (TSX:HCI) today announced its financial results for the three months ended March 31, 2014.

Consolidated results for the three months ended March 31, 2014

Hartco Inc. ("Hartco") posted consolidated revenues of $63.1 million for the three months ended March 31, 2014, compared to $70.2 million for the same period last year, and a net loss of $1.0 million or -$0.08 per share on a diluted basis compared to a net loss of $0.9 million or -$0.07 per share on a diluted basis, for the corresponding period in 2013. Included in operating results are net earnings of $0.5 million for the first quarter of 2014 and $0.7 million for the corresponding period in 2013

Effective February 3, 2014, the new franchising and distribution model announced by the Company in October 2013 was fully implemented. As a result of the foregoing change, the Company has reclassified the results of the disposed business as discontinued operations.

"First quarter 2014 revenues and earnings were adversely affected by enterprise software licensing contract renewals that could not be invoiced until the month of April, as well as weaker than anticipated demand in Alberta and Quebec." said Pat Waid, Hartco's President and Chief Operating Officer.

Financial Position

Hartco ended the first quarter of 2014 with a cash position of $27.9 million and no debt.

Hartco Outlook

"The transformation of Hartco into a services-led IT solution provider is essential to the Company's long-term success and we will continue to invest in lifecycle management services capabilities to drive a differentiated customer experience." said Pat Waid. "As we review strategic options, Hartco will continue to adapt its business model and explore opportunities to accelerate success in response to emerging trends, opportunities and challenges."

Detailed Financial Information

Detailed financial information pertaining to Hartco's quarterly and annual results can be accessed at www.sedar.com or at www.hartco.com. The quarterly and annual financial statements have been prepared in accordance with the International Financial Reporting Standards ("IFRS").

About Hartco Inc.

Hartco Inc. (TSX:HCI) has been a leader in the Canadian information technology business for more than thirty years. Through its operating divisions, which together include 47 locations across Canada, Hartco Inc. delivers information technology solutions to private and public sector organizations of every size. For more information, please visit www.hartco.com.

Forward-Looking Statements

This news release contains forward-looking information. Except for historical information contained herein, the statements in this document are forward-looking. Forward-looking statements involve known and unknown risks and uncertainties, which may cause actual results in future periods to differ materially from forecasted results. Those risks include, among others, changes in customer demand for information technology products or services, changes in supplier pricing actions or terms, customer orders, pricing actions by competitors, changes in laws and regulations and general changes in economic conditions. Risks that could cause our results to differ materially from our expectations are discussed in our Annual Management's Discussion & Analysis ("MD&A").

(In thousands of dollars, except per share amounts)
Q1 2014 Q1 2013
Revenues 63,077 70,216
Adjusted EBITDA (loss) (1,178 ) (2,018 )
Net loss from continuing operations (1,478 ) (1,611 )
Net earnings from discontinued operations 455 710
Net loss (1,023 ) (901 )
Diluted earnings (loss)
per share (0.08 ) (0.07 )
Free cash flow (2,405 ) (2,597 )
Adjusted free cash flow (1,565 ) (2,565 )
Cash 27,869 24,850

Non-IFRS Financial Measures

Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other entities. In the following paragraphs, we have provided a description of our non-IFRS and have reconciled these amounts to IFRS measures. How the non-IFRS measures are used by the Company are described in the captions below.

Adjusted EBITDA

Adjusted EBITDA is a non-IFRS financial measure. Adjusted EBITDA is used by management to evaluate the financial and operating performance of the business at a consolidated level and the contribution of the Company's segments. Management believes that Adjusted EBITDA provides a better indication of the ongoing financial performance of the Company.

The Company defines Adjusted EBITDA as net (loss) earnings from continuing operations excluding financial costs, depreciation and amortization, income tax expense (recovery), non-recurring gains or losses, impairment charges and the share of results of equity investments.

The reconciliation of Adjusted EBITDA from net loss from continuing operations is as follows:

Adjusted EBITDA reconciliation

Q1 2014 Q1 2013
Net loss from continuing operations (1,478 ) (1,611 )
Adjusted for:
Income tax recovery - (352 )
Share of (earnings) of equity investments
(net of income tax) (234 ) (454 )
Net financial costs 112 8
Depreciation and amortization (1) 422 391
Adjusted EBITDA (loss) (1,178 ) (2,018 )
(1) Depreciation and amortization is allocated to cost of goods sold, direct expenses, marketing and selling expenses, and general administrative expenses in the Statements of Loss and Comprehensive Loss.

Free Cash Flow and Adjusted Free Cash Flow

Free Cash Flow and Adjusted Free Cash flow are non-IFRS measures and are used as indicators of financial strength and performance. Because they exclude many items included in the financial statements, they should not be used as a measure of the Company's liquidity. Accordingly, investors are encouraged to use IFRS measures when evaluating the Company's financial performance or liquidity.

The Company uses Free Cash Flow to determine its continuing capacity to generate discretionary cash from operations after using cash to maintain or expand its asset base. It does not represent the cash flow in the period available for management to use at its discretion, which may be affected by other sources and non-discretionary use of cash.

Free Cash Flow is defined as cash flows from operating activities as reported in accordance with IFRS, less adjustments for:

  • financial income; and
  • total capital expenditures as reported in accordance with IFRS.

Capital expenditures are defined as cash outlays, capital in nature, required to maintain the business at its current operating capacity and efficiency level, including additions to intangible assets.

The Company believes the use of Adjusted Free Cash Flow is meaningful as the use of this financial measure provides the Company and the users of its financial statements with supplemental information about the impact on the Company's cash flows from the items specified below. Adjusted Free Cash Flow is a measure of liquidity that management uses in its business as an alternative to net cash provided by (used in) operating activities.

Adjusted Free Cash Flow is defined as cash flows from operating activities as reported in accordance with IFRS, less adjustments for:

  • financial income;
  • total capital expenditures as reported in accordance with IFRS;
  • dividends received from equity investments; and
  • the net decrease (increase) in long-term receivables.

The reconciliation of cash flow from operations to Free Cash Flow and Adjusted Free Cash Flow is as follows:

Free Cash Flow and Adjusted Free Cash Flow reconciliation

Q1 2014 Q1 2013
Cash flow used in operating activities (2,430 ) (2,352 )
Financial income 30 96
Additions to property and equipment and intangible assets (5 ) (341 )
Free cash flow (2,405 ) (2,597 )
Dividends received from equity investments 750 -
Net decrease in long-term receivables 90 32
Adjusted free cash flow (1,565 ) (2,565 )

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