Macro Enterprises Inc.
TSX VENTURE : MCR

Macro Enterprises Inc.

August 27, 2014 19:15 ET

Macro Enterprises Inc. Announces 2014 Second Quarter Results

FORT ST. JOHN, BRITISH COLUMBIA--(Marketwired - Aug. 27, 2014) - Macro Enterprises Inc. (TSX VENTURE:MCR) -

Summary of financial results
(thousands of dollars except per share amounts)
Three months ended
June 30
Six months ended
June 30
2014 2013 2014 2013
(unaudited)
Revenue $ 36,698 $ 37,282 $ 124,477 $ 97,404
EBITDA1 2,726 9,814 7,830 24,835
Net earnings 495 5,710 2,648 15,395
Net earnings per share $ 0.01 $ 0.21 $ 0.08 $ 0.61
Weighted average common shares outstanding (thousands)
30,007

25,120

Note 1 - References to EBITDA are to net income from continuing operations before interest, taxes, amortization and impairment charge. EBITDA is not an earnings measure recognized by International Financial Reporting Standards ("IFRS") and does not have a standardized meaning prescribed by IFRS. Management believes that EBITDA is an appropriate measure in evaluating the Company's performance. Readers are cautioned that EBITDA should not be construed as an alternative to net income (as determined under IFRS) as an indicator of financial performance or to cash flow from operating activities (as determined under IFRS) as a measure of liquidity and cash flow. The Company's method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, the Company's EBITDA may not be comparable to similar measures used by other issuers.

Highlights

  • The Company continues to build on and maintains a strong working capital position increasing it from $40.3 million as at December 31, 2013 to $41.4 million as at June 30, 2014

  • The Company added a net $4.7 million of new property, plant and equipment. In addition, the Company obtained a 3rd party valuation of its existing fleet of equipment that shows a surplus in excess of $30 million over book value

  • The Company reduced total long-term debt by $1.5m from year end to $18.8 million as at June 30, 2014

  • Revenues were comparable to 2013 Q2 revenues, however, operating margins decreased as a result of the absorption of a loss from a strategic job

Second quarter results

Consolidated revenue was $36.7 million compared to $37.3 million in the second quarter last year. Most of the revenue in the quarter was derived from two larger facility jobs, the completion of a big inch pipeline project and a series of integrity digs for one of the Company's key customers. In the second quarter last year, the Company worked on three larger facility and pipeline projects as well as maintenance and pipeline integrity work for two other customers.

Operating expenses were $31.9 million or 87% of revenue compared to $25.5 million or 68% of revenue in the second quarter last year. The decline in operating margins as reported was the result of carry over completion work performed on a large pipeline project in Fort McMurray which had commenced in December 2013 and was materially accounted for in the first quarter 2014. The increased costs have resulted in lower than anticipated profits for the Company. For strategic reasons, Macro originally bid this job at low margins but unanticipated problems with the project resulted in a final loss of $8.0 million dollars of which an addition $1.1 million dollars was accounted for this quarter completing and demobilizing the job. Total operating expenditures incurred in the second quarter of 2014 for a strategic job amounted to $4.9 million dollars compared to $3.8 million dollars recognized as revenue.

Macro has entered into discussions with the pipeline operator requesting additional compensation. Additional compensation, if any, will be recorded when such further compensation has been formally agreed to.

During the prior year three month period ended June 30th the Company realized improved bid margins and a greater percentage of non-fixed price work that resulted in improved operating margins compared to prior periods.

General and administrative expenses were $2.4 million, up from $2.2 million last year, but consistent with levels of the most recent quarter. Costs were higher compared to prior year as a result of increased professional fees and additional staff costs associated with the increased work activity. As part of the Company's strategy to pursue large scale projects, it incurred significant expenditures in connection with the bid process. It anticipates that this will continue. In addition, the Company has engaged the advisory services of an investment bank to assist in evaluating its financial requirements for large scale projects. In this regard, the Company also commissioned an independent valuation of its existing fleet of equipment which provided for a fair market value in excess of $82 million before fiscal 2014 additions.

Total depreciation expense of $1.8 million was comparable to prior year period reflecting the additional assets obtained in the November 2012 acquisition.

Interest expense of $0.2 million was approximately $0.1 million lower than the second quarter last year as a result of improved interest rates and a decrease in total amount of debt outstanding.

Income tax expense in the quarter of $0.2 million was in line with current enacted tax rates of approximately 26.6%.

Net income was $0.5 million ($0.01 per share) compared to $5.7 million ($0.21 per share). The decrease in net income is a result of increased operating costs being incurred during the quarter.

OUTLOOK

Activity in the oil and gas industry in western Canada remains very active. Macro is strategically pursuing multiple large scale potential projects that combine commercial, logistic, and time scheduled criteria that are conducive to minimizing risk and maximizing the synergies of pipeline and facility construction. Macro is continuing to see benefits from numerous pipeline integrity and facility projects derived from its multiple major clients. However, primarily as a result of customer project scheduling delays within the industry, the Company is expecting revenues in the third quarter of fiscal 2014 to be below those recorded in third quarter of fiscal 2013 with total revenues being recognized for the nine months ended September 30, 2014 to be slightly less than prior year. With the completion of the strategic pipeline project in the second quarter, the Company is targeting margins more in line with historical averages and as such expects to see significant financial improvements to its operations over the balance of fiscal 2014.

In addition, the Company is seeking out pipeline construction contracts in connection with the Liquefied Natural Gas (LNG) projects being planned on the west coast of British Columbia, an industry that is anticipated to bring substantial economic activity to British Columbia over the next 30 years. Macro has completed bid processes and has entered into discussions with several of the LNG project owners regarding future pipeline and facilities construction.

Macro's core business is providing pipeline and facilities construction and maintenance services to major companies in the oil and gas industry. The Company's corporate office is in Fort St. John, British Columbia. Its shares are listed on the TSX Venture Exchange under the symbol MCR. Information on the Company's principal operating unit, Macro Industries Inc., can be found at www.macroindustries.ca.

Forward Looking Statements

Certain statements in this news release may include forward-looking information that involves various risks and uncertainties. These may include, without limitation, statements regarding expected revenues, expenses and industry trends and the pursuit of strategic acquisitions. These risks and uncertainties include, but are not restricted to, global economic conditions, government regulation of energy and resource companies, seasonal weather patterns, maintaining and increasing market share, terrorist activity, the price and availability of alternative fuels, the availability of pipeline capacity, and potential instability or armed conflict in oil producing regions. These risks and uncertainties may cause actual results to differ from information contained herein. There can be no assurance that such forward-looking statements will prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. These statements are based on the estimates and opinions of management on the dates they are made and are expressly qualified in their entirety by this notice. Except as required by law, the Company assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Macro Enterprises Inc.
    Frank Miles
    President and C.E.O.
    (250) 785-0033

    Macro Enterprises Inc.
    Jeff Redmond
    Interim C.F.O.
    (250) 785-0033