Macro Enterprises Inc.
TSX VENTURE : MCR

Macro Enterprises Inc.

August 18, 2015 20:44 ET

Macro Enterprises Inc. Announces 2015 Second Quarter Results

FORT ST. JOHN, BRITISH COLUMBIA--(Marketwired - Aug. 18, 2015) - 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
2015 2014 2015 2014
(unaudited)
Revenue $45,842 $36,698 $76,080 $124,477
EBITDA1 7,371 2,726 11,440 7,830
Net earnings 3,812 495 5,340 2,648
Net earnings per share $0.12 $0.01 $0.17 $0.08
Weighted average common shares outstanding (thousands) 30,180 30,007
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 materially exceed industry standard safety averages. As at June 30, 2015 Macro Enterprises has now exceeded 8 quarters and 2.0 million man hours worked without a single lost time injury.
  • The Company is reporting its sixteenth consecutive profitable quarter with net income of $3.8 million and an EBITDA of $7.4 million despite challenging market conditions and an early spring break-up
  • During the quarter the Company elected to extinguish all term and mortgage debt due to the strength of its balance sheet and enhanced liquidity
  • The Company is reporting shareholders' equity of $91.3 million or $3.03 per share based on common shares issued and outstanding as at June 30, 2015
  • Subsequent to quarter end the Company completed its move into the new office facilities and disposed of its existing office space as anticipated

Second Quarter Results

Consolidated revenue increased $9.1 million or 25% to $45.8 million compared to $36.7 million in the second quarter last year. The increase in revenues realized in the quarter was due to higher volumes of work being performed during the seasonally slower spring break-up period. Most of the revenue in the quarter was derived from a large pipeline project and a new facilities job along with recurring revenues from integrity and maintenance work from its existing clients under master service agreements. In the second quarter last year, the Company worked on two larger facility jobs, the completion of a big inch pipeline job and a series of integrity digs for one of the Company's key clients.

Operating expenses were $36.1 million or 79% of revenue compared to $31.9 million or 87% of revenue in the second quarter last year. Operating expenses remained in-line with historical averages and were comparable with margins in the first quarter of fiscal 2015. The Company has been successful at maintaining its operating margins thru safe, timely and efficient execution of work and will continue to tightly monitor all operating costs under its control in an effort to remain competitive during this period of challenging market conditions. Margins in prior year's second quarter were negatively impacted by unanticipated problems and higher than expected costs from a larger project.

General and administrative expenses were down slightly or approximately $0.1 million to $2.3 million from $2.4 million being recorded last year. The Company's general and administrative expenditures reflects cost incurred in connection with the bid processes, professional fees, corporate wages, burdens and various other overheads, including rents, insurance, travel and administrative supplies that are not charged directly to projects. Despite challenging market conditions, the Company will remain active bidding and pursuing large scale jobs, along with maintaining its master service agreements with existing clients, and as such will continue to invest in business development and strategic initiatives. General and administrative costs should remain consistent going forward.

Depreciation of property, plant and equipment was $1.9 million and comparable to prior year's second quarter. Depreciation is calculated at various declining balance methods across the Company's multiple categories of property, plant and equipment and is used in guiding the annual capital expenditure estimates. Residual values, methods of amortization and useful lives of the assets are reviewed annually and adjusted if appropriate.

During the second quarter the Company recognized non-cash stock-based compensation charges of $309,000 relating to options granted prior year. The Company anticipates recognizing an additional $0.7 million in stock-based compensation pertaining to the 2014 option grant over the next 4 quarters.

Finance costs were down $43,000 from prior year's second quarter costs of $198,000 despite incurring an additional interest charge of $35,000 on the prepayment of the Company's mortgage during the quarter. As a result of a strong working capital position, and in anticipation of its new $115 million senior secured credit facility, the Company elected to extinguish all of its existing term debt and its mortgage allowing for future annual interest savings of $200,000.

Income tax expense in the quarter of $1.5 million was in line with current enacted tax rates of approximately 28%.

Net income was $3.8 million ($0.12 per share) compared to $0.5 million ($0.01 per share) recognized during the three months ended June 30, 2015. The increase in net income was a result of a stronger than anticipated second quarter with increased levels of work activity and improved operating margins being realized over prior year's results.

Outlook

Activity levels in the oil and gas industry have been materially impacted across Western Canada as a result of the volatility in commodity prices. Although the pricing uncertainty is affecting activity and many projects have been delayed, large oil and gas companies are continuing to request bids on significant projects, both LNG-related and not. With a solid balance sheet, enhanced liquidity and its industry leading health, safety and environmental practices, the Company is in excellent financial shape to address these uncertain times.

Macro will remain geographically focused and financially disciplined. The Company will maintain its focus on working with blue chip pipeline owners and operators to carry out their construction and maintenance programs. However, as a result of challenging market conditions and client project scheduling delays, the Company is presently anticipating a protracted slower second half for fiscal 2015. With operating margins expected to remain consistent, revenues in the third quarter should average what was achieved in the first two quarters of this year. Recurring revenues from its multiple existing master service agreements will represent the bulk of activity.

As part of its overall strategy to develop a significant backlog of work and revenue certainty, including seeking its new credit facilities, the Company is seeking out pipeline and facilities 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 the LNG project owners regarding future pipeline and facilities construction.

The Company's new revolving operating facility will provide enhanced flexibility and essential funding support as the Company works to realize on those large-scale potential growth opportunities. The secured letter of credit facility is intended to facilitate the issuance of letters of credit to support qualifying projects.

Macro has also been approached by a number of its clients to assist with budget and constructability estimates, on fee based recovery arrangements, for major pipeline and facility projects including LNG related opportunities. These projects are scheduled for approvals by late 2015 to early 2016.

New $115 Million Senior Secured Credit Facility

On July 31, 2015, the Company closed in escrow its new $65 million three-year revolving operating credit facility pursuant to a Credit Agreement with The Toronto-Dominion Bank ("TD Bank"), National Bank of Canada and Export Development Canada ("EDC"). A separate agreement with TD Bank for the provision of a $50 million letter of credit facility will close upon the final sign-off of inter-creditor subordination and indemnity agreements. Macro's obligations under the Credit Agreement are secured in first priority against all the assets of the Company and of its material subsidiaries.

The Company has the right, subject to customary conditions, to increase the amount of the operating facility by up to $20 million by securing increased commitments from one or more of the initial lenders or by securing one or more new lenders.
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.

Conference Call

The Company will host a conference call at 8 am PDT on Wednesday, August 19, 2015 to discuss the 2015 second quarter results. The conference call can be accessed by dialing 1-888-390-0546 and referencing conference ID 96560780.

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

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

    Jeff Redmond
    C.F.O.
    (250) 785-0033