Newalta Corporation

TSX : NAL


Newalta Corporation

May 02, 2013 19:10 ET

Newalta Reports First Quarter 2013 Results, Increases Dividend

CALGARY, ALBERTA--(Marketwired - May 2, 2013) - Newalta Corporation ("Newalta") (TSX:NAL) today reported results for the three months ended March 31, 2013. Reflecting its continued positive long-term outlook and the momentum associated with growth initiatives, Newalta also announced a 10 percent increase in its quarterly dividend to $0.11 per share.

FINANCIAL HIGHLIGHTS1

Three months ended March 31,
($000s except per share data) (unaudited) 2013 2012 % Increase
(Decrease
)
Revenue 171,348 166,498 3
Gross profit 37,836 42,878 (12 )
- % of revenue 22 % 26 % (15 )
Net earnings 14,160 4,819 194
- per share ($) - basic 0.26 0.10 160
- per share ($) - basic adjusted(2) 0.11 0.25 (56 )
- per share ($) - diluted 0.26 0.10 160
Adjusted EBITDA(2) 27,721 36,073 (23 )
- per share ($)(2) 0.51 0.74 (31 )
Cash (used in) from operations (19,053 ) 36,240 (153 )
- per share ($) (0.35 ) 0.75 (147 )
Funds from operations(2) 23,699 33,345 (29 )
- per share ($)(2) 0.43 0.69 (38 )
Maintenance capital expenditures(2) 3,670 3,612 2
Growth capital expenditures(2) 16,871 28,574 (41 )
Dividends declared 5,473 3,893 41
- per share ($)(2) 0.10 0.08 25
Dividends paid 4,311 3,889 11
Book value per share, March 31 12.05 11.14 8
Weighted average shares outstanding 54,512 48,579 12
Shares outstanding, March 31,(3) 54,735 48,665 13
(1) Management's Discussion and Analysis and Newalta's Consolidated Financial Statements and notes are attached. References to Generally Accepted Accounting Principles ("GAAP") are synonymous with IFRS and references to Consolidated Financial Statements and notes are synonymous with Financial Statements.
(2) These financial measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Non-GAAP financial measures are identified and defined throughout the attached Management's Discussion and Analysis.
(3) Newalta has 54,871,253 shares outstanding as at May 2, 2013.

Management Commentary

"Results in Q1, as well as Q4 last year, were weighed down by slumping commodity prices and reduced drilling activity," said Al Cadotte, President and CEO of Newalta. "Our organic growth investments in onsite contracts, the expansion of our U.S. business and the addition of satellite facilities in our oilfield business are all delivering exceptional returns as we capitalize on our first-mover position in these markets. We will continue to execute our business plan in the quarters ahead to drive the strong, profitable growth of our company. We will realize substantial improvements in bottom-line performance when commodity prices and drilling activity recover.

"Adjusted EBITDA in Q2 is expected to be at least 20 percent higher than last year. We also anticipate strong increases in year-over-year performance in the second half as the returns from our recent capital investments are realized."

Dividend Increase

In determining the dividend, the Board of Directors considers a number of factors including forecasts for operating and financial results, maintenance and growth capital requirements, market activity and economic conditions. After a review of all factors, the Board approved a 10 percent increase in the quarterly cash dividend to $0.11 per share ($0.44 per share annualized) from $0.10 per share ($0.40 per share annualized), starting with the dividend payable to shareholders of record as of June 28, 2013.

Consolidated Overview

First quarter revenue was up 3% year-over-year to $171.3 million. Gross profit decreased 12% from Q1 2012 to $37.8 million, primarily due to lower commodity prices and drilling activity which impacted results by $6.4 million.

Adjusted EBITDA was $27.7 million, 23% lower than Q1 2012 resulting from reduced gross profit and higher Adjusted selling, general and administrative ("Adjusted SG&A") expenses. Of the increase in Adjusted SG&A, approximately half was due to a non-recurring expense, with the balance of the increase attributable to investments in people and people development to support our growth initiatives. Net earnings increased as a result of lower stock-based compensation expense, net finance charges and deferred income taxes. Our Total Debt to Adjusted EBITDA ratio increased from 2.36 in Q1 2012 to 2.94 in Q1 2013.

Capital expenditures for the three months ended March 31, 2013, were $20.5 million, focused primarily on growth capital projects in New Markets and Oilfield.

During the quarter, we were awarded a contract with Shell Canada Limited ("Shell") to process mature fine tailings ("MFT") at Shell's Jackpine Mine. Our capital investment for the contract is approximately $20 million and is included in our 2013 capital budget.

Operational Overview

In our New Markets Division, revenue increased 13% to $40.9 million in Q1 2013, while gross profit was down marginally to $13.0 million compared to Q1 2012. Strong demand for our onsite services was offset by a 30% decline in crude oil pricing and the timing of Heavy Oil contract and project work.

Oilfield Division revenue and gross profit of $48.6 million and $19.2 million, respectively, were essentially flat to last year. The impact of lower commodity prices and a 9% decline in active rigs of $3.4 million was offset by facility efficiency improvements.

Industrial Division revenue increased 2% to $81.9 million in the first quarter. Gross profit was down by $3.5 million to $5.6 million from Q1 2012. Increased demand for our services was offset by the impact of lower commodity prices of $1.5 million and reduced event-based business at Stoney Creek Landfill ("SCL").

Outlook

In Q2 2013, we anticipate Adjusted EBITDA be at least 20% higher than last year driven primarily by growth in New Markets from our MFT contracts with Syncrude Canada Ltd. ("Syncrude") and Shell, and increased project activity in the U.S. Based on our anticipated Q2 results, first half performance in 2013 will be at or near the first half of 2012. Oil and gas drilling activity is expected to be comparable to Q2 2012. In Industrial, we expect Ville Ste-Catherine ("VSC") volumes to be in line with our historical quarterly average while SCL volumes are expected to be below the historical quarterly average. We expect annual volumes at SCL to approximate historical averages. Changes in commodities are not anticipated to materially impact Q2 2013 performance, compared to 2012.

We continue to focus on growing our portfolio of longer term contracts, strengthening our foundation of stable cash flow, and maximizing cash flow from our existing assets. We have good visibility on our pipeline of organic growth capital projects, extending well into 2014. Capital spending will be prioritized towards long-term contracts which deliver the highest returns. We remain on target to spend approximately 40% of our capital budget of $190 million in the first half of 2013.

We continue to execute our business plan, and our strong balance sheet will allow us to weather short-term market fluctuations. We expect to improve our debt leverage ratio throughout the year, ending 2013 with Total Debt to Adjusted EBITDA lower than 2.50.

Growth from contract and project work, contributions from the 2012 capital program and continued market demand for our products and services will deliver increased performance compared to last year.

Quarterly Conference Call

Management will hold a conference call on Friday, May 3, 2013 at 11:00 a.m. (ET) to discuss Newalta's performance for the first quarter ended March 31, 2013. To participate in the teleconference, please call 877-440-9795. To access the simultaneous webcast, please visit www.newalta.com. For those unable to listen to the live call, a taped broadcast will be available at www.newalta.com and, until midnight on Friday, May 10, 2013 by dialing 800-408-3053 and using pass code 6716509 followed by the pound sign.

Newalta will hold its annual meeting of shareholders on Tuesday, May 7, 2013 at 11:00 a.m. Mountain Time.

Location: Newalta's corporate office, Building 'C'

220 - 12th Avenue, S.W.

Calgary, Alberta

For those unable to attend the annual meeting, the presentation will be webcast live at www.newalta.com and subsequently archived on Newalta's website.

The unaudited interim Condensed Consolidated Financial Statements and MD&A, which contain additional notes and disclosures, are available on our website at www.newalta.com under Investor Relations/Financial Reports.

About Newalta

Newalta is North America's leading provider of innovative, engineered environmental solutions that enable customers to reduce disposal, enhance recycling and recover valuable resources from industrial residues. We serve customers onsite directly at their operations and through a network of 85 locations in Canada and the U.S. Our proven processes, portfolio of more than 250 operating permits and excellent record of safety make us the first choice provider of sustainability enhancing services to oil, natural gas, petrochemical, refining, lead, manufacturing and mining markets. With a skilled team of more than 2,000 people, two decade track record of profitable expansion and commitment to commercializing new solutions, Newalta is positioned for sustained future growth and improvement. Newalta trades on the TSX as NAL. For more information, visit www.newalta.com.

SELECTED FINANCIAL INFORMATION

Three months ended March 31,
($000s, except where otherwise noted) (unaudited) 2013 2012 % Increase
(Decrease
)
New Markets
Revenue 40,858 36,131 13
Gross Profit 13,018 14,200 (8 )
- % of revenue 32 % 39 % (18 )
Revenue by Business Unit
U.S. 40 % 37 % 8
Heavy Oil 60 % 63 % (5 )
Assets Employed(1) 238,454 174,461 37
Oilfield
Revenue 48,632 50,452 (4 )
Gross Profit 19,177 19,515 (2 )
- % of revenue 39 % 39 % -
Assets Employed(1) 354,625 333,829 6
Industrial
Revenue 81,858 79,915 2
Gross Profit 5,641 9,163 (38 )
- % of revenue 7 % 11 % (36 )
Revenue by Business Unit
Western Industrial 24 % 26 % (8 )
Eastern Industrial 76 % 74 % 3
VSC as a percent of Industrial Division 40 % 34 % 18
Assets Employed(1) 428,775 421,377 2
Capital Expenditures
Maintenance capital expenditures 3,670 3,612 2
New Markets 252 275 (8 )
Oilfield 1,852 1,355 37
Industrial 838 1,081 (22 )
Growth capital expenditures 16,871 28,574 (41 )
New Markets 5,323 17,241 (69 )
Oilfield 5,242 5,394 (3 )
Industrial 2,838 2,932 (3 )
(1) "Assets employed" is provided to assist management and investors in determining the effectiveness of the use of the assets at a divisional level. Assets employed is the sum of capital assets, intangible assets and goodwill allocated to each division.

Condensed Consolidated Balance Sheets

(Unaudited - Expressed in thousands of Canadian Dollars)

March 31, 2013 December 31, 2012
Assets
Current assets
Cash - 409
Accounts and other receivables 147,081 150,347
Inventories 45,024 43,123
Prepaid expenses and other 14,098 10,627
206,203 204,506
Non-current assets
Property, plant and equipment 937,063 929,580
Permits and other intangible assets (Note 4) 58,433 58,614
Other long-term assets 31,438 23,443
Goodwill 102,615 102,615
TOTAL ASSETS 1,335,752 1,318,758
Liabilities
Current liabilities
Bank indebtedness 14,767 -
Accounts payable and accrued liabilities 121,202 181,876
Deferred revenue 6,656 6,494
Dividends payable (Note 9) 5,473 5,426
148,098 193,796
Non-current liabilities
Senior secured debt (Note 5) 126,001 76,500
Senior unsecured debentures (Note 6) 246,493 246,334
Other liabilities (Note 7) 1,598 4,228
Deferred tax liability 77,985 77,519
Decommissioning liability 75,969 78,941
TOTAL LIABILITIES 676,144 677,318
Shareholders' Equity
Shareholders' capital 401,200 394,048
Contributed surplus 2,881 2,881
Retained earnings 256,252 247,565
Accumulated other comprehensive loss (725 ) (3,054 )
TOTAL SHAREHOLDERS' EQUITY 659,608 641,440
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,335,752 1,318,758

Condensed Consolidated Statements of Operations

(Unaudited - Expressed in thousands of Canadian Dollars)

(Except per share data)

For the three months ended March 31,
2013 2012
Revenue 171,348 166,498
Cost of sales 133,512 123,620
Gross profit 37,836 42,878
Selling, general and administrative 22,963 29,538
Research and development 203 809
Earnings before finance charges and income taxes 14,670 12,531
Finance charges 6,593 6,758
Embedded derivative gain (Note 11) (7,068 ) (1,370 )
Net financing charges (recovery) expense (475 ) 5,388
Earnings before income taxes 15,145 7,143
Income tax expense 985 2,324
Net earnings 14,160 4,819
Net earnings per share (Note 8) 0.26 0.10
Diluted earnings per share (Note 8) 0.26 0.10
Supplementary information:
Amortization included within cost of sales 10,995 11,417
Amortization included in selling, general and administrative 3,395 3,321
Total amortization 14,390 14,738

Condensed Consolidated Statements of Comprehensive Income

(Unaudited - Expressed in thousands of Canadian Dollars)

For the three months ended March 31,
2013 2012
Net earnings 14,160 4,819
Other comprehensive income (loss):
Exchange difference on translating foreign operations 2,361 (1,697 )
Unrealized loss on available for sale financial assets (Note 11) (32 ) (65 )
Other comprehensive income (loss) 2,329 (1,762 )
Total comprehensive income 16,489 3,057

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited - Expressed in thousands of Canadian Dollars)

Shareholders' capital Contributed surplus Retained earnings Accumulated other comprehensive income (loss ) Total
Balance, December 31, 2011 317,386 2,700 223,679 (1,844 ) 541,921
Changes in equity for the three months ended March 31, 2012
Exercise of options 868 - - - 868
Dividends declared - - (3,893 ) - (3,893 )
Other comprehensive loss - - - (1,762 ) (1,762 )
Net earnings for the period - - 4,819 - 4,819
Balance, March 31, 2012 318,254 2,700 224,605 (3,606 ) 541,953
Changes in equity for the nine months ended December 31, 2012
Exercise of options 1,575 - - - 1,575
Issuance of shares 74,400 - - - 74,400
Cancellation of shares (181 ) 181 - - -
Dividends declared - - (15,025 ) - (15,025 )
Other comprehensive income - - - 552 552
Net earnings for the period - - 37,985 - 37,985
Balance, December 31, 2012 394,048 2,881 247,565 (3,054 ) 641,440
Changes in equity for the three months ended March 31, 2013
Exercise of options 5,912 - - - 5,912
Reduction of 2012 share issuance costs 124 - - - 124
Shares issued under dividend reinvestment plan 1,116 - - - 1,116
Dividends declared - - (5,473 ) - (5,473 )
Other comprehensive income - - - 2,329 2,329
Net earnings for the period - - 14,160 - 14,160
Balance, March 31, 2013 401,200 2,881 256,252 (725 ) 659,608

Condensed Consolidated Statements of Cash Flows

(Unaudited - Expressed in thousands of Canadian Dollars)

For the three months ended March 31,
2013 2012
Cash provided by (used for):
Operating Activities
Net earnings 14,160 4,819
Adjustments for:
Amortization 14,390 14,738
Income tax expense 985 2,324
Income taxes paid (207 ) (10 )
Stock-based compensation (recovery) expense (4,313 ) 7,382
Finance charges 6,593 6,758
Embedded derivative gain (Note 11) (7,068 ) (1,370 )
Finance charges paid (1,006 ) (984 )
Other 165 (312 )
Funds from Operations 23,699 33,345
(Increase) decrease in non-cash working capital (Note 12) (41,724 ) 3,248
Decommissioning costs incurred (1,028 ) (353 )
Cash (used in) from Operating Activities (19,053 ) 36,240
Investing Activities
Additions to property, plant and equipment (Note 12) (39,782 ) (32,865 )
Other (3,645 ) 175
Cash used in Investing Activities (43,427 ) (32,690 )
Financing Activities
Issuance of shares 1,647 -
Increase in senior secured debt 49,501 5,471
Increase (decrease) in bank indebtedness 14,767 (4,713 )
Decrease in note receivable 51 55
Dividends paid (Note 9) (4,311 ) (3,889 )
Cash from Financing Activities 61,655 (3,076 )
Effect of foreign exchange on cash 416 (474 )
Change in cash (409 ) -
Cash, beginning of period 409 -
Cash, end of period - -

FORWARD-LOOKING STATEMENTS

Certain statements contained in this document constitute "forward-looking statements". When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", and similar expressions, as they relate to Newalta Corporation and the subsidiaries of Newalta Corporation, or their management, are intended to identify forward-looking statements. In particular, forward-looking statements included or incorporated by reference in this document include statements with respect to:

  • future operating and financial results;
  • anticipated industry activity levels;
  • expected demand for our services;
  • business prospects and strategy;
  • capital expenditure programs and other expenditures;
  • the amount of dividends declared or payable in the future;
  • realization of anticipated benefits of growth capital investments, acquisitions and our technical development initiatives;
  • our projected cost structure; and
  • expectations and implications of changes in legislation.

Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including, without limitation:

  • general market conditions of the industries we service;
  • strength of the oil and gas industry, including drilling activity;
  • fluctuations in commodity prices for oil and the price we received for our recovered oil;
  • fluctuations in commodity prices for lead including the price differential we pay for lead feedstock and the price we receive for our lead products;
  • fluctuations in base oil prices including the price differential we pay for used oil and the price we receive for our finished lube oil products;
  • fluctuations in interest rates and exchange rates;
  • supply of waste lead acid batteries as feedstock to support direct lead sales;
  • demand for our finished lead products by the battery manufacturing industry;
  • our ability to secure future capital to support and develop our business, including the issuance of additional common shares;
  • the highly regulated nature of the environmental services and waste management business in which we operate;
  • dependence on our senior management team and other operations management personnel with waste industry experience;
  • the competitive environment of our industry in Canada and the U.S.;
  • success of our growth, acquisition and technical development strategies including integration of businesses and processes into our operations and potential liabilities from acquisitions;
  • potential operational and safety risks and hazards and obtaining insurance for such risks and hazards on reasonable financial terms;
  • the seasonal nature of our operations;
  • costs associated with operating our landfills and reliance on third party waste volumes;
  • risk of pending and future legal proceedings;
  • risk to our reputation;
  • our ability to attract and retain skilled employees and maintain positive labour union relationships;
  • open access for new industry entrants and the general unprotected nature of technology used in the waste industry;
  • possible volatility of the price of, and the market for, our common shares, and potential dilution for shareholders in the event of a sale of additional shares;
  • financial covenants in our debt agreements that may restrict our ability to engage in transactions or to obtain additional financing; and
  • such other risks or factors described from time to time in reports we file with securities regulatory authorities.

By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Many other factors could also cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements and readers are cautioned that the foregoing list of factors is not exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Furthermore, the forward-looking statements contained in this document are made as of the date of this document and are expressly qualified by this cautionary statement. Unless otherwise required by law, we do not intend, or assume any obligation, to update these forward-looking statements.

The information contained on our website does not form part of this press release.

RECONCILIATION OF NON-GAAP MEASURES

This Press Release contains references to certain financial measures, including some that do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS" or "GAAP") and may not be comparable to similar measures presented by other corporations or entities. These financial measures are identified and defined below:

"EBITDA", "EBITDA per share", "Adjusted EBITDA", and "Adjusted EBITDA per share" are measures of our operating profitability. EBITDA provides an indication of the results generated by our principal business activities prior to how these activities are financed, assets are amortized or how the results are taxed in various jurisdictions. In addition, Adjusted EBITDA provides an indication of the results generated by our principal business activities prior to recognizing stock-based compensation. Stock-based compensation, a component of employee remuneration, can vary significantly with changes in the price of our common shares. As such, Adjusted EBITDA provides improved continuity with respect to the comparison of our operating results over a period of time. EBITDA and Adjusted EBITDA are derived from the condensed consolidated statements of operations and comprehensive income. EBITDA per share and Adjusted EBITDA per share are derived by dividing EBITDA and Adjusted EBITDA by the basic weighted average number of shares.

They are calculated as follows:

Three months ended March 31,
($000s) 2013 2012
Net earnings 14,160 4,819
Add back (deduct):
Income taxes 985 2,324
Net finance (income) expense (475 ) 5,388
Amortization 14,390 14,738
EBITDA 29,060 27,269
Add back (deduct):
Stock-based compensation (recovery) expense (1,339 ) 8,804
Adjusted EBITDA 27,721 36,073
Weighted average number of shares 54,512 48,579
EBITDA per share 0.53 0.56
Adjusted EBITDA per share 0.51 0.74

"Adjusted net earnings" and "Adjusted net earnings per share" are measures of our profitability. Adjusted net earnings provides an indication of the results generated by our principal business activities prior to recognizing stock-based compensation recovery or expense and the gain or loss on embedded derivatives. Stock-based compensation, a component of employee remuneration, can vary significantly with changes in the price of our common shares. The gain on the embedded derivative is a result of the change in the trading price of the debentures and the volatility of the applicable bond market. As such, Adjusted net earnings provides improved continuity with respect to the comparison of our results over a period of time. Adjusted net earnings per share is derived by dividing Adjusted net earnings by the basic weighted average number of shares.

Three months ended March 31,
($000s) 2013 2012
Net earnings 14,160 4,819
Add back (deduct):
Stock-based compensation (recovery) expense (1,339 ) 8,804
Embedded derivative gain (7,068 ) (1,370 )
Adjusted net earnings 5,753 12,253
Adjusted net earnings per share 0.11 0.25

"Book value per share" is used to assist management and investors in evaluating the book value compared to the market value.

Three months ended March 31,
($000s) 2013 2012
Total Equity 659,608 541,953
Shares outstanding, March 31, 54,735 48,665
Book value per share 12.05 11.14

"Funds from operations" is used to assist management and investors in analyzing cash flow and leverage. Funds from operations as presented is not intended to represent operating funds from operations or operating profits for the period, nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS. Funds from operations is derived from the consolidated statements of cash flows and is calculated as follows:

Three months ended March 31,
($000s) 2013 2012
Cash (used in) from operations (19,053 ) 36,240
Add back (deduct):
Increase (decrease) in non-cash working capital 41,724 (3,248 )
Decommissioning obligations incurred 1,028 353
Funds from operations 23,699 33,345
Weighted average number of shares 54,512 48,579
Funds from operations per share 0.43 0.69

"Return on capital" is used to assist management and investors in measuring the returns realized from capital employed.

($000s) Q1 2013 TTM Q1 2012 TTM
Adjusted EBITDA 133,785 147,665
Total assets 1,335,752 1,177,052
Current liabilities (148,098 ) (167,640 )
Capital employed 1,187,654 1,009,412
2-Year net assets average 1,098,533 974,474
Return on capital (%) 12.2 % 15.2 %

References to EBITDA, EBITDA per share, Adjusted EBITDA, Adjusted EBITDA per share, Adjusted net earnings, Adjusted net earnings per share, Funds from operations, Funds from operations per share and Return on capital throughout this document have the meanings set out above. Adjusted SG&A is defined as SG&A adjusted for stock-based compensation and amortization.

Contact Information

  • Newalta Corporation
    Anne M. Plasterer
    Executive Director, Investor Relations
    (403) 806-7019
    www.newalta.com