Newalta Corporation
TSX : NAL

Newalta Corporation

November 04, 2014 18:49 ET

Newalta Reports Strong Third Quarter 2014 Results

CALGARY, ALBERTA--(Marketwired - Nov. 4, 2014) - Newalta Corporation (Newalta) (TSX:NAL) today reported results for the three and nine months ended September 30, 2014.

FINANCIAL HIGHLIGHTS(1)

Three months ended
September 30,
Nine months ended
September 30,
($000s except per share data)
(unaudited)
2014 2013 % Increase
(Decrease)
2014 2013 % Increase
(Decrease)
Revenue 228,431 212,112 8 629,325 579,597 9
Gross profit 64,674 59,231 9 160,009 142,443 12
- % of revenue 28% 28% - 25% 25% -
Net earnings 16,570 13,158 26 14,890 32,261 (54)
- per share ($) - basic 0.30 0.24 25 0.27 0.59 (54)
- per share ($) - diluted 0.29 0.24 21 0.26 0.58 (55)
Adjusted net earnings(2) 24,373 20,417 19 46,583 38,063 22
- per share ($) - basic(2) 0.44 0. 37 19 0.84 0.69 22
Adjusted EBITDA(2) 59,115 51,199 15 137,208 117,270 17
- per share ($)(2) 1.06 0.93 14 2.46 2.14 15
Cash from operating activities 27,648 67,319 (59) 64,506 77,753 (17)
- per share ($) 0.49 1.22 (60) 1.16 1.42 (18)
Funds from operations(2) 55,422 49,339 12 106,223 100,682 6
- per share ($)(2) 0.99 0.90 10 1.91 1.84 4
Maintenance capital expenditures(2) 9,323 6,398 46 23,120 15,247 52
Growth capital expenditures(2) 37,863 37,012 2 83,978 83,675 -
Dividends declared 6,990 6,060 15 20,097 17,583 14
- per share ($)(2) 0.125 0.11 14 0.36 0.32 13
Dividends paid 5,567 4,918 13 15,006 12,937 16
Book value per share, September 30, 12.20 12.19 - 12.20 12.19 -
Weighted average shares outstanding 55,901 55,077 1 55,734 54,841 2
Shares outstanding, September 30,(3) 55,923 55,090 2 55,923 55,090 2
(1) Newalta's unaudited Condensed Consolidated Financial Statements are attached. References to Generally Accepted Accounting Principles (GAAP) are synonymous with IFRS and references to unaudited Condensed Consolidated Financial Statements 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 later in this document.
(3) Newalta has 55,998,393 shares outstanding as at November 4, 2014.

Management Commentary

"Results in the third quarter reflect the continued execution of our business plan with strong contributions from our growth investments," said Al Cadotte, President and CEO of Newalta.

"We remain on track to deliver 20 percent growth in Adjusted EBITDA for the year, primarily driven by our growth capital investments. We continue to make progress on the strategic review of our Industrial Division. At the same time, we are evaluating opportunities to accelerate our organic growth plans in the Oilfield and New Markets Divisions where we have seen excellent returns. In addition, we will pursue acquisition opportunities in the U.S. where we can add meaningful value and advance our growth strategy.

"Our 2014 capital program is fully committed with investments prioritized towards our key growth areas that provide the lowest risk, highest returns, and stable cash flows. The investments that we made this year will drive strong, profitable performance in 2015 and in the years ahead."

Consolidated Overview

Third quarter revenue was up 8% to $228.4 million. Adjusted EBITDA increased 15% to $59.1 million compared to the prior year. Adjusted EBITDA as a percentage of revenue was 26%, up from 24% in 2013. Net earnings for the quarter was $16.6 million, up 26% over prior year due to higher Adjusted EBITDA offset by restructuring and other related charges. Returns from growth capital investments in New Markets and Oilfield, coupled with the savings realized from the Rationalization Plan in Industrial drove growth.

Year-to-date, Adjusted EBITDA was $137.2 million, up 17% over the prior year. Year-to-date results reflect the same factors as the quarter and were also impacted by improved commodity prices in the first half of the year. Year-to-date net earnings was $14.9 million, down 54% from prior year due to higher finance charges associated with the early redemption of the Series 1 Senior Unsecured Debentures, higher stock-based compensation expense and restructuring and other related costs. Year-to-date adjusted net earnings, which excludes stock-based compensation, embedded derivative loss and restructuring and other related costs, was up 22% over prior year.

Operational Overview

New Markets revenue and gross profit in the quarter increased 17% and 9%, respectively, to $79.7 million and $26.8 million compared to prior year. Improved performance was primarily driven by growth in our U.S. operations. Year-to-date, revenue and gross profit increased by 25% and 14%, respectively, to $206.9 million and $63.8 million compared to prior year. Strong returns from growth capital investments, specifically the Mature Fine Tailings (MFT) contracts and U.S. expansion, coupled with increased activity at our Heavy Oil facilities drove improved performance.

Oilfield revenue and gross profit in the quarter increased 14% and 16%, respectively, to $55.7 million and $23.6 million compared to prior year. Performance was driven by returns from growth capital investments and increased demand at our facilities and for our drill site services. Year-to-date revenue and gross profit increased by 13% and 12%, respectively, to $155.3 million and $61.1 million compared to prior year. Results were impacted by the same factors as the quarter and were also impacted by improved commodity prices in the first half of the year.

Q3 2014 Industrial revenue and gross profit was $93.0 million and $14.3 million, respectively, flat compared to prior year. Year-to-date, revenue decreased 4% to $267.1 million while gross profit increased by 9% to $35.1 million, compared to prior year. Savings realized from the Rationalization Plan, gains from favourable commodity prices and increased demand for our eastern onsite services were offset by lower waste receipts at the Stoney Creek Landfill (SCL) and reduced contributions from oil recycling services (ORS).

Other Highlights

Newalta's Board of Directors declared $7.0 million in dividends or $0.125 per share, paid October 15, 2014, to shareholders on record as at September 30, 2014.

Revenue from contracts generated 16% of consolidated revenue on a trailing-twelve month (TTM) basis compared to 13% in TTM Q3 2013.

Q3 2014 Adjusted SG&A improved to 9.5% of revenue from 10.6% in 2013, primarily due to overhead reductions in the quarter as part of the Rationalization Plan initiated in the Industrial Division partially offset by executive recruitment charges.

Our Total Debt to EBITDA ratio of 2.85 in Q3 2014 remains flat to Q2 2014 (2.54 in Q3 2013). We anticipate ending the year at or about 2.50.

Capital expenditures for Q3 2014 and year-to-date were $47.2 million and $107.1 million, respectively, focused primarily on growth projects in New Markets and Oilfield. We remain on track to execute our capital expenditures program of approximately $145 million in growth capital and $35 million in maintenance capital this year.

Recent Developments

During the first quarter, we initiated the rationalization plan associated with the comprehensive review announced in December 2013 focused primarily on our Industrial Division (Rationalization Plan). To date, we have closed four facilities, reduced overhead in associated support functions and have redirected lines of business.

In Q2, we engaged RBC Capital Markets to conduct the Strategic Review of our Industrial Division. We are committed to optimizing value from this Division and continue to make progress as we evaluate our strategic alternatives for the Industrial Division. Concurrently, we are evaluating our organizational capacity and investment opportunities to accelerate growth in the New Markets and Oilfield divisions via organic growth capital or acquisitions in the U.S.

Year-to-date, we realized approximately $7.0 million in savings associated with the Rationalization Plan and remain on track to realize approximately $10.0 million in annualized cash savings. Including costs associated with the Strategic Review, we incurred approximately $7.4 million in one-time restructuring and other related costs and anticipate incurring an additional $2.0 million before year end. We will assess and update savings and cost estimates throughout the year.

In addition to the Rationalization Plan, we are assessing our cost structure across all divisions, including SG&A. We have identified areas to better align resources with our business needs and have initiated steps to realize additional cost savings.

On October 14, Newalta announced the appointment of John Barkhouse as President and Chief Executive Officer and to the Board of Directors, to succeed Al Cadotte, current President and Chief Executive Officer, effective November 10, 2014. Mr. Cadotte will remain on Newalta's Board until the Annual General Meeting in 2015. In addition, Mr. Cadotte will work with Mr. Barkhouse to ensure a seamless leadership transition.

Outlook

We remain on track to deliver Adjusted EBITDA growth of 20% over 2013. Growth capital investments combined with improved commodity prices, rationalization initiatives focused primarily on the Industrial Division and reductions in SG&A will drive strong returns and improved results over prior year.

In Q4 2014, Adjusted EBITDA growth will be driven by stronger activity levels and returns from our growth capital investments in New Markets and Oilfield. These gains will offset the impact of softer commodity prices and a shortfall in event-based volumes at SCL.

  • In New Markets, we expect growth to be driven by our onsite contracts as well as continued progress in the U.S. expansion. In the U.S., growth will be driven by increased contributions from our satellites and drill site services. Operations at our existing satellites are gaining momentum and will drive year-over-year growth. Drill site utilization is expected to trend near maximum practical capacity throughout the remainder of the year, with utilization of approximately 70% to 75%.
  • In Oilfield, we expect growth to be driven by our growth capital investments, specifically in satellites and productivity improvements, and steady drilling activity. Operations at our satellites commissioned in the second quarter continue to ramp up with construction on the two new 2014 satellites progressing as planned.
  • In Industrial, we expect gains in profitability from the initiatives implemented under the Rationalization Plan to be partially offset by lower contributions from SCL and ORS. SCL volumes in the fourth quarter are expected to be significantly lower than our previous guidance due largely to reduced event-based volumes. Q4 activity levels at Ville Ste-Catherine (VSC) are expected to be in line with 2013.

We continue to focus on growing our portfolio of longer term contracts, strengthening our foundation of stable cash flow, and maximizing returns from our existing assets.

Quarterly Conference Call

Management will hold a conference call on Wednesday, November 5, 2014 at 11:00 a.m. (ET) to discuss Newalta's performance for the quarter ended September 30, 2014. To participate in the teleconference, please call 416-340-2218 or 866-223-7781. 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 Wednesday, November 12, 2014 by dialing 800-408-3053 and entering passcode 5569913 followed by the pound sign.

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 2,100 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.

The press release contains certain statements that constitute forward-looking information. Please refer to the section below "Forward-Looking Information", for further discussion of assumptions and risks relating to this forward looking information. 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.

SELECTED FINANCIAL INFORMATION

Three months ended
September 30,
Nine months ended
September 30
,
($000s, except where otherwise noted) (unaudited) 2014 2013 % Increase
(Decrease)
2014 2013 % Increase
(Decrease)
New Markets(1)
Revenue 79,668 68,063 17 206,876 165,041 25
Gross Profit 26,849 24,674 9 63,784 55,916 14
- % of revenue 34% 36% (6) 31% 34% (9)
Revenue by Business Unit
Heavy Oil 71% 79% (10) 71% 72% (1)
U.S. 29% 21% 38 29% 28% 4
Divisional EBITDA(2) 34,128 30,577 12 80,399 68,488 17
Assets Employed(3) 325,923 270,345 21
Oilfield(1)
Revenue 55,730 48,994 14 155,327 137,127 13
Gross Profit 23,566 20,366 16 61,103 54,416 12
- % of revenue 42% 42% - 39% 40% (3)
Divisional EBITDA(2) 27,505 23,476 17 71,704 63,481 13
Assets Employed(3) 402,063 363,207 11
Industrial
Revenue 93,033 95,055 (2) 267,122 277,429 (4)
Gross Profit 14,259 14,191 - 35,122 32,111 9
- % of revenue 15% 15% - 13% 12% 8
Revenue by Business Unit
Western Industrial 24% 27% (13) 24% 25% (3)
Eastern Industrial 76% 73% 5 76% 75% 1
VSC as a percent of Industrial Division 31% 26% 19 34% 33% 5
Divisional EBITDA(2) 19,261 19,646 (2) 49,003 50,023 (2)
Assets Employed(3) 399,901 426,276 (6)
Capital Expenditures
Maintenance capital expenditures
New Markets 2,030 1,685 20 6,238 2,577 142
Oilfield 3,250 1,802 80 6,429 5,908 9
Industrial 2,904 2,221 31 7,187 4,486 60
Growth capital expenditures
New Markets 22,562 17,896 26 45,325 39,217 16
Oilfield 10,167 7,931 28 23,128 18,952 22
Industrial 2,139 5,412 (60) 6,155 11,517 (47)
(1) For comparative purposes, Cost of sales for the three and nine months ended September 30, 2013 has been restated for a reclassification of $468 and $1,558, respectively, from Oilfield to New Markets reflecting a change in reporting structure.
(2) Divisional EBITDA does not have any standardized meaning prescribed by GAAP.
(3) 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. Assets employed as defined does not include capital assets held by corporate. Corporate assets include information technology, leasehold improvements, and technical development.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - Expressed in thousands of Canadian Dollars)

September 30, 2014 December 31, 2013
Assets
Current assets
Cash 4,514 -
Accounts and other receivables 184,683 148,998
Inventories 55,870 57,037
Prepaid expenses and other assets 13,408 14,441
Assets held for sale 10,082 2,450
268,557 222,926
Non-current assets
Property, plant and equipment 1,073,884 1,011,921
Permits and other intangible assets 50,146 52,595
Other long-term assets 13,698 24,632
Goodwill 96,067 96,167
TOTAL ASSETS 1,502,352 1,408,241
Liabilities
Current liabilities
Bank indebtedness - 1,321
Accounts payable and accrued liabilities 197,848 217,283
Dividends payable 6,990 6,087
204,838 224,691
Non-current liabilities
Senior secured debt 183,762 117,136
Senior unsecured debentures 270,777 246,970
Other liabilities 2,640 2,537
Deferred tax liability 90,492 80,646
Decommissioning liability 67,710 61,099
TOTAL LIABILITIES 820,219 733,079
Shareholders' Equity
Shareholders' capital 420,961 409,894
Contributed surplus 10,810 15,251
Retained earnings 240,627 245,834
Accumulated other comprehensive income 9,735 4,183
TOTAL SHAREHOLDERS' EQUITY 682,133 675,162
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,502,352 1,408,241

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - Expressed in thousands of Canadian Dollars except per share data)

For the three months
ended September 30,
For the nine months
ended September 30,
2014 2013 2014 2013
Revenue 228,431 212,112 629,325 579,597
Cost of sales 163,757 152,881 469,316 437,154
Gross profit 64,674 59,231 160,009 142,443
Selling, general and administrative 29,067 33,014 87,859 80,919
Restructuring and other related costs 1,349 - 7,397 -
Earnings before finance charges and income taxes 34,258 26,217 64,753 61,524
Finance charges 7,436 6,646 27,915 20,249
Embedded derivative loss 3,314 507 11,641 370
Net financing charges expense 10,750 7,153 39,556 20,619
Earnings before income taxes 23,508 19,064 25,197 40,905
Income tax expense 6,938 5,906 10,307 8,644
Net earnings 16,570 13,158 14,890 32,261
Net earnings per share 0.30 0.24 0.27 0.59
Diluted earnings per share 0.29 0.24 0.26 0.58
Supplementary information:
Amortization included within cost of sales 16,220 14,468 41,097 39,549
Amortization included within selling, general and administrative 4,148 3,762 11,306 10,765
Total amortization 20,368 18,230 52,403 50,314

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited - Expressed in thousands of Canadian Dollars)

For the three months
ended September 30,
For the nine months
ended September 30,
2014 2013 2014 2013
Net earnings 16,570 13,158 14,890 32,261
Other comprehensive income (loss):
Exchange difference on translating foreign operations 5,532 (3,153) 5,579 3,713
Unrealized loss on available for sale investment - (127) (27) (159)
Other comprehensive income (loss) 5,532 (3,280) 5,552 3,554
Total comprehensive income 22,102 9,878 20,442 35,815

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited - Expressed in thousands of Canadian Dollars)

Shareholders'
capital
Contributed
surplus
Retained
earnings
Accumulated other comprehensive (loss) income Total
Balance, December 31, 2012 394,048 2,881 247,565 (3,054) 641,440
Changes in equity for the nine months ended September 30, 2013
Exercise of options 7,956 - - - 7,956
Issuance of shares 4,015 - - - 4,015
Dividends declared - - (17,583) - (17,583)
Other comprehensive income - - - 3,554 3,554
Net earnings for the period - - 32,261 - 32,261
Balance, September 30, 2013 406,019 2,881 262,243 500 671,643
Changes in equity for the three months ended December 31, 2013
Expense related to vesting of options - 235 - - 235
Reclassification of equity settled options - 12,598 - - 12,598
Exercise of options 2,678 (463) - - 2,215
Issuance of shares 1,197 - - - 1,197
Dividends declared - - (6,088) - (6,088)
Other comprehensive income - - - 3,683 3,683
Net loss for the period - - (10,321) - (10,321)
Balance, December 31, 2013 409,894 15,251 245,834 4,183 675,162
Changes in equity for the nine months ended September 30, 2014
Expense related to vesting of options - 1,968 - - 1,968
Exercise of options 6,880 (6,409) - - 471
Issuance of shares 4,187 - - - 4,187
Dividends declared - - (20,097) - (20,097)
Other comprehensive income - - - 5,552 5,552
Net earnings for the period - - 14,890 - 14,890
Balance, September 30, 2014 420,961 10,810 240,627 9,735 682,133

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - Expressed in thousands of Canadian Dollars)

For the three months ended September 30, For the nine months ended September 30,
2014 2013 2014 2013
Cash provided by (used for):
Operating Activities
Net earnings 16,570 13,158 14,890 32,261
Adjustments for:
Amortization 20,368 18,230 52,403 50,314
Income tax expense 6,938 5,906 10,307 8,644
Income tax (paid) recovered (5) (36) (12) 121
Non-cash stock-based compensation expense 2,498 5,762 7,343 1,117
Net financing charges 10,750 7,153 39,556 20,619
Finance charges paid (1,893) (989) (18,740) (12,937)
Other 196 155 476 543
Funds from Operations 55,422 49,339 106,223 100,682
(Increase) decrease in non-cash working capital (26,516) 20,059 (37,760) (18,950)
Decommissioning costs incurred (1,258) (2,079) (3,957) (3,979)
Cash from Operating Activities 27,648 67,319 64,506 77,753
Investing Activities
Additions to property, plant and equipment (35,411) (44,261) (132,850) (113,669)
Other (32) 1,748 516 (1,309)
Cash used in Investing Activities (35,443) (42,513) (132,334) (114,978)
Financing Activities
Issuance of shares 237 - 469 2,361
Issuance of Series 3 Senior Unsecured Debentures - - 147,069 -
Redemption of Series 1 Senior Unsecured Debentures - - (125,000) -
Increase (decrease) in senior secured debt 13,613 (10,000) 66,626 43,000
(Decrease) increase in bank indebtedness - (9,460) (1,321) 3,676
Dividends paid (5,567) (4,918) (15,006) (12,937)
Cash from (used in) Financing Activities 8,283 (24,378) 72,837 36,100
Effect of foreign exchange on cash (650) (428) (495) 716
Change in cash (162) - 4,514 (409)
Cash, beginning of period 4,676 - - 409
Cash, end of period 4,514 - 4,514 -

FORWARD-LOOKING INFORMATION

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

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

Our strategic objectives for the Business Plan period 2014 to 2017, including anticipated growth capital investments and our action plan for 2014 and 2015, are set out under "Strategy" on page 33 in our Annual Report for the year ended December 31, 2013.

Such information reflects 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, obtaining insurance for such risks and hazards on reasonable financial terms, and potential failure of meeting customer safety standards;
  • 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, retain, and integrate 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.

During the second quarter, we engaged a financial advisor to conduct a Strategic Review for our Industrial Division which is ongoing. As such, forward-looking information in this document is made subject to any changes that may be implemented as a result of this Strategic Review.

By its nature, forward-looking information involves 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 information 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 information 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 information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Furthermore, the forward-looking information contained in this document is made as of the date of this document and, in each case, is expressly qualified by this cautionary statement. Unless otherwise required by law, we do not intend, or assume any obligation, to update any such forward-looking information.

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 impaired, 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 and restructuring and other related costs. Adjusted EBITDA provides improved continuity with respect to the comparison of our operating results over a period of time. Stock-based compensation, a component of employee remuneration, can vary significantly with changes in the price of our common shares while restructuring and other related costs are outside of our normal course of business. Restructuring and other related costs are charges primarily attributable to the Rationalization Plan and the Strategic Review. EBITDA and Adjusted EBITDA are derived from the 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
September 30,
Nine months ended
September 30,
($000s) 2014 2013 2014 2013
Net earnings 16,570 13,158 14,890 32,261
Add back:
Income tax expense 6,938 5,906 10,307 8,644
Net financing charges expense 10,750 7,153 39,556 20,619
Amortization(1) 20,368 18,230 52,403 50,314
EBITDA 54,626 44,447 117,156 111,838
Add back:
Stock-based compensation expense 3,140 6,752 12,655 5,432
Restructuring and other related costs 1,349 - 7,397 -
Adjusted EBITDA 59,115 51,199 137,208 117,270
Weighted average number of shares 55,901 55,077 55,734 54,841
EBITDA per share 0.98 0.81 2.10 2.04
Adjusted EBITDA per share 1.06 0.93 2.46 2.14
(1) Includes impairment charges, non-cash gains or losses on asset disposal and other non-cash charges.

"Divisional EBITDA" provides an indication of the results generated by the division's principal business activities prior to how the assets are amortized, and before allocation of Selling, general and administrative costs (SG&A). Divisional EBITDA is the sum of gross profit and amortization for the respective division. Divisional EBITDA is derived from gross profit as follows:

Three months ended
September 30,
Nine months ended
September 30,
($000s) 2014 2013 2014 2013
Gross Profit 64,674 59,231 160,009 142,443
Add back:
Amortization included in cost of sales 16,220 14,468 41,097 39,549
Divisional EBITDA 80,894 73,699 201,106 181,992
New Markets(1) 34,128 30,577 80,399 68,488
Oilfield(1) 27,505 23,476 71,704 63,481
Industrial 19,261 19,646 49,003 50,023
Deduct:
SG&A(2) 24,919 29,252 76,553 70,154
Restructuring and other related costs 1,349 - 7,397 -
EBITDA 54,626 44,447 117,156 111,838
(1) New Markets and Oilfield Divisional EBITDA for the three and nine months ended September 30, 2013 has been restated to reflect a change in reporting structure. New Markets was reduced and Oilfield was increased by $468 and $1,558, in the respective periods.
(2) SG&A excludes amortization of $4,148 and $11,306 for Q3 2014 and 2014 year-to-date, respectively, and $3,762 and $10,765 for Q3 2013 and 2013 year-to-date, respectively.

"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, the gain or loss on embedded derivatives and restructuring and other related charges. Stock-based compensation expense, a component of employee remuneration, can vary significantly with changes in the price of our common shares. The loss (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. Restructuring and other related costs are related to initiatives outside of our normal course of business. 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
September 30,
Nine months ended
September 30,
($000s) 2014 2013 2014 2013
Net earnings 16,570 13,158 14,890 32,261
Add back:
Stock-based compensation expense 3,140 6,752 12,655 5,432
Embedded derivative loss 3,314 507 11,641 370
Restructuring and other related costs 1,349 - 7,397 -
Adjusted net earnings 24,373 20,417 46,583 38,063
Weighted average number of shares 55,901 55,077 55,734 54,841
Adjusted net earnings per share 0.44 0.37 0.84 0.69

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

Nine months ended
September 30,
($000s) 2014 2013
Total Equity 682,133 671,643
Shares outstanding, September 30, 55,923 55,090
Book value per share 12.20 12.19

"Cash Basis Return on Capital" (ROC - Cash) is used to assist management and investors in measuring the returns realized at the consolidated level from capital employed. ROC - Cash is derived from Adjusted EBITDA less cash stock-based compensation, cash taxes and maintenance capital divided by Net Assets. Net Assets is an average of the beginning and ending balances of our total assets less current liabilities for the period.

"Divisional Return on Capital" is used to assist management and investors in measuring the returns realized at the Divisional level from capital employed. It is derived from Divisional EBITDA divided by the average of the beginning and ending balances of assets employed for the period.

"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
September 30,
Nine months ended
September 30,
($000s) 2014 2013 2014 2013
Cash from Operating Activities 27,648 67,319 64,506 77,753
Add back(deduct):
Increase (decrease) in non-cash working capital 26,516 (20,059) 37,760 18,950
Decommissioning obligations incurred 1,258 2,079 3,957 3,979
Funds from operations 55,422 49,339 106,223 100,682
Weighted average number of shares 55,901 55,077 55,734 54,841
Funds from operations per share 0.99 0.90 1.91 1.84

References to EBITDA, EBITDA per share, Adjusted EBITDA, Adjusted EBITDA per share, Divisional EBITDA, Adjusted net earnings, Adjusted net earnings per share, ROC - Cash, Divisional Return on Capital, Funds from operations, and Funds from operations per share 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

    Newalta Corporation
    Stephanie MacVicar
    Director, Investor Relations
    (403) 806-7391