Northern Frontier Corp.
TSX VENTURE : FFF

Northern Frontier Corp.

March 19, 2015 17:01 ET

Northern Frontier Corp. Announces its Fourth Quarter and Fiscal 2014 Financial Results

CALGARY, ALBERTA--(Marketwired - March 19, 2015) - Northern Frontier Corp. (TSX VENTURE:FFF) ("Northern Frontier" or the "Corporation") announces its fourth quarter and fiscal 2014 financial results.

For the fourth quarter of 2014, Northern Frontier experienced average activity levels across both business lines. Monty Balderston, Executive Vice President and CFO commented, "Overall we generated $18.4 million in revenue and $4.4 million in Adjusted EBITDA during the quarter."

Also of note, the Corporation announced at the end of December 2014, that a significant client was considerably reducing its planned 2015 civil expenditures and therefore, management immediately reacted by adjusting its cost structure to be commensurate with the lower level of activity expected in fiscal 2015. These measures included reductions in personnel, capital expenditures, elective maintenance and SG&A. Mr. Yellowega stated, "With the excess equipment capacity this decision created, we are aggressively marketing our civil abilities in geographical markets outside of our core Conklin, Alberta operating region to strengthen and diversify our customer base." He added, "our operational management has significant experience leading businesses through commodity driven downturns such as the one we currently face and we are diligently structuring the business to not only weather the current situation, but to be able to take advantage of opportunities when activity levels improve."

For fiscal 2014 management completed a number of steps in its strategy to build an integrated industrial energy services business. During 2014 Northern Frontier:

  • restructured its balance sheet through raising $21.3 million in gross equity proceeds and replacing its existing credit facilities with $77.6 million of senior credit facilities of which $44.4 million was outstanding at December 31, 2014;
  • completed the acquisition of Central Water for aggregate consideration of $32.9 million (including contingent consideration);
  • generated $73.5 million in pro forma revenue; and
  • realized pro forma Adjusted EBITDA of $16.2 million.

Pro forma financial information

Northern Frontier acquired all of the issued and outstanding shares of Central Water on August 28, 2014 and the NEC Group on September 27, 2013. Actual financial results of the Corporation only reflect the activities of Central Water subsequent to August 28, 2014 and the NEC Group subsequent to September 27, 2013.

Assuming Northern Frontier acquired Central Water and the NEC Group on January 1, 2013, the pro forma consolidated financial results would have been as follows:

For the three months
ended Dec 31,
For the year
ended Dec 31,
(in 000's CAD, except as noted) 2014 2013 %
change
2014 2013 %
change
(unaudited) (unaudited)
Revenue $ 18,444 $ 22,445 (18 ) $ 73,489 $ 87,672 (16 )
Gross Profit 5,766 7,689 (25 ) 22,041 29,900 (26 )
as a % of revenue 31.3 34.3 30.0 34.1
EBITDA (1) 4,114 6,082 (32 ) 15,547 23,448 (34 )
as a % of revenue 22.3 27.1 21.2 26.7
Adjusted EBITDA (1) 4,446 6,145 (28 ) 16,198 23,511 (31 )
as a % of revenue 24.1 27.4 22.0 26.8
(1) EBITDA (earnings before finance costs, taxes, depreciation and amortization, gain/loss on disposal of property and equipment, share-based compensation and other specified items) and Adjusted EBITDA are not recognized measures under IFRS. Refer to "Non-GAAP Measures".

Select financial information

The following results only reflect the activities of the acquired businesses mentioned above subsequent to their respective acquisition dates.

Financial results

For the three months
ended Dec 31,
For the year
ended Dec 31,
(in 000's CAD, except as noted) 2014 2013 % change 2014 2013 (1) % change
(unaudited) (unaudited)
Revenue $ 18,444 $ 14,521 27 $ 63,321 $ 15,017 322
Gross Profit $ 5,766 2,954 95 $ 16,505 $ 3,077 436
as a % of revenue 31.3 20.3 26.0 20.5
EBITDA (2) $ 4,114 $ 2,082 98 $ 11,434 $ 1,867 512
per share - basic and diluted 0.18 0.26 0.74 0.71
as a % of revenue 22.3 14.3 18.1 12.4
Adjusted EBITDA (2) $ 4,446 $ 2,145 107 $ 12,085 $ 1,930 526
per share - basic and diluted 0.19 0.26 0.79 0.73
as a % of revenue 24.1 14.8 19.1 12.8
Net loss and comprehensive loss $ (22,685 ) $ (404 ) 5,515 $ (27,430 ) $ (1,967 ) 1,295
per share - basic and diluted (0.98 ) (0.05 ) (1.78 ) (0.74 )
Dividends declared $ - $ - - $ 2,038 - N/A
per share - - 0.155 -
Cash generated by (used in) operations (before non-cash Working Capital) $ 3,458 1,310
164
$ 5,645 $ (195 )
N/A
per share - basic and diluted 0.15 0.16 0.37 (0.07 )
Capital expenditures $ 391 $ 4,453 $ 8,131 $ 4,453
Capital management: (3)
Funded debt to EBITDA 2.61
Fixed charge coverage ratio (4) 2.19
Weighted average common shares outstanding - basic and diluted 23,215,727 8,126,304 15,367,315 2,643,524

Financial Position

As at December 31, (in 000's CAD, except as noted) 2014 2013
Working Capital (5) $ 3,879 $ 5,196
Total assets $ 82,871 $ 75,510
Funded Debt (6) $ 38,329 $ 32,723
Equity $ 26,888 $ 31,592
Common shares outstanding 23,250,944 11,160,609
Common share purchase warrants outstanding 17,049,042 5,115,639
(1) For the 2013 period, the Corporation had a 13 month fiscal period from December 1, 2012 to December 31, 2013.
(2) EBITDA and Adjusted EBITDA are not recognized measures under IFRS. Refer to "Non-GAAP Measures".
(3) The definition of these measures are in accordance with the lending agreements and are calculated based on the lenders' interpretation, which may not be equal to individual financial statement amounts.
(4) Fixed coverage ratio is defined as EBITDA less cash taxes, unfunded capital expenditures and distributions to required principal and interest payments on funded debt.
(5) Working Capital (current assets excluding cash and cash equivalents and restricted cash less current liabilities excluding current portion of loans and borrowings and obligations under finance lease) is not a recognized measure under IFRS. Refer to "Non-GAAP Measures".
(6) Funded Debt (loans and borrowings (before unamortized debt issue costs) and obligations under finance lease less cash and cash equivalents and restricted cash) is not a recognized measure under IFRS. Refer to "Non-GAAP Measures".

In addition to the commentary already provided on the financial results, included in the fourth quarter 2014 net loss of $22.7 million (fiscal 2014 - $27.4 million) was $26.9 million in impairment losses on long-lived assets. The impairments reflect management's lower near-term expectations of discounted future cash flows based on risk-adjusted visibility on future industry activity as at December 31, 2014.

Additional information

Northern Frontier's audited consolidated financial statements for the 12 months ended December 31, 2014 and 13 months ended December 31, 2013 and management's discussion and analysis ("MD&A") for year ended December 31, 2014 have been filed with the Canadian securities regulatory authorities and may be accessed under the Corporation's profile on SEDAR at www.sedar.com.

Conference call

Management will hold a conference call on Friday, March 20, 2015, at 9:30 a.m. Calgary / 11:30 a.m. Toronto time. The call will feature remarks by Monty Balderston, Executive Vice President and CFO regarding the financial results.

Conference dial-in instructions are as follows:

Toronto: 416.340.2218

North America: 1.866.223.7781

A replay of the call will be available 24 hours after the event until 11:59 p.m. EST on March 27, 2015. To access the archived conference call, please dial 905.694.9451 or 1.800.408.3053 and enter passcode 2834642.

About Northern Frontier Corp.

Northern Frontier's strategic objective is to create a large industrial and environmental services business through a buy and build growth strategy. Currently, the Corporation provides civil construction and excavation services to the industrial industry, primarily in the in situ Oilsands region south of Fort McMurray, Alberta and bulk water and fluids transfer logistic services in western Canada.

The Corporation's common shares and common share purchase warrants are listed on the TSX Venture Exchange under the trading symbol "FFF", "FFF.WT" and "FFF.WT.A", respectively.

Reader Advisory

Forward-Looking Statements

This news release includes certain statements that constitute forward-looking statements under applicable securities legislation. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. These forward-looking statements include, among other things, statements in respect of:

  • expectations of future financial performance of the Corporation; and
  • the diversification of the Corporation's operations.

These statements are only predictions and are based upon current expectations, estimates, projections and assumptions, which the Corporation believes are reasonable but which may prove to be incorrect and therefore such forward-looking statements should not be unduly relied upon. In making such forward-looking statements, assumptions have been made regarding, among other things, industry activity, the state of financial markets, business conditions, continued availability of capital and financing, future oil and natural gas prices and the ability of the Corporation to obtain necessary regulatory approvals. Although the Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements.

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 statements will not occur. Investors are cautioned that forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. The Corporation has no obligation to update any forward-looking statements set out in this news release, except as required by applicable law.

Non-GAAP Measures

Selected financial information for the three and 12 month periods ended December 31, 2014 and the three and 13 month periods ended December 31, 2013 are set out above and includes the following measures that are not recognized under International Financial Reporting Standards ("IFRS") and are non-generally accepted accounting principles ("non-GAAP") measures: EBITDA, Adjusted EBITDA, Working Capital and Funded Debt. This information should be read in conjunction with the consolidated financial statements for the 12 months ended December 31, 2014 and 13 months ended December 31, 2013 and the Corporation's MD&A for the year ended December 31, 2014 available under the Corporation's profile on SEDAR at www.sedar.com. Further information regarding these non-GAAP measures is contained in the Corporation's MD&A.

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

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