Tuckamore Capital Management Inc.
TSX : TX
TSX : TX.DB.B
TSX : TX.DB.C

Tuckamore Capital Management Inc.

March 30, 2012 08:00 ET

Tuckamore Announces 2011 Annual and Fourth Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - March 30, 2012) -

NOT FOR DISTRIBUTION TO THE U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Tuckamore Capital (TSX:TX)(TSX:TX.DB.B)(TSX:TX.DB.C) today announced its results for three months and year ended December 31, 2011.

Year-End Results

($ millions, except per share amounts) 2011 2010
Revenue 638.4 454.1
Gross profit 141.1 98.2
Selling, general & administrative expenses (98.3 ) (78.2 )
Net Income from continuing operations 13.1 42.7
EBITDA 76.9 96.0
Adjusted EBITDA 40.4 20.7
Income per share from continuing operations 0.18 0.60

Revenue for the year ended December 31, 2011 was $638.4 million, up 40.6 percent from $454.1 million produced in 2010. The increase was largely driven by the Industrial Services segment where both ClearStream (formerly NPC) and Quantum Murray have benefitted from increased business volumes throughout the year. In addition, Tuckamore's ownership interest in both ClearStream and Quantum Murray increased in 2011. Gross profit increased 43.7 percent to $141.1 million for the year representing a gross profit margin of 22.1 percent. In 2010, Tuckamore reported gross profit of $98.2 million representing a gross profit margin of 21.6 percent.

Non-cash items that impacted the results were depreciation and amortization, deferred income taxes, gains on re-measurement of investment and gain on debt extinguishment. Significant items were as follows:

(i) Depreciation and amortization was $27,829 for the year ended December 31, 2011, compared to $22,495 for the prior year.
(ii) Gain on re-measurement of investment relates to acquisition accounting under IFRS for transactions where control of an investment is obtained and the existing investment is re-measured. In 2010 a gain on re-measurement of $9,862 and $73,895 was recorded as a result of the 20% acquisition of Gemma and ClearStream respectively. In 2011, a re-measurement gain of $6,016 was recorded for the Quantum Murray acquisition.
(iii) Gain on debt extinguishment of $37,451 was recorded when convertible debentures and accrued interest were restructured to secured and unsecured debentures. The new debentures were recorded at fair value and the difference between the fair value, net of costs of the new debentures, and the carrying value of the convertible debentures and accrued interest was recorded as a gain on debt extinguishment.

Adjusted EBITDA which excludes the above noted items increased 95 percent to $40.4 million versus $20.7 million for prior year.

The net income from continuing operations for 2011 was $13.1 million versus $42.7 million in 2010.

PORTFOLIO REVIEW

Industrial Services

The industrial services segment had a strong year with both investments exceeding prior years' results.

At ClearStream, EBITDA growth was a result of increased activity at most divisions and the acquisitions of the remaining 20% ownership of ClearStream and ClearStream's acquisition of the 20% remaining ownership in the Oilsands division. Both the Conventional and Oilsands maintenance services divisions benefitted from strong demand and improved results compared to 2010. The Fabrication division also had increased revenues from project work. The transportation division also had growth compared to the prior year with increased revenues from additional trucks and trailers in deployment to accommodate pipe logistics for clients.

Quantum Murray had significantly improved earnings in the year with all three divisions reporting increased results compared to 2010. The acquisition of the remaining 35.7% ownership of Quantum Murray added to the strong fourth quarter results. With the strengthening economy, more large industrial projects became available in 2011 which impacted both the Remediation and Demolition divisions. The Demolition division benefitted from several large projects in Ontario and the Remediation division benefitted from large projects in British Columbia and Saskatchewan. Increased scrap prices and volumes resulted in improved results in the Metals division.

Marketing

The marketing segment had overall improved results compared to the prior year. Gemma had a solid year with new inbound volumes from financial services clients and stable inbound and outbound telesales revenues from other key clients.

Armstrong had consistent results over the last two years despite competitive pressure in the industry and the shift in marketing spending to data driven, emerging media and digital solutions.

Results were improved at IC group compared to the prior year with increased business from a key client.

Other

Both Titan and Gusgo had solid results for the year. Titan had significantly improved results compared to the prior year. Increased activity in the conventional drilling market and oil sands development resulted in strong demand for many of Titan's products.

Fourth Quarter Results

($ millions, except per share amounts) 2011 2010
Revenue 184.7 114.9
Gross profit 41.1 26.4
Selling, general & administrative expenses (28.0 ) (21.3 )
Net Income (loss) from continuing operations (6.3 ) 60.8
EBITDA 6.8 71.5
Adjusted EBITDA 12.5 5.2
Income (loss) per share from continuing operations (0.10 ) 0.85

Revenue for the three-month period ended December 31, 2011, was $184.7 million, versus $114.9 million produced in 2010. The increase was primarily driven by the acquisitions of additional ownership percentages in ClearStream and Quantum Murray. Gross profit for the three months ended December 31, 2011 was $41.1 million compared to $26.4 in 2010, an increase of 55.3%. Gross margins were 22.2% for the three months ended December 31, 2011 compared to 23% in the 2010 period. Adjusted EBITDA was $12.5 million, compared to $5.2 million for the corresponding period in 2010.

2012 Outlook

At ClearStream, projected global capital investment in the oilsands and the conventional oil and gas sectors should translate into additional project and maintenance work.

At Quantum Murray, 2012 is expected to be a solid year but with mixed results on a divisional basis. The remediation division is expecting good business volumes from government work tendered in British Columbia. In the Demolition division there will be a continuation of a few large projects that started in 2011, however increased competition may result in revenue levels not reaching 2011 levels.

In the marketing segment, the outlook is mixed with overall comparable results expected from 2012. At Gemma, the focus will be to diversify the client base and opportunities from new clients are encouraging. IC Group is anticipating a slightly improved year with a focus on stimulating its specialized insurance business and continued growth with existing clients as they move more lines of business to IC Group. Armstrong is anticipating a comparable year to 2011 with a focus on retaining a stable client base and maintaining margins in a competitive market.

Both Titan and Gusgo are anticipating slightly improved results in 2012. Gusgo is expecting to maintain its solid and stable client base with some volume increases from these existing clients. At Titan there is optimism that revenues will increase with higher business volumes in construction and oil and gas contractors as these markets remain strong.

Corporate costs will be significantly reduced in 2012. A number of one-time costs, such as transactions from acquisition activity, costs related to conversion to a corporation and IFRS transition costs will not recur in 2012. The refinancing of the senior credit facility will substantially decrease interest costs.

About Tuckamore Capital Management Inc.

Tuckamore Capital Management Inc. is a publicly-traded diversified fund that invests in successful Canadian private businesses run by proven entrepreneurs at reasonable prices. We target above-average rates of return by putting our money to work behind talented entrepreneurs who have a record of success in their business and a growth opportunity for the future. Tuckamore currently has $352 million invested in 8 companies representing a diverse cross-section of the Canadian economy.

Forward-looking information

This press release contains certain forward-looking information. Certain information included in this press release may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information 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 similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management's future outlook and anticipated events or results and may include statements or information regarding the future plans or prospects of Tuckamore or the Operating Partnerships and reflects management's expectations and assumptions regarding the growth, results of operations, performance and business prospects and opportunities of Tuckamore and the Operating Partnerships. Without limitation, information regarding the future operating results and economic performance of Tuckamore and the Operating Partnerships constitute forward-looking information. Such forward-looking information reflects management's current beliefs and is based on information currently available to management of Tuckamore and the Operating Partnerships. Forward-looking information involves significant risks and uncertainties. A number of factors could cause actual events or results to differ materially from the events and results discussed in the forward-looking information including risks related to investments, conditions of capital markets, economic conditions, dependence on key personnel, limited customer bases, interest rates, regulatory change, ability to meet working capital requirements and capital expenditures needs of the Operating Partners, factors relating to the weather and availability of labour.
These factors should not be considered exhaustive. In addition, in evaluating this information, investors should specifically consider various factors, including the risks outlined under "Risk Factors," which may cause actual events or results to differ materially from any forward-looking statement. In formulating forward-looking information herein, management has assumed that business and economic conditions affecting Tuckamore and the Operating Partnerships will continue substantially in the ordinary course, including without limitation with respect to general levels of economic activity, regulations, taxes and interest rates. Although the forward- looking information is based on what management of Tuckamore and the Operating Partnerships consider to be reasonable assumptions based on information currently available to it, there can be no assurance that actual events or results will be consistent with this forward-looking information, and management's assumptions may prove to be incorrect. This forward-looking information is made as of the date of this press release, and Tuckamore does not assume any obligation to update or revise it to reflect new events or circumstances except as required by law. Undue reliance should not be placed on forward-looking information. Tuckamore is providing the forward-looking financial information set out in this press release for the purpose of providing investors with some context for the "2012 Outlook" presented. Readers are cautioned that this information may not be appropriate for any other purpose.

Non-standard measures

The terms "EBITDA", "adjusted EBITDA", "invested capital", (collectively the "Non-GAAP) are financial measures used in this press release that are not standard measures under International Financial Reporting Standards ("IFRS"). Tuckamore's method of calculating Non-GAAP measures may differ from the methods used by other issuers. Therefore, Tuckamore's Non-GAAP measures, as presented may not be comparable to similar measures presented by other issuers.

EBITDA refers to net earnings determined in accordance with IFRS, before depreciation and amortization, interest expense and income tax expense. EBITDA is used by management and the Directors as well as many investors to determine the ability of an issuer to generate cash from operations. Management also uses EBITDA to monitor the performance of Tuckamore's reportable segments and believes that in addition to net income or loss and cash provided by operating activities, EBITDA is a useful supplemental measure from which to determine Tuckamore's ability to generate cash available for debt service, working capital, capital expenditures, income taxes and distributions. Tuckamore has provided a reconciliation of income to EBITDA in its press release.

Adjusted EBITDA refers to EBITDA excluding the gain or loss on reduction or sale of ownership interest (dilution gains or losses), the write-down of goodwill and intangible assets, restructuring costs, gain on re-measurement of investments, gain on debt extinguishment, fair value adjustments on stock based compensation expense and the impairment of long-term investments. Tuckamore has used Adjusted EBITDA as the basis for the analysis of its past operating financial performance. Adjusted EBITDA is used by Tuckamore and management believes it is a useful supplemental measure from which to determine

Tuckamore's ability to generate cash available for debt service, working capital, capital expenditures, and income taxes. Adjusted EBITDA is a measure that management believes facilitates the comparability of the results of historical periods and the analysis of its operating financial performance which may be useful to investors.

Investors are cautioned that the Non-standard Measures are not alternatives to measures under IFRS and should not, on their own, be construed as an indicator of performance or cash flows, a measure of liquidity or as a measure of actual return on the shares. These Non-standard Measures should only be used in conjunction with the financial statements included in the press release and Tuckamore's (formerly Newport Partners Income Fund) annual audited financial statements available on SEDAR at www.sedar.com or www.tuckamore.ca.

TUCKAMORE CAPITAL MANAGEMENT INC.
Consolidated Balance Sheets
December 31
(In thousands of dollars)
December 31, December 31, January 1,
2011 2010 2010
Assets
Current Assets:
Cash $ 28,625 $ 27,741 $ 43,882
Cash and short-term investments held in trust 8,108 18,767 20,142
Accounts receivable 149,371 96,137 119,363
Inventories 37,464 28,036 34,034
Prepaid expenses 3,486 3,529 2,951
Deferred income tax expense (recovery) 3,046 9,744 14,249
Current assets of discontinued operations 3,517 - -
Total current assets $ 233,617 $ 183,954 $ 234,621
Property, plant and equipment 60,100 53,837 45,603
Long-term investments - 14,490 15,729
Goodwill 77,093 83,985 68,914
Intangible assets 78,928 94,806 102,224
Other assets 3,114 1,566 14,069
Total assets $ 452,852 $ 432,638 $ 481,160
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 91,173 $ 76,081 $ 97,066
Provisions - 5,401 5,667
Deferred revenue 8,608 6,788 10,403
Current portion of obligations under capital leases 5,540 4,464 4,588
Accrued interest on convertible debentures - 23,870 11,935
Subordinated revolving credit facilities - 10,089 10,089
Accrued interest on subordinated revolving credit facilities - 1,449 449
Current portion of senior credit facility 10,000 86,939 150,499
Convertible debentures - 159,829 156,136
Stock based payment liability - 1,165 -
Current liabilities of discontinued operations 651 - -
Total current liabilities $ 115,972 $ 376,075 $ 446,832
Obligations under capital leases 3,681 4,452 5,915
Senior credit facility 85,705 - -
Secured debentures 146,314 - -
Unsecured debentures 14,215 - -
Deferred tax liabilities 11,028 8,596 7,549
Unitholders' equity - 43,515 20,864
Shareholders' equity 75,937 - -
Total liabilities & equity $ 452,852 $ 432,638 $ 481,160


TUCKAMORE CAPITAL MANAGEMENT INC.
Consolidated Statements of Income and Comprehensive Income
Years Ended December 31
(In thousands of dollars, except per share amounts)
2011 2010
Revenue $ 638,401 $ 454,145
Cost of revenue (497,216 ) (355,937 )
Gross profit 141,185 98,208
Selling, general and administrative (98,346 ) (78,244 )
Amortization of intangible assets (15,450 ) (12,030 )
Depreciation (12,379 ) (10,465 )
Income from equity investments 217 1,067
Interest expense, net (33,070 ) (37,173 )
Gain on re-measurement of investment 6,016 83,757
Loss on sale of investment - (442 )
Gain on debt extinguishment 37,451 -
Fair value adjustment to stock based compensation expense (883 ) 220
Transaction costs (2,638 ) (321 )
Write-down of long term investment (6,081 ) -
Write-down of goodwill and intangible assets - (8,218 )
Income before income taxes $ 16,022 $ 36,359
Income tax expense - current (23 ) (400 )
Income tax (expense) recovery - deferred (2,856 ) 6,762
Net income from continuing operations $ 13,143 $ 42,721
Income (loss) from discontinued operations (net of income tax) 14,722 (20,070 )
Net income and comprehensive income $ 27,865 $ 22,651
Income per share
Basic:
Continuing operations $ 0.18 $ 0.60
Net income $ 0.39 $ 0.32
Diluted:
Continuing operations $ 0.18 $ 0.60
Net income $ 0.39 $ 0.32


TUCKAMORE CAPITAL MANAGEMENT INC.
Consolidated Statements of Cash Flows
Years Ended December 31
(In thousands of dollars)
2011 2010
Operating activities:
Net income for the year $ 27,865 $ 22,651
Income (loss) from discontinued operations (net of income tax) (14,722 ) 20,070
Items not affecting cash:
Amortization of intangible assets 15,450 12,030
Depreciation 12,379 10,465
Deferred income tax expense (recovery) 2,856 (6,762 )
Income from equity investments, net of cash received (244 ) (728 )
Loss on sale of investment - 442
Non-cash interest expense 8,076 3,693
Gain on re-measurement of investment (6,016 ) (83,757 )
Gain on extinguishment of debt (37,451 ) -
Stock based compensation expense 3,392 1,165
Write-down of long-term investment 6,081 -
Write-down of goodwill and intangible assets - 8,218
Changes in non-cash working capital (22,471 ) 10,920
Distributions from discontinued operations 1,634 12,749
Cash provided by discontinued operations 829 9,982
Total cash provided by (used in) operating activities $ (2,342 ) $ 21,138
Investing activities:
Acquisition of businesses, net cash acquired (31,865 ) (19,587 )
Purchase of property, plant and equipment (2,808 ) (4,038 )
Proceeds on disposition of property, plant and equipment 968 885
Proceeds on disposition of businesses 38,730 65,581
Purchase of software (852 ) (634 )
Purchase of other intangible assets (2,000 ) -
Increase in other assets - 751
Cash used in discontinued operations (69 ) (1,980 )
Total cash provided by investing activities $ 2,104 $ 40,978
Financing activities:
Increase in long-term debt 46,989 15,000
Repayment of long term debt (36,973 ) (78,560 )
Increase (decrease) in cash held in trust (3,108 ) 667
Repayment of capital lease obligations (5,026 ) (4,587 )
Cash used in discontinued operations (1,269 ) (10,777 )
Total cash provided by (used in) financing activities $ 613 $ (78,257 )
Increase (decrease) in cash 375 (16,141 )
Cash beginning of year - continuing operations 27,741 40,597
Cash beginning of year - discontinued operations 509 3,285
Cash end of year $ 28,625 $ 27,741
Cash end of year - continuing operations $ 28,625 $ 27,232
Cash end of year - discontinued operations - 509
Supplemental cash flow information:
Interest paid $ 19,302 $ 20,941
Cash acquired upon acquisition (bank indebtedness) $ (1,575 ) $ (814 )
Supplemental disclosure of non-cash financing and investing activities:
Acquisition of property, plant and equipment through capital leases $ 2,155 $ 2,063
Debt and accrued interest repaid through issuance of debentures $ 152,951 $ -

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