TORONTO, ONTARIO--(Marketwired - March 7, 2014) -
NOT FOR DISTRIBUTION TO THE U.S. NEWSWIRE 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, 2013.
Year-End Results
| ($ millions, except per share amounts) | 2013 | 2012 |
| Revenue | 673.1 | 683.8 |
| Gross profit | 141.2 | 123.4 |
| Selling, general & administrative expenses | (103.6) | (91.9) |
| Net loss from continuing operations | (17.4) | (27.5) |
| EBITDA | 37.7 | 25.8 |
| Adjusted EBITDA | 44.2 | 38.4 |
| Loss per share from continuing operations | (0.24) | (0.38) |
Revenue for the year ended December 31, 2013 was $673.1million compared to $683.8 million produced in 2012, a 1.6 percent decrease. Increases at ClearStream which has benefitted from increased business volumes across all divisions this year, were offset by lower revenues at Quantum Murray, particularly in the demolition and metals divisions. Gross profit increased 14.4 percent to $141.2 million for the year representing a gross profit margin of 21.0 percent. In 2012, Tuckamore reported gross profit of $123.4 million representing a gross profit margin of 18.1 percent. The increase in gross profit margin percentage reflects pricing and operational improvements at ClearStream, as well as cost overruns in 2012 on two large projects at the demolition division of Quantum Murray. Non-cash items that impacted the results were depreciation and amortization, write-off of intangibles and goodwill, and deferred income taxes. Significant items were as follows:
- Depreciation and amortization was $24.2 million for the year ended December 31, 2013, compared to $25.3 million for the prior year.
- Write of intangibles and goodwill was $5.7 million for the year ended December 31, 2013, compared to $9.3 million for the prior year.
Adjusted EBITDA which excludes the above noted items increased 15.1percent to $44.2 million versus $38.4 million in 2012.
The net loss from continuing operations for 2013 was $17.4million versus $27.5 million in 2012.
PORTFOLIO REVIEW
INDUSTRIAL SERVICES
Within the Industrial Services division, ClearStream reported solid results. While improvements at Quantum Murray were encouraging, progress still needs to be made to return the business to acceptable levels of profitability.
At ClearStream, all divisions except the Fabrication division reported increased revenues as a result of an active oil sector and recognition of ClearStream's service offerings. Revenue gains at the Wear division and the Oilsands' maintenance divisions were the most favorable. Gross margin improvements were significant and reflect higher demand for specialty wear product, improved pricing on certain contracts and better operational efficiencies. Only the Transportation division reported gross margin slippage compared to the prior year as a result of new premises relocation and start-up costs.
ClearStream's EBITDA contribution in 2013 was significantly higher than the previous year largely because of the gross margin improvements seen in the majority of the business. At Quantum Murray, the Demolition division performed better than the previous year but still at a loss. New smaller to medium demolition projects contributed well but were offset by additional costs on legacy projects completed during the year. Lower demolition volumes also impacted the throughput to the scrap metals division revenues. Revenues within the environmental divisions were similar to last year although gross margins were impacted by increased competition.
MARKETING
The marketing segment had disappointing results for the year ended December 31, 2013. Gemma had a very challenging year with declining revenues compared to the two prior years. The decrease in revenues was primarily a result of a reduction in the business volumes from a few key clients. The lack of a more diverse client base has hurt Gemma, and generating new revenue and clients is being given the highest priority.
IC Group' results were also down compared to the prior years. The results were impacted by some temporary revenue reductions in several of the core accounts. Margins however are improved and there has been good progress in cost containment within the corporate expense categories.
OTHER
Gusgo's revenues were slightly down from the prior year as one client experienced shipping delays due to production issues. Margins were also impacted by higher delivery costs and operational challenges related to another client.
Titan's revenues were at similar levels to the prior year due to continuing strong demand from the oil sands construction industry. Margins were largely consistent with last year. Overhead costs have increased in 2013 as the business has invested in additional sales and marketing staff. These investments should benefit next year.
Fourth Quarter Results
| ($ millions, except per share amounts) | 2013 | 2012 |
| Revenue | 167.0 | 182.7 |
| Gross profit | 35.2 | 32.4 |
| Selling, general & administrative expenses | (30.4) | (23.1) |
| Net loss from continuing operations | (6.9) | (10.5) |
| EBITDA | 6.6 | 2.2 |
| Adjusted EBITDA | 6.8 | 11.7 |
| Loss per share from continuing operations | (0.09) | (0.15) |
Revenue for the three-month period ended December 31, 2013, was $167.0 million, versus $182.7 million produced in 2012. The decrease was primarily driven by decreased business volumes at ClearStream which had a very active fourth quarter in 2012. Gross profit for the three months ended December 31, 2013 was $35.2 million compared to $32.4 million in 2012, an increase of 8.6%. Gross profit margins were 21.1% for the three months ended December 31, 2013, compared to 17.8% in the 2012 period. This reflects better margins at both ClearStream and Quantum Murray. Adjusted EBITDA was $6.8 million, compared to $11.7 million for the corresponding period in 2012.
INDUSTRIAL SERVICES
ClearStream's results were a little below last year on slightly reduced revenues. Revenues were similar or better in all divisions except Oilsands maintenance which were lower because contracted work for a major client was completed earlier in 2013 compared to last year. Improved gross margins were offset by certain one-time costs in the fourth quarter. At Quantum Murray, revenues in the demolition and scrap metals division were well below the prior year quarter which included revenues from the final stages of some larger projects. Margins however were improved this quarter, in the demolition division in particular. The better margins however were offset this quarter by costs associated with changes in the senior management team, as well as additional corporate costs.
MARKETING
Gemma had a disappointing quarter with lower revenues in comparison to the same quarter in the prior year. Reduction in hours from a major client significantly impacted results. Although revenues were lower at IC group from a year ago, improved margins from operational efficiencies and lower selling, general and administrative expenses combined to produce only slightly lower earnings compared to the same period in the prior year.
OTHER
Titan's results for the quarter were impacted by lower revenues due to slower drilling activity, and increased pricing pressures compared to the same quarter in the prior year. While Gusgo had improved revenues, it experienced lower gross margins as a result of more drop shipments by a major client, resulting in similar earnings levels compared to the same quarter in the prior year.
2014 Outlook
At ClearStream strong levels of activity are expected to continue in both the oilsands and the conventional oil and gas sectors which should translate into significant levels of maintenance services work. ClearStream will look to carefully increase its project work this year with pricing solutions that reduce risk. The wear and fabrication divisions are currently busy. Margin compression is a risk as clients look to generate optimum value from their service providers. Growth will be carefully planned and monitored, and Tuckamore and ClearStream management will work closely to address the working capital needs of the business.
At Quantum Murray there will be a continued focus on project bidding and cost management at the demolition division. Progress made in 2013 has created a solid foundation which will allow more focus to be placed on medium to larger demolition projects. There are continual large industrial abatement and demolition projects to be won, particularly in Alberta. Revenue backlogs are encouraging. Operational execution will determine the timing of a return to profitability.
In the Marketing segment, the outlook is for improved results. At Gemma, a strategic review has underlined the need for a significant increase in efforts to attract new clients and diversify the existing base. At IC Group, the core client base is strong and IC Group will continue to try to sell internally to these existing clients.
In the Other segment, both Titan and Gusgo are expecting results similar to or improved from 2013. Titan should benefit from continued strong business activity in Alberta in both the construction and oil and gas sectors, and Gusgo is expecting consistent business volumes from its stable customer base, and looking to improve its margins. Management continues to look to create value through the improvement of the operations of Tuckamore's assets and, in some cases, may look to realize value through the sale of certain of its assets.
About Tuckamore Capital Management Inc.
Tuckamore has investments in 7 businesses 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 "2013 Outlook" presented. Readers are cautioned that this information may not be appropriate for any other purpose.
Non-standard measures
The terms "EBITDA" and "adjusted EBITDA" (collectively the "Non-GAAP measures") are financial measures used in this press release that are not standard measures under 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 of Tuckamore (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 loss on de-recognition of debt, fair value adjustments on stock based compensation expense, the write-down of goodwill and intangible assets, restructuring costs and the interest, taxes, depreciation and amortization 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 | ||||
| (In thousands of Canadian dollars) | ||||
| December 31, | December 31, | January 1, | ||
| As at | 2013 | 2012 | 2012 | |
| Restated1 | Restated1 | |||
| Assets | ||||
| Current Assets: | ||||
| Cash and cash equivalents | $ 28,883 | $ 10,543 | $ 26,134 | |
| Cash and short-term investments held in trust | 2,950 | 2,935 | 6,842 | |
| Accounts receivable | 145,858 | 160,786 | 132,258 | |
| Inventories | 12,721 | 15,926 | 27,044 | |
| Prepaid expenses | 6,753 | 4,485 | 2,896 | |
| Other current assets | 2,733 | 2,943 | 3,041 | |
| Current assets of discontinued operations | - | - | 3,517 | |
| Total current assets | 199,898 | 197,618 | 201,732 | |
| Property, plant and equipment | 62,688 | 63,817 | 60,606 | |
| Long-term investments | 28,281 | 27,115 | 33,160 | |
| Goodwill | 61,128 | 63,839 | 68,040 | |
| Intangible assets | 49,896 | 61,464 | 77,617 | |
| Other assets | 633 | 685 | 1,711 | |
| Total assets | $ 402,524 | $ 414,538 | $ 442,866 | |
| Liabilities and shareholders' equity | ||||
| Current liabilities: | ||||
| Accounts payable and accrued liabilities | $ 65,807 | $ 72,699 | $ 82,939 | |
| Deferred revenue | 3,048 | 2,705 | 3,016 | |
| Current portion of obligations under capital leases | 6,041 | 4,751 | 5,163 | |
| Current portion of senior credit facility | 5,481 | - | 10,000 | |
| Unsecured debentures | 24,819 | - | - | |
| Current liabilities of discontinued operations | - | - | 651 | |
| Total current liabilities | 105,196 | 80,155 | 101,769 | |
| Obligations under capital leases | 11,584 | 11,678 | 3,278 | |
| Senior credit facility | 84,354 | 89,300 | 85,705 | |
| Secured debentures | 159,700 | 152,860 | 146,314 | |
| Unsecured debentures | - | 18,781 | 14,215 | |
| Deferred tax liabilities | 5,650 | 8,513 | 13,947 | |
| Shareholders' equity | 36,040 | 53,251 | 77,638 | |
| Total liabilities and shareholders' equity | $ 402,524 | $ 414,538 | $ 442,866 | |
| 1 Please note that the December 31, 2012 and January 1, 2012 balance sheets were restated as a result of the retrospective application of IFRS 11 Investments in Joint Ventures. Please refer to the audited consolidated financial statements for the year ended December 31, 2013 for more information. | ||||
| TUCKAMORE CAPITAL MANAGEMENT INC. | |||
| Consolidated Statements of Loss and Comprehensive Loss | |||
| Years Ended December 31 | |||
| (In thousands of Canadian dollars, except per share amounts) | |||
| 2013 | 2012 | ||
| Restated1 | |||
| Revenue | $ 673,111 | $ 683,756 | |
| Cost of revenue | (531,894) | (560,323) | |
| Gross profit | 141,217 | 123,433 | |
| Selling, general and administrative expenses | (103,634) | (91,853) | |
| Amortization of intangible assets | (8,973) | (10,824) | |
| Depreciation | (15,210) | (14,438) | |
| Income from equity investments | 5,780 | 5,891 | |
| Interest expense | (33,676) | (32,606) | |
| Loss on de-recognition of debt | - | (1,534) | |
| Restructuring costs | - | (861) | |
| Write-down of goodwill and intangible assets | (5,713) | (9,268) | |
| Loss before income taxes | (20,209) | (32,060) | |
| Income tax expense - current | (3) | (671) | |
| Income tax recovery - deferred | 2,831 | 5,206 | |
| Loss from continuing operations | (17,381) | (27,525) | |
| Income from discontinued operations (net of income tax) | - | 1,962 | |
| Loss and comprehensive loss | $ (17,381) | $ (25,563) | |
| Loss per share | |||
| Basic & Diluted: | |||
| Continuing operations | $ (0.24) | $ (0.38) | |
| Net loss | $ (0.24) | $ (0.36) | |
| 1 Please note that the December 31, 2012 consolidated statement of loss and comprehensive loss was restated as a result of the retrospective application of IFRS 11 Investments in Joint Ventures. Please refer to the audited consolidated financial statements for the year ended December 31, 2013 for more information. | |||
| TUCKAMORE CAPITAL MANAGEMENT INC. | ||||
| Consolidated Statements of Cash Flows | ||||
| Years Ended December 31 | ||||
| (In thousands of Canadian dollars) | ||||
| 2013 | 2012 | |||
| Restated1 | ||||
| Operating activities: | ||||
| Net loss for the year | $ (17,381) | $ (25,563) | ||
| Income from discontinued operations (net of income tax) | - | (1,962) | ||
| Items not affecting cash: | ||||
| Amortization of intangible assets | 8,973 | 10,824 | ||
| Depreciation | 15,210 | 14,438 | ||
| Deferred income tax recovery | (2,831) | (5,206) | ||
| Income from long-term investments | (5,780) | (5,891) | ||
| Non-cash accretion expense | 12,878 | 11,112 | ||
| Amortization of deferred financing costs | 653 | 625 | ||
| Loss on de-recognition of debt | - | 1,534 | ||
| Stock-based compensation expense | 170 | 1,176 | ||
| Write-down of goodwill and intangible assets | 5,713 | 9,268 | ||
| Changes in non-cash working capital | 9,562 | (29,486) | ||
| Cash provided by discontinued operations | - | 106 | ||
| Total cash provided by (used in) operating activities | 27,167 | (19,025) | ||
| Investing activities: | ||||
| Distributions from long-term investments | 4,614 | 6,306 | ||
| Purchase of property, plant and equipment | (8,107) | (4,250) | ||
| Proceeds on disposition of property, plant and equipment, net | 1,423 | 737 | ||
| Proceeds on disposition of businesses | - | 7,866 | ||
| Purchase of software | (406) | (91) | ||
| Decrease in other assets | 52 | 1,026 | ||
| Cash used in discontinued operations | - | (7) | ||
| Total cash (used in) provided by investing activities | (2,424) | 11,587 | ||
| Financing activities: | ||||
| Repayment of long-term debt | (118) | (6,200) | ||
| (Increase) decrease in cash held in trust | (15) | 3,907 | ||
| Repayment of obligations under finance leases | (6,270) | (5,761) | ||
| Cash used in discontinued operations | - | (384) | ||
| Total cash used in financing activities | (6,403) | (8,438) | ||
| Increase (decrease) in cash | 18,340 | (15,876) | ||
| Cash beginning of year | ||||
| - continuing operations | 10,543 | 26,134 | ||
| Cash beginning of year | ||||
| - discontinued operations | - | 285 | ||
| Cash end of year | $ 28,883 | $ 10,543 | ||
| Cash end of year | ||||
| - continuing operations | $ 28,883 | $ 10,543 | ||
| Supplemental cash flow information: | ||||
| Interest paid | $ 19,221 | $ 22,607 | ||
| Supplemental disclosure of non-cash financing and investing activities: | ||||
| Acquisition of property, plant and equipment through finance leases | $ 7,412 | $ 13,823 | ||
| 1 Please note that the December 31, 2012 consolidated statement of cash flows was restated as a result of the retrospective application of IFRS 11 Investments in Joint Ventures. Please refer to the audited consolidated financial statements for the year ended December 31, 2013 for more information. | ||||
Contact Information:
Keith Halbert
Chief Financial Officer
416-775-3796
keith@tuckamore.ca
www.tuckamore.ca