TORONTO, ONTARIO--(Marketwired - March 27, 2015) -
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) today announced its results for three months and year ended December 31, 2014.
Year-End Results
| ($ millions, except per share amounts) | 2014 | 2013 | ||
| Revenue | 703.1 | 647.8 | ||
| Gross profit | 147.7 | 136.3 | ||
| Selling, general & administrative expenses | (98.1 | ) | (97.7 | ) |
| Net loss from continuing operations | (7.8 | ) | (14.7 | ) |
| EBITDA | 35.9 | 38.7 | ||
| Adjusted EBITDA | 53.0 | 45.3 | ||
| Loss per share from continuing operations | (0.09 | ) | (0.21 | ) |
Revenues for the year ended December 31, 2014 were $703.1 million compared to $647.8 million in 2013, an increase of 8.5% from 2013. ClearStream experienced increased business volumes at most of its divisions, while Quantum Murray was also able to generate increased revenues in comparison to the prior year. Gross profit for the year ended December 31, 2014 was $147.7 million compared to $136.3 million in 2013. Gross margins were 21.0%, which is consistent with the 21.0% gross margin achieved in 2013. Margins at the Remediation and Hazmat divisions of Quantum Murray improved in comparison to the prior year. Margins at ClearStream in 2014 were slightly below those in 2013, and reflect reduced volumes in the Oilsands maintenance division in the second quarter.
Non-cash items that impacted the results were depreciation and amortization, write-down of goodwill and intangibles and deferred income taxes.
- Depreciation and amortization was $20.7 million for the year ended December 31, 2014 compared to $22.6 million for the prior year.
- During the year ended December 31, 2014 $5.0 million of brand intangibles related to Quantum Murray was impaired due to continuing lower levels of business volumes. In addition $2.0 million of goodwill related to IC Group was impaired due to lower business volumes from large clients. During the year ended December 31, 2013 $2.7 million of goodwill and $3.0 million of brand intangibles related to Gemma were impaired as a result of business volume declines.
Adjusted EBITDA which excludes the above noted items increased 17.0 percent to $53.0 million versus $45.3 million in 2013.
The net loss from continuing operations for 2014 was $7.8 million versus $14.7 million in 2013.
PORTFOLIO REVIEW
INDUSTRIAL SERVICES
Within the Industrial Services division, ClearStream reported strong results. While some improvement at Quantum Murray has been made, the full benefits of progress are most likely to be seen in the future.
At ClearStream, most divisions reported increased revenues. Revenue gains at the Fabrication division and the Conventional oil and gas maintenance divisions were the most favorable. Revenues and gross margins at the Oilsands division were lower than the previous year due to production capacity issues at a major client in the second quarter. As a result, overall gross margin at ClearStream was slightly decreased from 2013.
ClearStream's EBITDA contribution in 2014 was significantly higher than the previous year largely because of a 7% revenue increase year over year, and careful cost management which resulted in a decrease in selling, general and administrative expenses.
At Quantum Murray, increased revenues came primarily from the remediation and emergency response divisions, in the pacific and prairie regions respectively. A larger remediation mandate contributed to the increase and will impact revenues favourably through 2015, albeit at lower gross margins. The demolition division continues to perform well on smaller to medium projects resulting in improved gross margins than the previous year, but still needs higher business volumes to fully leverage its infrastructure. The lower base of demolition volumes has contributed to a poor scrap metals division performance, and to the decision to dispose of this division. Results were also impacted by the recording of increased bad debt provision relating to a client in receivership.
MARKETING
Gemma had a challenging year with decreases in revenues from several key clients. The business also transitioned to a new management team, and incurred significant restructuring costs. This new team has brought increased focus to generating new revenue and clients which should benefit future quarters.
IC Group's results were also down compared to the prior years. The results have been impacted by revenue reductions in several of the core accounts, where some clients have taken in-house some loyalty programs previously outsourced to IC Group. Margins however are improved and there has been good progress in cost containment within the corporate expense categories, although offset by certain one-time costs.
OTHER
Gusgo had a strong performance with revenues increased from the prior year. Increased business volumes and improved contract pricing from two major clients drove the improvement as Gusgo was able to maintain gross margin levels and selling and general expense levels.
Titan had a difficult year. Revenues were reduced from a year ago, with increased competition, challenging conditions for weather related products, and a new sales force all contributing factors. Although gross margins were improved due to product mix, overhead costs increased as the business invested in additional sales and marketing staff.
Fourth Quarter Results
| ($ millions, except per share amounts) | 2014 | 2013 | ||
| Revenue | 176.8 | 160.3 | ||
| Gross profit | 36.9 | 34.0 | ||
| Selling, general & administrative expenses | (27.4 | ) | (28.8 | ) |
| Net loss from continuing operations | (9.5 | ) | (6.1 | ) |
| EBITDA | 1.9 | 6.9 | ||
| Adjusted EBITDA | 9.4 | 7.1 | ||
| Loss per share from continuing operations | (0.09 | ) | (0.09 | ) |
Revenues for the three months ended December 31, 2014 were $176.8 million compared to $160.3 million in 2013, an increase of 10.3%. The increase was primarily related to ClearStream which had a very active fourth quarter in its Oilsands maintenance division. Gross profit for the three months ended December 31, 2014 was $36.9 million compared to $34.0 million in 2013, an increase of 8.5%. Gross margins were 20.9% for the three months ended December 31, 2014 compared to 21.2% in the 2013 period.
INDUSTRIAL SERVICES
ClearStream's fourth quarter results were stronger than last year with revenues increased by 7.1%. The increase in revenues was primarily in the oilsands maintenance division which completed maintenance programs previously deferred from the second quarter. Wear revenues were similar to a year ago but conventional maintenance service revenue and more particularly fabrication revenues were lower than last year. Margins were slightly lower than last year more as a result of revenue mix, but significant savings in overhead costs through cost containment measures resulted in a strong earnings performance. At Quantum Murray, revenues in the demolition and emergency response divisions were increased from the prior year quarter. These divisions were also the main contributors to the increase in gross margins. There has been a steady improvement in demolition gross margins through the year, as older projects have been completed. The better margins however were offset this quarter by costs associated with restructuring and business alignment, and bad debt provisions
MARKETING
Gemma had lower revenues in comparison to the same quarter in the prior year. Reduction in hours from a major client significantly impacted results. Margins were also impacted by training costs for new programs commencing soon. Revenues were lower at IC Group compared to a year ago, and IC Group is working to maintain profitability by bringing costs in line with the reduced business volumes. Certain one-time costs were recorded in the quarter.
OTHER
Titan's results for the quarter were impacted by lower sales of ground engaging products due to warmer weather, resulting in revenues lower than the same quarter in the prior year. Gusgo's had higher revenues than a year ago, largely because of continued increased business volumes from two major clients. Margins were also improved as costs were carefully managed.
Contingency
In March 2015, the Company was advised by Brompton Corp. ("Brompton") that Brompton has received notices of reassessment from the Canada Revenue Agency (the "CRA") in which the CRA has denied the deduction to Brompton of certain non-capital losses and other tax attributes in computing Brompton's income for the 2010 to 2014 taxation years. Tuckamore has been notified by Brompton that, in view of its interest in mitigating any potential penalties or interest amounts associated with these taxes, Brompton proposes to pay some or all of the taxes assessed while continuing to challenge these assessments, and that Brompton is seeking indemnification in the amount of $4.0 million from Tuckamore Holdings LP, representing approximately 40% of its taxes, losses or costs, pursuant to certain agreements entered into by Tuckamore Holdings LP prior to the sale of its interest in Brompton. Please refer to the audited consolidated financial statements or the management's disclosure and analysis for the year ending December 31, 2014 for more information.
2015 Outlook
While lower oil prices are causing concern in the Alberta oil sector, there is confidence at ClearStream that its maintenance heavy platform has it positioned to be more resilient than many service providers in these times. It is anticipated that there will be low activity in the fabrication division due to delays and deferrals on new capital projects. In its core maintenance business, while there is client pressure for price concessions, ClearStream is being pro-active and has initiated a variety of cost savings measures, which management believes will help to mitigate the majority of the financial impact from any revenue reductions.
Quantum Murray has a healthy backlog of business in place, and has a considerable pipeline of opportunities. There will be further work on larger lower margin remediation projects, and increased focus on expanding business development activities for new and larger demolition opportunities. A leading emergency response business has been built which has good profitability and the ability to provide good leads for other services. Management continues to fine tune its organizational infrastructure to improve margins.
At Gemma, the new management team has been successful in some recent bids and remains active in bidding on new business. At IC Group, the core client base has reduced its project spending. Management is continuing its efforts to stabilize business volumes from its core client base while placing an increased focus on identifying and securing new clients.
In the Other segment, at Titan a new management team is in place which will look to leverage the new sales force to build sales and regain market share. Significant overhead reductions are required and are already being actioned. Process improvements are also being made to bring further efficiency and margin improvement. Gusgo is continuing to expect stable business volumes from its existing customer base and will continue to operate efficiently in order to maximize 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, commodity prices, 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 "2015 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 (loss) to EBITDA in its consolidated financial statements and management's discussion and analysis.
Adjusted EBITDA refers to EBITDA excluding the loss on de-recognition of debt, the write-down of goodwill and intangible assets, transaction costs, write-down of long-term investments, 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. Tuckamore has provided a reconciliation of income (loss) to Adjusted EBITDA in its management's discussion and analysis.
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) |
| As at | December 31, 2014 |
December 31, 2013 |
|||
| Assets | |||||
| Current Assets: | |||||
| Cash and cash equivalents | $ | 22,714 | $ | 28,883 | |
| Cash and short-term investments held in trust | 2,950 | 2,950 | |||
| Accounts receivable | 155,281 | 145,858 | |||
| Inventories | 22,215 | 12,721 | |||
| Prepaid expenses | 4,445 | 6,753 | |||
| Other current assets | 2,109 | 2,733 | |||
| Current assets of discontinued operations and assets held for sale | 3,293 | - | |||
| Total current assets | 213,007 | 199,898 | |||
| Property, plant and equipment | 56,154 | 62,688 | |||
| Long-term investments | 21,773 | 28,281 | |||
| Goodwill | 61,128 | 61,128 | |||
| Intangible assets | 38,506 | 49,896 | |||
| Other assets | 633 | 633 | |||
| Deferred tax asset | 531 | - | |||
| Total assets | $ | 391,732 | $ | 402,524 | |
| Liabilities and shareholders' equity | |||||
| Current liabilities: | |||||
| Accounts payable and accrued liabilities | $ | 68,841 | $ | 65,807 | |
| Income tax payable | $ | 2,050 | |||
| Deferred revenue | 5,363 | 3,048 | |||
| Current portion of obligations under finance leases | 6,457 | 6,041 | |||
| Current portion of senior credit facility | 67,253 | 5,481 | |||
| Unsecured debentures | - | 24,819 | |||
| Current liabilities of discontinued operations and assets held for sale | 3,293 | - | |||
| Total current liabilities | 153,257 | 105,196 | |||
| Obligations under finance leases | 11,799 | 11,584 | |||
| Senior credit facility | - | 84,354 | |||
| Secured debentures | 166,845 | 159,700 | |||
| Deferred tax liabilities | - | 5,650 | |||
| Shareholders' equity | 59,831 | 36,040 | |||
| Total liabilities and shareholders' equity | $ | 391,732 | $ | 402,524 | |
Please refer to the audited consolidated financial statements for the year ended December 31, 2014 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) |
| 2014 | 2013 | ||||||
| Restated(1) | |||||||
| Revenue | $ | 703,102 | $ | 647,788 | |||
| Cost of revenue | (555,397 | ) | (511,457 | ) | |||
| Gross profit | 147,705 | 136,331 | |||||
| Selling, general and administrative expenses | (98,147 | ) | (97,690 | ) | |||
| Amortization of intangible assets | (6,798 | ) | (8,973 | ) | |||
| Depreciation | (13,932 | ) | (13,654 | ) | |||
| Income from equity investments | 678 | 5,780 | |||||
| Interest expense | (27,726 | ) | (33,605 | ) | |||
| Transaction costs | (9,057 | ) | - | ||||
| Write-down of goodwill and intangible assets | (5,308 | ) | (5,713 | ) | |||
| Write-down of long term investment | - | - | |||||
| Loss before income taxes | (12,585 | ) | (17,524 | ) | |||
| Income tax expense - current | (2,050 | ) | (3 | ) | |||
| Income tax recovery - deferred | 6,799 | 2,831 | |||||
| Loss from continuing operations | (7,836 | ) | (14,696 | ) | |||
| Loss from discontinued operations (net of income taxes) | (9,411 | ) | (2,685 | ) | |||
| Net loss and comprehensive loss | $ | (17,247 | ) | $ | (17,381 | ) | |
| Loss per share | |||||||
| Basic & Diluted: | |||||||
| Continuing operations | $ | (0.09 | ) | $ | (0.21 | ) | |
| Net loss | $ | (0.19 | ) | $ | (0.24 | ) | |
| (1) | Please note that the December 31, 2013 consolidated statement of loss and comprehensive loss was restated as a result of the discontinued operations from Quantum Murray's Metals division. Please refer to the audited consolidated financial statements for the year ended December 31, 2014 for more information. |
| TUCKAMORE CAPITAL MANAGEMENT INC. |
| Consolidated Statements of Cash Flows |
| Years Ended December 31 |
| (In thousands of Canadian dollars) |
| 2014 | 2013 | |||||||
| Restated(1) | ||||||||
| Operating activities: | ||||||||
| Net loss for the year | $ | (17,247 | ) | $ | (17,381 | ) | ||
| Income from discontinued operations (net of income tax) | 9,411 | 2,685 | ||||||
| Items not affecting cash: | - | |||||||
| Amortization of intangible assets | 6,798 | 8,973 | ||||||
| Depreciation | 13,932 | 13,654 | ||||||
| Deferred income tax recovery | (6,799 | ) | (2,831 | ) | ||||
| Income from long-term investments | (678 | ) | (5,780 | ) | ||||
| Non-cash accretion expense | 8,878 | 12,878 | ||||||
| Amortization of deferred financing costs | 535 | 653 | ||||||
| Stock-based compensation expense | - | 170 | ||||||
| Write-down of goodwill and intangible assets | 5,308 | 5,713 | ||||||
| Impairment of long-term investments | 2,000 | - | ||||||
| Changes in non-cash working capital | (13,960 | ) | 7,549 | |||||
| Cash provided by discontinued operations | 122 | 846 | ||||||
| Total cash provided by operating activities | 8,300 | 27,129 | ||||||
| Investing activities: | ||||||||
| Distributions from long-term investments | 5,186 | 4,614 | ||||||
| Purchase of property, plant and equipment | (7,109 | ) | (8,107 | ) | ||||
| Proceeds on disposition of property, plant and equipment, net | 699 | 1,423 | ||||||
| Purchase of software | (408 | ) | (368 | ) | ||||
| Decrease in other assets | - | 52 | ||||||
| Acquisition of business, net | (308 | ) | - | |||||
| Total cash used in investing activities | (1,940 | ) | (2,386 | ) | ||||
| Financing activities: | ||||||||
| Repayment of long-term debt | (22,968 | ) | (118 | ) | ||||
| Proceeds from issuance of common shares, net | 12,500 | - | ||||||
| Proceeds from the exercise of options for common shares | 4,986 | - | ||||||
| Increase in cash held in trust | - | (15 | ) | |||||
| Repayment of obligations under finance leases | (6,792 | ) | (5,805 | ) | ||||
| Cash used in discontinued operations | (429 | ) | (465 | ) | ||||
| Total cash used in financing activities | (12,703 | ) | (6,403 | ) | ||||
| (Decrease) increase in cash | (6,343 | ) | 18,340 | |||||
| Cash beginning of year - continuing operations | 28,883 | 10,750 | ||||||
| Cash beginning of year - discontinued operations | 174 | (207 | ) | |||||
| Cash end of year | $ | 22,714 | $ | 28,883 | ||||
| Cash end of year - continuing operations | $ | 22,714 | $ | 28,709 | ||||
| Cash end of year - discontinued operations | $ | (133 | ) | $ | 174 | |||
| Supplemental cash flow information: | ||||||||
| Interest paid | $ | 21,349 | $ | 22,607 | ||||
| Supplemental disclosure of non-cash financing and investing activities: | ||||||||
| Acquisition of property, plant and equipment through finance leases | $ | 8,663 | $ | 13,823 | ||||
| (1) | Please note that the December 31, 2013 consolidated statement of cash flows was restated as a result of the discontinued operations from Quantum Murray's Metals division. Please refer to the audited consolidated financial statements for the year ended December 31, 2014 for more information. |
Contact Information:
Keith Halbert
Chief Financial Officer
416-775-3790
IRinfo@tuckamore.ca
www.tuckamore.ca