TORONTO, ONTARIO--(Marketwired - Aug. 12, 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 the three and six months ended June 30, 2015.
Second Quarter Results
| ($ millions, except per share amounts) | Q2 2015 | Q2 2014 | 6 months 2015 | 6 months 2014 | ||||||||
| Restated1 | Restated1 | |||||||||||
| Revenue | 154.8 | 166.5 | 286.3 | 335.8 | ||||||||
| Gross profit | 26.0 | 38.8 | 52.8 | 74.2 | ||||||||
| Selling, general & administrative expenses | (19.7 | ) | (23.8 | ) | (42.0 | ) | (47.5 | ) | ||||
| Net (loss) income from continuing operations | (6.3 | ) | 1.3 | (10.8 | ) | 4.4 | ||||||
| EBITDA | 3.3 | 13.2 | 7.6 | 26.3 | ||||||||
| Adjusted EBITDA | 6.8 | 16.0 | 11.3 | 29.3 | ||||||||
| Income (loss) per share from continuing operations, basic | (0.06 | ) | 0.01 | (0.10 | ) | 0.04 |
| 1 Adjusted for discontinued operations |
Revenue for the three and six month period ended June 30, 2015 was $154.8 million and $286.3 million, compared to $166.5 million and $335.8 million produced during the same periods in 2014. Gross profit for three and six months ended June 30, 2015 was $26.0 million and $52.8 million representing a gross profit margin of 16.8% and 18.4%. For the same periods in the prior year, the Company reported gross profit of $38.8 million and $74.2 million representing a gross profit margin of 23.3% and 22.1% percent. Adjusted EBITDA was $6.8 million and $11.3 million for the three and six months ended June 30, 2015, compared to $16.0 million and $29.3 million for the corresponding periods in 2014.
The net (loss) income from continuing operations for the three and six months ended June 30, 2015 was ($6.3) million and ($10.8) million compared to $1.3 million and $4.4 million for the same periods in the prior year.
PORTFOLIO REVIEW
INDUSTRIAL SERVICES
Within the Industrial Services division, both ClearStream and Quantum Murray reported lower results than a year ago.
At ClearStream, maintenance work volumes are improved from the first quarter, although revenues and margins have been impacted by market conditions. ClearStream was successful in re-negotiating a majority of its customer contracts and in doing so did not lose any of its existing customers. Management has partially mitigated the impact of market conditions through corporate overhead initiatives and efficiencies.
At Quantum Murray, revenues were slightly higher than a year ago, driven by some larger remediation projects albeit with lower gross margins. Management continues to place an increased focus on the group's service delivery platform and cost structure. Management is well into the process of performing a thorough analysis of the business and has commenced the implementation of necessary business and process changes.
MARKETING
Gemma is continuing to diversify and rebuild its recurring revenue base. Business development progress has been very good and there is good momentum in the business. However, long sales lead times, followed by detailed implementation and training schedules have resulted in a slower return to profitability. Furthermore, the second half of the year will be impacted by the recent loss of a key client that has made the strategic decision to internalize all of its clients touch functions.
IC Group results have improved slightly, primarily a result of two new customers which have helped minimize the impact of reductions in several core accounts, where loyalty programs that were outsourced to IC Group were taken in-house. Subsequent to the quarter end, Tuckamore disposed of its investment in IC Group. Please refer to the subsequent event section for more information.
OTHER
Gusgo had a strong performance with revenues increased from the prior year due to increased business volumes from its major customers.
Titan had another difficult quarter. Revenues were further impacted by the slowdown in the Alberta economy. Significant cost measures are being taken to match operating and overhead costs with the lower revenue base.
SUBSEQUENT EVENT
On July 30 2015, the Company sold its 80% interest in IC Group LP for cash proceeds of $2,500. Approximately $2,450 of the proceeds have been used to repay the Senior Credit Facility.
THIRD QUARTER 2015 OUTLOOK
This outlook is management's current view for the third quarter of 2015 as compared to the second quarter of 2015.
While continuing lower oil prices are causing concern in the Alberta oil sector, there is confidence at ClearStream that demand for its maintenance services will continue although with lower revenues due to recent pricing negotiations with clients. Demand for wear products remains strong and the outlook is improved for the fabrication division with two significant projects coming on stream. ClearStream will continue to be pro-active with a variety of cost savings measures and streamlining initiatives, which management believes will help to mitigate the financial impact of current market conditions.
Quantum Murray will continue to work on larger lower margin remediation projects, as well as several projects for the emergency response business. The Demolition division will work through a healthy backlog of medium size projects. Management is analyzing its organizational infrastructure, and will continue to implement changes to improve margins.
At Gemma, implementation and training for new clients will continue, and management remains active in bidding on new business.
In the Other segment, Titan is experiencing delays and deferrals by clients impacted by a slowdown in the Alberta economy. Overhead reductions are required to align to a lower revenue base.
Gusgo expects 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 5 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 "Third Quarter 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 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 (recovery). 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 Management's Discussion and Analysis.
Adjusted EBITDA refers to EBITDA excluding gain on sale of investment, restructuring costs, transaction 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) from continuing operations to Adjusted EBITDA in its MD&A.
Investors are cautioned that the Non-GAAP 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-GAAP Measures should only be used in conjunction with the financial statements included in the press release and Tuckamore's annual audited financial statements available on SEDAR at www.sedar.com or www.tuckamore.ca.
| TUCKAMORE CAPITAL MANAGEMENT INC. | ||||||
| Consolidated Interim Balance Sheets | ||||||
| (In thousands of Canadian dollars) | ||||||
| (unaudited) | ||||||
| June 30, 2015 | December 31, 2014 | |||||
| Assets | ||||||
| Current Assets: | ||||||
| Cash | $ | 11,489 | $ | 22,714 | ||
| Cash and short-term investments held in trust | 2,950 | 2,950 | ||||
| Accounts receivable | 137,732 | 155,281 | ||||
| Inventories | 25,566 | 22,215 | ||||
| Prepaid expenses | 4,907 | 4,445 | ||||
| Other current assets | 2,128 | 2,109 | ||||
| Current assets of discontinued operations and assets held for sale | - | 3,293 | ||||
| Total current assets | $ | 184,772 | $ | 213,007 | ||
| Property, plant and equipment | 52,135 | 56,154 | ||||
| Long-term investments | 21,520 | 21,773 | ||||
| Goodwill | 61,128 | 61,128 | ||||
| Intangible assets | 35,424 | 38,506 | ||||
| Other assets | 633 | 633 | ||||
| Deferred tax asset | 1,821 | 531 | ||||
| Total assets | $ | 357,433 | $ | 391,732 | ||
| Liabilities and Shareholders' Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued liabilities | 54,175 | 68,841 | ||||
| Income tax payable | - | 2,050 | ||||
| Deferred revenue | 5,097 | 5,363 | ||||
| Current portion of obligations under finance leases | 5,933 | 6,457 | ||||
| Senior credit facility | 63,129 | 67,253 | ||||
| Secured Debentures | 170,537 | - | ||||
| Current liabilities of discontinued operations and assets held for sale | - | 3,293 | ||||
| Total current liabilities | $ | 298,871 | $ | 153,257 | ||
| Obligations under finance leases | 9,421 | 11,799 | ||||
| Secured debentures | - | 166,845 | ||||
| Shareholders' equity | 49,141 | 59,831 | ||||
| Total liabilities & shareholders' equity | $ | 357,433 | $ | 391,732 | ||
| TUCKAMORE CAPITAL MANAGEMENT INC. | |||||||||||||
| Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss) | |||||||||||||
| (In thousands of Canadian dollars, except per share amounts) | |||||||||||||
| (unaudited) | |||||||||||||
| Three months ended | Six months ended | ||||||||||||
| June 30, | June 30, | ||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||
| Restated1 | Restated1 | ||||||||||||
| Revenues | $ | 154,760 | $ | 166,503 | $ | 286,346 | $ | 335,795 | |||||
| Cost of revenues | (128,757 | ) | (127,730 | ) | (233,547 | ) | (261,643 | ) | |||||
| Gross profit | 26,003 | 38,773 | 52,799 | 74,152 | |||||||||
| Selling, general and administrative expenses | (19,704 | ) | (23,785 | ) | (41,962 | ) | (47,502 | ) | |||||
| Amortization of intangible assets | (1,571 | ) | (1,732 | ) | (3,142 | ) | (3,451 | ) | |||||
| Depreciation | (3,625 | ) | (3,000 | ) | (6,237 | ) | (5,976 | ) | |||||
| Income from long-term investments | 910 | 877 | 639 | 2,362 | |||||||||
| Interest expense, net | (6,168 | ) | (6,498 | ) | (12,358 | ) | (14,861 | ) | |||||
| Restructuring costs | (3,914 | ) | - | (3,914 | ) | - | |||||||
| Transaction costs | - | (2,706 | ) | - | (2,706 | ) | |||||||
| (Loss) income from continuing operations | $ | (8,069 | ) | $ | 1,929 | $ | (14,175 | ) | $ | 2,018 | |||
| Income tax (expense) recovery - current | (20 | ) | - | (20 | ) | - | |||||||
| Income tax recovery (expense) - deferred | 1,816 | (643 | ) | 3,370 | 2,372 | ||||||||
| (Loss) income from continuing operations | $ | (6,273 | ) | $ | 1,286 | $ | (10,825 | ) | $ | 4,390 | |||
| (Loss) income from discontinued operations | |||||||||||||
| (net of income taxes) | $ | - | $ | (631 | ) | $ | 135 | $ | (1,591 | ) | |||
| Net (loss) income and comprehensive (loss) income | $ | (6,273 | ) | $ | 655 | $ | (10,690 | ) | $ | 2,799 | |||
| (Loss) income per share | Three months ended | Six months ended | |||||||||||
| June 30, | June 30, | ||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||
| Basic: | |||||||||||||
| Net (loss) income | $ | (0.06 | ) | $ | 0.01 | $ | (0.10 | ) | $ | 0.04 | |||
| Diluted: | $ | - | $ | - | $ | - | $ | - | |||||
| Net (loss) income | $ | (0.06 | ) | $ | 0.01 | $ | (0.10 | ) | $ | 0.03 | |||
| 1 Restated for discontinued operations. Please refer to the MD&A for more information. |
| TUCKAMORE CAPITAL MANAGEMENT INC. |
| Consolidated Interim Statements of Cash Flows |
| (In thousands of Canadian dollars) |
| (unaudited) |
| Six months ended | Six months ended | |||||||||
| June 30, 2015 | June 30, 2014 | |||||||||
| Restated1 | ||||||||||
| Cash provided by (used in): | ||||||||||
| Operating activities: | ||||||||||
| Net income (loss) for the period | $ | (10,690 | ) | $ | 2,799 | |||||
| (Income) loss from discontinued operations (net of income tax) | (135 | ) | 1,591 | |||||||
| Items not affecting cash: | - | - | ||||||||
| Amortization of intangible assets | 3,142 | 3,451 | ||||||||
| Depreciation | 6,237 | 5,976 | ||||||||
| Deferred income tax recovery | (3,370 | ) | (2,372 | ) | ||||||
| Income from equity investments, net of cash received | 253 | (67 | ) | |||||||
| Non-cash interest expense | 3,692 | 5,267 | ||||||||
| Amortization of deferred financing costs | 208 | 327 | ||||||||
| Stock based compensation expense | - | - | ||||||||
| Changes in non-cash working capital | (1,623 | ) | (21,223 | ) | ||||||
| Cash provided by (used in) discontinued operations | 173 | 15 | ||||||||
| Total cash (used in) provided by operating activities | $ | (2,113 | ) | $ | (4,236 | ) | ||||
| Investing activities: | ||||||||||
| Purchase of property, plant and equipment | (2,701 | ) | (3,426 | ) | ||||||
| Net proceeds on disposal of property, plant and equipment | 1,055 | 448 | ||||||||
| Purchase of software | - | (234 | ) | |||||||
| Proceeds on the disposition of business | 300 | - | ||||||||
| Cash provided by (used in) discontinued operations | - | 41 | ||||||||
| Total cash used in investing activities | $ | (1,346 | ) | $ | (3,171 | ) | ||||
| Financing activities: | ||||||||||
| Repayment of long-term debt | (4,184 | ) | (5,481 | ) | ||||||
| Repayment of finance lease obligations | (3,409 | ) | (2,907 | ) | ||||||
| Cash used in discontinued operations | (40 | ) | (125 | ) | ||||||
| Total cash used in financing activities | $ | (7,633 | ) | $ | (8,513 | ) | ||||
| (Decrease) increase in cash | (11,092 | ) | (15,920 | ) | ||||||
| Cash, beginning of the year - continuing operations | 22,714 | 28,709 | ||||||||
| Cash, beginning of the year - discontinued operations | (133 | ) | 174 | |||||||
| Cash, end of period | $ | 11,489 | $ | 12,963 | ||||||
| Cash, end of period - continuing operations | 11,489 | 12,858 | ||||||||
| Cash, end of period - discontinued operations | - | 105 | ||||||||
| Supplemental cash flow information: | ||||||||||
| Interest paid | 8,459 | 8,066 | ||||||||
| Supplemental disclosure of non-cash financing and investing activities: | - | - | ||||||||
| Acquisition of property, plant and equipment through finance leases | 677 | 1,680 | ||||||||
| 1 Restated for discontinued operations. Please refer to the MD&A for more information. |
Contact Information:
Keith Halbert
Chief Financial Officer
416-775-3796
keith@tuckamore.ca