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

Tuckamore Capital Management Inc.

November 09, 2011 08:00 ET

Tuckamore Announces Third Quarter 2011 Financial Results

TORONTO, ONTARIO--(Marketwire - Nov. 9, 2011) -

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 the three and nine months ended September 30, 2011.

Third Quarter Results

9 months 9 months
($ millions, except per share amounts) Q3 2011 Q3 2010 2011 2010
Revenue 162.4 118.5 453.7 339.3
Gross profit 37.7 23.9 100.1 71.8
Selling, general & administrative expenses (22.2 ) (18.6 ) (70.3 ) (56.9 )
Net income (loss) from continuing operations 6.5 (9.4 ) 22.3 (19.2 )
Adjusted EBITDA from continuing operations 14.6 5.7 27.9 15.6
Income (loss) per share from continuing operations – basic 0.09 (0.13 ) 0.31 (0.27 )
Income (loss) per share from continuing operations – diluted 0.08 (0.13 ) 0.27 (0.27 )

The results from continuing operations exclude those of assets sold during the quarter and which were classified in discontinued operations during the period.

Revenue for the three and nine months period ended September 30, 2011 was $162.4 and $453.7 million, versus $118.5 and $339.3 million reported in 2010. Gross profit was $37.7 million for the quarter representing a gross profit margin of 23% percent. For the same period last year, the Company reported gross profit of $23.9 representing a gross profit margin of 20% percent. Adjusted EBITDA was $14.6 and $27.9 million for the three and nine months ended September 30, 2011, compared to $5.7 and $15.6 million for the corresponding periods in 2010.

INDUSTRIAL SERVICES

The Industrial services segment had a strong quarter with both investments significantly exceeding the prior year results.

At NPC the improved results reflect the increase in ownership of both NPC and Golosky to 100%, as well as increased maintenance services activity and higher volumes in the fabrications divisions.

Quantum Murray had its most profitable quarter to date. The environmental division benefitted from several large hazmat and remediation projects, as well as seasonal Arctic work. The demolition division also had a solid quarter due to increased levels of industrial decommissioning activity. The metals division results were improved due to higher scrap prices and trading margins.

MARKETING

The Marketing segment had overall improved results compared to the prior year quarter. Gemma had its strongest quarter in over two years. Increased revenue and gross margin over the prior year were largely a result of key clients increasing inbound telesales volumes. Armstrong had a solid EBITDA contribution despite lower revenues reflecting a shift in mix of revenue to higher margin services. IC Group had improved results primarily due to improved margins.

OTHER

Results in the Other division were mixed in the quarter. Titan continued to have increased volumes for ground engaging tools and rigging products reflecting increased activity in the conventional oil and gas industry. Gusgo had slightly lower results compared to prior year period which reflected higher storage revenue.

FOURTH QUARTER OUTLOOK

Within the marketing segments, Gemma's outlook for Q4 is positive. Significant new business volumes from Gemma's larger clients will benefit the balance of 2011. Both IC Group and Armstrong continue to have a more cautious outlook as they continue to focus on business development activities.

The fourth quarter will see turnaround plant and maintenance assignments, and increased workload in NPC's fabrication and transportation divisions, but will also be affected by the December holiday season. Quantum Murray has a healthy work backlog and this quarter will see the completion of some larger projects in both the demolition and remediation divisions.

Titan and Gusgo's fourth quarter business levels are expected to be similar to this third quarter.

NEW BOARD MEMBER

Douglas Brown, Chairman of the Board of Directors of Tuckamore Capital, is pleased to announce the appointment of The Right Honourable Brian Mulroney to the Board of Directors, effective November 8, 2011. Mr. Mulroney was the Prime Minister of Canada from 1984 to 1993 and brings considerable business and international experience to the Board, and will provide valuable insight into ongoing corporate strategy.

About Tuckamore Capital

Tuckamore is a publicly traded company, which invests in successful Canadian private businesses. Tuckamore, has $352 million invested in 8 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 "Fourth Quarter 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-IFRS 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-IFRS measures may differ from the methods used by other issuers. Therefore, Tuckamore's Non-IFRS 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 (formally Newport Partners Income Fund) annual audited financial statements available on SEDAR at www.sedar.com or www.tuckamore.ca.

TUCKAMORE CAPITAL MANAGEMENT INC. (formerly "Newport Partners Income Fund")
Consolidated Balance Sheets
(In thousands of Canadian dollars)
(unaudited)
September 30, 2011 December 31, 2010
Assets
Current Assets:
Cash and cash equivalents $ 12,864 $ 27,230
Cash and short-term investments held in trust 9,372 5,000
Accounts receivable 158,144 90,184
Inventories 43,559 28,202
Prepaid expenses 3,580 3,354
Other current assets 2,953 8,513
Assets of discontinued operations - 45,233
$ 230,472 $ 207,716
Property, plant and equipment 55,329 53,390
Long-term investments 7,594 7,594
Goodwill 70,758 75,587
Intangible assets 98,101 80,890
Other assets 1,717 1,492
$ 463,971 $ 426,669
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities 101,094 58,232
Provisions 487 5,401
Deferred revenue 7,307 6,757
Current portion of obligations under capital leases 5,170 4,534
Accrued interest on convertible debentures - 23,870
Revolving credit facilities - 10,089
Accrued interest on revolving credit facilities - 1,449
Current portion of long-term debt 10,000 86,939
Convertible debentures - 159,829
Liabilities of discontinued operations - 22,221
$ 124,058 $ 379,321
Obligations under capital leases 3,471 4,306
Long-term debt 86,549 -
Secured debentures 144,721 -
Unsecured debentures 13,259 -
Stock based payment liability - 1,165
Deferred tax liability 14,025 7,332
Unitholders' equity - 34,545
Shareholders' equity 77,888
$ 463,971 $ 426,669
TUCKAMORE CAPITAL MANAGEMENT INC. (formerly "Newport Partners Income Fund")
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(In thousands of Canadian dollars, except per unit amounts)
(unaudited)
Three months ended Nine months ended
September 30 September 30
2011 2010 2011 2010
Revenue $ 162,447 $ 118,471 $ 453,739 $ 339,281
Cost of revenue (124,725 ) (94,515 ) (353,657 ) (267,511 )
Gross profit 37,722 23,956 100,082 71,770
Expenses
Selling, general and administrative (22,198 ) (18,567 ) (70,301 ) (56,943 )
Amortization of intangible assets (3,813 ) (3,191 ) (13,370 ) (9,354 )
Depreciation (5,297 ) (2,730 ) (12,670 ) (8,028 )
$ (31,308 ) $ (24,488 ) $ (96,341 ) $ (74,325 )
Income (loss) before the undernoted 6,414 (532 ) 3,741 (2,555 )
Income from equity investments - 280 372 765
Interest expense, net (9,212 ) (9,327 ) (23,841 ) (25,707 )
Gain on re-measurement of investment and gain on bargain purchase 10,871 - 10,871 9,051
Loss on sale of investment - (442 ) - (442 )
Gain on debt extinguishment - - 37,451 -
Fair value adjustment to stock based compensation expense - 482 (883 ) 833
Transaction costs (910 ) - (2,297 ) (40 )
Write-down of goodwill and intangible assets - - (321 ) (1,779 )
Income (loss) before income taxes $ 7,163 $ (9,539 ) $ 25,093 $ (19,874 )
Income tax expense - current (6 ) (161 ) (14 ) (205 )
Income tax (expense) recovery - deferred (646 ) 331 (2,759 ) 906
Net income (loss) from continuing operations $ 6,511 $ (9,369 ) $ 22,320 $ (19,173 )
Income (loss) from discontinued operations (net of income tax) 13,311 (3,642 ) 17,065 2,080
Net income (loss) and comprehensive income (loss) $ 19,822 $ (13,011 ) $ 39,385 $ (17,093 )
Income (loss) per share
Basic:
Continuing operations $ 0.09 $ (0.13 ) $ 0.31 $ (0.27 )
Net income (loss) $ 0.28 $ (0.18 ) $ 0.55 $ (0.23 )
Diluted:
Continuing operations $ 0.08 $ (0.13 ) $ 0.27 $ (0.27 )
Net income (loss) $ 0.23 $ (0.18 ) $ 0.47 $ (0.23 )
TUCKAMORE CAPITAL MANAGEMENT INC. (formerly "Newport Partners Income Fund")
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars, except per unit amounts)
(unaudited)
Nine months ended September 30
2011 2010
Cash provided by (used in):
Operating activities:
Net income (loss) for the period $ 39,385 $ (17,093 )
Items not affecting cash:
Income from discontinued operations (17,065 ) (2,080 )
Amortization of intangible assets 13,370 9,354
Depreciation 12,710 8,068
Deferred income tax expense (recovery) 2,759 (906 )
Income from equity investments, net of cash received 132 (428 )
Loss on sale of investment - 442
Non-cash interest expense 5,728 2,803
Gain on re-measurement of investment/ gain on bargain purchase (10,871 ) (9,051 )
Gain on extinguishment of debt (37,451 ) -
Stock based compensation expense 2,793 400
Write-down of goodwill and intangible assets 321 1,779
Changes in non-cash working capital (34,200 ) (8,635 )
Distributions from discontinued operations 1,634 13,992
Cash provided by (used in) discontinued operations 829 13,364
$ (19,926 ) $ 12,009
Investing activities:
Acquisition of businesses, net cash acquired (31,344 ) (4,321 )
Purchase of property, plant and equipment (1,633 ) (2,068 )
Proceeds on disposition of property, plant and equipment 733 -
Proceeds on disposition of businesses 38,730 23,581
Purchase of software (763 ) (329 )
Purchase of other intangible assets (2,000 ) -
Increase in other assets - (19 )
Cash provided by (used in) discontinued operations (69 ) (1,094 )
$ 3,654 $ 15,750
Financing activities:
Increase in long-term debt 11,016 -
Repayment of long term debt - (38,505 )
Increase (decrease) in cash held in trust (4,372 ) 35
Repayment of capital lease obligations (3,978 ) (3,603 )
Cash used in discontinued operations (1,269 ) (12,033 )
$ 1,397 $ (54,106 )
Decrease in cash and cash equivalents (14,875 ) (26,347 )
Cash and cash equivalents, beginning of period - continuing operations 27,230 40,595
Cash and cash equivalents, beginning of period - discontinued operations 509 3,287
Cash and cash equivalents, end of period $ 12,864 $ 17,535
Cash and cash equivalents, end of period - continuing operations $ 12,864 $ 14,011
Cash and cash equivalents, end of period - discontinued operations - 3,524
Supplemental cash flow information:
Interest paid $ 9,350 $ 22,904
Cash acquired upon acquisition $ (1,054 ) 4
Supplemental disclosure of non-cash financing and investing activities: $ - $ -
Acquisition of property, plant and equipment through capital leases $ 2,287 $ 1,632
Debt and accrued interest repaid through issuance of debentures $ 152,951 -

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