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

Tuckamore Capital Management Inc.

November 13, 2015 08:00 ET

Tuckamore Announces Third Quarter 2015 Financial Results

TORONTO, ONTARIO--(Marketwired - Nov. 13, 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 nine months ended September 30, 2015.

Third Quarter Results

($ millions, except per share amounts) Q3 2015
Q3 2014
9 months
2015

9 months
2014

Restated1 Restated1
Revenue 154.4 187.8 434.1 516.0
Gross profit 31.5 36.6 82.5 107.6
Selling, general & administrative expenses (19.2 ) (22.2 ) (58.2 ) (65.0 )
Net (loss) income from continuing operations (0.4 ) (1.7 ) (9.8 ) 4.2
EBITDA 8.8 8.6 17.6 36.2
Adjusted EBITDA 12.0 15.1 25.1 45.6
(Loss) income per share from continuing operations, basic (0.01 ) (0.03 ) (0.11 ) 0.05
1Adjusted for discontinued operations

Revenue for the three and nine month period ended September 30, 2015 was $154.4 million and $434.1 million, compared to $187.8 million and $516.0 million produced during the same periods in 2014. Gross profit for three and nine months ended September 30, 2015 was $31.5 million and $82.5 million representing a gross profit margin of 20.4% and 19.0%. For the same periods in the prior year, the Company reported gross profit of $36.6 million and $107.6 million representing a gross profit margin of 19.5% and 20.9% percent. Adjusted EBITDA was $12.0 million and $25.1 million for the three and nine months ended September 30, 2015, compared to $15.1 million and $45.6 million for the corresponding periods in 2014.

The net (loss) income from continuing operations for the three and nine months ended September 30, 2015 was ($0.4) million and ($9.8) million compared to ($1.7) million and $4.1 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, business volumes have improved significantly over the first two quarters of the year, however they remain lower than the same period in the prior year. ClearStream was successful in re-negotiating a majority of its customer contracts in the first half of the year. Lower gross profit from decreases in maintenance revenues in comparison to the same periods in the prior year have partially been mitigated through corporate overhead initiatives and further improvements in operational efficiencies. Wear technology revenues and margins were strong in the quarter.

At Quantum Murray, management is continuing to place an increased focus on the company's service delivery platform and cost structure. This review has resulted in the implementation of necessary business and process changes. Once all of the changes have been implemented, management will be able to shift its focus back to careful and strategic growth of the business.

OTHER

During the quarter, Gusgo's revenues decreased from the same period in prior year due to a scheduled plant shut-down by one of its major customers in the third quarter of 2015. A similar shut-down did not occur in the third quarter of 2014.

At Titan, 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.

FOURTH QUARTER 2015 OUTLOOK

This outlook is management's current view for the fourth quarter of 2015 as compared to the third quarter of 2015.

There is confidence at ClearStream that demand for its maintenance services will continue. New work opportunities are available and being bid, and recent wins are encouraging. Demand for wear products remains strong and the outlook remains solid for the fabrication division. 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 and the Demolition division will work through a healthy backlog of medium size projects. Management will continue to implement changes to improve margins.

In the Other segment, at Titan costs are being closely monitored to align to a lower revenue base. Gusgo expects stable business volumes from its existing customer base.

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 4 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" 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/loss 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)
September 30, 2015 December 31, 2014
Assets
Current Assets:
Cash $ 7,612 $ 22,714
Cash and short-term investments held in trust 2,680 2,950
Accounts receivable 159,686 155,281
Inventories 26,592 22,215
Prepaid expenses 3,077 4,445
Other current assets 1,556 2,109
Current assets of discontinued operations and assets held for sale - 3,293
Total current assets $ 201,203 $ 213,007
Property, plant and equipment 48,535 56,154
Long-term investments 18,277 21,773
Goodwill 61,128 61,128
Intangible assets 33,864 38,506
Other assets 633 633
Deferred tax asset 2,944 531
Total assets $ 366,584 $ 391,732
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities 70,261 68,841
Income tax payable - 2,050
Deferred revenue 3,464 5,363
Current portion of obligations under finance leases 4,720 6,457
Senior credit facility 58,515 67,253
Secured Debentures 172,414 -
Current liabilities of discontinued operations and assets held for sale - 3,293
Total current liabilities $ 309,374 $ 153,257
Obligations under finance leases 9,198 11,799
Secured debentures - 166,845
Shareholders' equity 48,012 59,831
Total liabilities & shareholders' equity $ 366,584 $ 391,732
TUCKAMORE CAPITAL MANAGEMENT INC.
Consolidated Interim Statements of (Loss) Income and Comprehensive (Loss) Income
(In thousands of Canadian dollars, except per share amounts)
(unaudited)
Three months ended
September 30,
Nine months ended
September 30,
2015 2014 2015 2014
Restated1 Restated1
Revenues $ 154,415 $ 187,796 $ 434,087 $ 515,960
Cost of revenues (122,935 ) (151,197 ) (351,567 ) (408,383 )
Gross profit 31,480 36,599 82,520 107,577
Selling, general and administrative expenses (19,201 ) (22,191 ) (58,221 ) (64,959 )
Amortization of intangible assets (1,575 ) (1,749 ) (4,716 ) (5,208 )
Depreciation (2,691 ) (3,073 ) (8,930 ) (8,888 )
Income from long-term investments (469 ) 542 229 2,599
Interest expense, net (6,280 ) (6,493 ) (18,535 ) (21,336 )
Restructuring costs (2,978 ) - (6,892 ) -
Transaction costs - (6,351 ) - (9,057 )
(Loss) income from continuing operations $ (1,714 ) $ (2,716 ) $ (14,545 ) $ 728
Income tax (expense) recovery - current (77 ) 65 (96 ) 63
Income tax recovery (expense) - deferred 1,349 993 4,800 3,363
(Loss) income from continuing operations $ (442 ) $ (1,658 ) $ (9,841 ) $ 4,154
(Loss) income from discontinued operations (net of income taxes) $ (687 ) $ (1,317 ) $ (1,978 ) $ (4,332 )
Net (loss) income and comprehensive (loss) income $ (1,129 ) $ (2,975 ) $ (11,819 ) $ (178 )
Basic and Diluted2:
Net loss, per share (note 7) $ (0.01 ) $ (0.03 ) $ (0.11 ) $ (0.00 )
1 Restated for discontinued operations. Please refer to the MD&A for more information.
2 The effect of stock options for the three and nine month periods ended September 30, 2015 and September 30, 2014 are anti-dilutive.
TUCKAMORE CAPITAL MANAGEMENT INC.
Consolidated Interim Statements of Cash Flows
(In thousands of Canadian dollars)
(unaudited)
Nine months ended
September 30, 2015
Nine months ended
September 30, 2014
Restated1
Cash provided by (used in):
Operating activities:
Net income (loss) for the period $ (11,819 ) $ (178 )
(Income) loss from discontinued operations (net of income tax) 1,978 4,332
Items not affecting cash: - -
Amortization of intangible assets 4,716 5,208
Depreciation 8,930 8,888
Deferred income tax recovery (4,800 ) (3,363 )
Income from equity investments, net of cash received (119 ) (201 )
Non-cash interest expense 5,568 7,063
Amortization of deferred financing costs 344 516
Stock based compensation expense - -
Changes in non-cash working capital (10,251 ) (29,748 )
Cash provided by (used in) discontinued operations 720 505
Total cash (used in) provided by operating activities $ (4,733 ) $ (6,978 )
Investing activities:
Purchase of property, plant and equipment (3,187 ) (4,489 )
Net proceeds on disposal of property, plant and equipment 2,183 447
Purchase of software - (381 )
Proceeds on the disposition of business 5,050 -
Cash provided by (used in) discontinued operations (587 ) (551 )
Total cash used in investing activities $ 3,459 $ (4,974 )
Financing activities:
Repayment of long-term debt (8,934 ) (22,968 )
Increase in cash held in trust 270 -
Proceeds from issuance of common shares, net - 12,500
Proceeds from the exercise of options for common shares - 4,986
Repayment of finance lease obligations (5,031 ) (4,942 )
Cash used in discontinued operations - (22 )
Total cash used in financing activities $ (13,695 ) $ (10,446 )
(Decrease) increase in cash (14,969 ) (22,398 )
Cash, beginning of the year - continuing operations 22,714 28,565
Cash, beginning of the year - discontinued operations (133 ) 318
Cash, end of period $ 7,612 $ 6,485
Cash, end of period - continuing operations 7,612 6,235
Cash, end of period - discontinued operations - 250
Supplemental cash flow information:
Interest paid 9,272 13,305
Supplemental disclosure of non-cash financing and investing activities:
Acquisition of property, plant and equipment through finance leases 1,143 6,237
1 Restated for discontinued operations. Please refer to the MD&A for more information.

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