TORONTO, ONTARIO--(Marketwire - March 22, 2013) -
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 three months and year ended December 31, 2012.
Year-End Results
| ($ millions, except per share amounts) | 2012 | 2011 | ||
| Revenue | 757.4 | 627.6 | ||
| Gross profit | 146.2 | 137.8 | ||
| Selling, general & administrative expenses | (107.8 | ) | (96.2 | ) |
| Net (loss) income from continuing operations | (27.5 | ) | 13.6 | |
| EBITDA | 26.8 | 77.7 | ||
| Adjusted EBITDA | 38.4 | 39.2 | ||
| (Loss) income per share from continuing operations | (0.38 | ) | 0.19 |
Revenue for the year ended December 31, 2012 was $757.4 million, up 20.7 percent from $627.6 million produced in 2011. The increase was largely driven by the Industrial Services segment where ClearStream has benefitted from increased business volumes across all divisions throughout the year. In addition, gross profit increased 6.1 percent to $146.2 million for the year representing a gross profit margin of 19.3 percent. In 2011, Tuckamore reported gross profit of $137.8 million representing a gross profit margin of 22.0 percent. The decline in gross profit margin percentage was primarily due to cost overruns on two large projects at the demolition division of Quantum Murray.
Non-cash items that impacted the results were depreciation and amortization, deferred income taxes, gains on re-measurement of investment and gain on debt extinguishment. Significant items were as follows:
| (i) | Depreciation and amortization was $26,003 for the year ended December 31, 2012, compared to $28,203 for the prior year. |
| (ii) | Gain on re-measurement of investment relates to acquisition accounting under IFRS for transactions where control of an investment is obtained and the existing investment is re-measured. In 2011 a gain on re-measurement of $7,281 was recorded for the Quantum Murray acquisition. |
| (iii) | In 2012 a $1,534 loss on de-recognition of debt was recorded related to the assignment of the senior credit facility to a new lender in the first quarter of the year. The loss recorded represented transactions costs and the write off of previously deferred financing fees. In 2011, a gain on debt extinguishment of $37,451 was recorded when convertible debentures and accrued interest were restructured to secured and unsecured debentures. The new debentures were recorded at fair value and the difference between the fair value, net of costs of the new debentures, and the carrying value of the convertible debentures and accrued interest was recorded as a gain on debt extinguishment. |
Adjusted EBITDA which excludes the above noted items decreased 2.0 percent to $38.4 million versus $39.2 million for prior year.
The net (loss) income from continuing operations for 2012 was ($27.5) million versus $13.6 million in 2011.
PORTFOLIO REVIEW
Industrial Services
Within the Industrial Services division, ClearStream reported solid results while Quantum Murray had a challenging year. At ClearStream, all divisions reported increased revenues as a result of the stimulated oil and gas industry. The percentage revenue gains at the Fabrication and Transportation divisions were the most favorable and on a dollar gain perspective the Industrial services and OilSands divisions had the largest revenue growth. Gross profit improved as a result of the revenue growth however there was some gross margin slippage due to some regional start-up costs and short term business solutions being implemented within the transportation division to address significant business volume increases.
At Quantum Murray, the project losses incurred at the Demolition division significantly impacted the full year results. In the second and third quarters, restructuring measures were undertaken to right size this division and to limit further losses. The negative variance year over year was further impacted by a lower EBITDA contribution in 2012 from the Environmental division which benefitted from several large projects in 2011.
Marketing
The marketing segment had mixed results for the year ended December 31, 2012. The decrease in revenues was primarily a result of a reduction in the business volumes from a few key clients at Gemma. In addition, Gemma experienced increased costs associated with adhering to regulatory changes for certain clients in the financial sector. IC Group had improved results compared to the prior year. The positive results were directly related to increased sales from existing clients, an overall improvement in margins due to the realization of operational efficiencies and a reduction in the use of external contractors.
Other
Gusgo had improved results due to an increase in business from its largest client and the addition of a new significant client for the full year in 2012. Favourable gross margins have also been realized as a result of achieving operational improvements with a large client.
Titan had improved results also due to strong demand from the oil sands construction industry and a general improvement in the volume of business from road maintenance contractors in Alberta. These gains were slightly offset by lower demand from the conventional drilling and government market segments.
Fourth Quarter Results
| ($ millions, except per share amounts) | 2012 | 2011 | ||
| Revenue | 203.2 | 188.1 | ||
| Gross profit | 38.7 | 41.4 | ||
| Selling, general & administrative expenses | (27.0 | ) | (28.3 | ) |
| Net loss from continuing operations | (8.5 | ) | (8.8 | ) |
| EBITDA | 4.5 | 6.6 | ||
| Adjusted EBITDA | 11.7 | 12.6 | ||
| Loss per share from continuing operations | (0.12 | ) | (0.12 | ) |
Revenue for the three-month period ended December 31, 2012, was $203.2 million, versus $188.1 million produced in 2011. The increase was primarily driven by increased business volumes at ClearStream. Gross profit for the three months ended December 31, 2012 was $38.7 million compared to $41.4 in 2011, a decrease of 6.5%. Gross profit margins were 19.1% for the three months ended December 31, 2012 compared to 22.0% in the 2011 period. The gross profit margin decline in the fourth quarter reflects large profitable remediation projects in 2011. Adjusted EBITDA was $11.7 million, compared to $12.6 million for the corresponding period in 2011.
2013 Outlook
At ClearStream, there is a strong business outlook. There are continuing high levels of activity in both the oilsands and the conventional oil and gas sectors which should translate into significant levels of maintenance services work. While project work volumes can be more volatile than maintenance work, the wear and fabrication divisions are currently busy and there are positive signs that this will continue. In addition, our transportation and pipe logistics division benefits across the board from increased activity levels. 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. There are large industrial abatement and demolition projects to be won, particularly in Alberta and there is a consistent amount of revenue backlog within the remediation group at the environmental division. The metals division is expected to be a contributor but there is risk of a potential decline in scrap metal prices.
In the Marketing segment, the outlook is for improved results over 2012. At Gemma, there are significant efforts underway to attract new clients and diversify the existing base. Recent new client wins are encouraging but need to continue. At IC Group, existing clients are expanding their loyalty programs to different regions and additional product lines which should bode well as IC Group works to lever its platform.
In the Other segment, both Titan and Gusgo are expecting good results, comparable to 2012. 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.
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", "adjusted EBITDA", "non-cash interest expense", (collectively the "'Non-GAAP") 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. 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 / loss on debt extinguishment / de-recognition of debt, 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 (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 |
| December 31 |
| (In thousands of Canadian dollars) |
| 2012 | 2011 | ||||||
| Assets | |||||||
| Current Assets: | |||||||
| Cash | $ | 12,082 | $ | 28,625 | |||
| Cash and short-term investments held in trust | 4,499 | 8,108 | |||||
| Accounts receivable | 174,417 | 149,371 | |||||
| Inventories | 25,788 | 37,464 | |||||
| Prepaid expenses | 4,953 | 3,486 | |||||
| Other current assets | 2,950 | 3,046 | |||||
| Current assets of discontinued operations | - | 3,517 | |||||
| Total current assets | $ | 224,689 | $ | 233,617 | |||
| Property, plant and equipment | 66,438 | 63,709 | |||||
| Goodwill | 72,466 | 76,667 | |||||
| Intangible assets | 62,773 | 78,928 | |||||
| Other assets | 1,767 | 3,114 | |||||
| Total assets | $ | 428,133 | $ | 456,035 | |||
| Liabilities and Shareholders' Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued liabilities | $ | 79,923 | $ | 91,173 | |||
| Deferred revenue | 8,151 | 8,608 | |||||
| Current portion of obligations under capital leases | 4,887 | 5,540 | |||||
| Current portion of senior credit facility | - | 10,000 | |||||
| Current liabilities of discontinued operations | - | 651 | |||||
| Total current liabilities | $ | 92,961 | $ | 115,972 | |||
| Obligations under capital leases | 12,228 | 3,681 | |||||
| Senior credit facility | 89,300 | 85,705 | |||||
| Secured debentures | 152,860 | 146,314 | |||||
| Unsecured debentures | 18,781 | 14,215 | |||||
| Deferred tax liabilities | 8,752 | 12,510 | |||||
| Shareholders' equity | 53,251 | 77,638 | |||||
| Total liabilities & equity | $ | 428,133 | $ | 456,035 | |||
| TUCKAMORE CAPITAL MANAGEMENT INC. |
| Consolidated Statements of Income and Comprehensive Income |
| Years Ended December 31 |
| (In thousands of Canadian dollars, except per share amounts) |
| 2012 | 2011 | |||||||
| Revenue | $ | 757,407 | $ | 627,612 | ||||
| Cost of revenue | (611,194 | ) | (489,805 | ) | ||||
| Gross profit | 146,213 | 137,807 | ||||||
| Selling, general and administrative | (107,790 | ) | (96,210 | ) | ||||
| Amortization of intangible assets | (10,826 | ) | (15,710 | ) | ||||
| Depreciation | (15,177 | ) | (12,493 | ) | ||||
| Income from equity investments | - | 252 | ||||||
| Interest expense | (32,827 | ) | (33,056 | ) | ||||
| Gain on re-measurement of investment | - | 7,281 | ||||||
| Gain on bargain purchase | - | 709 | ||||||
| (Loss) Gain on extinguishment / de-recognition of debt | (1,534 | ) | 37,451 | |||||
| Fair value adjustment to stock based compensation expense | - | (883 | ) | |||||
| Restructuring costs | (861 | ) | - | |||||
| Transaction costs | - | (2,638 | ) | |||||
| Write-down of goodwill and intangibles | (9,268 | ) | - | |||||
| Write-down of long term investment | - | (6,081 | ) | |||||
| (Loss) income before income taxes | $ | (32,070 | ) | $ | 16,429 | |||
| Income tax expense - current | (775 | ) | (23 | ) | ||||
| Income tax recovery (expense) deferred | 5,320 | (2,768 | ) | |||||
| Net (loss) income from continuing operations | $ | (27,525 | ) | $ | 13,638 | |||
| Income from discontinued operations | 1,962 | 15,928 | ||||||
| (net of income tax) | ||||||||
| Net (loss) income and comprehensive (loss) income | $ | (25,563 | ) | $ | 29,566 | |||
| (Loss) income per share | ||||||||
| Basic: | ||||||||
| Continuing operations | $ | (0.38 | ) | $ | 0.19 | |||
| Net (loss) income | $ | (0.36 | ) | $ | 0.41 | |||
| Diluted: | ||||||||
| Continuing operations | $ | (0.38 | ) | $ | 0.19 | |||
| Net (loss) income | $ | (0.36 | ) | $ | 0.41 | |||
| TUCKAMORE CAPITAL MANAGEMENT INC. |
| Consolidated Statements of Cash Flows |
| Years Ended December 31 |
| (In thousands of Canadian dollars) |
| 2012 | 2011 | ||||||||
| Operating activities: | |||||||||
| Net (loss) income for the year | $ | (25,563 | ) | $ | 29,566 | ||||
| Income from discontinued operations (net of income tax) | (1,962 | ) | (15,928 | ) | |||||
| Items not affecting cash: | |||||||||
| Amortization of intangible assets | 10,826 | 15,710 | |||||||
| Depreciation | 15,177 | 12,493 | |||||||
| Deferred income tax expense (recovery) | (5,320 | ) | 2,768 | ||||||
| Income from equity investments, net of cash received | - | (252 | ) | ||||||
| Non-cash accretion expense | 11,112 | 8,076 | |||||||
| Amortization of deferred financing costs | 625 | - | |||||||
| Gain on re-measurement of investment | - | (7,281 | ) | ||||||
| Loss (Gain) on extinguishment of debt | 1,534 | (37,451 | ) | ||||||
| Gain on bargain purchase | - | (709 | ) | ||||||
| Stock based compensation expense | 1,176 | 3,392 | |||||||
| Write-down of long-term investment | - | 6,081 | |||||||
| Write-down of goodwill and intangibles | 9,268 | - | |||||||
| Changes in non-cash working capital | (27,320 | ) | (22,528 | ) | |||||
| Distributions from discontinued operations | - | 2,742 | |||||||
| Cash provided by discontinued operations | 106 | 979 | |||||||
| Total cash used in operating activities | $ | (10,341 | ) | $ | (2,342 | ) | |||
| Investing activities: | |||||||||
| Acquisition of businesses, net cash acquired | - | (31,865 | ) | ||||||
| Purchase of property, plant and equipment | (4,419 | ) | (2,658 | ) | |||||
| Proceeds on disposition of property, plant and equipment | 642 | 968 | |||||||
| Proceeds on disposition of businesses | 7,866 | 38,730 | |||||||
| Purchase of software | (91 | ) | (852 | ) | |||||
| Increase in other assets | (1,027 | ) | (2,000 | ) | |||||
| Cash used in discontinued operations | (7 | ) | (219 | ) | |||||
| Total cash provided by investing activities | $ | 2,964 | $ | 2,104 | |||||
| Financing activities: | |||||||||
| Increase in long-term debt | - | 46,989 | |||||||
| Repayment of long term debt | (6,200 | ) | (36,973 | ) | |||||
| Decrease (increase) in cash held in trust | 3,609 | (3,108 | ) | ||||||
| Repayment of capital lease obligations | (6,191 | ) | (5,026 | ) | |||||
| Cash used in discontinued operations | (384 | ) | (1,269 | ) | |||||
| Total cash (used in) provided by financing activities | $ | (9,166 | ) | $ | 613 | ||||
| (Decrease) increase in cash | (16,543 | ) | 375 | ||||||
| Cash beginning of year | |||||||||
| - continuing operations | 28,340 | 27,741 | |||||||
| Cash beginning of year | |||||||||
| - discontinued operations | 285 | 509 | |||||||
| Cash end of year | $ | 12,082 | $ | 28,625 | |||||
| Cash end of year | |||||||||
| - continuing operations | $ | 12,082 | $ | 28,625 | |||||
| Supplemental cash flow information: | |||||||||
| Interest paid | $ | 22,607 | $ | 19,318 | |||||
| Cash acquired upon acquisition (bank indebtedness) | $ | - | (1,575 | ) | |||||
| Supplemental disclosure of non-cash financing and investing activities: | |||||||||
| Acquisition of property, plant and equipment through capital leases | $ | 14,085 | $ | 2,155 | |||||
| Debt and accrued interest repaid through issuance of debentures | $ | - | 152,951 | ||||||
Contact Information:
Keith Halbert
Chief Financial Officer
416-775-3796
keith@tuckamore.ca