TORONTO, May 12, 2022 (GLOBE NEWSWIRE) -- Shawcor Ltd. (“Shawcor” or the “Company”) (TSX: SCL) reported today its operational and financial results for the three months ended March 31, 2022. This press release should be read in conjunction with the Company’s Management Discussion and Analysis (MD&A) and interim consolidated financial statements for the three months ended March 31, 2022, which are available on the Company’s website and at www.sedar.com.
Highlights from the first quarter include:
- The Company exceeded expectations in the first quarter of 2022 with consolidated revenue of $267.8 million, Adjusted EBITDA1 of $20.0 million and operating income of $1.3 million.
- Shawcor’s businesses serving infrastructure & industrial end markets (formerly described as ‘non-oil & gas’) grew to represent 49% of total revenue during the quarter.
- Strong recovery in the Composite Systems segment with revenue of $106 million increasing by 50% compared to Q1 2021;
- Delivered a record quarter in the Automotive and Industrial segment with revenue of $78 million increasing by 23% compared to Q1 2021;
- Pipeline and Pipe Services segment results were better than expected despite revenue of $84 million representing a decline of 42% compared to Q1 2021;
- Increased order backlog for execution in the next 12 months by 19% to $702 million at March 31, 2022, compared to $589 million at December 31, 2021. This increase reflects continued growth in businesses serving infrastructure & industrial markets and several new offshore pipe coating contracts which were secured during the quarter.
- Invested in working capital to support near-term growth in infrastructure & industrial end markets. As a result, cash used in operating activities was $12.8 million during the quarter.
- As at March 31, 2022, the Company had net total debt of $245.5 million, and a Net debt-to-Adjusted EBITDA1 of approximately 2.29 times over a trailing twelve-month basis.
- Subsequent to the quarter, the Company successfully completed the sale of its Adria, Italy pipe coating facility.
“During the first quarter Shawcor continued to execute on its strategic plan, prioritizing the development and delivery of differentiated, high value, materials-based solutions in support of industrial and critical infrastructure end markets, while further simplifying our portfolio.” said Mike Reeves, President & CEO of Shawcor.
“We continue to see constructive market conditions for Shawcor’s high value products and services across virtually all end markets. The Company’s 12-month backlog rose to $702 million at quarter end. With strong underlying demand across our Composite Systems and Automotive and Industrial segments, increasing expectations of a multi-year up-cycle in offshore pipe coating activity, and a continued focus on tight cost control, we believe Shawcor is well positioned to navigate market volatility and deliver progressively higher returns for all stakeholders.”
1 EBITDA, Adjusted EBITDA and Net debt-to-Adjusted EBITDA are Non-GAAP measures. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. See Section 5.0 – Reconciliation of Non-GAAP Measures for further details and a reconciliation of these Non-GAAP measures. The Company expects the current calculation methodology of Adjusted EBITDA to be consistently applied in future periods.
“Particularly strong performance within our Automotive and Industrial segment and better than anticipated results within our Pipeline and Pipe Services segment enabled the Company to deliver stronger Adjusted EBITDA1 during the quarter than originally projected.” said Mr. Reeves. “As previously communicated, we believe our offshore pipe coating business will emerge from its multi-decade low as 2022 progresses. While we remain vigilant in the face of continued global supply chain tightness, we anticipate the first quarter to be the lowest of the year; with substantial earnings growth in the second half of 2022 leading to a full year Adjusted EBITDA1 outlook that is now modestly above 2021’s Adjusted EBITDA1 of $105.6 million.”
Selected Financial Highlights
| (in thousands of Canadian dollars, except per share amounts and percentages) | Three Months Ended March 31 | ||||||||
| 2022 | 2021 | ||||||||
| $ | % | $ | % | ||||||
| Revenue | 267,794 | 279,331 | |||||||
| Gross profit | 72,843 | 27.2 | % | 73,735 | 26.4 | % | |||
| Income (Loss) from Operations(a) | 1,334 | 0.5 | % | (4,600 | ) | (1.6 | %) | ||
| Net Loss for the period(b) | (6,942 | ) | (15,372 | ) | |||||
| Loss per share: | |||||||||
| Basic & Diluted | (0.10 | ) | (0.22 | ) | |||||
| Adjusted EBITDA(c) | 20,034 | 7.5 | % | 18,566 | 6.6 | % | |||
| (a) | Operating income in the three months ended March 31, 2022 includes restructuring costs and other, net, of $1.2 million, while 2021 operating loss includes restructuring costs and other, net of $3.4 million. | ||||||||
| (b) | Attributable to shareholders of the Company. | ||||||||
| (c) | Adjusted EBITDA is a non-GAAP measure. Non-GAAP measures do not have standardized meanings prescribed by GAAP and are not necessarily comparable to similar measures provided by other companies. See Section 5.0 – Reconciliation of Non-GAAP Measures for further details and a reconciliation of these Non-GAAP measures. | ||||||||
1.0 FIRST QUARTER HIGHLIGHTS
Adjusted EBITDA1 of $20.0 million in the first quarter of 2022 was higher than previously communicated expectations primarily due to increased demand for higher margin wire and cabling products and composite pipe products, an accelerated timeline for pipe coating projects and a foreign exchange gain, partially offset by legal and other professional fees. The 2022 first quarter Adjusted EBITDA1 result was 8% higher than the first quarter of 2021, primarily on stronger demand in the retail fuel and water markets for fiberglass reinforced plastic (“FRP”) tanks and composite pipe products, coupled with higher revenue and profitability for wire and cabling products from increased infrastructure spend, partially offset by lower pipe coating and girth weld inspection services activity. The first quarter continued to show growth in the Company’s infrastructure & industrial end markets which accounted for over 49% of total revenue. SG&A expenses of $53.8 million were higher than the previously communicated quarterly normalized SG&A run-rate of $50 million, largely as a result of the increased legal and other professional fees recorded in the quarter.
1 EBITDA and Adjusted EBITDA are Non-GAAP measures. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. See Section 5.0 – Reconciliation of Non-GAAP Measures for further details and a reconciliation of these Non-GAAP Measures. The Company expects the current calculation methodology of Adjusted EBITDA to be consistently applied in future periods.
Since March of 2020, the Company has actioned the controlled shutdown or sale of several girth weld inspection branches and 9 fixed pipe coating facilities to reduce its operating cost base and has since continued to focus on cost optimization. In the first quarter of 2022, the Company completed further initiatives which included additional headcount reductions and the sale of assets related to recent site closures. As a result, the Company recorded $1.2 million of restructuring and other costs, net. Subsequent to the quarter, the Company also completed the sale of its previously closed pipe coating facility in Adria, Italy.
As at March 31, 2022, the Company had cash and cash equivalents totaling $85.8 million (December 31, 2021 – $124.4 million). This decrease was primarily due to an investment of $22.7 million in working capital (excluding the impact of restructuring liabilities), a repayment of $10.0 million of the Credit Facility, and $10.4 million of growth and maintenance capital expenditures. Since the beginning of 2021, the Company has repaid $153.5 million of long-term debt. The Company continues to make progress on the finalization of the announced Rexdale property sale and leaseback and currently expects to close by early third quarter of 2022, yielding at least $45 million of net proceeds. The Company will continue to focus on maximizing the conversion of operating income into cash to continue repaying long term debt, to support its strategy of portfolio optimization and to explore M&A opportunities.
Selected Segment Financial Highlights
| Three Months Ended | |||||||||
| March 31, | March 31, | ||||||||
| 2022 | 2021 | ||||||||
| (in thousands of Canadian dollars) | ($) | (%) | ($) | (%) | |||||
| Revenue | |||||||||
| Composite Systems | 106,413 | 71,121 | |||||||
| Automotive and Industrial | 78,219 | 63,751 | |||||||
| Pipeline and Pipe Services | 84,068 | 144,518 | |||||||
| Elimination(a) | (906 | ) | (59 | ) | |||||
| Consolidated revenue | 267,794 | 279,331 | |||||||
| Operating income (loss) | |||||||||
| Composite Systems | 6,874 | 6.5 | % | 667 | 0.9 | % | |||
| Automotive and Industrial | 14,887 | 19.0 | % | 11,436 | 17.9 | % | |||
| Pipeline and Pipe Services | (16,180 | ) | (19.2 | %) | (9,499 | ) | (6.6 | %) | |
| Financial and Corporate | (4,247 | ) | (7,204 | ) | |||||
| Operating income (loss) | 1,334 | 0.5 | % | (4,600 | ) | (1.6 | %) | ||
| Adjusted EBITDA(b) | |||||||||
| Composite Systems | 14,706 | 13.8 | % | 8,547 | 12.0 | % | |||
| Automotive and Industrial | 15,999 | 20.5 | % | 12,578 | 19.7 | % | |||
| Pipeline and Pipe Services | (7,451 | ) | (8.9 | %) | 4,046 | 2.8 | % | ||
| Financial and Corporate | (3,220 | ) | (6,605 | ) | |||||
| Adjusted EBITDA(b) | 20,034 | 7.5 | % | 18,566 | 6.6 | % | |||
| (a) | Represents the elimination of the inter-segment sales between the Composite Systems segment, the Automotive and Industrial segment and the Pipeline and Pipe Services segment. | ||||||||
| (b) | Adjusted EBITDA is a non-GAAP measure. Non-GAAP measures do not have a standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures provided by other companies. See Section 5.0 – Reconciliation of Non-GAAP Measures for further details and a reconciliation of these Non-GAAP measures. | ||||||||
Revenue in the first quarter of 2022 for Composite Systems increased by $35.3 million, or 50%, compared to the first quarter of 2021, with an operating income of $6.9 million. Demand for retail fuel and water/wastewater FRP tanks remained strong while production continued to be constrained by availability of certain raw materials. Improved demand for tubular management services and composite pipe persisted as well counts and drilling and completion activities rose across North America, driving better than expected quarterly performance. Adjusted EBITDA1 in the first quarter of 2022 was $14.7 million, a 72% increase compared to $8.5 million in the first quarter of 2021. This increase was primarily attributed to strong order activity for composite pipe products.
The Automotive and Industrial segment rebounded from its typical fourth quarter seasonal slowdown to deliver record quarterly revenue of $78.2 million, which represents an increase of 23% versus the first quarter of 2021. In industrial markets, the business benefitted from continued infrastructure spending to build out communication and transportation networks and support nuclear reactor refurbishments, particularly in North America. The segment’s revenue also benefitted from the pass through of copper price increases. The segment delivered quarterly record Adjusted EBITDA1 of $16.0 million, a 27% increase over the prior year quarter, largely stemming from higher demand in industrial markets and bolstered by favourable product mix.
Although results in the Pipeline and Pipe Services segment were better than expected, it experienced an operating loss and negative Adjusted EBITDA1 in the first quarter of 2022 due to low activity levels across all of the business. The Pipeline and Pipe Services segment generated revenues of $84.1 million, a decrease of $60.4 million, or 42%, from $144.5 million in the first quarter of 2021. This was due to lower large pipe coating project activity in Europe, Middle East, Africa and Russia (“EMAR”), Latin America and Asia Pacific as well as the absence of $9.2 million of revenue attributable to the Shawcor Inspection Services business that was sold in December 2021. Adjusted EBITDA1 in the first quarter of 2022 was negative $7.5 million, a decrease compared to the positive $4.0 million reported in the first quarter of 2021 – primarily related to the decrease in revenue. Despite the decrease in revenue and Adjusted EBITDA1, the Company’s cost reduction and site optimization initiatives have substantially lowered fixed expenses for the segment which, in turn, partially offset the lower activity levels in the quarter.
The twelve-month order backlog of $702 million as at March 31, 2022, represents an increase over the $589 million order backlog as at December 31, 2021. This growth was attributed to stronger pipe coating backlog as well as continued growth in demand for the Company’s infrastructure and industrial offerings. The backlog includes firm customer contracts which will be executed over the next twelve months and is indicative of a generally stronger business environment.
Outstanding firm bids were over $946 million as of March 31, 2022, an increase versus the $843 million from last quarter despite several projects moving from bid into backlog during the quarter. Conditional awards, pending final investment decision, were at $56 million and budgetary estimates were over $1.5 billion at the end of the first quarter, in line with the conditional and budgetary values from the previous quarter.
1 EBITDA and Adjusted EBITDA are Non-GAAP measures. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. See Section 5.0 – Reconciliation of Non-GAAP Measures for further details and a reconciliation of these Non-GAAP Measures.
2.0 OUTLOOK
The Company continues to expect earnings in 2022 to be weighted to the second half of the year. The underlying business trends for all of Shawcor’s primary businesses remain favourable as its infrastructure and industrial focused portfolio continues to experience consistent demand growth, while the Company’s oil and gas focused offerings remain well-positioned as the conditions for a potential multi-year upcycle in commodity prices and related activity transpire. Looking forward in 2022, raw material and labour costs continue to rise and, as a result, the Company will continue to monitor its pricing and roll out price increases to help offset the cost increases. In parallel, supply chain volatility is expected to remain, which may continue to present challenges through the balance of 2022.
The Company has substantially rationalized its footprint, including the divestiture of non-core businesses, and will continue to focus on maintaining efficient operations with the technical expertise and geographic footprint that provide the best opportunity for the Company to secure work and drive profitability, particularly as pipe coating project activity picks up later in 2022. The Company expects its quarterly normalized SG&A run-rate will remain at approximately $50 million throughout 2022, although it is subject to movement depending on overall business performance and related incentive-based compensation costs.
Backlog is expected to continue to grow through the rest of 2022 as customers seek to secure orders for the Company’s infrastructure and industrial offerings, several pipe coating projects reach final investment decision and contract awards move into the 12-month period. Execution on work secured in the Company’s backlog is expected to increase in the second half of 2022 as FRP tank resin supply shortages alleviate and coating activities for newly sanctioned pipeline projects commence.
Composite Systems Segment
The Company is expecting robust demand for underground FRP tanks to continue throughout 2022 as retail fuel service station networks expand, upgrade and replace existing aging tanks. In addition, growth in demand for water and storm-water storage and treatment systems is expected to continue, supported by increasing societal demands to conserve and manage water resources, projected higher infrastructure spending and commercial and municipal water projects. Supply chain constraints are currently expected to continue through the first half of the year, tempering near term FRP tank production output, but these constraints are anticipated to ease in the second half of 2022. In addition to qualifying alternative raw material sources, the business continues to manage production schedules and lead times to minimize impacts, and price surcharges have been implemented to manage raw material cost increases. Growth in demand for the segment’s core composite pipe products and tubular management services in North America are expected to continue as activity levels in Western Canada and in the Permian Basin gradually rise, although normal seasonal slowing during Canadian ‘break-up’ will be observed in Q2.
Automotive and Industrial Segment
Activity levels within the Automotive and Industrial segment are expected to remain high throughout 2022, though not at the level experienced in the first quarter of the year, which benefitted from increased demand for higher margin nuclear and other industrial products during customers’ traditional re-stocking cycle. Demand for the Company’s automotive products is expected to continue to outpace overall automotive production as a result of electronic content growth in premium, hybrid and full electric vehicle markets, particularly in the Asia Pacific and EMAR regions. Premium micro-chip shortages, COVID-19 lock-downs in China and broader supply chain impacts from the Russia-Ukraine conflict continue to create challenges for automotive manufacturers and consequently the Company’s full year outlook does not incorporate any expectation of meaningful growth in total global vehicle output. The Company’s diversified geographies and end markets are expected to provide insulation from the near-term impacts of these automotive industry challenges. On the industrial side of the business, which represented 70% of the Segment’s revenue in Q1 2022, the Company is expecting to benefit from continued infrastructure spending as new and upgraded communication networks are constructed, nuclear refurbishments continue in Canada, and federal stimulus packages are rolled out, while continuing to effectively manage the volatility of copper raw material costs.
Pipeline and Pipe Services Segment
The Company is expecting progressive growth throughout the year in its Pipeline and Pipe Services segment as seasonal activity picks up and pipe coating projects commence. The Company continues to monitor international developments including sustained exploration success and additional project phases in Guyana and Brazil, and Middle Eastern offshore projects designed to meet domestic energy needs and global LNG demand. Increases in inbound subsea orders have been observed across the Company’s customer base, particularly in Brazil and Norway where the Company is well-positioned to secure and execute work. Activity levels in Western Canada are expected to remain strong, yielding steady demand for small diameter coating solutions. New offshore pipeline installations that range from small and mid-size to large in scope, are expected to rise during the second half of 2022 and into the years that follow, driving elevated demand for the Company’s market leading pipe coating technologies. The Company continues to maintain the resources needed to execute on projects currently in backlog and expected to begin in the second half of the year.
3.0 CONFERENCE CALL AND ADDITIONAL INFORMATION
Shawcor will be hosting a Shareholder and Analyst Conference Call and Webcast on Friday, May 13th, 2022 at 9:00 AM ET, which will discuss the Company’s First Quarter 2022 Financial Results. To participate via telephone, please dial 1-877-776-4039 or 1-315-625-6955. Conference Call ID: 7093213. Alternatively, please go to the following website address to participate via webcast: https://edge.media-server.com/mmc/p/kp94nv3h
The webcast recording will be available within 24 hours of the live presentation and will be accessible for 90 days.
About Shawcor
Shawcor Ltd. is a growth-oriented, global material sciences company serving the Infrastructure, Energy, and Transportation markets. The Company operates through a network of fixed and mobile manufacturing and service facilities. Its three business segments, Composite Systems, Automotive and Industrial and Pipeline and Pipe Services enable responsible renewal and enhancement of critical infrastructure while lowering risk and environmental impact.
For further information, please contact:
Meghan MacEachern
Director, External Communications & ESG
Tel: 437-341-1848
Email: meghan.maceachern@shawcor.com
Website: www.shawcor.com
Source: Shawcor Ltd.
Shawcor.ER
4.0 FORWARD-LOOKING INFORMATION
This news release includes certain statements that reflect management’s expectations and objectives for the Company’s future performance, opportunities and growth, which statements constitute "forward-looking information" and "forward-looking statements" (collectively "forward-looking information") under applicable securities laws. Such statements, other than statements of historical fact, are predictive in nature or depend on future events or conditions. Forward-looking information involves estimates, assumptions, judgements and uncertainties. These statements may be identified by the use of forward-looking terminology such as "may", "will", "should", "anticipate", "expect", "believe", "predict", "estimate", "continue", "intend", "plan" and variations of these words or other similar expressions. Specifically, this news release includes forward-looking information in the Outlook Section and elsewhere in respect of, among other things, the ability of the Company to deliver higher returns to all stakeholders; the level of the Company’s overall financial performance in 2022; the Company’s focus on maximizing the conversion of operating income into cash and the uses thereof; continuing demand growth in the Company’s infrastructure and industrial focused offerings; the impact from the potential upcycle in commodity prices and related activities on the Company’s oil and gas focused offerings; the level of quarterly normalized SG&A; the optimization of the Company’s portfolio by means of selective acquisitions and divestitures; the continuance of certain raw material shortages and supply chain disruptions for the first half of 2022 and their abatement in the second half of 2022; the demand for the Company’s products in each of its business segments; the impact of the Russia and Ukraine conflict on the Company’s demand for products and supply chains; the impact of raw material shortages on the Company’s Composite Systems segment; the impact of shortages of premium micro-chips, COVID-19 related lockdowns in China and other supply chain disruptions on automobile manufacturers and the impact thereof on the Company’s Automobile and Industrial segment; the growth in the Company’s order backlog during the first half of 2022 and the increased execution of work secured in the backlog during the second half of 2022; the anticipated increase in drilling and completion related capital spending in North America and an increase in offshore pipeline installations and the impact on the Company’s business; the impact on the Company’s business of the anticipated increase in infrastructure spending, including in the areas of water management, communication networks and nuclear refurbishment; and the impact on the Company’s business of increasing adoption rates for electric vehicles.
Forward-looking information involves known and unknown risks and uncertainties that could cause actual results to differ materially from those predicted by the forward-looking information. We caution readers not to place undue reliance on forward-looking information as a number of factors could cause actual events, results and prospects to differ materially from those expressed in or implied by the forward-looking information. Significant risks facing the Company include, but are not limited to: shortages and delays in the supply of or increases in the prices of raw materials used by the Company, as well as the impact of overall cost inflation; changes in underlying economic factors affecting demand for the Company’s products and services; the duration and impact of the COVID-19 pandemic and future public health crises and other events outside the Company’s control on the Company, its employees, customers, suppliers, energy and commodity markets and on the global economy; a decline in the level of North American drilling and completion activity; a decline in the level of global pipeline construction; the impact of divestitures and acquisitions on the Company; changes in competitive conditions within the markets that the Company operates in; the requirement to comply with various covenants under the Company’s existing and future debt obligations, the ability to make the scheduled payments thereunder and the potential for changes to the Company’s credit rating; rising interest and inflation rates; fluctuations in foreign exchange rates; exposure to product, environmental and other liability claims; the impact of expanding environmental, social and governance practices and disclosure requirements and changing investor sentiment in respect thereof; compliance with environmental, trade, health, safety, tax and other laws in multiple jurisdictions; the impact of activist shareholders; the impact of climate change on operations, supply chains and demand for the Company’s products and services; political, economic, health, global supply chain and other risks arising from the Company’s international operations including the Russia and Ukraine conflict; changes in trade, tax or other laws in Canada or internationally; disruptions of informational technology systems or cybersecurity breaches; as well as other risks and uncertainties described under "Risks and Uncertainties" in the Company’s annual MD&A and in the Company’s Annual Information Form under "Risk Factors".
These statements of forward-looking information are based on assumptions, estimates and analysis made by management in light of its experience and perception of trends, current conditions and expected developments as well as other factors believed to be reasonable and relevant in the circumstances. These assumptions include those in respect of the reduction of certain COVID 19 related restrictions and the impact thereof on global economic activity, the Company’s ability to manage supply chain disruptions caused by the COVID-19 pandemic, other health crises or by natural disasters, global oil and gas prices, improving pipe coating activity levels throughout the balance of 2022; sustained strong demand for the Company’s FRP tanks, including for retail fuel storage and water treatment and storage; increased demand for composite pipe; the easing of microchip shortages in the automotive sector and increased demand in the automotive and industrial markets; heightened demand for electric and hybrid vehicles; heightened infrastructure spending in Canada, including in respect of nuclear plant refurbishment and upgraded communication and transportation networks; the likelihood of projects tied to securing long-term domestic energy supply or drilling rights being sanctioned, the recommencement of increased capital expenditures in the global offshore oil and gas segment replace, maintain and rehabilitate existing infrastructure, replace production due to reservoir depletion and to address geopolitical challenges impacting several producing regions, the continued recovery of the global economy, a gradual recovery of oil and gas markets in North America, the Company’s ability to execute projects under contract, the Company’s continuing ability to provide new and enhanced product offerings to its customers, the higher level of investment in working capital by the Company, the easing of resin shortages and the continued supply of and stable pricing or the ability to pass on higher prices to its customers for commodities used by the Company, the availability of personnel resources sufficient for the Company to operate its businesses, the maintenance of operations in major oil and gas producing regions, the adequacy of the Company’s existing accruals in respect of environmental compliance and in respect of litigation and tax matters and other claims generally, and the level of payments under the Company's performance, bid and surety bonds and the ability of the Company to satisfy all covenants under its Credit Facility and other debt obligations and having sufficient liquidity to fund its obligations and planned initiatives. The Company believes that the expectations reflected in the forward-looking information are based on reasonable assumptions in light of currently available information. However, should one or more risks materialize, or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward-looking information included in this document and the Company can give no assurance that such expectations will be achieved.
When considering the forward-looking information in making decisions with respect to the Company, readers should carefully consider the foregoing factors and other uncertainties and potential events. The Company does not assume the obligation to revise or update forward-looking information after the date of this document or to revise it to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.
To the extent any forward-looking information in this document constitutes future oriented financial information or financial outlooks, within the meaning of securities laws, such information is being provided to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. Future oriented financial information and financial outlooks, as with forward-looking information generally, are based on the assumptions and subject to the risks noted above.
5.0 RECONCILIATION OF NON-GAAP MEASURES
The Company reports on certain non-GAAP measures that are used to evaluate its performance and segments, as well as to determine compliance with debt covenants and to manage its capital structure. These non-GAAP measures do not have standardized meanings under IFRS and are not necessarily comparable to similar measures provided by other companies. The Company discloses these measures because it believes that they provide further information and assist readers in understanding the results of the Company’s operations and financial position. These measures should not be considered in isolation or used in substitution for other measures of performance prepared in accordance with GAAP. The following is a reconciliation of the non-GAAP measures reported by the Company.
EBITDA and Adjusted EBITDA
EBITDA is a non-GAAP measure defined as earnings before interest, income taxes, depreciation, and amortization. Adjusted EBITDA is also a non-GAAP measure defined as EBITDA adjusted for items which do not impact day to day operations. Adjusted EBITDA is calculated by adding back to EBITDA the sum of impairments, costs associated with repayment of long-term debt and credit facilities, gain on sale of land and other, gain on sale of investment in associates, gain on sale of operating unit, acquisition costs, restructuring costs and other, net and hyperinflationary adjustments. The Company believes that EBITDA and Adjusted EBITDA are useful supplemental measures that provide a meaningful indication of the Company’s results from principal business activities prior to the consideration of how these activities are financed or the tax impacts in various jurisdictions and for comparing its operating performance with the performance of other companies that have different financing, capital or tax structures. The Company presents Adjusted EBITDA as a measure of EBITDA that excludes the impact of transactions that are outside the Company’s normal course of business or day to day operations. Adjusted EBITDA is used by many analysts as one of several important analytical tools to evaluate financial performance and is a key metric in business valuations. It is also considered important by lenders to the Company and is included in the financial covenants of the Company’s Credit Facility.
| Three Months Ended | ||||||
| March 31, | March 31, | |||||
| (in thousands of Canadian dollars) | 2022 | 2021 | ||||
| Net Loss | $ | (7,116 | ) | $ | (15,792 | ) |
| Add: | ||||||
| Income tax expense | 2,237 | 2,847 | ||||
| Finance costs, net | 4,345 | 7,033 | ||||
| Amortization of property, plant, equipment, intangible and Right-of-Use assets | 17,472 | 19,971 | ||||
| EBITDA | $ | 16,938 | $ | 14,059 | ||
| Hyperinflation adjustment for Argentina | 1,890 | 1,112 | ||||
| Restructuring costs and other, net | 1,206 | 3,395 | ||||
| Adjusted EBITDA(a) | $ | 20,034 | $ | 18,566 | ||
| (a) Adjusted EBITDA includes COVID-19 related government wage subsidies of $2.4 million in the first quarter of 2021. | ||||||
| Year Ended | ||
| December 31, | ||
| (in thousands of Canadian dollars) | 2021 | |
| Net Loss | (80,620 | ) |
| Add: | ||
| Income tax expense | 12,060 | |
| Finance costs, net | 22,213 | |
| Amortization of property, plant, equipment, intangible and Right-of-Use assets | 77,767 | |
| EBITDA | 31,420 | |
| Hyperinflation adjustment for Argentina | 5,529 | |
| Impairment | 57,328 | |
| Gain on redemption of investment in associate | (1,834 | ) |
| Gain on sale of operating unit | (3,212 | ) |
| Restructuring costs and other, net | 16,412 | |
| Adjusted EBITDA(a) | 105,643 | |
| (a) Adjusted EBITDA includes COVID-19 related government wage subsidies of $4.8 million in the year of 2021. | ||
Composite Systems Segment
| Three Months Ended | ||||
| March 31, | March 31, | |||
| (in thousands of Canadian dollars) | 2022 | 2021 | ||
| Operating Income | $ | 6,874 | $ | 667 |
| Add: | ||||
| Amortization of property, plant, equipment, intangible and Right-of-Use assets | 7,409 | 7,856 | ||
| EBITDA | $ | 14,283 | $ | 8,523 |
| Restructuring costs and other | 423 | 24 | ||
| Adjusted EBITDA(a) | $ | 14,706 | $ | 8,547 |
| (a) Adjusted EBITDA includes COVID-19 related government wage subsidies of $1.4 million in the first quarter of 2021. | ||||
Automotive and Industrial Segment
| Three Months Ended | ||||
| March 31, | March 31, | |||
| (in thousands of Canadian dollars) | 2022 | 2021 | ||
| Operating Income | $ | 14,887 | $ | 11,436 |
| Add: | ||||
| Amortization of property, plant, equipment, intangible and Right-of-Use assets | 1,085 | 1,110 | ||
| EBITDA | $ | 15,972 | $ | 12,546 |
| Restructuring costs and other | 27 | 32 | ||
| Adjusted EBITDA(a) | $ | 15,999 | $ | 12,578 |
| (a) Adjusted EBITDA includes COVID-19 related government wage subsidies of $0.4 million in the first quarter of 2021. | ||||
Pipeline and Pipe Services Segment
| Three Months Ended | ||||||
| March 31, | March 31, | |||||
| (in thousands of Canadian dollars) | 2022 | 2021 | ||||
| Operating Loss | $ | (16,180 | ) | $ | (9,499 | ) |
| Add: | ||||||
| Amortization of property, plant, equipment, intangible and Right-of-Use assets | 8,600 | 10,357 | ||||
| EBITDA | $ | (7,580 | ) | $ | 858 | |
| Hyperinflation adjustment for Argentina | (2 | ) | (83 | ) | ||
| Restructuring costs and other, net | 131 | 3,271 | ||||
| Adjusted EBITDA(a) | $ | (7,451 | ) | $ | 4,046 | |
| (a) Adjusted EBITDA includes COVID-19 related government wage subsidies of $0.3 million in the first quarter of 2021. | ||||||
Net debt-to-Adjusted EBITDA
Net debt-to-Adjusted EBITDA is a non-GAAP measure defined as the sum of long-term debt, current lease liabilities and long-term lease liabilities, less cash and cash equivalents, divided by Adjusted EBITDA, as defined above, for the trailing twelve-month period. The Company believes Net debt-to-Adjusted EBITDA is a useful supplementary measure to assess the borrowing capacity the Company. Net debt-to-Adjusted EBITDA is used by many analysts as one of several important analytical tools to evaluate how long a company would need to operate at its current level to pay of all its debt. It is also considered important by credit rating agencies to determine the probability of a company defaulting on its debt.
| March 31, | December 31, | |||||
| (in thousands of Canadian dollars, except Net debt-to-EBITDA ratio) | 2022 | 2021 | ||||
| Long-term debt | $ | 278,607 | $ | 292,140 | ||
| Lease liabilities | 52,698 | 54,439 | ||||
| Cash and cash equivalents | (85,781 | ) | (124,449 | ) | ||
| Net Debt | $ | 245,524 | $ | 222,130 | ||
| Q1 2021 Adjusted EBITDA | $ | – | $ | 18,566 | ||
| Q2 2021 Adjusted EBITDA | 35,206 | 35,206 | ||||
| Q3 2021 Adjusted EBITDA | 31,793 | 31,793 | ||||
| Q4 2021 Adjusted EBITDA | 20,078 | 20,078 | ||||
| Q1 2022 Adjusted EBITDA | 20,034 | – | ||||
| Trailing twelve-month Adjusted EBITDA | $ | 107,111 | $ | 105,643 | ||
| Net debt-to-Adjusted EBITDA | $ | 2.29 | $ | 2.10 | ||
