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Tuckamore Announces Second Quarter 2014 Financial Results
TORONTO, ONTARIO--(Marketwired - Aug. 5, 2014) -
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Tuckamore Capital (TX.TO)(TX-DBB.TO) today announced its results for the three and six months ended June 30, 2014.
Second Quarter Results
($ millions, except per share amounts) | Q2 2014 | Q2 2013 | 6 months 2014 | 6 months 2013 | ||||
Revenue | 172.5 | 177.3 | 345.1 | 320.2 | ||||
Gross profit | 40.6 | 36.2 | 77.3 | 63.8 | ||||
Selling, general & administrative expenses | (25.8 | ) | (23.9 | ) | (51.3 | ) | (47.2 | ) |
Net income (loss) | 0.7 | (2.1 | ) | 2.8 | (8.0 | ) | ||
EBITDA | 12.9 | 13.3 | 25.4 | 19.4 | ||||
Adjusted EBITDA | 15.8 | 13.5 | 28.5 | 19.8 | ||||
Income (loss) per share, basic | 0.01 | (0.03 | ) | 0.04 | (0.11 | ) |
Revenue for the three and six month period ended June 30, 2014 was $172.5 million and $345.1 million, compared to $177.3 million and $320.2 million produced during the same periods in 2013. Gross profit for three and six months ended June 30, 2014 was $40.6 million and $77.3 million representing a gross profit margin of 23.5% and 22.4%. For the same periods in the prior year, the Company reported gross profit of $36.2 million and $63.8 million representing a gross profit margin of 20.4% and 19.9% percent. Adjusted EBITDA was $15.8 million and $28.5 million for the three and six months ended June 30, 2014, compared to $13.5 million and $19.8 million for the corresponding periods in 2013.
The net income (loss) for the three and six months ended June 30, 2014 was $0.7 million and $2.8 million compared to $(2.1) million and $(8.0) for the same periods in the prior year.
Adjusted EBITDA increased to $15.8 million and $28.5 million compared to $13.5 million and $19.8 million for the same periods in the prior year.
PORTFOLIO REVIEW
INDUSTRIAL SERVICES
ClearStream experienced lower revenues in the current quarter compared to the prior year but realized gains and improvements in gross margin. The Wear, Fabrication and Conventional oil and gas maintenance divisions performed better in the current quarter compared to the same period in the prior year, while business volumes in the Oilsands division were lower than the same quarter in the prior year.
Quantum Murray's results have improved over the same quarter in the prior year. Better results stem from increased business volumes as a result of an improved backlog and the containment of costs on legacy projects.
MARKETING
Gemma had a challenging quarter with lower revenues compared to the same quarter in the prior year. The decrease in revenues was primarily a result of a reduction in business volumes and program delays with certain clients.
IC Group results were lower in the current quarter when compared to the same period in the prior year. Clients continue to postpone projects and internalize some of their marketing functions.
OTHER
Gusgo's results in the second quarter of 2014 were slightly higher than the same period a year ago. Improved results are primarily due to an increase in drop shipments compared to the same period in the prior year.
Titan's results in the second quarter of 2014 were lower than the same quarter in the prior year. This is due to increased competition in the market place as well as costs associated with improving the organizational infrastructure. Lower drilling activity also affected the results for the quarter.
SUBSEQUENT EVENTS
On July 25, 2014, Tuckamore announced that it had entered into a subscription agreement with Orange Capital Master I Ltd. ("Orange Capital") to sell $12.5 million of common shares of the Company to Orange Capital for a price not lower than $0.75 per share, resulting in the issuance of no more than 16,666,667 shares (the "Private Placement").
On August 1, 2014, following repeated submissions by Access Holdings Management Company LLC ("Access"), the Toronto Stock Exchange ("TSX") confirmed its conditional approval of the Private Placement. Access has indicated its intention to appeal the decision of the TSX, and on August 1, 2014 commenced an application before the Ontario Securities Commission (the "OSC") to consider a temporary cease trade order in respect of the Private Placement. The OSC dismissed this application on the basis that Tuckamore's counsel undertake that the company will effect an unwind of the Private Placement in circumstance where Access actually appeals the TSX decision and is successful on such appeal.
On August 1, 2014, and in accordance with the decision of the OSC, Tuckamore completed the Private Placement at a price of $0.80 per share for total gross proceeds of $13.3 million. As previously disclosed, Tuckamore has obtained approval from the lenders under its senior secured credit facilities to extend the maturity date thereunder from March 9, 2015 to December 31, 2015, which extension will become effective upon the prepayment of outstanding indebtedness thereunder using the net proceeds of the Private Placement
THIRD QUARTER 2014 OUTLOOK
At ClearStream, despite revenue softness in lower margin areas, higher margin divisions are performing well and we expect to maintain our EBITDA forecasts in the coming quarter. ClearStream remains committed to its business development strategy and has recently added to its business development team. Business volumes remain high in both the Fabrication and Wear divisions. Growth will be carefully planned and monitored, and Tuckamore and ClearStream management will work closely to address the working capital needs of the business.
At Quantum Murray the third quarter outlook calls for continued improvement with the expectation that the organization will continue to grow its backlog and improve its success rate in bidding on medium and large projects. Management is also focused on fine tuning changes to its organizational infrastructure to improve margins and ensure that the business has the tools required for its longer-term growth and operational efficiency.
In the Marketing segment, the outlook calls for mixed results. At Gemma, the new management team has been very active in bidding on new business and aims to grow the sales pipeline throughout the third quarter. At IC Group, the core client base has reduced its project spending. Management is continuing its efforts to stabilize business volumes from its core client base while placing an increased focus on identifying and securing new clients.
In the Other segment, Titan expects a challenging third quarter as a result of increased competition. Titan will continue to manage its overhead and inventory costs through the third quarter. Titan recently rebranded in an effort to improve the company's market recognition. Management is also continuing to strengthen Titan's business development and sales team for better market penetration. Gusgo is continuing to expect stable business volumes from its existing customer base and will continue to identify and target new customers that can be serviced at positive margins.
Management continues to look to create value through the improvement of the operations of Tuckamore's assets and, in some cases, may look to realize value through the sale of certain of its assets.
About Tuckamore Capital Management Inc.
Tuckamore has investments in 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 "Third Quarter Outlook" presented. Readers are cautioned that this information may not be appropriate for any other purpose.
Non-standard measures
The terms "EBITDA" and "adjusted EBITDA" (collectively the "Non-GAAP measures") are financial measures used in this press release that are not standard measures under International Financial Reporting Standards ("IFRS"). Tuckamore's method of calculating Non-GAAP measures may differ from the methods used by other issuers. Therefore, Tuckamore's Non-GAAP measures, as presented may not be comparable to similar measures presented by other issuers.
EBITDA refers to net earnings determined in accordance with IFRS, before depreciation and amortization, interest expense and income tax expense (recovery). EBITDA is used by management and the directors of Tuckamore (the "Directors") as well as many investors to determine the ability of an issuer to generate cash from operations. Management also uses EBITDA to monitor the performance of Tuckamore's reportable segments and believes that in addition to net income or loss and cash provided by operating activities, EBITDA is a useful supplemental measure from which to determine Tuckamore's ability to generate cash available for debt service, working capital, capital expenditures, income taxes and distributions. Tuckamore has provided a reconciliation of income to EBITDA in its Management's Discussion and Analysis.
Adjusted EBITDA refers to EBITDA excluding the interest, taxes, depreciation and amortization of long-term investments and transaction costs. 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-GAAP Measures are not alternatives to measures under IFRS and should not, on their own, be construed as an indicator of performance or cash flows, a measure of liquidity or as a measure of actual return on the shares. These Non-GAAP Measures should only be used in conjunction with the financial statements included in the press release and Tuckamore's annual audited financial statements available on SEDAR at www.sedar.com or www.tuckamore.ca
TUCKAMORE CAPITAL MANAGEMENT INC. |
Consolidated Interim Balance Sheets |
(In thousands of Canadian dollars) |
(unaudited) |
June 30, 2014 | December 31, 2013 | ||||
Assets | |||||
Current Assets: | |||||
Cash | $ | 12,963 | $ | 28,883 | |
Cash and short-term investments held in trust | 2,950 | 2,950 | |||
Accounts receivable | 161,389 | 145,858 | |||
Inventories | 16,918 | 12,721 | |||
Prepaid expenses | 3,391 | 6,753 | |||
Other current assets | 2,921 | 2,733 | |||
Total current assets | $ | 200,532 | $ | 199,898 | |
Property, plant and equipment | 60,606 | 62,688 | |||
Long-term investments | 28,348 | 28,281 | |||
Goodwill | 61,128 | 61,128 | |||
Intangible assets | 46,699 | 49,896 | |||
Other assets | 633 | 633 | |||
Total assets | $ | 397,946 | $ | 402,524 | |
Liabilities and Shareholders' Equity | |||||
Current liabilities: | |||||
Accounts payable and accrued liabilities | 63,818 | 65,807 | |||
Deferred revenue | 1,388 | 3,048 | |||
Current portion of obligations under finance leases | 5,886 | 6,041 | |||
Senior credit facility | 84,681 | 5,481 | |||
Unsecured debentures | - | 24,819 | |||
Total current liabilities | $ | 155,773 | $ | 105,196 | |
Obligations under finance leases | 10,221 | 11,584 | |||
Senior credit facility | - | 84,354 | |||
Secured debentures | 163,233 | 159,700 | |||
Deferred tax liability | 6,274 | 5,650 | |||
Shareholders' equity | 62,445 | 36,040 | |||
Total liabilities & shareholders' equity | $ | 397,946 | $ | 402,524 | |
TUCKAMORE CAPITAL MANAGEMENT INC. |
Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss) |
(In thousands of Canadian dollars, except per share amounts) |
(unaudited) |
Three months ended | Six months ended | ||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
Restated(1) | Restated(1) | ||||||||||||
Revenues | $ | 172,517 | $ | 177,337 | $ | 345,055 | $ | 320,193 | |||||
Cost of revenues | (131,913 | ) | (141,137 | ) | (267,739 | ) | (256,344 | ) | |||||
Gross profit | 40,604 | 36,200 | 77,316 | 63,849 | |||||||||
Selling, general and administrative expenses | (25,828 | ) | (23,888 | ) | (51,346 | ) | (47,241 | ) | |||||
Amortization of intangible assets | (1,712 | ) | (2,697 | ) | (3,431 | ) | (5,404 | ) | |||||
Depreciation | (3,367 | ) | (3,883 | ) | (6,690 | ) | (7,760 | ) | |||||
Income from long-term investments | 804 | 989 | 2,146 | 2,770 | |||||||||
Interest expense, net | (6,497 | ) | (8,442 | ) | (14,862 | ) | (16,598 | ) | |||||
Transaction costs | (2,706 | ) | - | (2,706 | ) | - | |||||||
Income (loss) before income taxes | $ | 1,298 | $ | (1,721 | ) | $ | 427 | $ | (10,384 | ) | |||
Income tax recovery (expense) - current | - | 50 | - | (109 | ) | ||||||||
Income tax (expense) recovery - deferred | (643 | ) | (379 | ) | 2,372 | 2,540 | |||||||
Net income (loss) | $ | 655 | $ | (2,050 | ) | $ | 2,799 | $ | (7,953 | ) | |||
Net income (loss) and comprehensive income (loss) | $ | 655 | $ | (2,050 | ) | $ | 2,799 | $ | (7,953 | ) | |||
Three months ended | Six months ended | ||||||||||||
Income (loss) per share | 2014 | 2013 | 2014 | 2013 | |||||||||
Basic: | |||||||||||||
Net income (loss) | $ | 0.01 | $ | (0.03 | ) | $ | 0.04 | $ | (0.11 | ) | |||
Diluted: | |||||||||||||
Net income(2) (loss) | $ | 0.01 | $ | (0.03 | ) | $ | 0.04 | $ | (0.11 | ) | |||
(1) | Please refer to Note 9 - "Comparative Figures" in Tuckamore's June 30, 2014 consolidated financial statements for more information. |
(2) | The effect of stock options for the three and six months period ended June 30, 2013 was anti-dilutive. |
TUCKAMORE CAPITAL MANAGEMENT INC. |
Consolidated Interim Statements of Cash Flows |
(In thousands of Canadian dollars) |
(unaudited) |
Six months ended | Six months ended | |||||||
Cash provided by (used in): | ||||||||
Operating activities: | ||||||||
Net income (loss) for the period | $ | 2,799 | $ | (7,953 | ) | |||
Items not affecting cash: | ||||||||
Amortization of intangible assets | 3,431 | 5,404 | ||||||
Depreciation | 6,690 | 7,760 | ||||||
Deferred income tax recovery | (2,372 | ) | (2,540 | ) | ||||
Income from equity investments, net of cash received | (67 | ) | (220 | ) | ||||
Non-cash interest expense | 5,267 | 6,191 | ||||||
Amortization of deferred financing costs | 327 | 326 | ||||||
Stock based compensation expense | - | 170 | ||||||
Changes in non-cash working capital | (20,270 | ) | 4,951 | |||||
Total cash (used in) provided by operating activities | $ | (4,195 | ) | $ | 14,089 | |||
Investing activities: | ||||||||
Purchase of property, plant and equipment | (3,426 | ) | (2,082 | ) | ||||
Net proceeds on disposal of property, plant and equipment | 448 | 497 | ||||||
Purchase of software | (234 | ) | (240 | ) | ||||
Decrease in other assets | - | 10 | ||||||
Total cash used in investing activities | $ | (3,212 | ) | $ | (1,815 | ) | ||
Financing activities: | ||||||||
Repayment of long-term debt | (5,481 | ) | (118 | ) | ||||
Increase in cash held in trust | - | (20 | ) | |||||
Repayment of finance lease obligations | (3,032 | ) | (3,076 | ) | ||||
Total cash used in financing activities | $ | (8,513 | ) | $ | (3,214 | ) | ||
(Decrease) increase in cash | (15,920 | ) | 9,060 | |||||
Cash, beginning of period | 28,883 | 10,549 | ||||||
Cash, end of period | $ | 12,963 | $ | 19,609 | ||||
Supplemental cash flow information: | ||||||||
Interest paid | 8,066 | 2,673 | ||||||
Supplemental disclosure of non-cash financing and investing activities: | ||||||||
Acquisition of property, plant and equipment through finance leases | 1,680 | 4,928 | ||||||
(1) | Please refer to Note 9 - "Comparative Figures" in Tuckamore's June 30, 2014 consolidated financial statements for more information. |
