Canada Markets closed

Empire Industries reports 2018 Results

Fortune 500 Company provides CAD $38.5 million of debt financing, resulting in net new funding of CAD $19.5 million to enable Empire to complete its record backlog of $252 million

WINNIPEG, Manitoba, May 01, 2019 (GLOBE NEWSWIRE) -- Empire Industries Ltd. (EIL.V) (“Empire”, “EIL” or the “Company”) today reported its audited consolidated financial results for the year ended December 31, 2018.  The audited consolidated financial statements and MD&A have been filed on SEDAR and can be viewed at sedar.com or at empind.com.

“Empire continued to face technical challenges in 2018 related to the completion of its three, first generation ride system contracts. The technical challenges and the financial implications, for the most part, are behind us as we complete two contracts in 2019 and the third one in 2020,” stated Guy Nelson.

“The enhanced working capital from the financing provided by our new senior lender and the announced convertible preferred share offer will give us the financial liquidity we need to execute our record backlog, 90% of which is predictable margin, not first generation work.  The positive impact of this should become apparent in the second half of the year.”

Summary of 2018 consolidated annual results

  • Revenues increased to $140.9 million, up $9.2 million or 7.0%, from $131.8 million in 2017.

  • Contract Backlog at the end of 2018 was $252 million, up $4 million from $248 million at the end of the Company’s third quarter 2018, with 90% being non-first generation contract backlog.

  • Net Loss of $50.5 million in 2018 versus a loss of $8.8 million in 2017.

  • The inclusion of a going concern basis of presentation note in the financial statements required a number of non-cash accounting provisions included in the Net Loss for 2018;

    • a non-cash write down of the value of its deferred tax assets. These tax assets remain available to be used by the Company to shield up to $65 million of taxable income.  The value of these assets may also be written back up when the Company determines that a going concern basis of presentation note is no longer needed.

    • a writedown of its intangible assets of $12.9 million; $6.2 million of which was non-cash impairment and $6.7 million was through an increased provision in cost of sales.  Like the deferred tax assets, the $6.2 million impaired intangible assets may be written back up when the Company determines that it is appropriate to do so.

  • Cash used in operating activities in 2018 was $4.4 million compared to cash generated in 2017 of $3.3 million.

“Notwithstanding the very disappointing results for 2018, the Company expects to generate substantial free cashflow in 2019,” stated Guy Nelson, CEO. “Moreover, the Company believes it has tremendous value in its developed portfolio of award winning, world class products the value of which is not reflected on the balance sheet.”

Empire Successfully Closes $38.5 million debt financing

Empire successfully closed its previously announced debt financing of $38.5 million on April 29, 2019 from a subsidiary of a Fortune 500 company.  As part of the financing arrangement, Export Development Canada has agreed to extend its $5.5 million term loan for between 18 and 24 months from April 30, 2019. After paying out the Company’s previous senior lender in full, this transaction has provided a net infusion of $19.5 million of additional liquidity to Empire.

Empire Announces $8.5 million convertible preferred share offering

On April 25, 2019, Empire announced that it is using its best efforts to complete a non-brokered private placement financing of up to 850,000 convertible preferred shares at an issue price of $10.00 per share for gross proceeds to the Company of up to $8,500,000.  Dividends accrue at 8% per annum.  The shares are convertible into common shares at $0.45 per share for thirty-six months, and at $0.75 per share before sixty months from the date of issue.  The preferred shares may be redeemed by the Company in certain circumstances, and may be retracted by the holder any time after thirty-six months. The Company intends to use the proceeds for general working capital purposes.

Update on Co-ventures

Empire is in the final stages of securing its first co-venture project to be located at The Island theme park in Pigeon Forge, Tennessee in the heart of the Smoky Mountains.  The Island is ranked the sixth most popular theme park in America by Trip Advisor.

Negotiations are also proceeding with several other co-venture opportunities, with negotiations underway at various stages of completion. The co-venture business model would see Empire’s subsidiary, Dynamic Entertainment Group Ltd., co-owning attractions in high traffic tourist areas, thereby generating steady, recurring revenue streams that are predominantly self-financed.

“Co-Ventures may be our most exciting initiative ever,” said Guy Nelson, Executive Chairman and CEO of Empire. “It leverages Empire’s strengths as a supplier of iconic attractions, expands the Company’s reach in a new part of the market, and positions the Company for a stream of long term, recurring revenue and profit.

Update on Ride Systems Manufacturing

Empire is currently working on high-profile ride systems for major theme parks around the world, including the United States, China, Japan, Qatar, Malaysia, and Indonesia.  These contracts include the Company’s proprietary ride systems such as its SFX Coaster, Dual Powered Coaster, and Dynamic Flying Theatre.  The Company is also building custom ride systems for the largest theme parks under commercial conditions to manage the unique scopes of work for such custom systems.

Update on Thirty Meter Telescope

Empire is completing its $10 million design contract for the enclosure of the Thirty Meter Telescope.  The contract for the manufacturing of the enclosure is expected to be awarded at some point after the TMT Observatory Board of Directors makes a final decision on the site for the telescope. The Company’s Dynamic Structures business unit has participated in the construction of more than half of the world’s large observatory telescopes.

Summary of 2018 Consolidated Financial Results

For the quarter and year ended December 31  
($ millions) Fiscal
2018
    Fiscal
20172
   
  Revenue 140.9     131.8    
  Adjusted EBITDA ($)1 (12.7 )   6.4    
  Adjusted EBIT ($)1 (18.9 )   1.5    
  Net loss from all operations (50.5 )   (8.8 )  
 

Per Share Information (Basic & Diluted)
       
  Income per share – all operations (0.53 )   (0.13 )  

1 Adjusted earnings (loss) before interest, tax, depreciation and amortization (Adjusted EBITDA) is not defined by IFRS.  The definition of Adjusted EBITDA does not take into account the Company’s share of profit of an associate investment, gains and losses on the disposal of assets, fair value changes in foreign currency forward contracts and non-cash components of stock based compensation.  Adjusted EBIT is the result of the Company’s Adjusted EBITDA less depreciation and amortization expenses.  While not IFRS measures, Adjusted EBITDA and Adjusted EBIT are used by management, creditors, analysts, investors and other financial stakeholders to assess the Company’s performance and management from a financial and operational perspective.

2 Restated to conform with IFRS 15

Conference Call Information

Empire’s management team will be holding an investor/analyst conference call to discuss the 2018 results and the outlook for the Company.  The call-in details are as follows:

Time/Date: Thursday, May 2, 2019 at 10:00AM Eastern Time
Dial-in Number:    1-800-319-4610 (Canada/USA toll-free)
  1-416-915-3239 (Toronto)

Callers should dial in 5 – 10 minutes prior to the scheduled start time and ask to join the Empire Industries 2018 Results Conference Call.

About Empire Industries Ltd.

Empire focuses on designing, supplying, and installing iconic media-based attractions and ride systems for the global theme park industry. Empire also uses these same turn-key integration services for special projects such as large optical telescopes and enclosures. Empire also has commenced an initiative to leverage its world class
flying theater and attraction development capability on a co-venture ownership basis. Empire’s common shares
are listed on the TSX Venture Exchange under the symbol EIL. Empire’s common shares are listed on the TSX Venture Exchange under the symbol EIL.

For more information about the Company, visit empind.com or contact:

Guy Nelson
Chief Executive Officer
Phone:  (416) 366-7977
Email:  gnelson@empind.com
Allan Francis
Vice President – Corporate Affairs and Administration
Phone:  (204) 589-9301
Email:  afrancis@empind.com

Reader Advisory

This news release contains forward-looking statements, within the meaning of applicable securities legislation, concerning Empire’s business and affairs.  In certain cases, forward-looking statements can be identified by the use of words such as ‘‘plans’’, ‘‘expects’’ or ‘‘does not expect’’, ‘‘budget’’, “booked”, ‘‘scheduled’’, “positions”, ‘‘estimates’’, “forecasts’’, ‘‘intends’’, ‘‘anticipates’’, “believes” or variations of such words and phrases or state that certain actions, events or results ‘‘may’’, “may be”, ‘‘could’’, “should”, ‘‘would’’, ‘‘might’’ or ‘‘will’’, ‘‘occur’’ or ‘‘be achieved’’.  Such statements include statements with respect to: (i) the enhanced liquidity provided by the recent debt financing and preferred share offer and the expected positive impact on performance therefrom; (ii) the potential future write-up of the tax deferral and intellectual property assets; (iii) the potential for generating steady, recurring revenue streams from the development of co-ventures; (iv) the Company’s belief that it has value beyond what is reflected in the financial statements; and (v) the development of the co-ventures positioning the Company for a stream of long term, recurring revenue and profit. . These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Although Empire believes these statements to be reasonable, no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. Such statements include statements with respect to the expected execution of the theme park agreements and the shipping dates of the three rides.  Actual results could differ materially from those anticipated in these forward-looking statements as a result of prevailing economic conditions, and other factors, many of which are beyond the control of Empire. The forward-looking statements contained in this news release represent Empire’s expectations as of the date hereof, and are subject to change after such date. Empire disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable securities regulations.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.