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Press release from Marketwire

Black Diamond Group Limited Reports Results for the Second Quarter Ended June 30, 2010

Thursday, August 12, 2010

Black Diamond Group Limited Reports Results for the Second Quarter Ended June 30, 201014:37 EDT Thursday, August 12, 2010CALGARY, ALBERTA--(Marketwire - Aug. 12, 2010) - Black Diamond Group Limited (TSX:BDI) ("Black Diamond" or the "Company") is pleased to announce its financial and operational results for the three months ended June 30, 2010.Revenue generated in the second quarter of 2010 was $31.2 million with EBITDA of $10.4 million for the period, compared to revenue of $16.7 million and EBITDA of $8.3 million for the same period in 2009. Revenue was higher than the prior year's comparable period mainly due to the newly acquired US operations that contributed approximately $5.4 million and from the Sunday Creek Lodges which contributed approximately $8.7 million. Gross profit for the quarter was $15.3 million, up 37% from the second quarter of 2009. Gross Profit margin at 49% was lower than the prior year, as a higher percentage of overall revenue was generated from lodging and ancillary sources which generates lower margins than rental streams. Rental revenues were $10.3 million as compared to $9.5 million for the second quarter of 2009. Lodging revenue was $8.7 million in the quarter compared to $nil in 2009 as Sunday Creek Lodges only began operations in September 2009. Non-rental revenues were $12.1 million as compared to $7.2 million in the second quarter of 2009 - a 69% increase.EBITDA margins in the second quarter declined from 50% in 2009 to 33% in 2010 due to the decline in the gross margins realized. Earnings for the quarter were $2.9 million, compared with $3.5 million for the second quarter of 2009.The Workforce Accommodations division of Black Diamond generated $4.5 million of revenue from rental activity during the Period which was approximately $1.3 million less than the rental revenues recorded in the second quarter of the prior year due to the transfer of 135 units into the Sunday Creek Lodges facility. Utilization of the workforce accommodation fleet averaged 83% for the period down from 89% for the second quarter of 2009. Non-rental revenue was higher than in the same period in the prior year due to used fleet sales in the quarter. The operating open camps, Sunday Creek Lodges, had 260 units at the end of the June 2010. This is comprised of the assets purchased in September 2009, the transfer of fleet assets that were rented to customers on that site prior to the acquisition, and expansion of the camp throughout the fourth quarter and into the first quarter of 2010. Revenue associated with room and board in the operating camp was $8.7 million with an occupancy rate of 47% for the quarter.The Canadian Space Rentals division has grown its fleet size by 9% from June 2009. Utilization of the space rental fleet averaged 70% for the period compared to 62% for the same period in 2009. The increases are a result of the signs of a slowly strengthening economy in the regions where Black Diamond has space rental operations. These increases in rental revenue were offset by reductions in the non-rental revenue for the period. As a result, the Canadian space rental division's revenues were consistent with those of the prior year.The US Space Rentals division had 1,134 units at June 30, 2010. Approximately 900 of the units were acquired in the Nortex acquisition which was completed on January 1, 2010, 90 units were purchased from Nortex in December 2009 and the remaining 144 units were acquired in small US equipment acquisitions completed in April and August 2009. Utilization rates were slightly lower than in the Canadian operations, averaging 66% for the quarter.The Energy Services division generated $2.6 million in revenues representing a decrease of 7% from the same period in 2009 primarily due to lower utilization of the drilling accommodations and surface rental fleets as well as pricing pressure across the entire surface rental platform. These decreases were offset by the acquisition of Paragon Energy Saskatchewan in January 2010, which was augmented by increased revenue from the provision of third party catering operations and associated revenue from other non-rental streams such as logistics, installation and sub-lease of additional fleet. The drilling accommodations unit count is down 7% to 224 units while the surface rental equipment has increased by 229 to 1,245 pieces of rental equipment.The Company declared dividends of $0.09 per common share per month in the quarter resulting in a payout ratio for the quarter of 47%. Management of Black Diamond plans to continue this monthly dividend and is confident that the cash generated from operations will be sufficient to allow it to meet ongoing requirements for the foreseeable future for working capital, maintenance costs, SG&A costs, interest costs as well as dividends to shareholders.The Company's results for the second quarter reflect the increased scale of operations following the acquisition of Nortex Modular and Paragon Saskatchewan, and the expanded facilities at Sunday Creek Lodges. They also reflect improving activity levels in the markets which Black Diamond serves. Consolidated revenue for the quarter is in- line or slightly stronger than management's previous outlook however EBITDA is lower. Management believes this is due to several factors including lower than anticipated margins in the Nortex and Sunday Creek operations, continued low rental rates in the surface rental segment of the Energy Services division, and marginally lower than expected utilization in the Space Rentals division.Management anticipates that the Company will realize the benefits during the remainder of the year of recent disciplined acquisitions and organic growth initiatives. Management maintains a positive outlook overall, most notably with future revenue growth being led by the rental revenue stream. It is anticipated the non-rental, ancillary revenue streams will continue to add further granularity.Operating efficiencies at Sunday Creek have been improving since the beginning of the year. It is anticipated that field operations relating to recently secured camps projects along with a gradual increase in rental revenue as the projects come on stream will strengthen the results generated by the workforce housing segment throughout the remainder of the year. The BOXX Modular division is experiencing stronger utilization in western Canada with new project deployments increasing. The US division continues to experience a struggling US economic environment, as a result management expects the results of this division during the remainder of 2010 will be similar to recent quarters. Improving activity levels for drilling and strengthened utilization levels and rates for summer and fall activity in the Energy Services division's core operating areas of northern British Columbia, northwestern Alberta, and southern Saskatchewan lead management to expect a corresponding increase in revenue from this division during the remainder of 2010.Overall, management anticipates the Company's results for Q3 2010 will continue to show increased revenue and stronger margins from the workforce housing division, modest strengthening from BOXX Modular Canada, consistent results from Nortex, and improved results from Energy Services. Consolidated EBITDA is expected to be modestly stronger than the first half of the year, and markedly increased revenue and EBITDA over the prior year's is expected, highlighting the effects of the larger operating platform which Black Diamond has assembled over the previous year.Summary Financial StatementsThe following is a summary of the Company's consolidated balance sheets as at June 30, 2010 and December 31, 2009, the Company's consolidated statements of net income, comprehensive income and retained earnings and consolidated statements of cash flows for the three and six month periods ended June 30, 2010 and 2009. These summary statements should be read in conjunction with the Company's consolidated financial statements including the accompanying notes for the three and six month periods ended June 30, 2010 as filed on SEDAR. Black Diamond Group Limited (formerly Black Diamond Income Fund) CONSOLIDATED BALANCE SHEETS (unaudited) (Expressed in thousands of dollars) June 30, December 31, As at 2010 2009 ---------------------------------------------------------------------------- $ $ ---------------------------------------------------------------------------- ASSETS Current Accounts receivable 23,111 12,553 Prepaid expenses and other current assets 1,600 874 ---------------------------------------------------------------------------- 24,711 13,427 Property and equipment 205,526 156,188 Intangible assets 12,978 9,821 Goodwill 35,154 29,316 ---------------------------------------------------------------------------- 278,369 208,752 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Bank indebtedness 1,502 9 Accounts payable and accrued liabilities 11,243 9,149 Dividends payable 1,480 1,234 Current income taxes payable 602 - Current portion of capital lease obligation 657 639 ---------------------------------------------------------------------------- 15,484 11,031 Capital lease obligation 228 561 Long-term debt 43,500 31,472 Risk management liability 1,415 - Asset retirement obligations 1,226 1,116 Future income taxes 22,165 11,724 ---------------------------------------------------------------------------- 84,018 55,904 ---------------------------------------------------------------------------- Commitments Shareholders' equity Share capital 189,306 146,366 Contributed surplus 1,102 969 Non-controlling interest (80) 51 Accumulated other comprehensive income (1,061) - Retained earnings 5,084 5,462 ---------------------------------------------------------------------------- 194,351 152,848 ---------------------------------------------------------------------------- 278,369 208,752 ---------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements Black Diamond Group Limited (formerly Black Diamond Income Fund) CONSOLIDATED STATEMENTS OF NET INCOME (unaudited) (Expressed in thousands of dollars, except per share amounts) Three months ended Six months ended June 30, June 30, June 30, June 30, 2010 2009 2010 2009 ---------------------------------------------------------------------------- $ $ $ $ ---------------------------------------------------------------------------- Revenue 31,161 16,669 62,132 43,542 Direct costs 15,870 5,524 30,386 16,861 ---------------------------------------------------------------------------- 15,291 11,145 31,746 26,681 ---------------------------------------------------------------------------- Expenses Selling, general and administrative costs 4,938 2,870 9,775 5,585 Amortization of property and equipment 4,604 3,356 8,914 6,527 Amortization of intangibles 382 247 769 495 Accretion on asset retirement obligation 24 - 47 - Acquisition costs - - 289 - Foreign exchange gain- realized - - (820) - Foreign exchange loss - unrealized 290 - 39 - Interest 534 327 1,058 694 Stock-based compensation 322 102 388 191 ---------------------------------------------------------------------------- 11,094 6,902 20,459 13,492 ---------------------------------------------------------------------------- Income before income taxes and non-controlling interest 4,197 4,243 11,287 13,189 Income tax expense Current 328 - 585 - Future 1,100 777 2,476 555 ---------------------------------------------------------------------------- 1,428 777 3,061 555 ---------------------------------------------------------------------------- Income before income attributable to non-controlling interest 2,769 3,466 8,226 12,634 Net (loss)/income attributable to non-controlling interest (159) - 75 - ---------------------------------------------------------------------------- Net income attributable to Black Diamond Group Limited 2,928 3,466 8,151 12,634 Net income per share Basic 0.18 0.29 0.53 1.07 Diluted 0.18 0.29 0.51 1.06 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements Black Diamond Group Limited (formerly Black Diamond Income Fund) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND RETAINED EARNINGS (unaudited) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Expressed in thousands of dollars, except per share amounts) Three months ended Six months ended June 30, June 30, June 30, June 30, 2010 2009 2010 2009 ---------------------------------------------------------------------------- $ $ $ $ ---------------------------------------------------------------------------- Net income attributable to Black Diamond Group Limited 2,928 3,466 8,151 12,634 Net change in derivative financial instruments designated as cash flow hedges Unrealized loss during the period (1,061) - (1,061) - ---------------------------------------------------------------------------- Comprehensive income 1,867 3,466 7,090 12,634 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Comprehensive income per share Basic 0.11 0.29 0.46 1.07 Diluted 0.11 0.29 0.45 1.06 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements CONSOLIDATED STATEMENT OF RETAINED EARNINGS/ (DEFICIT) (Expressed in thousands of dollars) Three months ended Six months ended June 30, June 30, June 30, June 30, 2010 2009 2010 2009 ---------------------------------------------------------------------------- $ $ $ $ ---------------------------------------------------------------------------- Retained earnings/ (deficit), beginning of period 6,583 5,264 5,462 (708) Net income 2,928 3,466 8,151 12,634 Dividends declared (4,427) (3,195) (8,529) (6,391) ---------------------------------------------------------------------------- Retained earnings, end of period 5,084 5,535 5,084 5,535 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements Black Diamond Group Limited (formerly Black Diamond Income Fund) CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Expressed in thousands of dollars) Three months ended Six months ended June 30, June 30, June 30, June 30, 2010 2009 2010 2009 $ $ $ $ ---------------------------------------------------------------------------- Operating activities Net income for the period 2,928 3,466 8,151 12,634 Add (deduct) non-cash items: Amortization of property and equipment 4,604 3,356 8,914 6,527 Amortization of intangible assets 382 247 769 495 Accretion of asset retirement obligation 24 - 47 - Foreign exchange loss - unrealized 290 - 39 - Future income taxes 1,100 777 2,476 555 Stock-based compensation expense 322 102 388 191 Earnings attributable to non-controlling interest (159) - 75 - ---------------------------------------------------------------------------- 9,491 7,948 20,859 20,402 Change in non-cash working capital related to operating activities (2,761) (198) (8,711) 8,910 ---------------------------------------------------------------------------- 6,730 7,750 12,148 29,312 ---------------------------------------------------------------------------- Investing activities Purchase of property and equipment (14,450) (1,752) (25,886) (11,367) Business acquisitions - - (17,945) - Change in non-cash working capital related to investing activities 1,615 (589) - (1,833) ---------------------------------------------------------------------------- (12,835) (2,341) (43,831) (13,200) ---------------------------------------------------------------------------- Financing activities Proceeds from long-term debt 11,528 - 36,969 1,000 Repayment of long-term debt 996 (4,000) (25,461) (4,000) Repayment of capital lease (159) (149) (315) (296) Net proceeds from issuance of shares 326 - 24,079 - Purchase of shares in trust (100) - (100) - Dividend payments (4,866) (3,195) (8,734) (6,391) Bank indebtedness (2,691) - 1,493 (4,889) Stock options exercised 1,071 - 3,752 - ---------------------------------------------------------------------------- 6,105 (7,344) 31,683 (14,576) ---------------------------------------------------------------------------- Increase/ (decrease) in cash - (1,935) - 1,536 Cash, beginning of period - 3,471 - - ---------------------------------------------------------------------------- Cash, end of period - 1,536 - 1,536 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements Cash paid during the period for: Interest 534 327 1,058 694 ---------------------------------------------------------------------------- Additional InformationA copy of the Company's unaudited consolidated financial statements for the three and six month periods ended June 30, 2010 and related management's discussion and analysis have been filed with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).Conference CallBlack Diamond will host a conference call for analysts, investors and interested parties to discuss its financial and operational results at 3:00 p.m. MST on August 12, 2010. Trevor Haynes, President and Chief Executive Officer, and Michael Burnyeat, Vice President, Finance and Chief Financial Officer, will be in attendance. The call can be accessed by calling 416-340-8061 or toll free 1-866-225-0198 prior to the scheduled start time. Digital playback of the conference call will be available on the Company's website.About Black DiamondBlack Diamond is an Alberta company, the principal undertaking of which, through its wholly-owned subsidiaries, Black Diamond Limited Partnership, Nortex Modular Leasing and Construction Company and through its 50% equity participation in the Black Diamond Dene Limited Partnership, is to rent modular structures for use as workforce accommodation and temporary workspace, and to provide complementary services including transportation, installation, dismantling, repair and maintenance of modular structures, as well as related services through three operating divisions consisting of Black Diamond Camps, BOXX Modular and Black Diamond Energy.Reader AdvisoryCertain information in this news release contains forward-looking statements including management's assessment of future plans and operations of Black Diamond including, without limitation, statements relating to utilization rates, fleet size, revenue, EBITDA, margins, cash flows, capital expenditures, further deployment of equipment, demand from existing and new customers and dividend levels. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Black Diamond's control including, without limitation, the impact of general economic conditions, industry conditions, fluctuation of commodity prices, fluctuation of exchange rates, environmental risks, industry competition, availability of qualified personnel and management, stock market volatility, timely and cost effective access to sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the forgoing list of factors is not exhaustive. Additional information on these and other factors that could affect Black Diamond's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and at Black Diamond's website (www.blackdiamondlimited.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Black Diamond does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.In this news release, the following terms have been referenced: EBITDA (earnings before interest, taxation, depreciation and amortization), gross profit and payout ratio. Readers are cautioned that these measures are not defined under Canadian Generally Accepted Accounting Principles ("GAAP"). Readers are cautioned that these non-GAAP measures are not alternatives to measures under GAAP and should not, on their own, be construed as an indicator of the Company's performance or cash flows, a measure of liquidity or as a measure of actual return on the common shares of the Company. These Non-GAAP measures should only be used in conjunction with the consolidated financial statements of the Company. A reconciliation between these measures and measures defined under GAAP is included in management's discussion and analysis for the three and six month periods ended June 30, 2010 filed on SEDAR.FOR FURTHER INFORMATION PLEASE CONTACT: Black Diamond Group Limited Trevor Haynes President and Chief Executive Officer (403) 206-4737 (403) 264-9281(FAX) or Black Diamond Group Limited Michael Burnyeat Vice President, Finance and Chief Financial Officer (403) 206-4740 (403) 264-9281(FAX) www.blackdiamondlimited.com The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.