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Press release from Marketwire

Newport Inc. Announces First Quarter 2011 Financial Results

Friday, May 13, 2011

Newport Inc. Announces First Quarter 2011 Financial Results08:54 EDT Friday, May 13, 2011TORONTO, ONTARIO--(Marketwire - May 13, 2011) -NOT FOR DISTRIBUTION TO THE U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATESNewport Inc. (TSX:NP)(TSX:NP.DB.B)(TSX:NP.DB.C) today announced the results of its predecessor, Newport Partners Income Fund for the three months ended March 31, 2011.First Quarter Results($ millions)20112010Revenue144.1100.9Gross profit31.923.8Selling, general & administrative expenses26.821.8Net income (loss) from continuing operations29.1(1.9)Adjusted EBITDA5.02.8Revenue for the three-month period ended March 31, 2011 was $144.1 million, versus $100.9 million produced in 2010. Gross profit was $31.9 million for the quarter representing a gross profit margin of 22.1 percent. For the same period last year, the Fund reported gross profit of $23.8 representing a gross profit margin of 23.6 percent. Adjusted EBITDA was $5.0 million, compared to $2.8 million for the corresponding period in 2010.INDUSTRIAL SERVICESSolid results at NPC not only reflect the Fund's increase in ownership in both NPC and Golosky but also strong performance of the underlying businesses. At NPC, on a divisional basis higher maintenance services and transportation revenues drove the improved results. Quantum Murray had a strong quarter, significantly improved over the prior year quarter. Increased activity in both demolition and remediation services. In the prior year quarter, Quantum Murray experienced lower activity levels and also right sized the business following the departure of management personnel. FINANCIAL SERVICESThe loss of large clients in the latter half of 2010 by Morrison Williams led to lower results compared to the prior year quarter. Significant increases in Brompton's AUM over the prior year quarter have led to improved results for Brompton. Baird MacGregor had a solid quarter and improved results are due to both new business initiatives and growth in existing business. Hargraft's reduced losses reflect the realization of the benefits of operational restructuring during 2010. MARKETINGThe marketing segment had a challenging quarter. Gemma continues to experience business level fluctuations from a major client. Both Armstrong and IC Group worked hard to maintain existing business from key clients. OTHERImproving Alberta economic conditions had a strong impact on Titan's results. Weather factors also worked in Titan's favour as higher than normal snowfall conditions created demand for its product lines. Gusgo's revenues were consistent with the prior year quarter. CORPORATECorporate expenses are increased from the prior year quarter. The increase primarily relates to professional advisory services related to the IFRS conversion. The current period income statement also includes two significant accounting gains. As a result of the Fund's balance sheet refinancing, a gain on debt extinguishment of $37,451 has been recorded and reflects the difference between the fair value of the new secured and unsecured debentures and the carrying value of the refinanced debt instruments, net of costs.As a result of IFRS accounting rules relating to business combinations, an entity which increases its interest in an investment to a control interest is required to revalue its existing investment at the date of the transaction. As a result of NPC increasing its investment in Golosky Energy Services from 80% to 100%, a gain on re-measurement of investment of $9,644 has been recorded.SECOND QUARTER OUTLOOKIn the first quarter of 2011, the Fund successfully completed its debt refinancing. With a restructured balance sheet, the Fund's senior management team's primary focus is on improving results within the different operating segments.Within the Industrial Services segment, the second quarter is typically a strong quarter for NPC, our oil and gas services business. The quarter is seasonally busy with significant shutdown and turnaround plant maintenance assignments. NPC is seeing an increased workload, and also expects to be busy in its fabrication and transportation divisions. Following a solid first quarter by Quantum Murray, increasing business activity and job tendering is promising in both the demolition and remediation divisions, and should benefit this quarter and beyond.The marketing segment continues to have a more cautious outlook. Each business within this segment is focused on business development activities, but client-spending decisions are taking longer to finalize.The fortunes of the financial services segment are tied to both market performance and client growth and retention. The best example of this is Morrison Williams which is working at rebuilding its client base. Both Baird and Hargraft are modestly positive about the second quarter and beyond. Good progress has been made at Baird, in particular, in solidifying its base of insurance clients.Both Titan and Gusgo operate within the Other segment. Titan's second quarter business levels may not match the strong first quarter, but should reflect the continued strength of the Alberta oil and gas and construction sectors. Gusgo generally benefits from broad economic strengthening. It fared well in the first quarter, and should see similar results in the second quarter.In the Corporate segment, there should be lower legal and advisor costs in future quarters as work associated with conversion to an Inc. is now complete, and work related to the IFRS transition will decrease over time.About Newport Inc.Newport Inc. is a publicly-traded company which invests in successful Canadian private businesses. Newport Inc. currently has $443 million invested in 12 businesses representing a diverse cross-section of the Canadian economy.Forward-Looking InformationCertain information included in this news 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 Newport Inc. or the Operating Partnerships and reflects management's expectations and assumptions regarding the growth, results of operations, performance and business prospects and opportunities of Newport Inc. and the Operating Partnerships. Without limitation, information regarding the future operating results and economic performance of Newport Inc. and the Operating Partnerships, and statements about net asset value constitute forward-looking information and the estimate is updated quarterly. Such forward-looking information reflects management's current beliefs and is based on information currently available to management of Newport Inc. 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, taxation of income trusts, dependence on key personnel, limited customer bases, interest rates, regulatory change, continued availability of credit facilities, availability of future financing, factors relating to the weather and availability of labor. 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" in the Annual Information Form dated March 30, 2011, 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 Newport Inc. and the Operating Partnerships will continue substantially in the ordinary course, including without limitation with respect to general levels of economic activity, regulations, taxes, interest rates, that there will be no material changes in its credit arrangements. Although the forward-looking information is based on what management of Newport Inc. 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 news release, and Newport Inc. does not assume any obligation to update or revise them to reflect new events or circumstances. Undue reliance should not be placed on forward-looking information. Newport Inc. is providing the forward-looking financial information for the purpose of providing investors with some context for the "2011 Second Quarter Outlook" presented. Readers are cautioned that this information may not be appropriate for any other purpose.Non-IFRS MeasuresThe terms "adjusted EBITDA", "EBITDA", (collectively the "Non-IFRS Measures") are financial measures used in this news release that are not standard measures under International Financial Reporting Standards ("IFRS"). Newport Inc.'s method of calculating Non-IFRS Measures may differ from the methods used by other issuers. Therefore, Newport Inc.'s Non-IFRS Measures, as presented may not be comparable to similar measures presented by other issuers.Adjusted EBITDA refers to EBITDA excluding the gain or loss on reduction of ownership interest (dilution gains or losses) , the write-down of goodwill and intangibles and accounting gains or losses on sale of investments, gain on measurement of investment, gain on debt extinguishment and fair value adjustments to stock based compensation expense. Newport Inc. has used Adjusted EBITDA as the basis for the analysis of its past operating financial performance. Adjusted EBITDA is used by Newport Inc. and management believes it is a useful supplemental measure from which to determine Newport Inc.'s ability to generate cash available for debt service, working capital, capital expenditures, income taxes and distributions. 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.EBITDA refers to net earnings determined in accordance with IFRS, before depreciation and amortization, net of gain or loss on disposal of capital assets, interest expense and income tax expense. EBITDA is used by management and the Trustees 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 Newport Inc.'s reportable segments and considers EBITDA to be a useful supplemental measure from which to determine Newport Inc's ability to generate cash available for debt service, working capital, capital expenditures, income taxes and distributions. Newport Inc. has provided a reconciliation of income to EBITDA in its MD&A.Investors are cautioned that the Non-IFRS 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 Units. These Non-IFRS Measures should only be used in conjunction with the financial statements included in the MD&A and Newport Partners Income Fund's annual audited financial statements available on SEDAR at www.sedar.com or at www.newportpartnersincomefund.ca.NEWPORT PARTNERS INCOME FUNDConsolidated Balance Sheets(In thousands of Canadian dollars)(unaudited)March 31,December 31,January 1,201120102010AssetsCurrent Assets:Cash and cash equivalents$12,783$27,739$41,262Cash and short-term investments held in trust16,54118,76720,142Accounts receivable116,88796,687107,143Inventories29,16428,20222,130Prepaid expenses3,5023,5832,377Other current assets10,0799,68314,059Current assets of discontinued operations27822327,547$189,234$184,884$234,660Property, plant and equipment53,92452,72441,932Long-term investments15,23614,84515,055Goodwill60,48250,48746,986Intangible assets151,218145,75065,015Other assets1,5111,49213,641Deferred tax asset--2,427Long-lived assets of discontinued operations--64,349$471,605$450,182$484,065Liabilities and Unitholders' EquityCurrent liabilities:Accounts payable and accrued liabilities86,98578,63192,628Provisions5,2385,4015,667Deferred revenue7,2166,7577,254Current portion of obligations under capital leases4,8574,5344,516Current liabilities of discontinued operations47332610,275Revolving credit facilities-10,08910,089Accrued interest on revolving credit facilities-1,449449Current portion of long-term debt-86,939150,499Convertible debentures-159,829156,136Accrued interest on convertible debentures-23,87011,935$104,769$377,825$449,448Obligations under capital leases3,4434,3065,801Long-term debt104,986--Secured debentures141,961--Unsecured debentures11,729--Stock based payment liability2,8331,165-Long-term liabilities of discontinued operations--7,952Deferred tax liability29,25823,394-Unitholders' equity72,62643,49220,864$471,605$450,182$484,065NEWPORT PARTNERS INCOME FUNDConsolidated Statements of Income (Loss) and Comprehensive Income (Loss)(In thousands of Canadian dollars, except per unit amounts)(unaudited)Three months endedThree months endedMarch 31, 2011March 31, 2010Revenues$144,115$100,880Cost of revenues(112,215)(77,033)Gross profit31,90023,847ExpensesSelling, general and administrative(26,824)(21,824)Amortization of intangible assets(8,799)(4,189)Depreciation(3,111)(2,693)$(38,734)$(28,706)Loss before the undernoted(6,834)(4,859)Income from equity investments762470Interest expense, net(7,126)(9,606)Gain on re-measurement of investment9,6449,051Gain on debt extinguishment37,451-Fair value adjustment to stock based compensation expense(883)305Transaction costs(1,177)(40)Income (loss) before income taxes$31,837$(4,679)Income tax expense - current(3)-Income tax (expense) recovery - deferred(2,700)2,738Net income (loss) from continuing operations$29,134$(1,941)Income from discontinued operations (net of income tax)-2,054Net income and comprehensive income$29,134$113Income (loss) per unitBasic:Continuing operations$0.41$(0.03)Net income$0.41$0.00Diluted:Continuing operations$0.41$(0.03)Net income$0.41$0.00NEWPORT PARTNERS INCOME FUNDConsolidated Statements of Unitholders' Equity(In thousands of Canadian dollars, except per unit amounts)(unaudited)Three months endedThree months endedMarch 31, 2011March 31, 2010Cash provided by (used in):Operating activities:Net income for the period$29,134$113Items not affecting cash:Income from discontinued operations-(2,054)Amortization of intangible assets8,7994,189Depreciation3,1242,707Deferred income tax expense (recovery)2,700(2,738)Income from equity investments, net of cash received(762)(470)Non-cash interest expense664912Gain on re-measurement of investment(9,644)(9,051)Gain on extinguishment of debt(37,451)-Stock based compensation expense1,668621Changes in non-cash working capital(19,000)6,154Distributions from discontinued operations-2,931Cash provided by discontinued operations-2,973$(20,768)$6,287Investing activities:Acquisition of businesses, net cash acquired(14,547)(4,281)Purchase of property, plant and equipment(58)(1,283)Net proceed on disposal of property, plant and equipment202366Purchase of software(477)-Cash used in discontinued operations-(351)$(14,880)$(5,549)Financing activities:Increase (repayment) of long-term debt19,766(18,041)Increase (decrease) in cash held in trust2,226(463)Repayment of capital lease obligations(1,300)(1,196)Cash used in discontinued operations-(3,557)$20,692$(23,257)Decrease in cash and cash equivalents(14,956)(22,519)Cash and cash equivalents, beginning of period - continuing operations27,73941,262Cash and cash equivalents, beginning of period - discontinued operations-2,620Cash and cash equivalents, end of period$12,783$21,363Cash and cash equivalents, end of period - continuing operations$12,783$19,680Cash and cash equivalents, end of period - discontinued operations-1,683Supplemental cash flow information:Interest paid775,232Cash acquired upon acquisition204Supplemental disclosure of non-cash financing and investing activities:Acquisition of property, plant and equipment through capital leases379243Debt and accrued interest repaid through issuance of debentures152,951-FOR FURTHER INFORMATION PLEASE CONTACT: Keith HalbertNewport Inc.(416-867-7544)IRinfo@newportpartners.ca