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Press release from Marketwire

Tuckamore Announces First Quarter 2013 Financial Results

Tuesday, May 14, 2013

Tuckamore Announces First Quarter 2013 Financial Results

08:00 EDT Tuesday, May 14, 2013

TORONTO, ONTARIO--(Marketwired - May 14, 2013) -

NOT FOR DISTRIBUTION TO THE U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Tuckamore Capital (TSX:TX)(TSX:TX.DB.B)(TSX:TX.DB.C) today announced its results for three months ended March 31, 2013.

First Quarter Results

($ millions, except per share amounts) 2013 2012
Revenue 145.4 157.1
Gross profit 28.2 28.1
Selling, general & administrative expenses 23.7 23.6
Net loss from continuing operations 5.9 7.1
EBITDA 6.1 4.7
Adjusted EBITDA 6.3 6.4
Loss per share from continuing operations 0.08 0.10

Commencing January 1, 2013 Tuckamore Capital was required to adopt International Financial Reporting Standards 11 Joint Arrangements ("IFRS 11"). The adoption of IFRS 11 requires that joint ventures be accounted for using the equity method of accounting and as such the assets, liabilities, revenues and expenses of joint ventures could no longer be proportionately consolidated. IFRS 11 requires retrospective application and as such the December 31, 2012 balance sheet and March 31, 2012 income statement have been restated. Please refer to the consolidated interim financial statements for the period ended March 31, 2013 for more information.

Revenue for the three-month period ended March 31, 2013 was $145.4 million, down 7.5 percent from $157.1 million produced in first quarter of 2012. The decrease was largely driven by lower revenues at Quantum Murray, which benefitted from the completion of larger projects in the first quarter of the previous year. Gross profit increased marginally by 0.3 percent to $28.2 million for the period ended March 31, 2013 representing a gross profit margin of 19.4 percent. In the first quarter of 2012, Tuckamore reported gross profit of $28.1 million representing a gross profit margin of 17.9 percent. The gross margin increase was primarily related to margin improvements in several divisions of ClearStream, as well as the containment of costs in the demolition division of Quantum Murray, which experienced cost overruns in the prior-year.

Non-cash items that impacted the results were depreciation and amortization, deferred income taxes, non-cash interest expense, loss on the de-recognition of debt and stock based compensation expense. Significant items were as follows:

(i) Depreciation and amortization was $6.6 million for the three-months ended March 31, 2013, compared to $5.7 million for the same period in the prior year.
(ii) Deferred income taxes were $2.9 million for the three-months ended March 31, 2013, compared to $2.4 million for the same period in the prior year.
(iii) In 2012 a $1.5 million loss on de-recognition of debt was recorded related to the assignment of the senior credit facility to a new lender in the first quarter of the year. A similar expense was not incurred in the first quarter of 2013.

Adjusted EBITDA which excludes the above noted items decreased slightly to $6.3 million versus $6.4 million for the same quarter in the prior year.

The net loss from continuing operations for the first quarter of 2013 was $5.9 million versus $7.1 million in the first quarter of 2012.

PORTFOLIO REVIEW

Industrial Services

ClearStream's improved results for the three months ended March 31, 2013 reflect a strong performance of the underlying businesses. On a divisional basis higher business volumes from the Wear and Oil Sands divisions drove the improved results.

Quantum Murray had a challenging quarter, producing results that were down from the same quarter in the prior year. On a divisional basis, results were reduced at the Demolition and Remediation divisions. The Demolition division had fewer large industrial projects in progress as a result of the division's restructuring in 2012. The Remediation division experienced delays on sizeable projects due to adverse winter weather conditions in the first quarter of 2013 compared to the same period in 2012.

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 from a key client, combined with the fact that Gemma had a highly profitable campaign for a large financial services client in the first quarter of 2012, which did not recur in the first quarter of 2013.

Other

Overall Gusgo's business volumes from significant customers in the first quarter of 2013 have been relatively consistent with the same quarter in the prior year.

SECOND QUARTER OUTLOOK

At ClearStream, there continues to be a strong business outlook. There are continuing high levels of activity in both the Wear and Oil Sands divisions, which should translate into significant levels of work into the second quarter. The Fabrication division is seeking opportunities for new work which are in various stages of the bidding/award process. Should these projects materialize, the Fabrication division should experience a growth in revenues over the first quarter. Transportation's new pipe logistics yard should become fully operational in the second quarter, resulting in less non-client work and the potential for an increase in business volumes.

Quantum Murray's second quarter outlook appears to be more favourable due to the anticipated return to higher business volumes with the coming of warmer, drier conditions as well as new projects starting to come on stream. Quantum Murray's backlog is growing as it continues to actively bid for projects across all divisions, including responses to several large tenders.

In the Marketing segment, the outlook continues to be mixed. At Gemma, unplanned hour reductions from a key client and a further delay in launching a large project for a financial services client may reduce second quarter revenues. However there are significant efforts underway to attract new clients and diversify the existing base. Recent new client wins are encouraging but need to continue. The IC Group expects to have results similar to the first quarter with an increase in business volumes from a new client, offsetting the loss of a large project.

In the Other segment, both Titan and Gusgo are expecting good results, comparable to the first quarter of 2013. Titan should benefit from continued strong business activity in Alberta in both the construction and oil and gas sectors, and Gusgo is expecting consistent business volumes from its stable customer base.

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 "Second 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. EBITDA is used by management and 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 net income to EBITDA in its press release.

Adjusted EBITDA refers to EBITDA excluding the loss on de-recognition of debt, fair value adjustments on stock based compensation expense and the interest, taxes, depreciation and amortization of long-term investments. 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-standard 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-standard measures should only be used in conjunction with the financial statements included in the press release and Tuckamore's annual audited consolidated 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)
March 31,
2013
December 31,
2012
Restated*
Assets
Current Assets:
Cash $ 18,582 $ 10,549
Cash and short-term investments held in trust 2,935 2,935
Accounts receivable 140,786 162,915
Inventories 12,855 16,073
Prepaid expenses 4,413 4,520
Other current assets 3,188 2,942
Total current assets $ 182,759 $ 199,934
Property, plant and equipment 63,066 64,473
Long-term investments 25,463 24,994
Goodwill 63,839 63,839
Intangible assets 58,757 61,464
Other assets 685 685
Total assets $ 394,569 $ 415,389
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities 59,746 73,434
Deferred revenue 412 2,705
Current portion of obligations under finance leases 4,893 4,789
Total current liabilities $ 65,051 $ 80,928
Obligations under finance leases 12,258 11,756
Senior credit facility 89,463 89,300
Secured debentures 154,542 152,860
Unsecured debentures 20,136 18,781
Deferred tax liability 5,600 8,513
Shareholders' equity 47,519 53,251
Total liabilities & shareholders' equity $ 394,569 $ 415,389

*The prior-year figures were restated for the adoption of IFRS 11 Joint Arrangements. Please refer to Tuckamore's Q1 2013 financial statements for more information.

TUCKAMORE CAPITAL MANAGEMENT INC.
Consolidated Interim Statements of Loss and Comprehensive Loss
(In thousands of Canadian dollars, except per share amounts)
(unaudited)
Three months
ended
Three months
ended
March 31,
2013
March 31,
2012
Restated*
Revenues $ 145,365 $ 157,103
Cost of revenues (117,128 ) (128,964 )
Gross profit 28,237 28,139
Selling, general and administrative (23,679 ) (23,635 )
Amortization of intangible assets (2,707 ) (2,663 )
Depreciation (3,896 ) (3,022 )
Income from long-term investments 1,565 1,729
Interest expense, net (8,176 ) (8,549 )
Loss on de-recognition of debt - (1,534 )
Loss before income taxes $ (8,656 ) $ (9,535 )
Income tax expense - current (158 ) -
Income tax recovery - deferred 2,912 2,386
Net loss from continuing operations $ (5,902 ) $ (7,149 )
Income from discontinued operations (net of income tax) - 30
Net loss and comprehensive loss $ (5,902 ) $ (7,119 )
Loss per share
Basic & Diluted:
Continuing operations $ (0.08 ) $ (0.10 )
Net loss $ (0.08 ) $ (0.10 )

*The prior-year figures were restated for the adoption of IFRS 11 Joint Arrangements. Please refer to Tuckamore's Q1 2013 financial statements for more information.

TUCKAMORE CAPITAL MANAGEMENT INC.
Consolidated Interim Statements of Cash Flows
(In thousands of Canadian dollars)
(unaudited)
Three months
ended
Three months
ended
March 31,
2013
March 31,
2012
Restated*
Cash provided by (used in):
Operating activities:
Net loss for the period $ (5,902 ) $ (7,119 )
Items not affecting cash:
Income from discontinued operations - (30 )
Amortization of intangible assets 2,707 2,663
Depreciation 3,896 3,022
Deferred income tax recovery (2,912 ) (2,386 )
Income from equity investments, net of cash received (468 ) (84 )
Non-cash interest expense 3,037 2,598
Amortization of deferred financing costs 163 156
Loss on extinguishment of debt - 1,534
Stock based compensation expense 170 528
Changes in non-cash working capital 9,224 (9,386 )
Total cash provided by (used in) operating activities $ 9,915 $ (8,504 )
Investing activities:
Proceeds on disposal of investment - 2,500
Purchase of property, plant and equipment (444 ) (1,460 )
Net proceeds on disposal of property, plant and equipment 191 48
Purchase of software - (14 )
Increase in other assets - (309 )
Total cash (used in) provided by investing activities $ (253 ) $ 765
Financing activities:
Repayment of long-term debt - (2,400 )
Decrease in cash held in trust - 1,682
Repayment of finance lease obligations (1,629 ) (1,269 )
Total cash used in financing activities $ (1,629 ) $ (1,987 )
Decrease in cash 8,033 (9,726 )
Cash, beginning of period - continuing operations 10,549 26,656
Cash, end of period $ 18,582 $ 16,930
Cash, end of period - continuing operations $ 18,582 $ 16,930
Supplemental cash flow information:
Interest paid 1,330 11,724
Supplemental disclosure of non-cash financing and investing activities:
Acquisition of property, plant and equipment through finance leases 2,235 2,299

*The prior-year figures were restated for the adoption of IFRS 11 Joint Arrangements. Please refer to Tuckamore's Q1 2013 financial statements for more information.

FOR FURTHER INFORMATION PLEASE CONTACT:

Contact Information:
Tuckamore Capital Management Inc.
Keith Halbert
Chief Financial Officer
416-775-3796
keith@tuckamore.ca
www.tuckamore.ca

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