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Press release from Marketwire

Tuckamore Announces Second Quarter 2013 Financial Results

Tuesday, August 13, 2013

Tuckamore Announces Second Quarter 2013 Financial Results

08:00 EDT Tuesday, August 13, 2013

TORONTO, ONTARIO--(Marketwired - Aug. 13, 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 the three and six months ended June 30, 2013.

Second Quarter Results
($ millions, except per share amounts) Q2
2013
Q2
2012
6
months
2013
6
months
2012
Revenue 179.5 176.8 324.9 333.9
Gross profit 36.6 29.0 64.9 57.1
Selling, general & administrative expenses (24.2) (22.8) (47.9) (46.4)
Net loss from continuing operations (2.1) (5.6) (8.0) (12.7)
Adjusted EBITDA from continuing operations 13.5 7.7 19.8 14.1
Basic loss per share from continuing operations (0.03) (0.08) (0.11) (0.18)

Revenue for the three and six month period ended June 30, 2013 was $179.5 million and $324.9 million, compared to $176.8 million and $333.9 million produced during the same periods in 2012. Gross profit for three and six months ended June 30, 2013 was $36.6 million and $64.9 million representing a gross profit margin of 20.4% and 20.0%. For the same periods in the prior year, the Company reported gross profit of $29.0 million and $57.1 million representing a gross profit margin of 16.4% and 17.1% percent. Adjusted EBITDA was $13.5 million and $19.8 million for the three and six months ended June 30, 2013, compared to $7.7 million and $14.1 million for the corresponding periods in 2012.

INDUSTRIAL SERVICES

ClearStream's improved results for the period ended June 30, 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. In addition to this, ClearStream has experienced improvements in gross margins across most of its divisions. The business is beginning to realize the organizational benefits and synergies of operating under the one company strategy which has been implemented over the past two years.

Quantum Murray's results have improved over the same quarter in the prior year, however the results are still disappointing. The Demolition division has been successful in bidding on and effectively executing several smaller and medium sized projects. Activity in the Pacific Remediation division of Quantum Murray has been stronger, however volumes in the Hazmat division have been lower than usual.

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, as well as program delays with other clients.

OTHER

Gusgo's results in the second quarter of 2013 were lower than the same period a year ago due to lower volumes from a significant client who experienced production issues. Another large client had fewer drop shipments than in the prior year, resulting in increased delivery and storage costs for Gusgo.

Titan's results in the second quarter of 2013 were lower than the same quarter in the prior year due to the fact that Titan's sales mix thus far in 2013 included a greater proportion of lower margin wear products. Abnormally wet weather conditions, also have negatively affected the construction market that Titan serves.

THIRD QUARTER OUTLOOK

At ClearStream, there continues to be a strong business outlook in some divisions as we expect high levels of activity in both the Wear and Oil Sands divisions to continue. The Fabrication division is now more active and 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 half of 2013. Conventional oil and gas maintenance services are expected to have better results in the second half of 2013, partly due to a significant client win. ClearStream now has its largest contingent of business development personnel with proven expertise currently on staff. Two new members recently joined the business development team and management believes that these individuals will be instrumental in successfully pursuing new opportunities.

Quantum Murray's third quarter outlook appears to be more favourable reflecting the high season of the business and improved results from a positive change in organizational structure and processes. Management expects continued strength in the Remediation divisions which will continue to work through several larger projects over the remaining summer months. In spite of a few ongoing challenges with legacy projects in the Demolition division, the Demolition group has a robust pipeline of projects which should contribute positively through the remainder of 2013. The Demolition division's recovery and future success continues to depend on management's ability to successfully bid and win new projects of all sizes, but particularly medium to large projects.

In the Marketing segment, the outlook continues to be mixed. At Gemma, unplanned hour reductions from a key client will impact third quarter revenues. Recent new client wins are encouraging but need to continue. The loss of a large customer from IC Group will continue to negatively impact IC Group's results for 2013, however management hopes that the shortfall will be made up by a new client that has been secured. Management has also increased its sales efforts at IC Group in an effort to diversify the client base and grow the business.

In the Other segment, results are expected to be similar to the first two quarters of 2013. The Canadian Association of Oilwell Drilling Contractors is calling for similar drilling activity in the third and fourth quarter of 2013, which may result in lower sales of higher margin rigging products compared to the prior year for Titan. Titan will continue to focus on improving its relationship with existing customers and cost cutting measures. Gusgo's results in the third and fourth quarter will depend on its clients' ability to manage production issues and return to more drop shipments, resulting in lower costs.

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

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-IFRS 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-IFRS measures may differ from the methods used by other issuers. Therefore, Tuckamore's Non-IFRS 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 income to EBITDA in its press release.

Adjusted EBITDA refers to EBITDA excluding the gain or loss on reduction or sale of ownership interest (dilution gains or losses), the write-down of goodwill and intangible assets, restructuring costs, gain on re-measurement of investments, gain on debt extinguishment, fair value adjustments on stock based compensation expense and the impairment 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 (formally Newport Partners Income Fund) 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,
2013
December 31,
2012
Restated*
Assets
Current Assets:
Cash $ 19,666 $ 10,549
Cash and short-term investments held in trust 2,955 2,935
Accounts receivable 154,637 162,915
Inventories 15,572 16,073
Prepaid expenses 3,365 4,520
Other current assets 3,464 2,942
Total current assets $ 199,659 $ 199,934
Property, plant and equipment 63,207 64,473
Long-term investments 24,996 24,994
Goodwill 63,839 63,839
Intangible assets 56,297 61,464
Other assets 675 685
Total assets $ 408,673 $ 415,389
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities 69,405 73,434
Deferred revenue 2,078 2,705
Current portion of obligations under finance leases 5,468 4,789
Unsecured debentures 21,589 -
Total current liabilities $ 98,540 $ 80,928
Obligations under finance leases 12,921 11,756
Senior credit facility 89,509 89,300
Secured debentures 156,243 152,860
Unsecured debentures - 18,781
Deferred tax liability 5,991 8,513
Shareholders' equity 45,469 53,251
Total liabilities & shareholders' equity $ 408,673 $ 415,389
* The prior-year figures were restated for the adoption of IFRS 11 Joint Arrangements. Please refer to Tuckamore's Q2 2013 financial statements for more information.
TUCKAMORE CAPITAL MANAGEMENT INC.
Consolidated Interim Statements of (Loss) Income and Comprehensive (Loss) Income
(In thousands of Canadian dollars, except per unit amounts)
(unaudited)
Three months ended June 30, Six months ended June 30,
2013 2012 2013 2012
Restated* Restated*
Revenues $ 179,508 $ 176,829 $ 324,873 $ 333,932
Cost of revenues (142,877) (147,856) (260,005) (276,820)
Gross profit 36,631 28,973 64,868 57,112
Selling, general and administrative (24,222) (22,756) (47,901) (46,391)
Amortization of intangible assets (2,697) (2,295) (5,404) (4,958)
Depreciation (3,902) (3,674) (7,798) (6,696)
Income from long-term investments 880 1,055 2,445 2,784
Interest expense, net (8,400) (7,577) (16,576) (16,126)
Loss on de-recognition of debt - - - (1,534)
Loss before income taxes $ (1,710) $ (6,274) $ (10,366) $ (15,809)
Income tax recovery (expense) - current 50 (11) (108) (11)
Income tax (expense) recovery - deferred (390) 733 2,522 3,119
Net loss from continuing operations $ (2,050) $ (5,552) $ (7,952) $ (12,701)
Income from discontinued operations (net of income tax) - 1,938 - 1,968
Net loss and comprehensive loss $ (2,050) $ (3,614) $ (7,952) $ (10,733)
Loss per share
Basic & Diluted:
Continuing operations $ (0.03) $ (0.08) $ (0.11) $ (0.18)
Net loss $ (0.03) $ (0.05) $ (0.11) $ (0.15)
* The prior-year figures were restated for the adoption of IFRS 11 Joint Arrangements. Please refer to Tuckamore's Q2 2013 financial statements for more information.
TUCKAMORE CAPITAL MANAGEMENT INC.
Consolidated Interim Statements of Cash Flows
(In thousands of Canadian dollars)
(unaudited)
Six months
ended
June 30,
2013
Six months
ended
June 30,
2012
Restated*
Cash provided by (used in):
Operating activities:
Net loss for the period $ (7,952) $ (10,733)
Items not affecting cash:
Income from discontinued operations - (1,968)
Amortization of intangible assets 5,404 4,958
Depreciation 7,798 6,696
Deferred income tax recovery (2,522) (3,119)
Income from equity investments, net of cash received (220) (1,089)
Non-cash interest expense 6,191 5,361
Amortization of deferred financing costs 326 313
Loss on derecognition of debt - 1,534
Stock based compensation expense 170 743
Changes in non-cash working capital 4,951 (14,399)
Cash provided by discontinued operations - 106
Total cash provided by (used in) operating activities $ 14,146 $ (11,597)
Investing activities:
Proceeds on disposal of investment - 7,557
Purchase of property, plant and equipment (2,082) (2,885)
Net proceeds on disposal of property, plant and equipment 497 141
Purchase of software (240) (21)
Decrease (increase) in other assets 10 (232)
Cash used by discontinued operations - (7)
Total cash (used in) provided by investing activities $ (1,815) $ 4,553
Financing activities:
Repayment of long-term debt (118) (16,200)
(Increase) decrease in cash held in trust (20) 2,352
Repayment of finance lease obligations (3,076) (2,787)
Cash used in discontinued operations - (385)
Total cash used in financing activities $ (3,214) $ (17,020)
Increase (decrease) in cash 9,117 (24,064)
Cash, beginning of period - continuing operations 10,549 26,371
Cash, beginning of period - discontinued operations - 285
Cash, end of period $ 19,666 $ 2,592
Cash, end of period - continuing operations $ 19,666 $ 2,592
Supplemental cash flow information:
Interest paid 2,673 12,814
Supplemental disclosure of non-cash financing and investing activities:
Acquisition of property, plant and equipment through finance leases 4,928 4,935
* The prior-year figures were restated for the adoption of IFRS 11 Joint Arrangements. Please refer to Tuckamore's Q2 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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