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Press release from Marketwire

Tuckamore Announces Third Quarter 2013 Financial Results

Wednesday, November 13, 2013

Tuckamore Announces Third Quarter 2013 Financial Results

08:00 EST Wednesday, November 13, 2013

TORONTO, ONTARIO--(Marketwired - Nov. 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 nine months ended September 30, 2013.

Third Quarter Results

9 months 9 months
($ millions, except per share amounts) Q3 2013 Q3 2012 2013 2012
Revenue 188.2 174.2 513.1 508.2
Gross profit 42.6 34.4 107.5 91.5
Selling, general & administrative expenses (26.3 ) (23.5 ) (74.2 ) (69.9 )
Net loss from continuing operations (2.6 ) (4.3 ) (10.5 ) (15.1 )
Adjusted EBITDA from continuing operations 17.6 12.6 37.4 26.7
Basic loss per share from continuing operations (0.04 ) (0.06 ) (0.15 ) (0.24 )

Revenue for the three and nine month period ended September 30, 2013 was $188.2 million and $513.1 million, compared to $174.2 million and $508.2 million produced during the same periods in 2012. Gross profit for three and nine months ended September 30, 2013 was $42.6 million and $107.5 million representing a gross profit margin of 22.6% and 21.0%. For the same periods in the prior year, the Company reported gross profit of $34.4 million and $91.5 million representing a gross profit margin of 19.7% and 18.0% percent. Adjusted EBITDA was $17.6 million and $37.4 million for the three and nine months ended September 30, 2013, compared to $12.6 million and $26.7 million for the corresponding periods in 2012.

INDUSTRIAL SERVICES

ClearStream has experienced results in the third quarter of 2013,which are in line with expectations and improved over the same period in the prior year. On a divisional basis increased demand for Wear and Oil Sands services were driving the improved results. In addition to this, ClearStream has also experienced improvements in gross margins across all of its divisions. ClearStream has started to realize the benefits and synergies of operating under the one company strategy. The one company strategy was implemented approximately two years ago and aimed at centralizing certain business functions and marketing all of ClearStream's subsidiaries under a single brand.

Quantum Murray's results have improved over the same quarter in the prior year and largely reflect increased activity in the Environmental division, with higher business volumes from the remediation and emergency response groups. The Demolition division has continued to perform well on the small to medium sized contracts that have been sourced to date. Management is also working diligently to minimize and recover costs on longer term projects which are approaching completion. Quantum Murray is active in the marketplace and is continuing to bid on several larger projects.

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 unbudgeted reductions in hours from a key client. As a result of continuing lower revenue levels, goodwill and brand values associated with the Gemma investment were written off. In addition to this, the IC Group experienced a temporary decline in business volumes from a few clients.

OTHER

Gusgo's results in the third quarter of 2013 were lower than the same period a year ago, due to lower volumes from a key client who experienced production issues and additional delivery costs related to another client.

Titan's results in the third quarter of 2013 were slightly higher than the same quarter in the prior year due to a gain in market share for their rigging products and services. Abnormally wet weather conditions continued to affect the construction market that Titan serves.

FOURTH QUARTER OUTLOOK

ClearStream is anticipating a better outlook for its higher margin wear and fabrications divisions, both of which have healthy work backlogs. It is expected that conventional oil and gas maintenance services will perform a little better with new client revenues being somewhat offset by lower than forecast volumes at other client sites. Oilsands maintenance services will be mixed with core maintenance programs continuing but with a lower number of special projects. The transportation division has had a transitional year with the development of a much expanded pipe logistics yard and it is looking to capitalize on new business opportunities with its expanded capacity. The outlook on the near term growth prospects of the Canadian oil industry remains mixed with several macroeconomic factors such as commodity pricing and pipeline access impacting current views.

Quantum Murray's outlook is less favourable as it reflects the start of the slower season for the business. There is a seasonal aspect to Quantum Murray's business as winter weather becomes a factor in scheduling demolition and remediation work. While both the demolition and remediation backlogs are improving, the larger projects in both divisions do not commence until 2014. Focus continues on business development and margin improvement, and management continues to implement strategic and tactical changes to reduce general and administrative expenses.

In the Marketing segment, the outlook continues to be mixed. At Gemma, unplanned hour reductions from a key client and the timing of a client's expansion will impact the final quarter revenues. The loss of a large customer from IC Group will continue to negatively impact IC Group's results, however much of the shortfall will be made up by a new client that has been secured. Management has also increased its sales efforts at the insurance division of IC Group.

In the Other segment, results are expected to be improved at Titan as the fourth quarter is typically busy with weather related sales including ground engaging tools. In addition, Titan is leveraging its relationship with ClearStream to ensure it is well placed to assist that business. Gusgo's results in fourth quarter will depend on its clients' ability to manage production issues and return to more drop shipments, which will result 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 "Fourth 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 loss on de-recognition of debt, fair value adjustments on stock based compensation expense, the write-down of goodwill and intangible assets, restructuring costs 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 (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)
September 30, 2013 December 31, 2012
Restated*
Assets
Current Assets:
Cash $ 11,993 $ 10,549
Cash and short-term investments held in trust 2,960 2,935
Accounts receivable 168,390 162,915
Inventories 16,775 16,073
Prepaid expenses 5,415 4,520
Other current assets 3,377 2,942
Total current assets $ 208,910 $ 199,934
Property, plant and equipment 61,834 64,473
Long-term investments 25,745 24,994
Goodwill 61,127 63,839
Intangible assets 51,735 61,464
Other assets 630 685
Total assets $ 409,981 $ 415,389
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities 67,925 73,434
Deferred revenue 4,352 2,705
Current portion of obligations under finance leases 5,423 4,789
Unsecured debentures 23,148 -
Total current liabilities $ 100,848 $ 80,928
Obligations under finance leases 12,785 11,756
Senior credit facility 89,671 89,300
Secured debentures 157,962 152,860
Unsecured debentures - 18,781
Deferred tax liability 5,818 8,513
Shareholders' equity 42,897 53,251
Total liabilities & shareholders' equity $ 409,981 $ 415,389
* The prior-year figures were restated for the adoption of IFRS 11 Joint Arrangements. Please refer to Tuckamore's Q3 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 Nine months ended
September 30, September 30,
2013 2012 2013 2012
Restated* Restated*
Revenues $ 188,230 $ 174,218 $ 513,103 $ 508,150
Cost of revenues (145,604 ) (139,834 ) (405,609 ) (416,653 )
Gross profit 42,626 34,384 107,494 91,497
Selling, general and administrative (26,294 ) (23,504 ) (74,195 ) (69,895 )
Amortization of intangible assets (1,646 ) (2,910 ) (7,050 ) (7,868 )
Depreciation (4,145 ) (4,086 ) (11,943 ) (10,782 )
Income from long-term investments 1,129 1,725 3,574 4,509
Interest expense, net (8,709 ) (7,772 ) (25,285 ) (23,894 )
Loss on de-recognition of debt - - - (1,534 )
Write-down of goodwill and intangible assets (5,713 ) - (5,713 ) -
Restructuring costs - (926 ) - (926 )
Loss before income taxes $ (2,752 ) $ (3,089 ) $ (13,118 ) $ (18,893 )
Income tax recovery (expense) - current 7 (632 ) (101 ) (645 )
Income tax recovery (expense) - deferred 173 (610 ) 2,695 2,515
Net loss from continuing operations $ (2,572 ) $ (4,331 ) $ (10,524 ) $ (17,023 )
Income from discontinued operations
(net of income tax) - - - 1,962
Net loss and comprehensive loss $ (2,572 ) $ (4,331 ) $ (10,524 ) $ (15,061 )
Loss per share
Basic & Diluted:
Continuing operations $ (0.04 ) $ (0.06 ) $ (0.15 ) $ (0.24 )
Net loss $ (0.04 ) $ (0.06 ) $ (0.15 ) $ (0.21 )
* The prior-year figures were restated for the adoption of IFRS 11 Joint Arrangements. Please refer to Tuckamore's Q3 2013 financial statements for more information.
TUCKAMORE CAPITAL MANAGEMENT INC.
Consolidated Interim Statements of Cash Flows
(In thousands of Canadian dollars)
(unaudited)
Nine months ended Nine months ended
September 30, 2013 September 30, 2012
Restated*
Cash provided by (used in):
Operating activities:
Net loss for the period $ (10,524 ) $ (15,061 )
Items not affecting cash:
Income from discontinued operations - (1,962 )
Amortization of intangible assets 7,050 7,868
Depreciation 11,943 10,782
Deferred income tax recovery (2,695 ) (2,515 )
Income from equity investments, net of cash received (751 ) (32 )
Non-cash interest expense 9,469 8,304
Amortization of deferred financing costs 489 -
Loss on derecognition of debt - 1,534
Stock based compensation expense 170 959
Write-down of goodwill and intangible assets 5,713 -
Changes in non-cash working capital (11,307 ) (21,497 )
Cash provided by discontinued operations - 106
Total cash provided by (used in) operating activities $ 9,557 $ (11,514 )
Investing activities:
Proceeds on disposal of investment - 7,866
Purchase of property, plant and equipment (3,613 ) (2,906 )
Net proceeds on disposal of property, plant and equipment 729 321
Purchase of software (283 ) (29 )
Decrease in other assets (55 ) (1,347 )
Cash used by discontinued operations - (7 )
Total cash (used in) provided by investing activities $ (3,222 ) $ 3,898
Financing activities:
Repayment of long-term debt (118 ) (6,200 )
(Increase) decrease in cash held in trust (25 ) 3,907
Repayment of finance lease obligations (4,748 ) (4,193 )
Cash used in discontinued operations - (385 )
Total cash used in financing activities $ (4,891 ) $ (6,871 )
Increase (decrease) in cash 1,444 (14,487 )
Cash, beginning of period - continuing operations 10,549 26,371
Cash, beginning of period - discontinued operations - 285
Cash, end of period $ 11,993 $ 12,169
Cash, end of period - continuing operations $ 11,993 $ 12,169
Supplemental cash flow information:
Interest paid 10,924 20,984
Supplemental disclosure of non-cash financing and investing activities:
Acquisition of property, plant and equipment through finance leases 6,420 11,206
* The prior-year figures were restated for the adoption of IFRS 11 Joint Arrangements. Please refer to Tuckamore's Q3 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

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