FORT ST. JOHN, BC–(Marketwired – November 28, 2016) – Macro Enterprises Inc. (TSX VENTURE: MCR)
| Summary of financial results | ||||
| (thousands of dollars except per share amounts) | ||||
| Three months ended September 30 |
Nine months ended September 30 |
|||
| 2016 | 2015 | 2016 | 2015 | |
| (unaudited) | ||||
| Revenue | $19,817 | $25,846 | $33,028 | $101,926 |
| EBITDA1 | 509 | 5,756 | (4,404) | 17,196 |
| Net earnings | ($1,024) | 2,791 | (7,588) | 8,034 |
| Net earnings per share | ($0.03) | $0.09 | ($0.25) | $0.26 |
| Weighted average common shares outstanding (thousands) | 30,120 | 30,063 | ||
Note 1-References to EBITDA are to net income from continuing operations before interest, taxes, amortization and impairment charge. EBITDA is not an earnings measure recognized by International Financial Reporting Standards (“IFRS”) and does not have a standardized meaning prescribed by IFRS. Management believes that EBITDA is an appropriate measure in evaluating the Company’s performance. Readers are cautioned that EBITDA should not be construed as an alternative to net income (as determined under IFRS) as an indicator of financial performance or to cash flow from operating activities (as determined under IFRS) as a measure of liquidity and cash flow. The Company’s method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, the Company’s EBITDA may not be comparable to similar measures used by other issuers.
Highlights
- The Company continues to materially exceed industry standard safety averages. As at September 30, 2016 Macro Enterprises has now exceeded 13 quarters and 2.8 million man hours worked without a single lost time injury.
- Revenue in the quarter was 150% greater than total revenue recognized in the first 6 months of fiscal 2016. Fourth quarter revenue is projected to be higher than third quarters revenue.
- The Company is reporting a $0.5 million EIBITDA despite incurring a $1.5 million extraordinary impairment charge.
- The Company is reporting shareholders’ equity of $83.2 million or $2.76 per share based on common shares issued and outstanding as at September 30, 2016.
- The Company reached a settlement agreement with a client converting $14.2 million in aged accounts receivable to cash. Total working capital as at September 30, 2016 was $41.9 million of which $36.4 million was held in cash.
- Subsequent to period end the Company negotiated an amendment to its credit facility allowing it to avoid unnecessary future covenant breaches due to diminished operations from the first half of fiscal 2016.
Third Quarter Results
Revenue in the quarter was 150% greater than total revenue recognized in the first 6 months of fiscal 2016. However, consolidated revenue decreased $6.0 million or 23% to $19.8 million compared to $25.8 million recognized in the third quarter last year. As a result of commodity price uncertainty clients are continuing to defer infrastructure spending and projects as well as most discretionary maintenance and integrity work that would otherwise be planned. Revenue during the quarter primarily related to non-discretionary maintenance and integrity work performed under master service agreements. Two weather related emergency service jobs were also executed during the period. In the third quarter last year, most of the revenue was derived from a large pipeline project and a new facilities job.
Operating expenses were $16.7 million or 84% of revenue compared to $15.4 million or 60% of revenue in the third quarter last year. The Company’s operating margins remained higher than historical averages due to the mix of variable and necessary fixed costs incurred compounded by a decline in revenues realized during the quarter. All aspects of the Company’s operations are being actively examined and streamlined to realize efficiencies and costs savings while ensuring the highest degree of health, safety and environmental standards are maintained. These efficiencies and savings are showing up in the results of operations despite the temporarily deficient margins being experienced.
General and administrative expenses were $1.3 million, representing a 50% reduction from the $2.6 million incurred prior year. The significant decline is a result of diminished operations concurrent with the Company actively reducing its overhead costs. These reductions have been achieved through headcount and scheduling optimizations, scrutiny of administrative expenditures and a focused effort to cut unnecessary costs. The Company will continue to contain its overhead expenditures while ensuring its business development plans are achieved despite these challenging market conditions.
Depreciation of property, plant and equipment was $1.7 million and down slightly from prior year’s third quarter. Depreciation is calculated at various declining balance methods across the Company’s multiple categories of property, plant and equipment and is used in guiding the annual capital expenditure estimates. Residual values, methods of amortization and useful lives of the assets are reviewed annually and adjusted if appropriate.
During the third quarter the Company recognized a non-cash gain of $359,000 on the mark-to-market re-measurement of its preferred shares at period end.
During the period ended September 30, 2016, the Company recognized an impairment charge on receivables of $1.5 million. The charge resulted from a cash settlement of an aged accounts receivable.
During the third quarter the Company recognized non-cash stock-based compensation charges of $124,000 relating to options granted in prior years. The Company anticipates recognizing an additional $0.2 million in stock-based compensation pertaining to past grants over the next 4 quarters.
Finance costs were up $68,000 from prior year’s third quarter costs of $125,000 to $193,000. Included in the finance costs were the 6.5% dividend payments to the preferred shareholders now recorded as an effective interest rate payment for the quarter, the $72,000 in amortized deferred financing costs, stand-by fees for the senior secured credit facility and interest expense payments for the remaining capital leases outstanding as a September 30, 2016.
Income tax recovery in the quarter of $0.3 million was in line with current enacted tax rates of approximately 25%.
Net loss was $1.0 million (($0.03) per share) compared to a net income of $2.8 million ($0.09 per share) recognized during the three months ended September 30, 2015. The decrease in net income was a result of a $1.5 million impairment charge and depressed quarterly results compounded by an industry wide protracted downturn.
Outlook
Activity levels in the oil and gas industry have been materially impacted across Western Canada as a result of the volatility in commodity prices. Although the pricing uncertainty is affecting activity and many projects have been delayed, large oil and gas companies are continuing to request bids on significant projects, both LNG-related and not. With a solid balance sheet, enhanced liquidity and its industry leading health, safety and environmental practices, the Company is in excellent financial shape to address these uncertain times.
The Company will maintain its focus on working with blue chip pipeline owners and operators to carry out their construction and maintenance programs across Canada.
Macro has also been assisting clients with budget and constructability estimates on fee based recovery arrangements.
If investment decisions continue to be deferred and as a result of market conditions, the Company is anticipating a protracted slower period of business activity over the next 12 to 18 months. The Company expects fourth quarter revenues to be greater than third quarter revenues. However, as a result of its operating deficiencies and unexpected impairment charges the Company will be challenged to achieve overall positive cash flows for its full fiscal 2016 year end results. Recurring revenues from its existing master service agreements will continue to represent the bulk of activity for the remainder of the calendar year.
Forward Looking Statements
Certain statements in this news release may include forward-looking information that involves various risks and uncertainties. These may include, without limitation, statements regarding expected revenues, expenses and industry trends and the pursuit of strategic acquisitions. These risks and uncertainties include, but are not restricted to, global economic conditions, government regulation of energy and resource companies, seasonal weather patterns, maintaining and increasing market share, terrorist activity, the price and availability of alternative fuels, the availability of pipeline capacity, and potential instability or armed conflict in oil producing regions. These risks and uncertainties may cause actual results to differ from information contained herein. There can be no assurance that such forward-looking statements will prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. These statements are based on the estimates and opinions of management on the dates they are made and are expressly qualified in their entirety by this notice. Except as required by law, the Company assumes no obligation to update forward-looking statements should circumstances or management’s estimates or opinions change.
For further information please contact:
Frank Miles
President and C.E.O.
Phone: (250) 785-0033
Jeff Redmond
C.F.O.
(250) 785-0033