NAPEC Inc. Reports Results for the Third Quarter of 2017

DRUMMONDVILLE, QUEBEC–(Marketwired – Nov. 8, 2017) – NAPEC Inc. (“NAPEC” or “the Corporation”) (TSX:NPC) reported its results today for the third quarter ended September 30, 2017. All amounts are in Canadian dollars unless otherwise indicated.

Financial highlights		Three months ended Sept. 30			Nine months ended Sept. 30
(in thousands of dollars, except the number of
shares and per-share data)		2017	2016		2017	2016
Revenues		106,741	85,483		328,250	255,895
Adjusted EBITDA1		10,990	6,333		28,891	17,733
Net earnings (loss)		2,574	(9	)	3,702	(1,282	)
	Per share – basic and diluted ($)	0.02	0.00		0.04	(0.02	)
Weighted average number of outstanding shares (basic, in thousands)		103,923	79,866		103,923	79,866

1	Earnings before interest, taxes, depreciation and amortization. Not an IFRS measure. See “Non-IFRS Measures” below for a reconciliation.

“NAPEC recorded a solid increase in its revenues and profitability in the third quarter, while its teams made a significant contribution to the effort to rebuild electrical transmission and distribution systems in the aftermath of the damage caused by Hurricane Irma in the U.S. Southeast. This emergency work, together with the ongoing increase of the scope of its high value-added services, gave NAPEC the highest quarterly adjusted EBITDA in its history,” said Pierre L. Gauthier, President and Chief Executive Officer of NAPEC.

THIRD QUARTER RESULTS

Revenues for the third quarter of 2017 were 6.7 million, up 24.9% from .5 million a year earlier. The increase reflects the addition of the activities of PCT Contracting LLC (“PCT”) in the construction, maintenance and repair of natural gas networks, which represented revenues of .7 million in the third quarter of 2017. However, the currency conversion effect resulting from fluctuations in the value of the Canadian dollar decreased the value of U.S.-dollar-denominated revenues by approximately .9 million in the third quarter of 2017, compared to the same period in 2016.

Excluding these elements, NAPEC recorded a revenue growth of .5 million or 14.6%. It should be noted that the Corporation recorded natural-disaster-related revenues totalling .7 million in the third quarter of 2017, compared to .3 million in the third quarter of 2016. However, the emergency work performed required some workers to be temporarily reassigned, which delayed the performance of regular contracts. The Corporation estimates that the recognition of revenues totalling approximately .0 million was therefore postponed from the third quarter of 2017 to subsequent periods.

Adjusted EBITDA for the third quarter of 2017 amounted to .0 million or 10.3% of revenues, compared to .3 million or 7.4% of revenues in the third quarter of 2016. The increase in monetary terms was mainly due to higher business activity, while the increase as a percentage of revenues reflects a better revenue mix, with a larger proportion coming from high value-added services, including work performed in the aftermath of natural disasters.

NAPEC concluded the third quarter of 2017 with net earnings of .6 million or {$content}.02 per share, basic and diluted, compared to a net loss of ,000 or {$content}.00 per share, basic and diluted, a year earlier.

As at September 30, 2017, NAPEC had an order backlog of 9 million, compared to 6 million as at September 30, 2016. This value excludes the contract mentioned in the “New Contract Award in the United States” section below.

NINE-MONTH RESULTS

Revenues for the nine-month period ended September 30, 2017 were 8.3 million, up 28.3% from 5.9 million for the same period in 2016. The addition of PCT’s activities represented revenues of .1 million, while the currency conversion effect decreased the value of U.S.-dollar-denominated revenues for the first nine months of 2017 by about .3 million compared to the same period in 2016. Excluding these elements, revenues increased by .6 million or 13.5%.

Adjusted EBITDA amounted to .9 million or 8.8% of revenues, compared to .7 million or 6.9% of revenues a year earlier. Net earnings for the first nine months of 2017 were .7 million or {$content}.04 per share, basic and diluted, compared to a net loss of .3 million or {$content}.02 per share, basic and diluted, in the first nine months of 2016.

FINANCIAL POSITION

As at September 30, 2017, long-term debt including the current portion was .0 million, compared to .3 million three months earlier and .0 million at the beginning of the current year. The long-term debt to equity ratio was 0.74 as at September 30, 2017, holding stable compared to the previous quarter. As at September 30, 2017, the Corporation had a cash balance of .6 million and an amount of .2 million was used from its credit facilities, including a temporary credit facility of US.0 million (Cdn .7 million) awarded for working capital requirements stemming from work related to natural disasters.

NEW CONTRACT AWARD IN THE UNITED STATES

NAPEC also announced that its U.S. subsidiary Riggs Distler & Company, Inc. was awarded an important contract valued at approximately million. This contract, awarded by a large-scale utility service provider, calls for the rebuilding of a 41-mile (approximately 66 kilometres) section of a 230kV and 138kV electricity transmission line in New Jersey.

Work is expected to begin in the fourth quarter of 2017 and should spread out until the second quarter of 2019. The value of this contract was not included in the Corporation’s order backlog as at September 30, 2017.

OUTLOOK

“The solid results recorded to this date in 2017 should, at the end of the year, translate into organic revenue growth and an operating margin that reflects the steady growth of our high value-added activities. Over the longer term, NAPEC aims to further increase the scope of its service offering and foster cross-selling across its network. The level of bidding activity remains high in the majority of our market niches, especially in the United States, and the solid reputation of our subsidiaries should help us achieve our goals. As well, our good financial position will allow us to remain on the lookout for acquisitions with the potential to enhance our expertise and higher value-added services,” concluded Mr. Gauthier.

CONFERENCE CALL

NAPEC will hold a conference call to discuss its results on Wednesday, November 8, 2017 beginning at 10:00 a.m. Eastern Time. Interested parties can join the call by dialling 647-788-4922 (from Toronto and overseas) or 1-877-223-4471 (from elsewhere in North America). If you are unable to participate, you can listen to a recording by dialling 1-800-585-8367 and entering the code 83524059 on your telephone keypad. The recording will be available from 1:00 p.m. on Wednesday, November 8, 2017 until 11:59 p.m. on Wednesday, November 15, 2017.

Those wishing to join the webcast and presentation can do so by clicking on the following link: http://www.napec.ca/en-CA/investor-relations/calendar-financial-activities/upcoming-activities

NON-IFRS MEASURES

EBITDA and adjusted EBITDA are measures that have no standardized meaning under IFRS and are therefore considered non-IFRS measures. As a result, such measures may not be comparable to similar measures presented by other companies. These measures are presented and described in this press release in order to provide additional information regarding the Corporation’s liquidity and its ability to generate funds to finance its operations.
The following table is a reconciliation of the EBITDA and adjusted EBITDA used by the Corporation to the reported net earnings (loss).

Reconciliation of EBITDA and adjusted EBITDA to net earnings (loss)		Three months ended Sept. 30				Nine months ended Sept. 30
(in thousands of dollars)		2017		2016		2017		2016
Net earnings (loss) for the period		2,574		(9	)	3,702		(1,282	)
Plus:
	Finance charges	1,515		1,256		4,908		3,716
	Income tax expense (recovery)	1,564		(404	)	2,443		(1,827	)
	Depreciation and amortization	5,995		5,405		18,496		17,041
EBITDA		11,648		6,248		29,549		17,648
Gain related to disposal of property		(658	)	–		(658	)	–
Costs related to business acquisition		–		85		–		85
Adjusted EBITDA		10,990		6,333		28,891		17,733

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements that reflect management’s current expectations regarding future events. Forward-looking statements are based on a number of factors and include risks and uncertainties. Actual results may differ from forecast results. Management assumes no obligation beyond what is required under the law to update or revise forward-looking statements pursuant to new information or future events.

OVERVIEW OF THE CORPORATION

NAPEC is a company operating in the energy sector. The Corporation is a leading provider of construction and maintenance services to the public utility and heavy industrial markets, mainly in Quebec, Ontario and the eastern United States. NAPEC and its subsidiaries build and maintain electrical transmission and distribution systems, solar panel farms and natural gas networks. The Corporation also installs gas-powered and electric-powered heavy equipment for utilities, gas-fired industrial power plants and petrochemical facilities in North America. The Corporation also offers environmental construction and road matting services.

Additional information on NAPEC can be found in the SEDAR database (www.sedar.com) and on the Corporation’s website, at www.napec.ca.