ENTREC Announces 2013 Fourth Quarter and Year-End Financial Results
- 2013 revenue increased by 61% to $212.9 million
- Adjusted EBITDA $53.6 million and adjusted net income $0.17
per share
- 2014 revenue expected to range between $250 million and $270
million
SPRUCE GROVE, ALBERTA--(Marketwired - Mar 10, 2014) - ENTREC
Corporation ("ENTREC" or the "Company") (TSX-VENTURE:ENT), a
leading provider of heavy lift and heavy haul services, today
announced financial results for the fourth quarter and year ended
December 31, 2013.
|
Three Months Ended |
|
Year Ended |
|
$ thousands, except per share amounts and margin
percent |
Dec.
31 2013 |
|
Dec.
31 2012 |
|
Dec.
31 2013 |
|
Dec.
31 2012 |
|
|
|
|
|
|
|
|
|
|
Revenue |
52,821 |
|
44,026 |
|
212,911 |
|
132,491 |
|
|
|
|
|
|
|
|
|
|
Gross profit |
16,068 |
|
14,164 |
|
72,513 |
|
45,100 |
|
Gross margin |
30.4 |
% |
32.2 |
% |
34.1 |
% |
34.0 |
% |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
11,364 |
|
10,829 |
|
53,610 |
|
33,471 |
|
|
Margin(1) |
21.5 |
% |
24.6 |
% |
25.2 |
% |
25.3 |
% |
|
Per share(1) |
0.10 |
|
0.13 |
|
0.49 |
|
0.49 |
|
|
|
|
|
|
|
|
|
|
Adjusted net income(1) |
2,254 |
|
3,566 |
|
18,420 |
|
13,025 |
|
|
Per share(1) |
0.02 |
|
0.04 |
|
0.17 |
|
0.19 |
|
|
|
|
|
|
|
|
|
|
Net income |
342 |
|
3,428 |
|
15,813 |
|
12,112 |
|
|
Per share - basic |
0.00 |
|
0.04 |
|
0.15 |
|
0.18 |
|
|
Per share - diluted |
0.00 |
|
0.04 |
|
0.14 |
|
0.17 |
|
Note 1: See "Non-IFRS Financial Measures" section of the
Company's Management Discussion & Analysis for the year ended
December 31, 2013.
"In 2013, we continued to make strong progress in positioning
ourselves for the future," said John M. Stevens, ENTREC's President
and CEO. "Through the acquisition of GT's and a robust $59 million
capital expenditure program, we expanded our operations in key
geographical areas and added significant scale to our fleet. We
believe we are now well-positioned to capture a major share of the
overall work in our growing markets throughout western Canada and
in the Bakken region of North Dakota."
"This includes Alberta's oil sands, where construction activity
is expected to remain strong, and maintenance, repair and operation
(MRO) work is expected to grow over the next several years. In
addition, our operations are well-positioned to take advantage of
liquefied natural gas (LNG) development in northeast B.C., where
much of the natural gas is expected to be sourced, and in northwest
B.C. where the LNG facilities and the connecting pipelines are
expected to be constructed in future years. We consider these two
industries to be our critical growth drivers over the next
decade."
2013 Financial Results
Overall, the Company's financial results in 2013 were mixed.
ENTREC started the year strong, but was hampered in the second half
through lower utilization of its equipment fleet, which impacted
revenue. A combination of certain projects winding down and the
deferred start of other large projects until later in 2014 caused
the decline.
Revenue increased by 61% year-over-year to $212.9 million in
2013 from $132.5 million in 2012, reflecting the positive impact of
business acquisitions completed over the past year. On a pro forma
basis, revenue in the year ended December 31, 2013 was slightly
lower than the $219.9 million ENTREC and each of its acquired
businesses achieved on a combined basis in the year ended December
31, 2012.
Over the past year ENTREC has created the foundation for
substantial organic revenue growth from the expansion of its
equipment fleet, though its capital expenditure programs. The
anticipated growth was, however, offset for the short term by lower
equipment utilization, especially in the second half of 2013.
Compared to the previous year, revenue from the conventional oil
and natural gas industry was weaker in 2013. In addition, ENTREC
also experienced a temporary slowdown in demand for its services in
the Alberta oil sands market in the second half of 2013. This
temporary period of lower activity in regional crane and heavy haul
transportation projects extended into the first two months of
2014.
Adjusted EBITDA increased to $53.6 million during the year ended
December 31, 2013 from $33.5 million in 2012. As a percentage of
revenue, the 2013 adjusted EBITDA margin of 25.2% was consistent
with the adjusted EBITDA margin of 25.3% achieved in 2012. The
Company's continued expansion in crane services in 2013 contributed
to higher EBITDA margins in the year. The increases were, however,
completely offset by lower equipment utilization in crane services
and heavy haul transportation than in 2012.
Adjusted net income increased to $18.4 million in 2013 from
$13.0 million in 2012, reflecting the higher year-over-year
revenue. Adjusted earnings per share were $0.17 per share in the
year ended December 31, 2013, compared to $0.19 per share last
year.
For the year ended December 31, 2013, net income grew to $15.8
million or $0.15 per share from $12.1 million or $0.18 per share in
2012. Net income includes the after-tax effect of
acquisition-related intangible asset amortization, interest
accretion on convertible debentures and gains on the revaluation of
the embedded derivative component of convertible debentures; all of
which are components excluded from the calculation of adjusted net
income.
The higher adjusted net income and net income reported in 2013
were offset by an increase in the weighted average number of shares
outstanding. This resulted in adjusted net income and net income on
a per share basis being lower in 2013 than in 2012. Adjusted net
income and net income in 2013 also included $1.4 million in
non-recurring acquisition and integration costs, primarily related
to ENTREC's acquisition of GT's (year ended December 31, 2012 -
$1.3 million).
Outlook for 2014 and Beyond
"Our outlook for the future remains positive," said Mr. Stevens.
"Despite the lower demand we have seen in some markets in recent
months, quoting activity in our key markets continues to be strong
for work commencing later in 2014 and beyond. In the short term, we
expect continuing modest activity in the first half of 2014 as
equipment utilization remains lower. We are, however, experiencing
strong activity from our operations in northeast B.C. and northwest
Alberta in early 2014, which are supporting LNG-related natural gas
projects in those regions."
Oil sands demand for ENTREC's services is expected to gain
momentum as the year progresses. The Company is currently working
with oil sands customers on large crane and heavy haul
transportation projects that will commence as 2014 unfolds. Certain
of these projects will extend through 2017.
Consistent with its strategy, the Company is expanding the
amount of long-term maintenance, repair and operation (MRO)
contract work it performs in the Alberta oil sands region. ENTREC
was recently awarded a five-year MRO contract with a new oil sands
customer, which commenced in late 2013. The Company also continues
to cross-sell its crane and heavy haul transportation services to
existing and new oil sands customers.
"We believe in situ-related oil sands production will
grow at a brisk pace over the next several years as new projects
commence and existing facilities are expanded," added Mr. Stevens.
"We believe we are well-positioned to support our customers through
the construction and the MRO phases of these developments."
Northwest B.C. continues to be a busy area for ENTREC's
business. The Company is working on various mining, hydro-electric,
pipeline, and oil and natural gas projects in the region and is
providing crane and transportation services to support a
multi-billion-dollar revitalization of an aluminum smelter in
Kitimat, B.C. The Company will continue to expand its service
capabilities in this important region throughout 2014 in
preparation of the planned development of LNG facilities in future
years. These projects, along with ancillary infrastructure
developments, are expected to require extensive crane and heavy
haul transportation services.
With ENTREC's acquisition of GT's in 2013, it now has a leading
market position in northeast B.C. and northwest Alberta. The
Company believes this will be a busy area in 2014 as it supports
oil and natural gas projects in the region, including customer
investments in LNG-driven natural gas production and
infrastructure. ENTREC also recently expanded its operations into
Fort St. John, B.C. to better serve customers in the region.
Based on current expectations for future business activity, and
assuming no business acquisitions are completed, ENTREC reiterates
its previous guidance that revenue for the year ending December 31,
2014 could range between $250 and $270 million. This compares to
pro forma revenue of $237 million that ENTREC and each of its
acquired businesses achieved on a combined basis in the year ended
December 31, 2013. The Company expects revenue to trend upward
throughout 2014 as project work begins to ramp up and utilization
levels increase. Any business acquisitions completed in fiscal 2014
could increase the revenue achieved and/or trigger revised revenue
guidance.
The Company also continues to estimate that its overall adjusted
EBITDA margin for fiscal 2014 could approximate 25%. Consistent
with the anticipated trend in revenue, ENTREC believes its adjusted
EBITDA margin will also begin 2014 lower and then increase as the
year progresses and utilization improves.
2014 Capital Expenditure and Share Buy-back Programs
The Company has commenced its previously announced $46 million
capital expenditure program for 2014. The program is focused on
growing ENTREC's crane fleet to expand its service capabilities in
this market and consists of $34 million in growth capital
expenditures and $12 million in maintenance capital
expenditures.
In addition, with ENTREC's positive outlook for the future, it
believes one of the best investments it can make is in itself. In
November 2013 ENTREC implemented a normal course issuer bid (NCIB)
to purchase for cancellation, from time to time, its issued and
outstanding common shares. Pursuant to the NCIB, ENTREC may
purchase for cancellation up to a maximum of 8,561,671 common
shares, being approximately 10% of the public float, during the
NCIB's term. The NCIB commenced November 20, 2013 and will
terminate on November 19, 2014 or such earlier time as it is
completed or otherwise terminated at ENTREC's option. At current
market prices, ENTREC plans to initiate purchases under the NCIB
shortly.
ENTREC intends to fund its 2014 capital expenditure program and
NCIB purchases from its new asset-based debt facility (the "ABL
Facility"), finance leases and cash from operating activities. The
Company also expects to have the flexibility to increase its
capital expenditure program throughout 2014 should customer demand
warrant. ENTREC does not believe it will need to raise additional
equity to fund its 2014 capital expenditure program.
New ABL Facility
On March 6, 2014, ENTREC closed a new $240 million senior
secured ABL Facility with a syndicate of lenders led by Wells Fargo
Capital Finance Corporation Canada. The ABL Facility replaced the
Company's previous senior debt facilities and will be used to fund
future capital expenditures and business acquisitions and for
general corporate purposes.
The ABL Facility has a five year term and requires payments of
interest only. Amounts borrowed bear interest, at ENTREC's option,
at bank prime or bankers' acceptance rates, plus a credit spread
based on a sliding scale. ENTREC may prepay all or any part of the
ABL Facility at any time.
"This facility is covenant light with a borrowing base that
increases as our business grows making the ABL Facility a perfect
fit with our business," said Jason Vandenberg, ENTREC's Chief
Financial Officer. "The customized financing provided by Wells
Fargo demonstrates the strong value in our equipment fleet and will
provide us with significant financial flexibility to continue to
execute our growth strategies."
A complete set of ENTREC's most recent financial statements and
Management's Discussion and Analysis will be filed on SEDAR
(www.sedar.com) and posted on the Company's website
(www.entrec.com).
About ENTREC
ENTREC is a leading provider of heavy lift and heavy haul
services with offerings encompassing crane services, heavy haul
transportation, engineering, logistics and support. ENTREC provides
these services to the oil and natural gas, construction,
petrochemical, mining and power generation industries. ENTREC's
common shares trade on the TSX Venture Exchange under the trading
symbol "ENT".
Fourth Quarter and Year-end Conference Call
ENTREC will host a conference call and webcast to discuss
its 2013 fourth quarter and year-end financial results tomorrow,
March 11, 2014 at 9:00 am (MDT) (11:00 am Eastern). The call can be
accessed by dialing toll-free: 1-866-225-0198 or
416-340-2219 (GTA and International).
A replay will be available approximately two hours after the
completion of the call until March 18, 2014, by dialing
905-694-9451 / 1-800-408-3053, passcode: 8507621.
The conference call will also be available via webcast
within the Investors section of ENTREC's website at:
www.entrec.com.
Consolidated Statements of Financial Position As at
(thousands of Canadian dollars) |
December 31 2013 $ |
December 31 2012 $ |
|
|
|
|
|
ASSETS |
|
|
|
Current assets |
|
|
|
|
Cash |
651 |
2,511 |
|
|
Trade and other receivables |
45,146 |
41,789 |
|
|
Inventory |
2,552 |
1,968 |
|
|
Prepaid expenses and deposits |
2,487 |
1,936 |
|
|
50,836 |
48,204 |
|
Non-current assets |
|
|
|
|
Long-term deposits and other assets |
4,910 |
523 |
|
|
Deposits on business acquisitions |
- |
4,273 |
|
|
Property, plant and equipment |
207,205 |
134,761 |
|
|
Intangible assets |
27,560 |
23,868 |
|
|
Goodwill |
69,276 |
53,575 |
|
|
Deferred income taxes |
- |
165 |
|
|
|
|
|
Total assets |
359,787 |
265,369 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
18,335 |
16,781 |
|
|
Income taxes payable |
1,876 |
2,703 |
|
|
Acquisition consideration payable |
587 |
2,320 |
|
|
Current portion of long-term debt |
20,619 |
14,226 |
|
|
Current portion of obligations under finance lease |
1,788 |
1,298 |
|
|
43,205 |
37,328 |
|
Non-current liabilities |
|
|
|
|
Long-term debt |
76,321 |
64,281 |
|
|
Obligations under finance lease |
2,422 |
4,914 |
|
|
Notes payable |
7,294 |
- |
|
|
Convertible debentures |
23,557 |
23,426 |
|
|
Deferred income taxes |
27,220 |
19,428 |
|
Total liabilities |
180,019 |
149,377 |
|
|
|
|
|
Shareholders' equity |
|
|
|
|
Share capital |
141,711 |
94,880 |
|
|
Contributed surplus |
9,155 |
8,429 |
|
|
Retained earnings |
28,532 |
12,719 |
|
|
Accumulated other comprehensive income (loss) |
370 |
(36 |
) |
Total shareholders' equity |
179,768 |
115,992 |
|
|
|
|
|
Total liabilities and shareholders' equity |
359,787 |
265,369 |
|
|
|
|
|
Consolidated Statements of Income |
Three Months Ended |
|
Year Ended |
|
(thousands of Canadian dollars, except per share
amounts) |
December 31 2013 $ |
|
December 31 2012 $ |
|
December 31 2013 $ |
|
December 31 2012 $ |
|
|
|
|
|
|
|
|
|
|
Revenue |
52,821 |
|
44,026 |
|
212,911 |
|
132,491 |
|
Direct costs |
36,753 |
|
29,862 |
|
140,398 |
|
87,391 |
|
|
|
|
|
|
|
|
|
|
Gross profit |
16,068 |
|
14,164 |
|
72,513 |
|
45,100 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
General and administrative expense |
4,816 |
|
3,747 |
|
20,331 |
|
12,897 |
|
Depreciation of property, plant and equipment |
5,486 |
|
3,424 |
|
18,705 |
|
9,061 |
|
Amortization of intangible assets |
966 |
|
725 |
|
3,479 |
|
1,825 |
|
Share-based compensation |
331 |
|
584 |
|
1,567 |
|
1,395 |
|
Loss on disposal of property, plant and equipment and
other assets |
49 |
|
58 |
|
1 |
|
229 |
|
|
11,648 |
|
8,538 |
|
44,083 |
|
25,407 |
|
|
|
|
|
|
|
|
|
|
Income before finance items and income taxes |
4,420 |
|
5,626 |
|
28,430 |
|
19,693 |
|
|
|
|
|
|
|
|
|
|
Finance items |
|
|
|
|
|
|
|
|
|
Finance costs |
2,208 |
|
1,570 |
|
7,876 |
|
3,579 |
|
|
Finance income |
- |
|
- |
|
- |
|
(19 |
) |
|
Loss (gain) on change in fair value of embedded derivative |
1,314 |
|
(691 |
) |
(1,002 |
) |
(691 |
) |
|
3,522 |
|
879 |
|
6,874 |
|
2,869 |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
898 |
|
4,747 |
|
21,556 |
|
16,824 |
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
|
|
|
|
|
|
|
Current |
831 |
|
(120 |
) |
2,666 |
|
1,056 |
|
|
Deferred |
(275 |
) |
1,439 |
|
3,077 |
|
3,656 |
|
|
556 |
|
1,319 |
|
5,743 |
|
4,712 |
|
|
|
|
|
|
|
|
|
|
Net income |
342 |
|
3,428 |
|
15,813 |
|
12,112 |
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic |
0.00 |
|
0.04 |
|
0.15 |
|
0.18 |
|
Earnings per share - diluted |
0.00 |
|
0.04 |
|
0.14 |
|
0.17 |
|
|
|
|
|
|
|
|
|
|
Non-IFRS Financial Measures
Adjusted EBITDA is defined as earnings before interest,
income taxes, depreciation, amortization, loss (gain) on disposal
of property, plant and equipment, change in fair value of embedded
derivative, share-based compensation, and non-recurring business
acquisition and integration costs. In addition to net income,
Adjusted EBITDA is a useful measure as it provides an indication of
the financial results generated by ENTREC's principal business
activities prior to consideration of how these activities are
financed or how the results are taxed in various jurisdictions and
before certain non-cash expenses. Adjusted EBITDA also illustrates
what ENTREC's EBITDA is, excluding the effect of non-recurring
business acquisition and integration costs. Adjusted EBITDA margin
is calculated as adjusted EBITDA divided by revenue. Per share
amounts are calculated as adjusted EBITDA divided by the basic
weighted average number of shares outstanding during the
period.
Adjusted net income is calculated excluding the after-tax
amortization of acquisition-related intangible assets, notional
interest accretion expense arising from convertible debentures, and
the gain (loss) on change in fair value of the embedded derivative
related to such convertible debentures. These exclusions represent
non-cash charges the Company does not consider indicative of
ongoing business performance. ENTREC also believes the elimination
of amortization of acquisition-related intangible assets provides
management and investors an improved view of its business results
by providing a degree of comparability to internally developed
intangible assets for which the related costs are expensed as
incurred. Adjusted earnings per share are calculated as adjusted
net income divided by the basic weighted average number of shares
outstanding during the applicable period.
Please see ENTREC's Management Discussion & Analysis for
the year ended December 31, 2013 for reconciliations of adjusted
EBITDA and adjusted net income to net income, the most directly
comparable financial measure calculated and presented in accordance
with IFRS.
Forward-looking Statements
This press release contains forward-looking statements which
reflect ENTREC's current beliefs and are based on information
currently available to ENTREC. These statements require ENTREC to
make assumptions it believes are reasonable and are subject to
inherent risks and uncertainties. Actual results and developments
may differ materially from the results and developments discussed
in the forward-looking statements as certain of these risks and
uncertainties are beyond ENTREC's control.
Examples of such forward-looking statements in this MD&A
include, but are not limited to: plans to execute a 2014 capital
expenditure program of $46 million; expectation that ENTREC's
equipment utilization will remain lower as activity levels in the
first half of 2014 will continue to be modest; expectation that
demand for the Company's services in the Alberta oil sands region
will gain momentum as the year progresses; belief that in
situ-related oil sands production will grow at a brisk pace over
the next several years as new projects commence and existing
facilities are expanded, and that ENTREC is well-positioned to
support its customers through both the construction and MRO phases
of these developments; intention that ENTREC will continue to
expand its service capabilities in northwest B.C. throughout 2014,
due to the anticipation that LNG facilities and related
infrastructure will be developed; expectation that northwest
Alberta and northeast B.C. will be a busy area for ENTREC in 2014
as it supports oil and natural gas projects in the region,
including customer investments in LNG-driven natural gas production
and infrastructure; estimate that revenue for the year ending
December 31, 2014 could range between $250 million and $270
million; estimate that overall adjusted EBITDA margin for fiscal
2014 could approximate 25%; intention that the 2014 capital
expenditure program and NCIB purchases will be funded from the
Company's asset-based debt facility, finance leases and cash from
operating activities; and belief that the Company will have the
flexibility to increase its 2014 capital expenditure program
throughout 2014 should customer demand warrant and that ENTREC will
not need to raise additional equity to fund its 2014 capital
expenditure program.
ENTREC's forward-looking statements involve a number of
significant assumptions. Key assumptions utilized in developing
forward-looking statements related to ENTREC's growth and revenue
expectations include achieving its internal revenue, net income and
cash flow forecasts for 2014 and beyond. Key assumptions involved
in preparing ENTREC's internal forecasts include, but are not
limited to, its expectations and estimates that: demand for crane
and heavy haul transportation services in western Canada increase
from current levels in 2014; ENTREC will be able to retain key
personnel and attract additional high-quality personnel to support
its planned revenue growth; construction projects and production
activity in the Alberta oil sands region and in northern British
Columbia continue at or above current levels; ENTREC is able to
achieve anticipated revenues on current and future MRO contracts;
the planned development of LNG facilities proceeds and certain
customers choose to utilize ENTREC's services; there are no
significant unplanned increases in ENTREC's cost structure,
including those costs related to fuel and wages; market interest
rates remain similar to current rates and that additional debt
financing remains available to ENTREC on similar terms to its
existing debt financing; there is no prolonged period of inclement
weather that impedes or delays the need for crane and heavy haul
transportation services; the competitive landscape in western
Canada for crane and heavy haul transportation services does not
materially change during the remainder of 2014; and there is no
material adverse change in overall economic conditions.
Achieving these forecasts largely depends on a number of
factors beyond ENTREC's control including several of the risks
discussed further under "Business Risks" in ENTREC Management's
Discussion & Analysis for the year ended December 31, 2013. The
business risks that are most likely to affect ENTREC's ability to
achieve its internal revenue, net income and cash flow forecasts
for 2014 and beyond are the volatility of the oil and gas industry,
its exposure to the Alberta oil sands, workforce availability,
competition, weather and seasonality, availability of debt and
equity financing, competition, and business integration risks.
These risk factors are interdependent and the impact of any one
risk or uncertainty on a particular forward-looking statement is
not determinable.
ENTREC's intention to acquire shares pursuant to its NCIB is
subject to potential fluctuations in the market price of its shares
and the potential management may find another, more desirable use
for its available funds.
ENTREC's ability to finance its capital expenditure program
through its debt facilities depends on its ability to achieve debt
financing terms acceptable to the lenders and ENTREC as well as
meeting its internal cash flow forecasts.
Consequently, all of the forward-looking statements made in
this press release are qualified by these cautionary statements and
other cautionary statements or factors contained herein, and there
can be no assurance that the actual results or developments will be
realized or, even if substantially realized, that they will have
the expected consequences to, or effects on, ENTREC. These
forward-looking statements are made as of the date of this press
release. Except as required by applicable securities legislation,
ENTREC assumes no obligation to update publicly or revise any
forward-looking statements to reflect subsequent information,
events, or circumstances.
Neither the TSX Venture Exchange nor its regulation services
provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
ENTREC CorporationJohn M. StevensPresident & CEO(780)
960-5625ENTREC CorporationJason VandenbergCFO(780)
960-5630www.entrec.com
Entrec Corporation (TSXV:ENT)
Historical Stock Chart
From May 2024 to Jun 2024
Entrec Corporation (TSXV:ENT)
Historical Stock Chart
From Jun 2023 to Jun 2024