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FORT ST. JOHN, BRITISH COLUMBIA--(Marketwired - Mar 29, 2016) -
|Summary of financial results|
|(thousands of dollars except per share amounts)|
Three months ended
|Net income per share||$0.04||$0.12||$0.29||$0.25|
|Weighted average common shares outstanding (thousands)||
|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.|
Fourth quarter results
Three months ended December 31, 2015 vs. three months ended December 31, 2014
Consolidated revenue was $12.9 million compared to $41.5 million in the fourth quarter last year representing a decrease of $28.6 million or 69%. The substantial decrease was a result of a material reduction in the Company's backlog of maintenance and integrity work along with an absence of any new project work commencing during the quarter. Market conditions in the fourth quarter were extremely challenging across the industry and greatly impacted all aspects of the Company's business activities. Revenues recognized in the fourth quarter related to the completion of a large facilities project and various integrity digs and maintenance work completed for its clients under Master Service Agreements. During the fourth quarter prior year, close to half the Company's revenues were derived from integrity work being performed for one of its main clients in Alberta and Manitoba. Other large jobs last year included pipeline maintenance and repair work in Northeast B.C. and facilities construction in the Fort McMurray area.
Operating expenses were 78.9% of revenue in the quarter compared to 77.1% in the same quarter last year. Operating expenses were comparable to prior quarter and in-line with historical averages. The Company has been successful at maintaining its operating margins through safe, timely and efficient execution of work and will continue to tightly monitor all operating costs under its control in an effort to remain competitive during this period of unrelenting market conditions.
General and administrative expenses were $1.7 million, up $177,000 from the $1.5 million recorded prior year. The slight increase over prior year reflected an increase in spending on business development initiatives. The Company's general and administrative expenditures reflects costs incurred in connection with the bid processes, professional fees, corporate wages, burdens and various other overheads, including rents, insurance, travel and administrative supplies that are not charged directly to projects. Despite challenging market conditions, the Company will remain active bidding and pursuing large scale jobs, along with maintaining its master service agreements with existing clients, and as such will continue to invest in business development and strategic initiatives while actively cutting back on redundancies and inefficiencies to ensure corporate savings are being realized wherever possible.
Depreciation of property, plant and equipment was $2.2 million and comparable to prior year's fourth quarter depreciation. 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 fourth quarter the Company recognized a $0.4 million gain on the disposal of its property, plant and equipment. Gains and losses on disposals of property, plant and equipment are determined by comparing proceeds with the carrying amount of the asset and are included as part of other gains and losses in the statement of income.
During the fourth quarter the Company recognized a $2.9 million change in an accounting estimate. The Company had previously provided for a volume discount on work performed under a master services agreement that did not renew in fiscal 2015. Based on the terms of the expired agreement the Company no longer had the obligation to provide the discount and as such reversed the provision.
During the fourth quarter the Company reduced its impairment on receivables charge by $0.2 million for taxes subsequently collected on monies remitted for the original write down.
During the fourth quarter the Company recognized a non-cash stock-based compensation charge of $0.2 million. The Company anticipates recognizing an additional $0.6 million in stock-based compensation over the next 7 quarters. The non-cash stock-based compensation charge relate to options granted in fiscal 2014 and in August 2015.
Finance costs of $0.2 million were approximately the same as last year. However, included in the finance costs were $72,000 of amortized deferred transaction costs relating to the establishment of the Company's $115 million senior secured credit facility.
Income tax expense in the quarter of $0.8 million was at an effective rate of 41.1% which is higher than the enacted tax rates of 26% after appropriate deductions. The increase over the enacted tax rates related to timing differences being realized during the quarter as a result of the yearend accounting for the Company's deferred income tax liability and other accounting adjustments.
Net income in the quarter was $1.1 million ($0.04 per share) compared to $3.7 million ($0.12 per share). The decrease in net income was the result of significantly reduced levels of work being performed during the quarter compared to prior year. However, results in the fourth quarter were impacted positively by a change in an accounting estimate being recognized along with an amendment to the impairment charge accounted for previously but offset by a non-cash stock-based compensation charge and an increase to the Company's yearend tax provisions.
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.
As part of its overall strategy to develop a significant backlog of work and revenue certainty, including seeking its new credit facilities, the Company is seeking out pipeline and facilities construction contracts in connection with the Liquefied Natural Gas (LNG) projects being planned on the west coast of British Columbia, an industry that is anticipated to bring substantial economic activity to British Columbia over the next 30 years. Macro continues to have active discussions with the LNG project owners regarding future pipeline and facilities construction.
The Company's new revolving operating facility will provide enhanced flexibility and essential funding support as the Company works to realize on those large-scale potential growth opportunities. The secured letter of credit facility is intended to facilitate the issuance of letters of credit to support qualifying projects.
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. With operating margins expected to remain largely in line with historical averages the Company expects to continue to operate cash flow positively in fiscal 2016. Recurring revenues from its multiple existing master service agreements will represent the bulk of activity.
The Company will host a conference call at 8 am PT on Wednesday, March 30, 2016 to discuss the 2015 fourth quarter and year end results. The conference call can be accessed by dialing 1-888-390-0546 and referencing conference ID 49779073.
Macro's core business is providing pipeline and facilities construction and maintenance services to major companies in the oil and gas industry in northeastern B.C. and northwestern Alberta. The Company's corporate office is in Fort St. John, British Columbia. Its shares are listed on the TSX Venture Exchange under the symbol MCR. Information on the Company's principal operations can be found at www.macroindustries.ca
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.
Neither 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.
Macro Enterprises Inc.
President and C.E.O.
Macro Enterprises Inc.