Mosaic Capital Corporation Reports Q1 2015 Financial Results and Other Matters

Calgary, Alberta (FSCwire) - Mosaic Capital Corporation ("Mosaic") (TSX–V Symbols: M, M.PR.A and M.WT) has released its unaudited condensed interim consolidated financial statements for the three months ended March 31, 2015.

"Our model of acquiring a diversified cash flow stream works," commented John Mackay, Executive Chairman and CEO. He then added "While some of our businesses have been affected by the weakness that the energy sector has put on western Canada we continue to see strength within our subsidiaries as Ambassador, Place-Crete, SECON and Industrial Scaffold all have had a good start to the year. We saw increases in all of our key financial metrics as revenue grew by 103%, Adjusted EBITDA by 42%, Free Cash Flow 25% and twelve month rolling Adjusted Return on Common Equity hit 100%. With strong deal flow our investment focus is on the diversity of opportunities to invest in successful enterprises, many of which do not have significant exposure to the western Canadian energy sector."

Q1 2015 Financial and Operational Highlights

• 2015 Q1 revenue increased 103% from Q1 2014 to $45.8 million;

• 2015 Q1 Adjusted EBITDA¹ increased 42% from Q1 2014 to $4.5 million;

• 2015 Q1 Free Cash Flow² increased 25% from Q1 2014 to $3.2 million;

• Preferred Distribution Payout Ratio⁴ of 90% for the three month period ended March 31, 2015;

• 2015 Q1 net income and comprehensive income attributable to shareholders decreased 98% from Q1 2014 to $22 thousand. This resulted primarily from a 298% increase in amortization of property plant and equipment and a 160% increase in amortization of intangible assets over Q1 2014 due to the acquisition of Streamline, Place-Crete and SECON;

• Mosaic completed two private placements of units, with each unit consisting of a private yield security and a private yield security purchase warrant, for total gross proceeds of $26.5 million; and

• Mosaic has the full amount of its $25 million acquisition facility available for draw following repayments made on the facility in Q1 2015.

Selected Q1 2015 Highlights

Revenue for Q1 2015 increased 103% or $23,191 to $45,804 when compared to Q1 2014, primarily due to the addition of revenue from Streamline Mechanical L.P. (effective June 1, 2014), Place-Crete Systems L.P. (effective September 1, 2014), South East Construction L.P. (effective November 1, 2014), and growth in revenue from Ambassador Mechanical Corp. and Industrial Scaffold Services L.P. within the Infrastructure and Diversified segments.

Adjusted EBITDA for Q1 2015 increased 42% or $1,330 to $4,512 compared to Q1 2014, primarily attributed to:

• Adjusted EBITDA growth from some of the existing businesses within the Infrastructure and Diversified segments;

• Results from Q1 2015 operations of Streamline Mechanical L.P., Place-Crete Systems L.P. and South East Construction L.P., none of which was owned by the Company in Q1 2014.

Free Cash Flow for Q1 2015 increased 25% or $649 to $3,207 compared to Q1 2014 due to these factors.

The Q1 2015 revenue and income from operations breakdown by segment is as follows:

*Revenue and income from operations attributable to the real estate segment are immaterial

RECONCILIATIONS FOR NON-IFRS FINANCIAL MEASURES

The following tables reconcile both Adjusted EBITDA and Free Cash Flow to income from continuing operations before income taxes, which is the most directly comparable measure under International Financial Reporting Standards ("IFRS") to each of those non-IFRS financial measures:

Adjusted Return on Common Equity compared to IFRS measure - There is no IFRS measure comparable to Adjusted Return on Common Equity. However, this ratio utilizes Free Cash Flow in its calculation and the most directly comparable measure under IFRS to Free Cash Flow is income from continuing operations before income taxes. Accordingly, dividing (i) income from continuing operations before income taxes less distributions/dividends declared to holders of Mosaic preferred securities, private yield securities and series "A" shares, in each case during the twelve-month rolling period ending March 31, 2015, by (ii) weighted average common shareholders' equity for the same period, yields a ratio of 81% (2014 - 15%).

Preferred Distribution Payout Ratio compared to IFRS measure - There is no IFRS measure comparable to Preferred Distribution Payout Ratio. However, this ratio utilizes Free Cash Flow in its calculation and the most directly comparable measure under IFRS to Free Cash Flow is income from continuing operations before income taxes. Accordingly, dividing (i) the total amount of distributions/dividends declared to holders of Mosaic preferred securities, private yield securities and series "A" shares during the Q1 2015 period by (ii) income from continuing operations before income taxes for the Q1 2015 period, yields a payout ratio of 1,550% (2014 – 123%).

Non-IFRS Financial Measures

Below are definitions of key performance indicators used by management of Mosaic that are not recognized under IFRS and have no standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other issuers.

¹Adjusted EBITDA:  is defined as income from continuing operations before income taxes and before (i) gain (loss) on sale of equipment, (ii) non-cash income and expenses, (iii) finance income and expenses, (iv) securities-based compensation expense, and (v) any unusual non-operating one-time items such as acquisition and reorganization costs. Adjusted EBITDA is used by management to assess Mosaic's normalized cash generated on a consolidated basis and in its operating segments. Adjusted EBITDA is also a performance measure which may be utilized by investors to analyze the cash generated by Mosaic and its operating segments.

²Free Cash Flow:  is defined as Adjusted EBITDA less (i) non-controlling interests' share of Adjusted EBITDA, (ii) Mosaic's share of current income tax expense and (iii) Mosaic's share of the Sustaining Capital Expenditures. Free Cash Flow is a performance measure used by management to summarize the funds available for (i) the payment of distributions to holders of preferred securities and private yield securities, and dividends to holders of series "A" shares and common shares, (ii) investment in capital expenditures made to grow the enterprise and (iii) new acquisitions and working capital. Free Cash Flow is also a performance measure which may be utilized by investors to analyze the free cash available for preferred security distributions, private yield security distributions, common share dividends, series "A" share dividends, acquisitions and additional investment into existing businesses.

Sustaining Capital Expenditures:  is defined as capital expenditures required to sustain the operations of Mosaic at its current level of operations and is calculated by subtracting those capital expenditures which are, as determined in the discretion of management, made to grow the enterprise and expected to generate additional Adjusted EBITDA from total capital expenditures for the period. An example of Sustaining Capital Expenditures would be the replacement of vehicles that have completed their useful life.

³Adjusted Return on Common Equity:  means that number, expressed as a percentage, that is obtained by dividing (i) Free Cash Flow less distributions declared to holders of preferred securities and private yield securities, and dividends declared to holders of series "A" shares during the period indicated, by (ii) weighted average common shareholders' equity for the period. Management believes Adjusted Return on Common Equity is a key performance measure as it indicates the return generated by Mosaic on its common equity. Management believes that this measure is most useful and relevant when measured over a twelve-month period, as opposed to quarterly periods. As a result, management is reporting on this financial metric over the trailing twelve-month period ended as of the last day of the most recently completed financial period, being March 31, 2015 (March 31, 2014 for the comparative period).

⁴Preferred Distribution Payout Ratio:  means that number, expressed as a percentage, which is the total amount declared (which includes cash paid as well as preferred securities distributed pursuant to the Mosaic distribution reinvestment plan ("DRIP")) to holders of preferred securities, private yield securities and series "A" shares during the period divided by Free Cash Flow for the period. Management believes that this measure may be useful to investors in assessing the likelihood that Mosaic will be able to continue to pay distributions on its preferred securities and private yield securities, and pay dividends on its series "A" shares.

Investors are cautioned that the above non-IFRS measures should not be viewed as an alternative to measures that are recognized under IFRS such as net income or cash from operating activities. Mosaic's method of calculating the above non-IFRS measures may differ from that of other entities and therefore may not be comparable to measures utilized by them. 

Restricted Securities Units

In 2014 Mosaic previously conditionally issued, as part of its variable compensation incentive program (the "Plan"), restricted securities units ("RSUs") to its executive officers and certain employees. The RSUs conditionally issued were both RSUs to be settled for common shares as well as RSUs to be settled for preferred securities. The terms of the Plan provide that the RSUs conditionally issued to each Plan participant are subject to cancellation in whole or in part based upon (i) Mosaic's subsequent determination of the actual amount of variable compensation earned by a participant for a fiscal year (which is based upon the attainment of personal performance and corporate performance over the fiscal year), and (ii) certain elections and allocations made by the participant, both of which then determine the number of RSUs which shall remain issued and outstanding to the benefit of the participant. All remaining RSUs conditionally issued to the participant in that fiscal year will then be terminated and cancelled. The RSUs are to be settled on a one-for-one basis for the underlying security.

Mosaic today reports that upon Mosaic's recent determination of actual variable compensation entitlements earned by participants under the Plan for the fiscal year 2014, and following certain elections made by the participants, the number of RSUs which then remained issued and outstanding in respect of the 2014 issuances are (i) 27,765 RSUs to be settled for 27,765 common shares, each at a settlement price of $11.90 per share, and (ii) 22,928 RSUs to be settled for 22,928 preferred securities, each at a settlement price of $11.10 per security. The RSUs vest yearly in three equal tranches with the first tranche having vested immediately.

ABOUT MOSAIC CAPITAL CORPORATION

Mosaic is an investment company based in western Canada that owns a portfolio of established businesses with competitive advantages that have a history of generating cash flow from their operations. Mosaic's objective is to create long-term value for our shareholders and business partners and to have that reflected in our share price. Mosaic believes that this is achieved by growing free cash flow per share and retained earnings. Mosaic does this by acquiring businesses that it understands at attractive prices, managing risk through extensive due diligence, creative transaction structuring and working closely with subsidiary businesses after acquisition.

FOR FURTHER INFORMATION PLEASE CONTACT:

Tim Taylor
Vice President
Mosaic Capital Corporation
400, 2424 – 4^th Street SW
Calgary, AB  T2S 2T4

Tel:  (403) 270-4658

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Information

This news release contains forward-looking information and statements within the meaning of applicable Canadian securities laws (herein referred to as "forward-looking statements") that involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  All information and statements in this press release which are not statements of historical fact may be forward-looking statements. The words "believe", "expect", "intend", "estimate", "anticipate", "project", "scheduled", and similar expressions, as well as future or conditional verbs such as "will", "should", "would", and "could" often identify forward-looking statements. In particular this news release may contain forward-looking statements regarding anticipated financial and operating performance for Mosaic. Such statements or information, if any, are only predictions and reflect the current beliefs of management with respect to future events and are based on information currently available to management.  Actual results and events may differ materially from those contemplated by these forward-looking statements due to these statements being subject to a number of risks and uncertainties. Undue reliance should not be placed on these forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature forward-looking statements involve assumptions and known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other things contemplated by the forward-looking statements will not occur. Some of the assumptions made by Mosaic upon which forward-looking statements are typically based include:  the business operations of the operating businesses of Mosaic continuing on a basis consistent with prior years; the ability of Mosaic and its subsidiaries to access financing from time to time on favorable terms; the ability of Mosaic to realize anticipated benefits of acquisitions; the continuation of executive and operating management or the non-disruptive replacement of them on competitive terms; the ability of Mosaic to maintain reasonably stable operating and general administrative expenses; the current economic environment in western Canada (including commodity prices, such as oil prices) stabilizing and showing signs of strengthening over the coming year; and the economic environment in Canada not deteriorating due to the influence of international economic developments in the United States, Europe, Asia and elsewhere.

A number of factors could cause actual results to differ materially from the results stated in the forward-looking statements, including, but not limited to, risks related to: general economic and business conditions; the failure of Mosaic to identify acquisition targets or complete announced acquisitions; third parties honouring their contractual obligations with Mosaic and its subsidiaries; results of management's ongoing efforts to sell, re-lease, lease, develop and improve real estate owned and being acquired indirectly by Mosaic through its subsidiaries; the failure to realize the anticipated benefits of Mosaic's recent and future acquisitions; adverse fluctuations in commodity prices; competition for, among other things, capital, equipment and skilled personnel; the inability to generate sufficient cash flow from operations to meet current and future obligations; the inability to obtain required debt and/or equity capital on suitable terms; competition for acquisition targets; supply disruptions; adverse weather conditions; seasonality and fluctuations in results; and limited diversification of Mosaic's subsidiaries. Should any of the risks or uncertainties facing Mosaic and its subsidiaries materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance, activities or achievements could vary materially from those expressed or implied by any forward-looking statements contained in this news release.

Readers are cautioned that the foregoing list of risks is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of Mosaic and its subsidiaries are included in Mosaic's annual information form for the year ended December 31, 2014 which has been filed under Mosaic's profile on SEDAR (www.sedar.com).

Although Mosaic believes that the expectations represented by any forward-looking-statements contained herein are reasonable based on the information available to them on the date of this news release, management cannot assure investors that actual results, performance or achievements will be consistent with these forward-looking statements. Any forward-looking statements herein contained are made as of the date of this press release and Mosaic does not assume any obligation to update or revise them to reflect new information, events or circumstances, except as required by law.

To view this press release as a PDF file, click onto the following link:
public://news_release_pdf/mosaic05272015.pdf

Source: Mosaic Capital Corporation (TSX Venture:M) http://www.mosaiccapitalcorp.com/

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