Mosaic Capital Corporation Reports Second Quarter 2014 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 and six months ended June 30, 2014.

"We are pleased with our second quarter financial results as we generally saw activity levels during the quarter return to historic levels," commented John Mackay, Executive Chairman and CEO. Mr. Mackay added, "The financial results included one month of operations from Streamline and we are pleased with their results and future growth prospects. Overall, for the quarter, our subsidiaries are operating within our expectations and we continue to look at operational improvements and expansion opportunities. We have strong deal flow and with current cash of approximately $27 million and a $25 million undrawn credit facility we are well positioned for future acquisitions."

Second Quarter 2014 Financial and Operational Highlights

• 2014 Q2 Revenue increased 84% from Q2 2013 to $35.2 million.

• 2014 Q2 Net Income and Comprehensive Income attributable to Shareholders increased 82% from Q2 2013 to $3.4 million.

• 2014 Q2 Adjusted EBITDA¹ increased 82% from Q2 2013 to $6.0 million.

• 2014 Q2 Free Cash Flow² increased 126% from Q2 2013 to $3.8 million.

• Preferred Security Payout Ratio⁴ of 55% for the 3 month period ended June 30, 2014.

• On June 20^th, 2014 Mosaic closed a public offering of 2,524,240 units, at a price of $11.40 per unit for total gross proceeds of $28.8 million.

• On June 1, 2014 Mosaic completed the acquisition of a 70% interest in the business being carried on by Streamline for $13.2 million cash including the initial purchase price of $12.6 million and the purchase of some additional assets for $0.6 million, along with the assumption by the partnership of $4.0 million in notes payable and payment of up to $3.5 million in contingent consideration over the next 3 years.

• On May 20^th, 2014, Mosaic entered into an agreement with ATB Corporate Financial Services to provide a $25 million credit facility (the "Credit Facility"). On May 31, 2014, Mosaic drew down approximately $13.24 million on the Credit Facility to fund its acquisition of Streamline. On June 20^th, 2014 Mosaic paid the credit facility down to zero with part of the proceeds from its public offering.

Selected Second Quarter 2014 Highlights

Notes 1-5: See Non-IFRS Financial Measures below

RECONCILIATIONS FOR NON-IFRS FINANCIAL MEASURES

Adjusted EBITDA and Free Cash Flow:

The following tables reconcile both Adjusted EBITDA and Free Cash Flow to income from continuing operations before tax, which is the most directly comparable measure under IFRS to each of those non-IFRS financial measures:

Note:

On February 1, 2013 Mosaic announced that its wholly owned subsidiary, First West Properties L.P., completed the sale of its Decade warehouse located at 1820, 31st Street North and its Braman warehouse located at 2930, 9th Avenue North, both in Lethbridge, Alberta.The two warehouses were sold for aggregate consideration of $14,700 which resulted in a gain on sale of real estate of $2,249.This gain resulted in a positive impact on income from continuing operations before tax, Adjusted EBITDA and Free Cash Flow in 2013.Gains of this nature within the Real Estate segment are unpredictable as to timing of occurrence and magnitude.

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 tax.  Accordingly, dividing (i) income from continuing operations before tax less distributions/dividends declared to holders of preferred securities and series "A" shares, in each case during the twelve-month rolling period ending June 30, 2014, by (ii) weighted average common shareholders' equity for the same period, yields a ratio of 27% (2013 - 69%) for such twelve-month period.

Preferred Security Payout Ratio compared to IFRS measure:

There is no IFRS measure comparable to Preferred Security 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 tax.  Accordingly, dividing the total amount of distributions/dividends declared to holders of Mosaic preferred securities and series "A" shares during the period by income from continuing operations before tax for the period, for each of the three months and six months periods ended June 30, 2014 yields payout ratios of 49% (2013 – 78%) and 69% (2013 – 48%) respectively

Combined Payout Ratio compared to IFRS measure:

There is no IFRS measure comparable to Combined 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 tax.  Accordingly, dividing the total amount of distributions/dividends declared to holders of Mosaic preferred securities, series "A" shares and common shares during the period by income from continuing operations before tax for the period, for each of the three months and six months periods ended June 30, 2014 yields payout ratios of 61% (2013 – 88%) and 87% (2013 – 54%) respectively.

Six-Month Financial Highlights

Revenue for the six months ended June 30, 2014 increased 44% or $17,646 to $57,859 when compared to the same period in 2013. The primary reasons for the increase in revenue are due to organic revenue growth of 3.2% within the Industrial segment as well as the additions of one month of revenue for Streamline and six additional months of revenue from Industrial Scaffold.

Adjusted EBITDA for the six months ended June 30, 2014 decreased 6% or $631 to $9,162 when compared to the same period in 2013. The reason for this decrease can be primarily attributed to three factors:

• The primary factor was that during the last year in February 2013, the Real Estate segment realized a $2,249 gain as a result of the sale of the two properties, and during the six month period ended June 30, 2014 did not realize any gains as there were no properties sold during the period.

• During the first quarter in the six-month period ended June 30, 2014, Ambassador experienced a slight decrease in income as a result of project delays resulting from adverse weather conditions which accounted for the underutilization of direct labour and increased operating costs during the first part of the quarter.  However, in the month of March 2014 work trends for Ambassador improved to reasonable levels. Over the same period Ambassador's backlog has increased from approximately $40,000 to over $60,000.

• During the first quarter in the six-month period ended June 30, 2014, Industrial Scaffold experienced typical winter seasonality, and a delay in starting a project by a client as a result of a 28-day work stoppage by truck drivers servicing Port Metro Vancouver.  Industrial Scaffold was acquired effective September 1, 2013 and therefore does not have comparable period results.

Free Cash Flow for the six-month period ended June 30, 2014 decreased 3% or $204 to $6,386 when compared to the same period in 2013 as a result of the items discussed above.  

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 tax and before (i) gain (loss) on sale of equipment; (ii) non-cash expenses such as amortization; (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 interest 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, series "A" shares and common shares, (ii) investment in capital expenditures made to grow the enterprise, and (iii) new acquisitions and working capital.

³Sustaining 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.

⁴Preferred Security 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 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 series "A" shares.

⁵Adjusted 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 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.

Resignation of Director

Mosaic also advises that Michael Hill has resigned as a director effective August 31, 2014. John Mackay, Executive Chairman and CEO commented, "Mike Hill contributed significantly to Mosaic's success from our earliest days. We congratulate him on his recent appointment as CFO of Cathedral Energy Services; we are sorry to see him go and wish him the best in his future endeavours."

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. We believe that this is achieved by growing free cash flow per share and retained earnings. We do this by acquiring businesses that we understand at attractive prices and we manage our risk through extensive due diligence, creative transaction structuring and working closely with our 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 news 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 and its subsidiaries. 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, projections and other forward-looking statements will not occur. 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 the 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, 2013 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 news 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.

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public://news_release_pdf/mosaic08252014.pdf

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

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