Mosaic Capital Corporation Reports Third Quarter 2013 Financial Results and Net Income of $2.9 Million
Calgary, Alberta CANADA, November 25, 2013 /FSC/ - Mosaic Capital Corporation (M - TSX Venture, M.PR.A - TSX Venture), has released its unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2013.
"We are pleased to announce our third quarter results for the period ended September 30, 2013. Our comparative quarter in 2012 is a particularly high benchmark due to the inclusion of an assignment fee of $1.3 million received by First West Properties in connection with a disposition of an interest in land," commented John Mackay, Executive Chairman and CEO. Mr. Mackay added, "Ambassador Mechanical's backlog increased from approximately $45 million to $60 million, however the completion of a number of lower margin projects impacted Adjusted EBITDA. In addition, Allied Cathodic's business was affected by wet weather conditions and reduced exploration activity in southern Saskatchewan. However, we saw organic growth in 4 of our 6 industrial segment subsidiaries and identified many expansion opportunities. We also acquired 67.5% of Industrial Scaffold during the quarter for an acquisition cost of $15.8 million. Industrial Scaffold is a leading provider of worksite surface and access scaffolding solutions to industrial and commercial customers in the energy & utilities, pulp & paper and marine sectors in western Canada. With a strong deal flow pipeline and a current cash position as of September 30, 2013 of approximately $24 million dollars we are well positioned for future growth."
Third Quarter 2013 Financial and Operational Highlights
* 2013 Q3 Revenue increased 14% from Q3 2012 to $25.3 million;
* 2013 Q3 Income from Operations and Adjusted EBITDA1 decreased 27% from Q3 2012 to $5 million;
* 2013 Q3 Free Cash Flow2 decreased 13% from Q3 2012 to $3.2 million;
* 2013 Q3 Net Income and Comprehensive Income decreased 31% from Q3 2012 to $2.9 million;
* 2013 Q3 Preferred Security Payout Ratio3 was 58% for the three months and 57% for the nine months ended September 30, 2013;
* 2013 Q3 Organic growth for the Industrial Segment gave rise to growth in revenue of 7.4% and decrease in growth in income from operations of 6.1%, each as compared with Q3 2012. This organic growth does not take into account the acquisition of Kendall's Supply or Industrial Scaffold.
Selected Third Quarter 2013 Highlights
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All amounts are in thousands
except % and share data 2013 2012 % Change
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Revenue $25,318 $22,143 +14%
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Income from Operations $5,017 $6,870 -27%
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Adjusted EBITDA 1 $5,017 $6,870 -27%
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Cash Flow prior to non-cash working capital $4,530 $6,766 -33%
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Free Cash Flow 2 $3,244 $3,726 -13%
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Free Cash Flow per common share (diluted) $0.39 $0.45 -13%
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Selected Year-to-date Financial Results
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All amounts are in thousands
except % and share data 2013 2012 % Change
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Revenue $65,531 $53,759 +22%
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Income from Operations $12,561 $12,974 -3%
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Adjusted EBITDA 1 $14,810 $12,974 +14%
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Cash Flow prior to non-cash working capital $10,884 $12,662 -14%
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Free Cash Flow 2 $9,833 $7,773 +27%
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Free Cash Flow per common share (diluted) $1.17 $0.93 +26%
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Adjusted Return on Common Equity[4] 40% 33% -
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Reconciliations for Non-IFRS Financial Measures
Adjusted EBITDA, Free Cash Flow, Adjusted Return on Common Equity and Preferred Security Payout Ratio are not recognized measures under International Financial Reporting Standards (IFRS) and have no standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other issuers. 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:
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Three months ended Nine months ended
Sep 30, Sep 30,
2013 2012 2013 2012
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Income from continuing
operations before tax $ 3,835 $ 5,313 $ 11,671 $ 9,223
Amortization 799 947 2,100 2,820
Accretion 40 41 112 114
Securities-based compensation 330 434 845 542
Non-operating items
(Gain) loss on sale of equipment 6 31 30 (37)
Finance income (86) (26) (224) (48)
Finance expense 93 130 276 360
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ADJUSTED EBITDA $ 5,017 $ 6,870 $ 14,810 $ 12,974
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Three months ended Nine months ended
Sep 30, Sep 30,
2013 2012 2013 2012
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Adjusted EBITDA $5,017 $ 6,870 $ 14,810 $ 12,974
Non-controlling interest
of Adjusted EBITDA (1,258) (1,715) (2,981) (2,786)
Mosaic's share of current
income tax expense (379) (932) (1,285) (1,440)
Mosaic's share of
Sustaining Capital Expenditures (136) (497) (711) (975)
FREE CASH FLOW $3,244 $ 3,726 $ 9,833 $ 7,773
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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 declared to holders of preferred securities and series "A" shares, in each case during the twelve-month period ending September 30, 2013, by (ii) weighted average common shareholders' equity for the same period, yields a ratio of 48% (2012 - 41%) for such twelve-month period.
Preferred Security Payout Ratio compared to IFRS measures: 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 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 nine months ended September 30, 2013, yields payout ratios of 49% (2012 - 24%) and 48% (2012 - 41%) respectively.
Year-to-date results to September 30, 2013
Revenue for the nine-month period ended September 30, 2013 increased 22% or $11,772 to $65,531 when compared to the same period in 2012. The primary reasons for the increase in revenue is due to organic revenue growth of 7.4% in the Industrial segment as well as the additions of one month of revenue for Industrial Scaffold and seven months for Kendall's Supply. The above increase was offset by a loss of $1,947 of revenue during the period as a result of the sale of two properties in the Real Estate segment in February 2013.
The Adjusted EBITDA for the nine-month period ended September 30, 2013 increased 14% or $1,836 to $14,810 when compared to same period in 2012. This can be primarily attributed to four factors:
- Nine months of operations of Kendall's Supply in the current period as compared to two months of operations in the comparative period.
- One month of operations of Industrial Scaffold that was not part of Mosaic in the 2012 comparative period.
- A $2,249 gain on sale of real estate within the Real Estate segment.
- A decrease in income from operations for Ambassador due to lower margin projects and increased operating costs during the three-month period ended September 30, 2013.
Free Cash Flow for the nine-month period ended September 30, 2013 increased 27% or $2,060 to $9,833 when compared to the same period in 2012. This increase in Free Cash Flow can be attributed to the same factors as resulted in the increase in Adjusted EBITDA.
As a result of the above, Free Cash Flow per common share for the nine-month period ended September 30, 2013 increased 29% to $1.24 from $0.96 in the comparable period.
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.
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.
3Preferred 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) 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.
4Adjusted 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. 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 September 30, 2013.
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 - 4th 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, 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, 2012 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.
Mosaic Capital Corporation
400, 2424 - 4th Street SW
Calgary, Alberta T2S 2T4
To view this press release as a PDF, please click on the following link:
http://www.usetdas.com/pr/mosaic11252013.pdf
Source: Mosaic Capital Corporation (TSXV: M - TSXV: M.PR.A)
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