Mosaic Capital Corporation Reports Third Quarter 2014 Financial Results

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 nine months ended September 30, 2014.

"We are pleased with our third quarter financial results," commented John Mackay, Executive Chairman and CEO. Mr. Mackay added, "We saw increases in all of our key financial metrics. The last six months have been extremely busy with Mosaic deploying about $50 million to acquire interests in Streamline, Place-Crete and our latest acquisition, South East Construction. These three transactions have added substantial diversification to our revenue and cash flow. We continue to have a strong balance sheet and a very strong deal flow pipeline."

Third Quarter 2014 Financial and Operational Highlights

• 2014 Q3 revenue increased 90% from Q3 2013 to $48 million.

• 2014 Q3 net income and comprehensive income attributable to shareholders increased 111% from Q3 2013 to $4 million.

• 2014 Q3 Adjusted EBITDA¹ increased 65% from Q3 2013 to $8.3 million.

• 2014 Q3 Free Cash Flow² increased 66% from Q3 2013 to $5.4 million.

• Preferred Security Payout Ratio⁵ of 47% for the 3 month period ended September 30, 2014.

• Joint Venture with Harbour Equity - In August 2014 Mosaic's subsidiaries First West Properties L.P. and First West Developments L.P. signed a partnership agreement with Harbour Equity Capital Corp. ("Harbour Equity") for the development of the Parker Industrial Park near Regina, Saskatchewan.  Under this financing arrangement, Harbour Equity contributed $6 million for a 50% interest in the development project and Mosaic, through First West Properties L.P., retained the remaining 50% interest.

• Increase in quarterly common share dividend - On August 20, 2014 Mosaic announced a 33% increase of the quarterly dividend on Mosaic's common shares from $0.06 per share to $0.08 per share.  A dividend at the new rate of $0.08 per share has been declared and was paid September 30, 2014 to holders of record as of August 29, 2014. Mosaic's dividend on its common shares has grown 400% since inception in 2012.

• Acquisition of Place-Crete – Effective September 1, 2014, Mosaic completed the acquisition of a 75% interest in the business now carried on by Place-Crete Systems L.P. ("Place-Crete") by acquiring the operating assets and liabilities of Place-Crete Systems Inc. and Floor-Tech Systems Inc. (the "Place-Crete Acquisition"). The cost of the Place-Crete Acquisition was $18 million which was funded through a combination of $14 million in cash and $4 million in vendor take-back financing. Place-Crete is a provider of specialty contracting services that focuses on concrete restoration, traffic deck membranes, cement and gypsum floor underlayment, hydro demolition services, plaza and bridge deck waterproofing, polymer floor and wall systems, and various other specialty contracting services.

Selected Third Quarter 2014 Highlights

All amounts below are in thousands except % and share data.

Notes 1-4: 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:

Notes:

1. On February 1, 2013 Mosaic announced that its wholly owned subsidiary FWPLP completed the sale of its Decade warehouse located at 1820, 31^st Street North and its Braman warehouse located at 2930, 9^th 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.
2. On August 1, 2014 Mosaic's subsidiary FWDLP entered into a joint venture with Harbour Equity which resulted in Mosaic recognizing, under IFRS, a non-cash gain of $1,414 on the disposition of a 50% interest in FWDLP to Harbour Equity.

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 September 30, 2014, by (ii) weighted average common shareholders' equity for the same period, yields a ratio of 44% (2013 - 48%) 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  and nine-month periods ended September 30, 2014 yields payout ratios of 36% (2013 - 49%) and 51% (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 during the period to holders of Mosaic preferred securities, series "A" shares and common shares by income from continuing operations before tax for the period, for each of the three and nine-month periods ended September 30, 2014 yields payout ratios of 46% (2013 - 55%) and 64% (2013 - 54%), respectively.

DISCUSSION - FINANCIAL HIGHLIGHTS

Three-Month Financial Highlights

Revenue for the three months ended September 30, 2014 increased 90% or $22,674 to $47,992 when compared to the same period in 2013, primarily due to the addition of revenue from Streamline Mechanical L.P. and Streamline Projects L.P. (collectively "Streamline") which was acquired effective June 1, 2014 and the addition of revenue from Place-Crete which was acquired effective September 1, 2014.

Adjusted EBITDA for the three months ended September 30, 2014 increased 65% or $3,240 to $8,257 when compared to the same period in 2013. This can be primarily attributed to two factors:

• Three months of operations of Streamline that was not part of Mosaic in the 2013 comparative period.

• One month of operations of Place-Crete that was not part of Mosaic in the 2013 comparative period.

Free Cash Flow for the three-month period ended September 30, 2014 increased 66% or $2,126 to $5,370 when compared to the same period in 2013. The primary reasons for this increase are the factors discussed above.

Nine-Month Financial Highlights

Revenue for the nine months ended September 30, 2014 increased 62% or $40,320 to $105,851 when compared to the same period in 2013. The primary reasons for the increase in revenue are due to the additions of four months of revenue from Streamline and one month of revenue from Place-Crete.

Adjusted EBITDA for the nine months ended September 30, 2014 increased 18% or $2,609 to $17,419 when compared to the same period in 2013. The primary reasons for the increase in EBITDA are due to the additions of four months of revenue from Streamline and one month of revenue from Place-Crete.

Free Cash Flow for the nine-month period ended September 30, 2014 increased 20% or $1,923 to $11,756 when compared to the same period in 2013 as a result of the factors discussed above.

Non-IFRS Financial Measures

Below are definitions of key performance indicators used by management of Mosaic that are not recognized 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.

¹Adjusted EBITDA:  is defined as income from continuing operations before tax 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 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.  Free Cash Flow is also a performance measure which may be utilized by investors to analyze the free cash available for preferred security distributions, common share dividends, acquisitions and additional investment into existing businesses.

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.

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, in this MD&A, 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, 2014.

⁵Preferred 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.

⁶Combined 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 DRIP) to holders of preferred securities, series "A" shares and common 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 pay dividends on its series "A" shares and common 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.

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 objective is to create long term value for its shareholders and business partners and to have that reflected in its share price.  Mosaic believes that this is achieved by growing free cash flow per share and retained earnings.  Mosaic does this by acquiring businesses 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 may contain 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. Some of the assumptions made by Mosaic, upon which such forward-looking statements are based include, but are not limited to: that the business of Mosaic will continue on a basis at least consistent with prior years, including as to the ability of Mosaic to identify acquisition targets and complete acquisitions.  In addition, the risks and uncertainties which could cause actual results to differ materially from the those expressed or implied by the forward-looking statements include, but are not limited 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/mosaic11112014.pdf

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

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