Reports Second Quarter 2013 Financial Results and Net Income of $2.4 Million
Calgary, Alberta CANADA, August 27, 2013 /FSC/ - Mosaic Capital Corporation, ("Mosaic") (TSX-V Symbols: M and M.PR.A) has released its unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2013.
"I am pleased with our second quarter results showing the continued growth of our subsidiaries," commented John Mackay, Executive Chairman and CEO. Mr. Mackay added, "Historically the second quarter is our slowest quarter however as we continue to make future acquisitions we would expect to see less seasonality. We continue to see growth in our financial metrics and are reviewing acquisition opportunities that we believe will be accretive and provide future long term growth for shareholders. With a current cash position as of June 30, 2013 of approximately $37 million dollars and a strong pipeline of deal flow we are very well positioned for future acquisitions."
Second Quarter 2013 Financial and Operational Highlights
* 2013 Q2 Revenue increased 25% from Q2 2012 to $19.1 million;
* 2013 Q2 Income from Operations and Adjusted EBITDA1 increased 22% from Q2 2012 to $3.3 million;
* 2013 Q2 Free Cash Flow2 increased 19% from Q2 2012 to $1.7 million;
* 2013 Q2 Net Income and Comprehensive Income increased 109% from Q2 2012 to $2.4 million;
* 2013 Q2 Preferred Security Payout Ratio3 was 110% for the three months and 57% for the six months ended June 30, 2013;
* 2013 Q2 Organic growth for the Industrial Segment gave rise to growth in revenue of 10.6% and growth in income from operations of 13.4%, each as compared with Q2 2012. This organic growth does not take into account the acquisition of Kendall's Supply.
Selected Second Quarter 2013 Highlights
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All amounts are in thousands except 2013 2012 % Change
% and share data
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Revenue $19,111 $15,309 +25%
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Income from Operations $3,283 $2,698 +22%
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Adjusted EBITDA 1 $3,283 $2,698 +22%
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Cash Flow prior to $2,689 $2,308 +17%
non-cash working capital
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Free Cash Flow 2 $1,697 $1,429 +19%
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Free Cash Flow per $0.20 $0.17 +18%
common share (diluted)
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Selected Year-to-date Financial Results
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All amounts are in thousands except 2013 2012 % Change
% and share data
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Revenue $40,213 $31,616 +27%
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Income from Operations $7,544 $6,104 +24%
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Adjusted EBITDA 1 $9,793 $6,104 +60%
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Cash Flow prior to non-cash $6,354 $5,254 +21%
working capital
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Free Cash Flow 2 $6,590 $3,680 +79%
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Free Cash Flow per common $0.79 $0.44 +80%
share (diluted)
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Adjusted Return on Common 53% - -
Equity[4
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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 table reconciles Adjusted EBITDA and Free Cash Flow to income from continuing operations before tax, which is the most directly comparable measure under IFRS:
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Adjusted EBITDA Three months ended
June 30,
2013 2012
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Income from continuing operations before tax $ 2,397 $ 1,119
Amortization 661 1,336
Accretion 34 73
Securities-based compensation 187 54
Non-operating items
(Gain) loss on sale of equipment 4 (25)
Finance income (88) (16)
Finance expense 88 157
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Adjusted EBITDA $ 3,283 $ 2,698
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Adjusted EBITDA Six months ended
June 30,
2013 2012
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Income from continuing operations before tax $ 7,836 $ 3,910
Amortization 1,301 1,873
Accretion 72 73
Securities-based compensation 515 108
Non-operating items
(Gain) loss on sale of equipment 24 (68)
Finance income (138) (22)
Finance expense 183 230
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Adjusted EBITDA $ 9,793 $ 6,104
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Free Cash Flow Three months ended
June 30,
2013 2012
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Adjusted EBITDA $ 3,283 $ 2,698
Non-controlling interest of
Adjusted EBITDA 768) (643)
Mosaic's share of current
income tax expense (467) (197)
Mosaic's share of Sustaining
Capital Expenditures (351) (429)
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Free Cash Flow[(A)] $ 1,697 $ 1,429
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Free Cash Flow Six months ended
June 30,
2013 2012
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Adjusted EBITDA $ 9,793 $ 6,104
Non-controlling interest
Adjusted EBITDA of (1,723) (1,438)
Mosaic's share of current
income tax expense (905) (508)
Mosaic's share of Sustaining
Capital Expenditures (575) (478)
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Free Cash Flow[(A)] $ 6,590 $ 3,680
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(A) Free Cash Flow has been calculated to
include a deduction for Mosaic's share of current income tax expense (whereas prior to June 30, 2012 it was calculated before any deduction for Mosaic's share of current income tax expense). This change in calculation from that previously reported for the period ended June 30, 2012 is to reflect a calculation which is consistent with that being utilized for calculation of the Preferred Security Payout Ratio for all periods ending September 30, 2012 and going forward.
Adjusted Return on Common Equity compared to IFRS measures: 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 June 30, 2013, by (ii) weighted average common shareholders' equity for the same period, yields a ratio of 69% 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 six months ended June 30, 2013, yields payout ratios of 78% (2012 - 114%) and 48% (2012 - 65%) respectively.
Year-to-date results to June 30, 2013
The strong financial condition of Mosaic as at June 30, 2013 is attributable to the solid financial performance during the first six months of 2013 as well as the strong financial condition of Mosaic entering the year. The second quarter is typically expected to be the weakest financial operating quarter for the Company due to seasonal factors.
For the six months ended June 30, 2013 the positive change in the financial performance of Mosaic was primarily attributable to three factors: first, the acquisition of Kendall's Supply (August 2012) which was not part of Mosaic in the 2012 comparative period; second, organic growth during the quarter in our existing businesses (exclusive of Kendall's Supply) in both revenue of 10.6% and income from operations of 13.4%; and third, a $2,249 gain on sale of real estate within our Real Estate Segment. The $2,249 gain on sale of real estate had a significant positive impact on a number of key performance indicators including Free Cash Flow and Adjusted EBITDA and metrics derived therefrom.
As of June 30, 2013 Mosaic had a cash position of $36,571 (December 31, 2012 - $30,818) and net working capital of $53,071 (December 31, 2012 - 53,052) which gives rise to a current ratio of 4.6:1 (December 31, 2012 - 3.2:1). The increase in the current ratio was largely due to (i) Mosaic's positive cash flow from operations in the period of $2,689 which was driven primarily by the strong financial performance of Remote Waste, Ambassador and Kendall's Supply within the Industrial Segment, and (ii) the positive results of the disposition during the period of two buildings held for sale resulting in net cash of $8,527 after costs of disposition and repayment of the operating loan of $5,828 necessitated by the disposition.
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 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; (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 dividend 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 June 30, 2013. Management only commenced reporting on this metric for the twelve month period ending December 31, 2012 and, accordingly, there is no comparative measure for the twelve month period ending June 30, 2012.
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.
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http://www.usetdas.com/pr/mosaic08272013.pdf
Source: Mosaic Capital Corporation (TSXV: M - TSXV: M.PR.A)
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