Acasta Enterprises Inc. Reports 2017 Financial Results

TORONTO--()--Acasta Enterprises Inc. (TSX:AEF) (“Acasta” or the “Company”) today announced the release of its consolidated financial statements for the year and quarter ended December 31, 2017, management discussion and analysis (MD&A) and Annual Information Form (“AIF”). These documents, among others, will be posted on the Company’s website at www.acastaenterprises.com and SEDAR at www.sedar.com. All values in this news release and the Company’s financial disclosures are in Canadian dollars unless otherwise stated.

“Having completed the sale of Stellwagen, the Board and management intend to continue on the path of reducing Acasta’s overall indebtedness and focusing on the consumer products businesses. The Company is also in the process of streamlining its corporate operations with a view to materially reducing its cost structure and thereby strengthening its financial position,” commented Ian Kidson, Interim Chief Executive Officer of the Company.

Financial Highlights

  • Acasta reported its first year as an operating company, consolidating the results of the three businesses that it acquired on January 3, 2017.
  • Acasta’s 2017 consolidated results included revenues of $366.5 million, a net loss of $413.1 million or $4.65 per share, adjusted net income of $8.1 million or $0.09 per share and adjusted EBITDA of $134.4 million.
  • Acasta reported impairment losses totaling $440.7 million ($423.6 million net of tax) during the year ended December 31, 2017, including goodwill and intangible asset impairments of $240.0 million related to Stellwagen Group Limited (“Stellwagen”) and a goodwill impairment of $200.7 million related to Apollo Health and Beauty Care Inc. (“Apollo”).
  • As a result of the sale of Stellwagen, which closed on March 27, 2018, Acasta significantly reduced its over-all bank indebtedness to approximately U.S.$153.0 million and eliminated the additional indebtedness associated with Stellwagen’s on-balance sheet financings of several aircraft through the sale of Stellwagen.

Corporate Highlights

On March 27, 2018, the sale of Acasta’s Stellwagen business unit closed in exchange for:

  • The cancellation of 26 million Class B Shares (reducing outstanding shares by 27.2%);
  • U.S. $35.0 million in cash;
  • The termination of the Stellwagen earn-out; and
  • Up to an additional U.S.$5.0 million if proceeds from the sale of certain profit participating notes (“PPNs”) issued by a subsidiary of Stellwagen are below a specified threshold.

Our MD&A will provide additional details and will describe the results from each of the reportable segments in our portfolio.

2017 Financial Statements and Investor Conference Call

Acasta will release its fourth quarter and year-end 2017 financial results after market close on Monday April 2, 2018 instead of March 29, 2018 as previously announced.

Acasta’s senior management will host a conference call on Tuesday, April 3, 2018 at 9:00 a.m. (E.D.T.) to discuss the Company’s financial and operating results. Please dial 1-416-406-0743 or toll-free (Canada/US) 1-800-806-5484 with passcode 1948342#. To ensure your participation, please join approximately five minutes prior to the scheduled start of the conference call.

The conference call will be archived on the Company’s website at www.acastaenterprises.com and will be available for replay at 1-905-694-9451 or toll-free (Canada/US) 1-800-408-3053 with passcode 8204336#, expiring on May 15, 2018.

Advisories:

Cautionary Note Concerning Forward Looking Statements

This news release includes forward looking statements. All such statements constitute forward looking information within the meaning of applicable securities law and are made pursuant to the “safe harbour” provisions of applicable securities laws. Forward looking statements include, but are not limited to, monetizing the PPNs and statements about other anticipated future events or results, including comments with respect to Company’s future financial performance and condition. Forward looking statements are statements that are predictive in nature, depend upon or refer to future events or conditions and are identified by words such as “will”, “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates” or similar expressions concerning matters that are not historical facts. Such statements are based on current expectations of the Company’s management and inherently involve numerous risks and uncertainties, known and unknown, including economic factors. The forward-looking information contained in this news release is presented for the purpose of assisting readers in understanding the Company’s business and strategic priorities and objectives. A number of risks, uncertainties and other factors may cause actual outcomes or financial results to differ materially from the forward looking statements contained in this news release, including, among other factors, those referenced in the section entitled “Risk Factors” in the Company’s annual information form for the year ended December 31, 2017, a copy of which is available on the SEDAR website at www.sedar.com under the Company’s profile. Forward looking statements contained in this news release are not guarantees of future outcomes performance and, while forward looking statements are based on certain assumptions that the Company considers reasonable, actual events could differ materially from those expressed or implied by forward looking statements made by the Company. Readers are cautioned to consider these and other factors carefully when making decisions with respect to the Company and to not place undue reliance on forward looking statements. Circumstances affecting the Company may change rapidly. Except as may be expressly required by applicable law, Acasta does not undertake any obligation to update publicly or revise any such forward looking statements, whether as a result of new information, future events or otherwise. These cautionary statements expressly qualify all forward looking statements in this new release.

Non-IFRS Financial Performance Measures (Unaudited)

Adjusted net income (loss), EBITDA and adjusted EBITDA are not recognized measures under International Financial Reporting Standards (“IFRS”) and this data may not be comparable to data presented by other companies.

Adjusted net income (loss) is calculated by adjusting net income (loss) as recorded in the unaudited condensed consolidated interim statements of income (loss) and comprehensive income (loss) for the exclusion of certain other income and expense items determined in accordance with IFRS. The Company believes that this generally accepted measure allows the evaluation of the results of continuing operations and is useful in making comparisons between periods. Adjusted net income (loss) is intended to provide investors with information about the Company's continuing income generating capabilities. Management uses this measure to monitor and plan for the operating performance of the Company in conjunction with other financial data prepared in accordance with IFRS.

EBITDA is calculated by adjusting net income (loss) as recorded in the unaudited condensed consolidated interim statements of income (loss) and comprehensive income (loss) for finance costs, current and deferred income tax, depreciation and amortization expenses. The Company believes that this generally accepted measure allows the evaluation of the results of continuing operations and is useful in making comparisons between periods. EBITDA is intended to provide investors with information about the Company's continuing income generating capabilities. Management uses this measure to monitor and plan for the operating performance of the Company in conjunction with other financial data prepared in accordance with IFRS.

Adjusted EBITDA is calculated by adjusting net income (loss) as recorded in the unaudited condensed consolidated interim statements of income (loss) and comprehensive income (loss) for the exclusion of certain other income and expense items determined in accordance with IFRS (the calculation for adjusted net income (loss)) and then further adjusting for finance costs, current and deferred income tax, depreciation and amortization expenses. The Company believes that this generally accepted measure allows the evaluation of the results of continuing operations and is useful in making comparisons between periods. Adjusted EBITDA is intended to provide investors with information about the Company’s continuing income generating capabilities. Management uses this measure to monitor and plan for the operating performance of the Company in conjunction with other data prepared in accordance with IFRS.

       
ACASTA ENTERPRISES INC.
 
NON-IFRS FINANCIAL PERFORMANCE MEASURES RECONCILIATION (UNAUDITED)
(In thousands of Canadian dollars, except share and per share amounts)
 
 
Year Ended December 31, 2017
Reportable Segments   Year
Ended
December 31,
2016
NON-IFRS FINANCIAL PERFORMANCE MEASURES
(in thousands of Canadian dollars,
except share and per share amounts)
Consumer
Products
  Aviation   Other Acasta
Consolidated
Acasta
Consolidated
Net income (loss) $ (180,622 ) $ (249,050 ) $ 16,606 $ (413,066 ) $ (36,009 )
Impairment of intangible assets and goodwill, net of tax 186,002 237,571 423,573
Gain on redemption of Class A Shares (3,699 ) (3,699 )
Net gain on disposal of property, plant and equipment (206 ) (206 )
Qualifying Acquisition transaction costs 4,627 4,627
ECN Acquisition transaction costs 628 628
Costs to prepare aircraft for sale 706 706
Net (gain) loss on foreign exchange (1,063 ) 609 (6,301 ) (6,755 )
Amortization of inventory fair value increment 1,946 1,946
Other non-recurring costs   359             359      
Adjusted net income (loss) $ 6,622   $ (9,742 ) $ 11,233   $ 8,113   $ (36,009 )
Net loss per share — basic and diluted(1) $ (4.65 ) $ (3.85 )
Adjusted net income (loss) per share — basic $ 0.09 $ (3.85 )
Adjusted net income (loss) per share — diluted(1) $ 0.09 $ (3.85 )
Weighted average number of Class B Shares outstanding — basic 88,795,384 9,349,648
Weighted average number of Class B Shares outstanding — diluted(1) 88,808,863 9,349,648
Finance costs $ 5,576 $ 25,954 $ 11,702 $ 43,232 $
Current income tax expense 9,009 880 9,889
Deferred income tax recovery (22,232 ) (6,117 ) (28,349 )
Depreciation of property, plant and equipment and amortization of intangible assets   30,966     53,349         84,315      
EBITDA $ (157,303 ) $ (174,984 ) $ 28,308   $ (303,979 ) $ (36,009 )
Adjusted EBITDA $ 44,684   $ 66,754   $ 22,935   $ 134,373   $ (36,009 )

________________________

(1)   The dilutive impact of Class B Shares related to the Company’s DSU Plan was excluded from the computation of diluted weighted average number of Class B Shares outstanding in periods where the Company reported a net loss or adjusted net loss because their effect would have been anti-dilutive.
 
ACASTA ENTERPRISES INC.
 
NON-IFRS FINANCIAL PERFORMANCE MEASURES RECONCILIATION (UNAUDITED)
(In thousands of Canadian dollars, except share and per share amounts)
     
 
Acasta Consolidated
Three Months Ended  
NON-IFRS FINANCIAL PERFORMANCE MEASURES
(in thousands of Canadian dollars)
March 31,
2017
  June 30,
2017
  September 30,
2017
  December 31,
2017
Year
Ended
December 31,
2017
Net income (loss) $ 4,198 $ (1,242 ) $ (9,739 ) $ (406,283 ) $ (413,066 )
Impairment of intangible assets and goodwill, net of tax 423,573 423,573
Gain on redemption of Class A Shares (3,699 ) (3,699 )
Net loss (gain) on disposal of property, plant and equipment (aircraft) 1,083 (1,289 ) (206 )
Qualifying Acquisition transaction costs 4,627 4,627
ECN Acquisition transaction costs 628 628
Costs to prepare aircraft for sale 706 706
Net loss (gain) on foreign exchange 124 (1,468 ) (1,041 ) (4,370 ) (6,755 )
Amortization of inventory fair value increment 1,946 1,946
Other non-recurring costs   359                 359  
Adjusted net income (loss) $ 9,344   $ (3,371 ) $ (10,780 ) $ 12,920   $ 8,113  
Net income (loss) per share — basic and diluted(1) $ 0.05 $ (0.01 ) $ (0.11 ) $ (4.49 ) $ (4.65 )
Adjusted net income (loss) per share — basic $ 0.11 $ (0.04 ) $ (0.12 ) $ 0.14 $ 0.09
Adjusted net income (loss) per share — diluted(1) $ 0.11 $ (0.04 ) $ (0.12 ) $ 0.14 $ 0.09
Weighted average number of Class B shares outstanding — basic 85,642,902 88,435,533 90,494,283 90,494,283 88,795,384
Weighted average number of Class B shares outstanding — diluted(1) 85,642,902 88,435,533 90,494,283 90,534,097 88,808,863
Finance costs $ 6,652 $ 10,045 $ 12,182 $ 14,353 $ 43,232
Current income tax expense 4,034 3,494 1,189 1,172 9,889
Deferred income tax recovery (3,090 ) (2,244 ) (2,381 ) (20,634 ) (28,349 )
Depreciation of property, plant and equipment and amortization of intangible assets   20,091     22,381     20,449     21,394     84,315  
EBITDA $ 31,885   $ 32,434   $ 21,700   $ (389,998 ) $ (303,979 )
Adjusted EBITDA $ 37,031   $ 30,305   $ 20,659   $ 46,378   $ 134,373  

________________________

(1)   The dilutive impact of Class B Shares related to the Company’s DSU Plan was excluded from the computation of diluted weighted average number of Class B Shares outstanding in periods where the Company reported a net loss or adjusted net loss because their effect would have been anti-dilutive.
 
ACASTA ENTERPRISES INC.
 
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of Canadian dollars)
       
 
As at
December 31, 2017
As at
December 31, 2016
Assets
Current assets
Cash and cash equivalents $ 26,139 $ 187
Trade and other receivables 39,644 597
Inventories 48,423
Prepaid expenses and deposits 54,548 25
Current portion of loans receivable 11,257
Other current assets 5,534
Restricted cash       405,002  
$ 185,545 $ 405,811
Non-current assets
Property, plant and equipment $ 617,594 $
Intangible assets 275,469
Goodwill 176,552
Long-term loans receivable 189,974
Non-current deposits 5,077
Other non-current assets   12,889     710  
$ 1,277,555   $ 710  
Total assets $ 1,463,100   $ 406,521  
 
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 37,107 $ 8,779
Current portion of long-term debt 276,735
Income taxes payable 7,232
Other current liabilities 14,333 13,504
Class A Restricted Voting Shares subject to redemption       409,342  
$ 335,407 $ 431,625
Non-current liabilities
Long-term debt $ 707,211 $
Deferred tax liabilities 20,306
Other non-current liabilities   31,520      
$ 759,037   $  
Total liabilities $ 1,094,444   $ 431,625  
 

Shareholders’ equity (deficiency)

Share capital $ 849,383 $ 14,995
Contributed surplus 300
Warrants 3,939 3,939
Deficiency (457,104 ) (44,038 )
Accumulated other comprehensive loss   (27,862 )    
Total shareholders’ equity (deficiency) $ 368,656   $ (25,104 )
Total liabilities and shareholders’ equity (deficiency) $ 1,463,100   $ 406,521  
 
ACASTA ENTERPRISES INC.
 
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands of Canadian dollars, except share and per share amounts)
       
 
Year ended
December 31, 2017
Year ended
December 31, 2016
Revenue $ 366,521 $ 1,845
Cost of revenue, expenses, and other items
Cost of revenue 187,616
Selling, general and administrative expense 171,896 10,886
Finance costs 43,232
Net unrealized loss on change in fair value of financial instruments 2,909 26,968
Impairment of intangible assets and goodwill 440,746
Net gain on foreign exchange (6,755 )
Other income, net   (41,597 )    
Loss before income tax $ (431,526 ) $ (36,009 )
Current income tax expense 9,889
Deferred income tax recovery   (28,349 )    
Net loss $ (413,066 ) $ (36,009 )
Comprehensive loss
Items that may be subsequently reclassified to net income (loss)
Foreign currency translation $ (29,377 ) $
Net movement in cash flow hedges, net of tax   1,515      
Other comprehensive loss $ (27,862 ) $  
Total comprehensive loss $ (440,928 ) $ (36,009 )
Net loss per share
Basic $ (4.65 ) $ (3.85 )
Diluted $ (4.65 ) $ (3.85 )
Other comprehensive loss per share
Basic $ (0.31 ) $
Diluted $ (0.31 ) $
Weighted average number of Class B Shares outstanding
Basic 88,795,384 9,349,648
Diluted 88,795,384 9,349,648
 
ACASTA ENTERPRISES INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)

 

       
 
Year ended
December 31, 2017
Year ended
December 31, 2016
Operating activities
Net loss $ (413,066 ) $ (36,009 )
Adjustments for non-cash items and other adjustments:
Share-based compensation 300
Depreciation of property, plant and equipment 26,279
Amortization of intangible assets 58,036
Gain on redemption of Class A Restricted Voting Shares (3,699 )
Gain on disposal of property, plant and equipment (206 )
Gain on revaluation of Stellwagen Vendors Earn-out (37,143 )
Net unrealized (gain) loss on change in fair value of financial liabilities (236 ) 26,968
Finance costs 43,232
Current income tax expense 9,889
Deferred income tax recovery (28,349 )
Impairment of intangible assets and goodwill 440,746
Net gain on foreign exchange (6,755 )
Amortization of inventory fair value increment 3,360
Changes in non-cash working capital   (77,770 )   8,688  
Net cash flows provided by (used in) operating activities $ 14,618 $ (353 )
Income taxes paid   (4,920 )    
Cash provided by (used in) operating activities $ 9,698   $ (353 )
 

Investing activities

Additions to loans receivable, net $ (198,875 ) $
Additions to property, plant and equipment (311,317 )
Additions to intangible assets (68,464 )
Proceeds on disposal of property, plant and equipment 53,099
Proceeds from restricted cash to finance acquisitions 106,240
Acquisition of Apollo (161,545 )
Acquisition of JemPak (55,448 )
Acquisition of Stellwagen (90,781 )
Interest received on restricted cash and cash equivalents held in escrow 4
Proceeds on maturity of restricted cash and cash equivalents held in escrow 2,020,533
Investment in restricted cash and cash equivalents held in escrow       (2,022,383 )
Cash used in investing activities $ (727,091 ) $ (1,846 )
 

Financing activities

Proceeds from debt and credit facilities $ 737,372 $
Repayment of debt (91,187 )
Payment of debt issuance costs (24,175 ) (635 )
Proceeds from restricted cash to fund redemption of Class A Restricted Voting Shares and deferred underwriters’ commission 298,761
Redemption of Class A Restricted Voting Shares (285,680 )
Proceeds from private placement of Class B Shares 159,551
Payment of deferred underwriters’ commission (13,081 )
Payment of share issuance costs related to private placement (1,136 ) (75 )
Interest paid   (35,342 )    
Cash provided by (used in) financing activities $ 745,083   $ (710 )
Net increase (decrease) in cash and cash equivalents during the year $ 27,690 $ (2,909 )
Foreign exchange impact on cash and cash equivalents held in foreign currencies (1,738 )
Cash and cash equivalents, beginning of year   187     3,096  
Cash and cash equivalents, end of year $ 26,139   $ 187  

Contacts

Acasta Enterprises Inc.
Ian Kidson, 1-647-725-6707
Interim Chief Executive Officer
www.acastaenterprises.com

Release Summary

Acasta Enterprises Inc. Reports 2017 Financial Results

Contacts

Acasta Enterprises Inc.
Ian Kidson, 1-647-725-6707
Interim Chief Executive Officer
www.acastaenterprises.com