Acasta Enterprises Reports First Quarter Results

TORONTO--()--Acasta Enterprises Inc. (TSX: AEF) (“Acasta” or the “Company”) today announced its consolidated financial results for the quarter ended March 31, 2018 and provided the following corporate update.

Financial and Operating Highlights

  • Acasta’s results from continuing operations for the three-month period ended March 31, 2018 included revenues of $67.0 million, a net loss of $38.9 million or $0.44 per share (basic and diluted), an adjusted net loss of $25.2 million or $0.28 per share (basic and diluted) and adjusted EBITDA of ($4.6) million compared to revenues of $63.8 million, a net loss of $0.3 million or $0.00 per share (basic and diluted), adjusted net income of $3.1 million or $0.04 per share (basic and diluted) and adjusted EBITDA of $12.6 million for the three-month period ended March 31, 2017.
  • Acasta’s results from discontinued operations for the three-month period ended March 31, 2018 included revenues of $22.5 million, a net loss of $129.9 million or $1.45 per share (basic and diluted), an adjusted net loss of $96.8 million or $1.08 per share (basic and diluted) and adjusted EBITDA of ($81.9) million compared to revenues of $29.2 million, a net income of $4.5 million or $0.05 per share (basic and diluted), adjusted net income of $6.2 million or $0.07 per share (basic and diluted) and adjusted EBITDA of $24.5 million for the three-month period ended March 31, 2017.
  • On March 27, 2018, Acasta closed the sale of Stellwagen Group (“Stellwagen”), disposing of and derecognizing substantially all of the net assets in the former Aviation reportable segment.
  • On May 14, 2018, Acasta monetized its interest in the Stelloan profit participating notes (“PPNs”) for net proceeds of approximately $28.5 million. These proceeds exclude the additional U.S. $5 million in downside protection due from the purchaser of Stellwagen pursuant to the sale agreement.
  • As a result of the sale of Stellwagen and the PPNs, Acasta has effectively reduced its total indebtedness by approximately $68.8 million.
  • Acasta entered into a definitive agreement to sell JemPak Corporation (“JemPak”) on May 10, 2018 to Henkel Canada Corporation, a wholly-owned subsidiary of Henkel AG & Co. KGaA (“Henkel”) at a purchase price of $118 million on a cash and debt free basis, subject to customary working capital adjustments and indemnities. The parties expect the transaction to close on or about May 31, 2018.
  • At March 31, 2018, the Company was in breach of certain financial leverage ratio covenants under its credit agreements. Failure to meet these covenants at March 31, 2018 caused the debt outstanding under the Credit Facility and US Credit Facility (the “Lenders”) to be presented as a current liability, which the Company would not be able to satisfy if called by its lenders. In response, the Company sought and obtained waivers from the lenders in respect of such covenants subsequent to March 31, 2018 and also modified terms of the covenant requirements under the Lenders’ credit agreements that resulted in an increase in the maximum permissible debt to EBITDA ratios for the period through the earlier of the sale of JemPak and July 31, 2018, subject to certain conditions.

First Quarter 2018 Results Conference Call:

Acasta’s senior management will host a conference call on Wednesday, May 16, 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 3696205#. 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 8033218#, expiring on June 21, 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 the 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 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 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 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 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, being 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

(In thousands of Canadian dollars, except share and per share amounts)

 
Three Months Ended March 31, 2018 Three Months Ended March 31, 2017

Continuing
Operations

   

Discontinued
Operations

   

Continuing
Operations

   

Discontinued
Operations

   
Reportable Segments Reportable Segments
NON-IFRS FINANCIAL PERFORMANCE MEASURES
(in thousands of Canadian dollars,
except share and per share amounts)

Consumer
Products

   

Other

Aviation

Acasta
Consolidated

Consumer
Products

    Other Aviation

Acasta
Consolidated

Net income (loss) from continuing operations $(16,141) $(22,728) $— $(38,869) $1,869 $(2,142) $— $(273)
Net income (loss) from discontinued operations, net of tax (129,945) (129,945) 4,471 4,471
Impairment of goodwill 12,248 12,248
Loss on revaluation of loans receivable 33,121
Gain on redemption of Class A Shares (3,699) (3,699)
Loss on disposal of property, plant and equipment 1,083
Qualifying Acquisition transaction costs 4,627 4,627
ECN Acquisition transaction costs
Costs to prepare aircraft for sale 706
Net (gain) loss on foreign exchange (557) 2,006 61 1,449 244 (95) (25) 149
Amortization of inventory fair value increment 1,946 1,946
Other non-recurring costs 359 359
Adjusted net income (loss) from continuing operations $(4,450) $(20,722) $— $(25,172) $4,418 $(1,309) $— $3,109
Adjusted net income (loss) from discontinued operations, net of tax $— $— $(96,763) $(96,763) $— $— $6,235 $6,235
Finance costs $1,218 $12,630 $7,342 $13,848 $1,046 $192 $5,414 $1,238
Current income tax expense 547 (379) 547 3,016 1,018 3,016
Deferred income tax recovery (1,743) (71) (1,743) (2,353) (737) (2,353)
Depreciation of property, plant and equipment and amortization of intangible assets 7,906 8,008 7,906 7,555 12,536 7,555
EBITDA from continuing operations $(8,213) $(10,098) $— $(18,311) $11,133 $(1,950) $— $9,183
EBITDA from discontinued operations (115,045) (115,045) 22,702 22,702
EBITDA $(8,213) $(10,098) $(115,045) $(133,356) $11,133 $(1,950) $22,702 $31,885
Adjusted EBITDA from continuing operations $3,478 $(8,092) $— $(4,614) $13,682 $(1,117) $— $12,565
Adjusted EBITDA from discontinued operations (81,863) (81,863) 24,466 24,466
Adjusted EBITDA $3,478 $(8,092) $(81,863) $(86,477) $13,682 $(1,117) $24,466 $37,031
 
                             

ACASTA ENTERPRISES INC.

 

NON-IFRS FINANCIAL PERFORMANCE MEASURES RECONCILIATION (Continued)

(In thousands of Canadian dollars, except share and per share amounts)

 
Three Months Ended March 31, 2018 Three Months Ended March 31, 2017

Continuing
Operations

   

Discontinued
Operations

Continuing
Operations

Discontinued
Operations

Reportable Segments Reportable Segments
NON-IFRS FINANCIAL PERFORMANCE MEASURES
(in thousands of Canadian dollars,
except share and per share amounts)
Consumer
Products
Other Aviation

Acasta
Consolidated

Consumer
Products
Other Aviation

Acasta
Consolidated

Net loss from continuing operations per share — basic (0.44) (0.00)
Net income (loss) from discontinued operations per share — basic (1.45) 0.05
Net loss from continuing operations per share — diluted(1) (0.44) (0.00)
Net income (loss) from discontinued operations per share — diluted(1) (1.45) 0.05
Adjusted net income (loss) from continuing operations per share — basic (0.28) 0.04
Adjusted net income (loss) from discontinued operations per share — basic (1.08) 0.07
Adjusted net income (loss) from continuing operations per share — diluted(1) (0.28) 0.04
Adjusted net income (loss) from discontinued operations per share — diluted(1) (1.08) 0.07
Weighted average number of Class B shares outstanding — basic 89,325,743 85,642,902
Weighted average number of Class B shares outstanding — diluted 89,402,953 85,642,902
(1)       The dilutive impact of Class B Shares related to the Company’s DSU Plan, which commenced on July 1, 2017, was excluded from the computation of diluted weighted average number of Class B Shares outstanding where the Company reported a net loss or adjusted net loss because their effect would have been anti-dilutive.
 
         

ACASTA ENTERPRISES INC.

 

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(in thousands of Canadian dollars)

 
As at
March 31, 2018
As at
December 31, 2017
Assets
Current assets
Cash and cash equivalents $3,625 $26,139
Trade and other receivables 36,463 39,644
Inventories 54,096 48,423
Prepaid expenses and deposits 4,392 54,548
Investment in Profit Participating Notes 32,638
Other current assets 6,960 5,534
Current portion of loans receivable 11,257
$138,174 $185,545
Non-current assets
Property, plant and equipment $62,462 $617,594
Intangible assets 139,238 275,469
Goodwill 94,663 176,552
Long-term loans receivable 189,974
Non-current deposits 5,077
Other non-current assets 12,889
$296,363 $1,277,555
Total assets $434,537 $1,463,100
Liabilities
Current liabilities
Accounts payable and accrued liabilities $31,140 $37,107
Current debt obligations 196,581 276,735
Income taxes payable 7,314 7,232
Other current liabilities 5,226 14,333
$240,261 $335,407
Non-current liabilities
Deferred tax liabilities $18,104 $20,306
Other non-current liabilities 7,265 31,520
Long-term debt 707,211
$25,369 $759,037
Total liabilities $265,630 $1,094,444
Shareholders’ equity
Share capital $593,241 $849,383
Contributed surplus 198,028 300
Warrants 3,939 3,939
Deficiency (626,301) (457,104)
Accumulated other comprehensive loss (27,862)
Total shareholders’ equity $168,907 $368,656
Total liabilities and shareholders’ equity $434,537 $1,463,100
 
         

ACASTA ENTERPRISES INC.

 

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands of Canadian dollars, except share and per share amounts)

 
Three months ended
March 31, 2018
Three months ended
March 31, 2017
Revenue $67,014 $63,774
Cost of revenue, expenses, and other items
Cost of revenue 53,324 44,714
Selling, general and administrative expense 24,016 20,958
Finance costs 13,848 1,238
Impairment of goodwill 12,248
Net loss on foreign exchange 1,449 149
Other loss (income), net 2,194 (3,675)
Income (loss) before income tax $(40,065) $390
Current income tax expense 547 3,016
Deferred income tax recovery (1,743) (2,353)
Net loss from continuing operations $(38,869) $(273)
Net income (loss) from discontinued operations, net of tax (129,945) 4,471
Net income (loss) $(168,814) $4,198
Other comprehensive (loss) from discontinued operations, net of tax $— $(1,529)
Total comprehensive income (loss) $(168,814) $2,669
Net income (loss) per share
Basic — continuing operations $(0.44) $—
Basic — discontinued operations $(1.45) $0.05
Diluted — continuing operations $(0.44) $—
Diluted — discontinued operations $(1.45) $0.05
 
         

ACASTA ENTERPRISES INC.

 

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(in thousands of Canadian dollars)

 
Three months
ended
March 31, 2018
Three months
ended
March 31, 2017
Operating activities
Net income (loss) $(168,814) $4,198
Adjustments for non-cash items and other adjustments:
Share-based compensation 113
Depreciation of property, plant and equipment 6,596 5,822
Amortization of intangible assets 9,300 14,269
Net unrealized loss (gain) on change in fair value of financial instruments 33,121 (236)
Finance costs 13,848 6,652
Current income tax expense 547 4,034
Deferred income tax recovery (1,743) (3,090)
ECN contingent consideration payable in Class B Shares 1,005
Impairment of goodwill 12,248
Loss on disposal of Aviation reportable segment 97,721
Net loss on foreign exchange 1,449 124
Gain on redemption of Class A Restricted Voting Shares (3,699)
Loss on disposal of property, plant and equipment 1,083
Amortization of inventory fair value increment 3,355
Changes in non-cash working capital (599) (13,227)
Cash provided by operating activities $4,792 $19,285
Income taxes paid (1,334) (3,448)
Net cash flows provided by operating activities $3,458 $15,837
Investing activities
Additions to property, plant and equipment $(3,563) $(299,442)
Additions to intangible assets (67,881)
Proceeds on disposition of Aviation reportable segment, net 32,727
Proceeds on disposal of property, plant and equipment 24,989
Proceeds from restricted cash to finance acquisitions 106,240
Acquisition of Apollo (161,545)
Acquisition of JemPak (55,448)
Acquisition of Stellwagen (90,772)
Cash provided by (used in) investing activities $29,164 $(543,859)
Financing activities
Proceeds from debt and credit facilities $12,162 $441,182
Repayment of debt (59,285) (26,605)
Payment of debt issuance costs (5,112)
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 (1,075)
Interest paid (8,013) (5,968)
Cash provided by (used in) financing activities $(55,136) $561,973
Net increase (decrease) in cash during the period $(22,514) $33,951
Cash and cash equivalents, beginning of period 26,139 187
Cash and cash equivalents, end of period $3,625 $34,138
 

Contacts

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

Release Summary

Acasta Enterprises Reports First Quarter Results

Contacts

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