FORT ST. JOHN, BRITISH COLUMBIA -- (Marketwired) -- 11/27/14 -- Macro Enterprises Inc. (TSX VENTURE: MCR) -
Summary of financial results
(thousands of dollars except per share
amounts)
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Three months Nine months
ended Sept. 30 ended Sept. 30
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2014 2013 2014 2013
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(unaudited)
Revenue $34,132 $60,056 $158,609 $157,460
EBITDA(1) 4,198 14,283 12,028 39,118
Net earnings 1,385 9,220 4,033 24,615
Net earnings per share $0.04 $0.30 $0.13 $0.91
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Weighted average common shares
outstanding (thousands) 30,075 26,663
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Note 1 - References to EBITDA are to net income from continuing operations before interest, taxes, amortization and impairment charge. EBITDA is not an earnings measure recognized by International Financial Reporting Standards ("IFRS") and does not have a standardized meaning prescribed by IFRS. Management believes that EBITDA is an appropriate measure in evaluating the Company's performance. Readers are cautioned that EBITDA should not be construed as an alternative to net income (as determined under IFRS) as an indicator of financial performance or to cash flow from operating activities (as determined under IFRS) as a measure of liquidity and cash flow. The Company's method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, the Company's EBITDA may not be comparable to similar measures used by other issuers.
Highlights
-- The Company continues to materially exceed industry standard safety
averages. In the nine month period ended September 30, 2014 Macro
Enterprises exceeded 1.0 million man hours worked without a single lost
time injury.
-- The Company is reporting its thirteenth consecutive profitable quarter
with net income of $1.4 million in what is a cyclical industry.
-- The Company is reporting shareholders' equity of $81.8 million or $2.70
per share based on common shares issued and outstanding as at September
30, 2014.
-- The Company continues to build on and maintains a strong working capital
position of $41.9 million as at September 30, 2014.
-- The Company's third quarter operating margins improved to 22% now
approaching its expected historical averages.
RESULTS OF OPERATIONS
Three months ended September 30, 2014 vs. three months ended September 30, 2013
Consolidated revenue was $34.1 million compared to $60.1 million in the third quarter last year. Most of the revenue in the quarter was derived from a series of integrity digs for one of the Company's key clients, the commencement of a larger facilities job, and carry-over work from 2 other large facilities projects that had commenced in the prior quarters. The reduction in revenue being recognized compared to prior year is due to the overall reduced work levels experienced and the size and scope of the jobs being performed during the quarter. In the third quarter of last year, the Company's best third quarter on record, most of the revenue was derived from five larger projects covering pipeline and facility construction and pipeline repair work.
Operating expenses were $26.7 million or 78% of revenue compared to $43.9 million or 73% of revenue in the third quarter last year. The Company was successful in improving its operating margins quarter over quarter, from 87% being recognized in second quarter 2014 to 78% in the third quarter, for an effective improvement of 9%, which now aligns with historical operating margins.
General and administrative expenses were $1.9 million, up slightly compared to prior year, but reduced from the levels of the two most recent quarters reported. The Company's general and administrative expenditures reflects costs incurred in connection with the bid processes, professional fees, corporate wages, burdens and various other overheads, including rents, insurance, travel and administrative supplies that are not charged directly to projects. The Company has incurred and anticipates growing these costs as it continues to evaluate, bid and pursue large scale project opportunities.
Total depreciation expense of $2.1 million was $0.2 higher than prior year's third quarter reflecting additional assets acquired with accelerated depreciation schedules and the commencement of depreciation on the expansion of the Company's mechanics shop.
Interest expense of $0.3 million was approximately $0.1 million higher than the third quarter last year as a result of new finance leases entered into during the first nine months of fiscal 2014.
Other (gains) and expenses included $0.4 million in bad debt expense relating to the write-off of an aged account receivable for a disputed balance.
During the third quarter the Company issued stock options to its directors, management, employees and a consultant and as such recorded a related non-cash stock based compensation charge of $945,000.
Income tax expense in the quarter of $0.4 million was at an effective tax rate of 22.5% which approximates the enacted tax rates after appropriate deductions.
Net income was $1.4 million ($0.04 per share) compared to $9.2 million ($0.30 per share). The decrease in net income is a result of reduced levels of work activity during the quarter compared to prior year further impacted by reduced operating margins being achieved and a non-cash stock based compensation charge being incurred as a result of options being granted during the quarter. Compared to second quarter 2014, the Company's net income increased $0.9 million as a result of improved margins being achieved despite the slight reduction in quarter over quarter revenue being recognized and the stock option grant.
OUTLOOK
Activity in the oil and gas industry in western Canada remains active. Macro is strategically pursuing multiple large scale potential projects that combine commercial, logistic, and time scheduled criteria that are conducive to minimizing risk and maximizing the synergies of pipeline and facility construction. Macro is continuing to see benefits from numerous pipeline integrity and facility projects derived from its multiple major clients. However, primarily as a result of client project scheduling delays, the Company is anticipating revenues in the fourth quarter of fiscal 2014 to be less than those recorded in the fourth quarter of fiscal 2013. Total revenues for the fiscal year ended December 31, 2014 is expected to be approximately 90% of revenues recognized in the prior year. The Company is targeting margins more in line with historical averages and as such expects to see continued financial improvements to its operations over the balance of fiscal 2014, as experienced in the 3rd quarter.
As part of its strategy, the Company is seeking out pipeline and facilities construction contracts in connection with the Liquefied Natural Gas (LNG) projects being planned on the west coast of British Columbia, an industry that is anticipated to bring substantial economic activity to British Columbia over the next 30 years. Macro has completed bid processes and has entered into discussions with the LNG project owners regarding future pipeline and facilities construction.
Macro has been approached by multiple major clients to assist with budget and constructability estimates for major pipeline and facility projects that are not LNG related. These projects are scheduled for approvals by mid-2015.
Macro's core business is providing pipeline and facilities construction and maintenance services to major companies in the oil and gas industry. The Company's corporate office is in Fort St. John, British Columbia. Its shares are listed on the TSX Venture Exchange under the symbol MCR. Information on the Company's principal operating unit, Macro Industries Inc., can be found at www.macroindustries.ca.
Conference call
The Company will host a conference call at 8 am PT on Friday, November 28, 2014 to discuss the 2014 third quarter results. The conference call can be accessed by dialing 1-888-390-0546 and referencing conference ID 40666242.
Forward-Looking Statements
Certain statements in this news release may include forward-looking information that involves various risks and uncertainties. These may include, without limitation, statements regarding expected revenues, expenses and industry trends and the pursuit of strategic acquisitions. These risks and uncertainties include, but are not restricted to, global economic conditions, government regulation of energy and resource companies, seasonal weather patterns, maintaining and increasing market share, terrorist activity, the price and availability of alternative fuels, the availability of pipeline capacity, and potential instability or armed conflict in oil producing regions. These risks and uncertainties may cause actual results to differ from information contained herein. There can be no assurance that such forward-looking statements will prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. These statements are based on the estimates and opinions of management on the dates they are made and are expressly qualified in their entirety by this notice. Except as required by law, the Company assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Macro Enterprises Inc.
Frank Miles
President and C.E.O.
(250) 785-0033
Macro Enterprises Inc.
Jeff Redmond
C.F.O.
(250) 785-0033
www.macroindustries.ca
