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Acasta Enterprises Reports Second Quarter Results
[August 09, 2018]

Acasta Enterprises Reports Second Quarter Results


Acasta Enterprises Inc. (TSX: AEF) ("Acasta" or the "Company") today announced its consolidated financial results for the quarter ended June 30, 2018 and provided the following corporate update.

Financial and Operating Highlights

  • Acasta's results from continuing operations for the three-month period ended June 30, 2018 included revenues of $44.1 million, a net loss of $96.9 million or $1.49 per share (basic and diluted), an adjusted net loss of $17.6 million or $0.27 per share (basic and diluted) and adjusted EBITDA of ($9.8) million compared to revenues of $43.4 million, a net loss of $0.5 million or $0.01 per share (basic and diluted), adjusted net loss of $2.2 million or $0.02 per share (basic and diluted) and adjusted EBITDA of $6.4 million for the three-month period ended June 30, 2017.
  • On June 1, 2018, the Company sold 100% of its shares held in JemPak Corporation ("JemPak Sale Transaction") at a purchase price of $118.0 million. Net cash proceeds were used to reduce debt outstanding and pay fees and accrued interest to lenders.
  • On May 15, 2018, Acasta monetized its interest in the Stelloan profit participating notes ("PPNs") for net proceeds of US $25.8 million. These proceeds exclude the additional U.S. $5.0 million in downside protection due from the purchaser of Stellwagen pursuant to the sale agreement.
  • Proceeds from the sales of JemPak, Stellwagen and the monetization of the PPNs were primarily used to repay debt. As a result, Acasta has effectively reduced its total indebtedness by approximately $911.3 million from $983.9 million at December 31, 2017 to $72.6 million at June 30, 2018.

Second Quarter 2018 Results Conference Call:

Acasta's senior management will host a conference call on Friday, August 10, 2018 at 9:00 a.m. (E.D.T.) to discuss the Company's financial and operating results. Please dial +1 (416) 340-2217 or toll-free (Canada/US) +1 (800) 806-5484 with passcode 2398339#. To ensure your participation, please join approximately five minutes prior to the scheduled start of the conference call.

The conference call will be available for replay at +1 (905) 694-9451 or toll-free (Canada/US) +1 (800) 408-3053 with passcode 4939925#, expiring on September 14, 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, 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, foreign exchange and impairment charges. 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 June 30, 2018   Three months ended June 30, 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 Consumer
Products
Acasta
Consolidated
Consumer
Products
Other   Consumer
Products
Aviation Acasta
Consolidated
Net income (loss) $(75,756) $(21,115) $- $(96,871) $3,769 $(4,294) $- $- $(525)
Net income (loss) from discontinued operations - - (2,227) (2,227) - - (320) (397) (717)
Impairment of goodwill 79,775 - - 79,775 - - - - -
Loss on revaluation of Profit Participating Notes - - - - - - - - -
Gain on redemption of Class A Shares - - - - - - - - -
Gain on disposal of property, plant and equipment - - - - - - - (1,289) -
Qualifying Acquisition transaction costs - - - - - - - - -
ECN Acquisition transaction costs - - - - - - - 628 -
Costs to prepare aircraft for sale - - - - - - - - -
Net loss (gain) on foreign exchange (1,417) 880 151 (537) (1,329) (314) 149 26 (1,643)
Amortization of inventory fair value increment - - - - - - - - -
Other non-recurring costs - - - - - - - - -
Adjusted net income (loss) from continuing operations $2,602 $(20,235) $- $(17,633) $2,440 $(4,608) $- $- $(2,168)
Adjusted net income (loss) from discontinued operations $- $- $(2,076) $(2,076) $- $- $(171) $(1,032) $(1,203)
Finance costs $1,911 $8,133 $803 $10,044 $1,021 $934 $1,161 $6,929 $1,955
Current income tax expense (1,871) - 476 (1,871) 2,390 - 257 847 2,390
Deferred income tax recovery (5,824) - (196) (5,824) (1,085) - (339) (820) (1,085)
Depreciation of property, plant and equipment and amortization of intangible assets 5,438 - 1,124 5,438 5,270 - 2,390 14,721 5,270
EBITDA from continuing operations $(76,102) $(12,982) $- $(89,084) $11,365 $(3,360) $- $- $8,005
EBITDA from discontinued operations - - (20) (20) - - 3,149 21,280 24,429
EBITDA $(76,102) $(12,982) $(20) $(89,104) $11,365 $(3,360) $3,149 $21,280 $32,434
Adjusted EBITDA from continuing operations $2,256 $(12,102) $- $(9,846) $10,036 $(3,674) $- $- $6,362
Adjusted EBITDA from discontinued operations - - 131 131 - - 3,298 20,645 23,943
Adjusted EBITDA $2,256 $(12,102) $131 $(9,715) $10,036 $(3,674) $3,298 $20,645 $30,305
 

 
ACASTA ENTERPRISES INC.
 
NON-IFRS FINANCIAL PERFORMANCE MEASURES RECONCILIATION (Continued)
(In thousands of Canadian dollars, except share and per share amounts)
 
  Three months ended June 30, 2018   Three months ended June 30, 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 Consumer
Products
Acasta
Consolidated
Consumer
Products
Other   Consumer
Products
Aviation Acasta
Consolidated
Net loss from continuing operations per share - basic (1.49) (0.01)
Net income (loss) from discontinued operations per share - basic (0.03) (0.01)
Net loss from continuing operations per share - diluted(1) (1.49) (0.01)
Net income (loss) from discontinued operations per share - diluted(1) (0.03) (0.01)
Adjusted net income (loss) from continuing operations per share - basic (0.27) (0.02)
Adjusted net income (loss) from discontinued operations per share - basic (0.03) (0.02)
Adjusted net income (loss) from continuing operations per share - diluted(1) (0.27) (0.02)
Adjusted net income (loss) from discontinued operations per share - diluted(1) (0.03) (0.02)
Weighted average number of Class B shares outstanding - basic 64,972,060 88,435,533
Weighted average number of Class B shares outstanding - diluted 64,972,060 88,435,533
(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 where the Company reported a net loss or adjusted net loss because their effect would have been anti-dilutive.
 
   
Six months ended June 30, 2018 Six months ended June 30, 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 Consumer
Products
  Aviation Acasta
Consolidated
Consumer
Products
  Other Consumer
Products
  Aviation Acasta
Consolidated
Net income (loss) from continuing operations $(79,471) $(43,843) $- $- $(123,314) $5,996 $(6,436) $- $- $(440)
Net income (loss) from discontinued operations - - (14,653) (129,945) (144,598) - - (678) 4,074 3,396
Impairment of goodwill 79,775 - 12,248 - 79,775 - - - - -
Loss on revaluation of Profit Participating Notes - - - 33,121 - - - - - -
Gain on redemption of Class A Shares - - - - - - (3,699) - - (3,699)
Gain on disposal of property, plant and equipment - - - - - - - - (206) -
Qualifying Acquisition transaction costs - - - - - - 4,627 - - 4,627
ECN Acquisition transaction costs - - - - - - - - 628 -
Costs to prepare aircraft for sale - - - - - - - - 706 -
Net (gain) loss on foreign exchange (1,738) 2,886 (85) 61 1,148 (1,146) (409) 210 1 (1,555)
Amortization of inventory fair value increment - - - - - 1,203 - 743 - 1,203
Other non-recurring costs - - - - - - - 359 - -
Adjusted net income (loss) from continuing operations $(1,434) $(40,957) $- $- $(42,391) $6,053 $(5,917) $- $- $136
Adjusted net income (loss) from discontinued operations $- $- $(2,490) $(96,763) $(99,253) $- $- $634 $5,203 $5,837
Finance costs $2,576 $20,763 $1,356 $7,342 $23,339 $1,760 $1,126 $1,468 $12,343 $2,886
Current income tax expense (1,871) - 1,023 (379) (1,871) 4,929 - 734 1,865 4,929
Deferred income tax recovery (7,103) - (660) (71) (7,103) (2,842) - (935) (1,557) (2,842)
Depreciation of property, plant and equipment and amortization of intangible assets 10,824 - 3,644 8,008 10,824 10,434 - 4,781 27,257 10,434
EBITDA from continuing operations $(75,045) $(23,080) $- $- $(98,125) $20,277 $(5,310) $- $- $14,967
EBITDA from discontinued operations - - (9,290) (115,045) (124,335) - - 5,370 43,982 49,352
EBITDA $(75,045) $(23,080) $(9,290) $(115,045) $(222,460) $20,277 $(5,310) $5,370 $43,982 $64,319
Adjusted EBITDA from continuing operations $2,992 $(20,194) $- $- $(17,202) $20,334 $(4,791) $- $- $15,543
Adjusted EBITDA from discontinued operations - - 2,873 (81,863) (78,990) - - 6,682 45,111 51,793
Adjusted EBITDA $2,992 $(20,194) $2,873 $(81,863) $(96,192) $20,334 $(4,791) $6,682 $45,111 $67,336
 
   
Six months ended June 30, 2018 Six months ended June 30, 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 Consumer
Products
  Aviation Acasta
Consolidated
Consumer
Products
  Other Consumer
Products
  Aviation Acasta
Consolidated
Net loss from continuing operations per share - basic (1.60) (0.01)
Net income (loss) from discontinued operations per share - basic (1.88) 0.04
Net loss from continuing operations per share - diluted(1) (1.60) (0.01)
Net income (loss) from discontinued operations per share - diluted(1) (1.88) 0.04
Adjusted net income (loss) from continuing operations per share - basic (0.55) 0.00
Adjusted net income (loss) from discontinued operations per share - basic (1.29) 0.07
Adjusted net income (loss) from continuing operations per share - diluted(1) (0.55) 0.00
Adjusted net income (loss) from discontinued operations per share - diluted(1) (1.29) 0.07
Weighted average number of Class B shares outstanding - basic 77,035,949 87,049,295
Weighted average number of Class B shares outstanding - diluted 77,035,949 87,049,295
(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 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
June 30, 2018
  As at
December 31, 2017
Assets
Current assets
Cash and cash equivalents $2,974 $26,139
Trade and other receivables 27,519 39,644
Inventories 42,491 48,423
Prepaid expenses and deposits 3,372 54,548
Other current assets 6,445 5,534
Current portion of loans receivable - 11,257
$82,801 $185,545
Non-current assets
Property, plant and equipment $37,608 $617,594
Intangible assets 60,168 275,469
Goodwill - 176,552
Long-term loans receivable - 189,974
Non-current deposits - 5,077
Other non-current assets - 12,889
$97,776 $1,277,555
Total assets $180,577 $1,463,100
Liabilities
Current liabilities
Accounts payable and accrued liabilities $28,182 $37,107
Current debt obligations 72,562 276,735
Income taxes payable 5,362 7,232
Other current liabilities 477 14,333
$106,583 $335,407
Non-current liabilities
Deferred tax liabilities $3,262 $20,306
Other non-current liabilities - 31,520
Long-term debt - 707,211
$3,262 $759,037
Total liabilities $109,845 $1,094,444
Shareholders' equity
Share capital $594,246 $849,383
Contributed surplus 197,946 300
Warrants 3,939 3,939
Deficiency (725,399) (457,104)
Accumulated other comprehensive loss - (27,862)
Total shareholders' equity $70,732 $368,656
Total liabilities and shareholders' equity $180,577 $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
June 30,
  Six months ended
June 30,
2018   2017 2018   2017
Revenue $44,094 $43,381 $86,398 $85,426
Cost of revenue, expenses, and other items
Cost of revenue 35,186 26,966 69,364 54,843
Selling, general and administrative expense 24,817 15,321 43,709 31,537
Finance costs, net 10,044 1,955 23,339 2,886
Impairment of goodwill and intangible assets 79,775 - 79,775 -
Net unrealized loss on change in fair value of financial instruments 92 - 92 -
Net loss (gain) on foreign exchange (537) (1,643) 1,148 (1,555)
Other loss (income) loss, net (717) 2 1,259 (3,932)
Income (loss) before income tax $(104,566) $780 $(132,288) $1,647
Current income tax expense (recovery) (1,871) 2,390 (1,871) 4,929
Deferred income tax recovery (5,824) (1,085) (7,103) (2,842)
Net loss from continuing operations $(96,871) $(525) $(123,314) $(440)
Net income (loss) from discontinued operations, net of tax (2,227) (717) (144,598) 3,396
Net income (loss) $(99,098) $(1,242) $(267,912) $2,956
Other comprehensive income (loss) from discontinued operations, net of tax $- $(12,607) $- $(14,136)
Total comprehensive loss $(99,098) $(13,849) $(267,912) $(11,180)
Net income (loss) per share
Basic - continuing operations $(1.49) $(0.01) $(1.60) $(0.01)
Basic - discontinued operations $(0.03) $(0.01) $(1.88) $0.04
Diluted - continuing operations $(1.49) $(0.01) $(1.60) $(0.01)
Diluted - discontinued operations $(0.03) $(0.01) $(1.88) $0.04
 
 
ACASTA ENTERPRISES INC.
 
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
 
  Six months ended
June 30, 2018
  Six months ended
June 30, 2017
Operating activities
Net (loss) income $(267,912) $2,956
Adjustments for non-cash items and other adjustments:
Share-based compensation 1,036 -
Depreciation of property, plant and equipment 8,141 12,714
Amortization of intangible assets 14,364 29,758
Net unrealized loss (gain) on change in fair value of financial instruments 92 (236)
Finance costs 23,339 16,697
Current income tax expense (recovery) (1,227) 7,528
Deferred income tax recovery (7,834) (5,334)
ECN consideration paid in Class B Shares 1,005 -
Impairment of goodwill and intangible assets 92,023 -
Loss on disposal of Aviation reportable segment 97,721 -
Loss on disposal of JemPak 2,649 -
Gain on fair value remeasurement of Profit Participating Notes (621) -
Net loss (gain) on foreign exchange 1,126 (1,344)
Gain on redemption of Class A Restricted Voting Shares - (3,699)
Gain on disposal of property, plant and equipment - (206)
Amortization of inventory fair value increment - 3,355
Changes in non-cash working capital (3,175) (42,225)
Cash (used in) provided by operating activities $(39,273) $19,964
Income taxes paid (1,632) (3,620)
Net cash flows provided by (used in) operating activities $(40,905) $16,344
Investing activities
Additions to property, plant and equipment $(5,923) $(305,746)
Proceeds on disposition of Aviation reportable segment, net 32,727 -
Proceeds on disposition of JemPak, net 114,062 -
Proceeds on monetization of Profit Participating Notes 33,215 -
Additions to intangible assets - (68,463)
Proceeds on disposal of property, plant and equipment - 53,744
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 $174,081 $(521,990)
Financing activities
Proceeds from debt and credit facilities $39,362 $475,630
Repayment of debt (182,098) (62,724)
Payment of debt issuance costs (1,000) (20,362)
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)
Interest paid (12,605) (14,040)
Cash provided by (used in) financing activities $(156,341) $536,919
Net increase (decrease) in cash during the period $(23,165) $31,273
Foreign exchange impact on cash held in foreign currencies - 1,967
Cash and cash equivalents, beginning of period 26,139 187
Cash and cash equivalents, end of period $2,974 $33,427
 


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