Acasta Enterprises Reports Third Quarter Results

Nov 09, 2017 08:27 pm
TORONTO -- 

Acasta Enterprises Inc. (TSX:AEF and AEF.WT) (“Acasta” or the “Company”) today announced its consolidated financial results for the three and nine months ended September 30, 2017 and provided the following corporate update.

Financial Highlights1

  • Net loss was $9.7 million or $0.11 per share.2
  • Adjusted net loss was $10.8 million, or $0.12 per share.3
  • EBITDA was $21.7 million.3
  • Adjusted EBITDA was $20.7 million.3

Corporate Highlights

  • Strong sales momentum in the Consumer Products segment on a constant currency basis.
  • Stellwagen continued on its path to becoming an aviation asset manager with the launch of the Stelloan Fund, a senior secured lending vehicle.
  • Three Stelloan transactions were closed during the quarter in the aggregate amount of U.S.$100 million.
  • The Company continued to build out its private equity team with the addition of experienced professionals.

“Revenue in our Consumer Products segment was up slightly on an absolute basis over the second quarter’s results and up approximately 8% on a constant currency basis” commented Anthony Melman. “Further, we were pleased that Stellwagen continued to make good progress along its path to becoming an aviation asset manager with the execution of its first fund based senior loan transactions. With the recent addition of David Butler as COO of Stellwagen, the acquisition of ECN Commercial Aviation completed in the second quarter and certain other recent executive changes, Doug Brennan has now established a strong management team to move the business forward. Acasta’s focus over the past nine months has been to ensure we have a strong foundation for our consumer products platform and also for our commercial aircraft asset management business. With respect to the Consumer Products segment, this effort includes M&A transactions (potential acquisitions and dispositions), strategic partnerships with private equity investors and major industry players. We are very focused on determining the most optimal path forward given the nature and scope of these strategic options that are available to us.”

1 Until January 3, 2017, Acasta was a special purpose acquisition corporation, only becoming a long-term investment and private equity asset management firm upon the closing of its Qualifying Acquisition. As a result, there are no meaningful comparatives from the previous year. This will be the case for all of the quarters in fiscal 2017.

2 Calculated excluding shares subject to the amended and restated forfeiture conditions and transfer restrictions agreement and undertaking. For further information, please see the section in the MD&A entitled “Qualifying Acquisition.”

3 Please see the section entitled “Non-IFRS Financial Performance Measures” under the Advisories section of this news release.

Operating Results

Acasta’s operating companies have been presented and aggregated, where appropriate, into three segments for reporting purposes: Consumer Products, Aviation and Other.

The Consumer Products segment recorded a net loss and an adjusted net loss of $1.7 million and $0.3 million, respectively, for the third quarter of 2017. EBITDA and adjusted EBITDA were $6.7 million and $8.2 million, respectively.

Net loss for the Aviation segment was $2.5 million for the third quarter of 2017. EBITDA and adjusted EBITDA were $15.8 million and $15.9 million, respectively.

On a consolidated basis, Acasta’s net loss for the third quarter of 2017 was $9.7 million or $0.11 per share and the Company reported an adjusted net loss of $10.8 million or $0.12 per share. The Company achieved EBITDA and adjusted EBITDA of $21.7 million and $20.7 million, respectively. The Consumer Products segment experienced compressed margins during the quarter due to several non-recurring factors, including adverse foreign exchange, higher launch costs associated with new programs at Apollo, and hurricane related input price and freight price increases.

Our Management’s Discussion and Analysis (“MD&A”) will provide additional details and will describe the results from each of the reportable segments in our portfolio.

Acasta’s Unaudited Consolidated Interim Financial Statements of Financial Position and MD&A for the third quarter fiscal 2017 will be available on the Company’s website at www.acastaenterprises.com or on SEDAR at www.sedar.com on Friday, November 10, 2017.

Third Quarter 2017 Conference Call Details:

As previously disclosed, Acasta’s senior management will host a conference call on Friday, November 10, 2017 at 9:00 a.m. (Toronto time) to discuss the Company’s financial and operating results.

Analysts and investors are invited to participate by using the following dial-in numbers:

Participant Number (Local):       1-416-340-2217
Participant Number (Canada/US): 1-800-806-5484
Passcode: 6690724#
 

To ensure your participation, please join approximately five minutes prior to the scheduled start of the conference call.

A replay of the conference call will be available until May 27, 2018 and can be accessed by using the following dial-in numbers:

Toll Free Dial-in Number:       1-800-408-3053
Local Dial-in Number: 1-905-694-9451
Passcode: 4084701#
 

Investor Day

Acasta announced today that the Investor Day, previously scheduled for November 17, 2017 has been postponed until such time as the Company has determined the most optimal path forward given the strategic alternatives being evaluated. The new date will be announced as soon as practicable.

About Acasta Enterprises Inc.

Acasta Enterprises Inc. is a Canadian public company that acquires businesses with exceptional potential for value creation through strategic and transformational initiatives. As a proactive private equity manager, Acasta partners with the senior management teams of its acquired businesses, empowering them to pursue value creating trajectories.

Advisories:

Cautionary Note Concerning Forward Looking Statements

This news release may include 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 may include, but are not limited to, statements about anticipated future events or results, including comments with respect to the Company’s objectives and priorities for 2017 and beyond, strategies or further actions with respect to the Company, including the acquisition by the Company of one or more businesses or assets, and the Company’s future business operations, 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 as at the periods indicated and may not be appropriate for other purposes.

A number of risks, uncertainties and other factors may cause actual 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, 2016, a copy of which is available on the SEDAR website at www.sedar.com under the Company’s profile.

This news release contains certain financial measures that are not recognized under IFRS. These measures are described in greater detail in the section entitled “Non-IFRS Financial Performance Measures” below.

Forward looking statements contained in this news release are not guarantees of future 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

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.

Currency

All financial information is presented in Canadian dollars, except as otherwise indicated.

                     

ACASTA ENTERPRISES INC.


NON-IFRS FINANCIAL PERFORMANCE MEASURES RECONCILIATION

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

 

 
Three Months Ended September 30, 2017 Three Months
Ended
September 30,
2016
Reportable Segments
NON-IFRS FINANCIAL PERFORMANCE MEASURES Consumer
Products
Aviation Other Acasta
Consolidated
Acasta
Consolidated
Net income (loss) (1,734) (2,546) (5,459) (9,739) (5,584)
Net loss (gain) on foreign exchange transactions 1,446 37 (2,524) (1,041)
Adjusted net income (loss) (288) (2,509) (7,983) (10,780) (5,584)
Net income (loss) per share — basic (0.11) (0.60)
Net income (loss) per share — diluted (0.11) (0.60)
Adjusted net income (loss) per share — basic (0.12) (0.60)
Adjusted net income (loss) per share — diluted (0.12) (0.60)
Weighted average number of Class B Shares outstanding — basic 90,494,283 9,349,648
Weighted average number of Class B Shares outstanding — diluted 90,507,945 9,349,648
Finance costs 1,182 6,393 4,607 12,182
Current income tax expense 900 289 1,189
Deferred income tax recovery (1,450) (931) (2,381)
Depreciation of property, plant and equipment and amortization of intangible assets 7,827 12,622 20,449
EBITDA 6,725 15,827 (852) 21,700 (5,584)
Adjusted EBITDA 8,171 15,864 (3,376) 20,659 (5,584)
 
         
Nine Months Ended September 30, 2017 Nine Months
Ended
September 30,
2016
Reportable Segments    
NON-IFRS FINANCIAL PERFORMANCE MEASURES Consumer
Products
    Aviation     Other Acasta
Consolidated
Acasta
Consolidated
Net income (loss) 3,584 1,528 (11,895) (6,783) (12,747)
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 transactions 510 38 (2,933) (2,385)
Amortization of inventory fair value increment 1,946 1,946
Other non-recurring costs 359 359
Adjusted net income (loss) 6,399 2,694 (13,900) (4,807) (12,747)
Net income (loss) per share — basic (0.08) (1.36)
Net income (loss) per share — diluted (0.08) (1.36)
Adjusted net income (loss) per share — basic (0.05) (1.36)
Adjusted net income (loss) per share — diluted (0.05) (1.36)
Weighted average number of Class B Shares outstanding — basic 88,214,511 9,349,648
Weighted average number of Class B Shares outstanding — diluted 88,219,082 9,349,648
Finance costs 4,410 18,736 5,733 28,879
Current income tax expense 6,563 2,154 8,717
Deferred income tax recovery (5,227) (2,488) (7,715)
Depreciation of property, plant and equipment and amortization of intangible assets 23,042 39,879 62,921
EBITDA 32,372 59,809 (6,162) 86,019 (12,747)
Adjusted EBITDA 35,187 60,975 (8,167) 87,995 (12,747)
 
         

ACASTA ENTERPRISES INC.


UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(In thousands of Canadian dollars)

 
As at
September 30,
2017
As at
December 31,
2016
Current assets
Cash and cash equivalents $18,318 $187
Trade and other receivables 48,758 597
Inventories 37,609
Prepaid expenses and deposits 9,053 25
Restricted cash 405,002
Current portion of loans receivable 8,579
Other current assets 6,511
$128,828 $405,811
Non-current assets
Property, plant and equipment $618,285 $—
Intangible assets 308,911
Goodwill 595,572
Long-term loans receivable 146,293
Other non-current assets 10,433 710
$1,679,494 $710
Total assets $1,808,322 $406,521
Liabilities
Current liabilities
Accounts payable and accrued liabilities $34,288 $8,779
Current portion of long-term debt 55,604
Class A Restricted Voting Shares subject to redemption 409,342
Income taxes payable 7,786
Other current liabilities 42,458 13,504
$140,136 $431,625
Non-current liabilities
Long-term debt $793,790 $—
Deferred tax liabilities 40,514
Other non-current liabilities 59,983
$894,287 $—
Total liabilities $1,034,423 $431,625
Shareholders’ equity
Share capital $849,383 $14,995
Contributed surplus 150
Warrants 3,939 3,939
Deficit (50,821) (44,038)
Accumulated other comprehensive loss (28,752)
Total shareholders’ equity $773,899 $(25,104)
Total liabilities and shareholders’ equity $1,808,322 $406,521
 
             

ACASTA ENTERPRISES INC.


UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS

OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

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

 
Three months ended September 30, Nine months ended
September 30,
2017     2016 2017 2016
Revenue $91,233 $488 $274,806 $1,404
Cost of revenue, expenses, and other items
Cost of revenue 50,045 138,388
Selling, general and administrative expense 43,647 1,242 122,284 2,076
Finance costs 12,182 28,879
Net unrealized loss (gain) on change in fair value of financial liabilities 4,830 (236) 12,075
Net gain on foreign exchange transactions (1,041) (2,385)
Other income, net (2,669) (6,343)
Loss before income tax $(10,931) $(5,584) $(5,781) $(12,747)
Current income tax expense 1,189 8,717
Deferred income tax recovery (2,381) (7,715)
Net loss $(9,739) $(5,584) $(6,783) $(12,747)
Comprehensive loss
Items that may be subsequently reclassified to net income (loss)
Foreign currency translation $(16,100) $— $(27,775) $—
Net movement in cash flow hedges, net of tax 1,484 (977)
Other comprehensive loss $(14,616) $— $(28,752) $—
Total comprehensive loss $(24,355) $(5,584) $(35,535) $(12,747)
Net loss per share
Basic $(0.11) $(0.60) $(0.08) $(1.36)
Diluted $(0.11) $(0.60) $(0.08) $(1.36)
Other comprehensive loss per share
Basic $(0.16) $— $(0.33) $—
Diluted $(0.16) $— $(0.33) $—
Weighted average number of Class B Shares outstanding
Basic 90,494,283 9,349,648 88,214,511 9,349,648
Diluted 90,507,945 9,349,648 88,219,082 9,349,648
 
         

ACASTA ENTERPRISES INC.


UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(In thousands of Canadian dollars)

 
Nine months
ended
September 30,
2017
Nine months
ended
September 30,
2016
Operating activities
Net loss $(6,783) $(12,747)
Adjustments for non-cash items and other adjustments:
Share-based compensation 150
Depreciation of property, plant and equipment 19,417
Amortization of intangible assets 43,504
Gain on redemption of Class A Restricted Voting Shares (3,699)
Gain on disposal of property, plant and equipment (211)
Net unrealized (gain) loss on change in fair value of financial liabilities (236) 12,075
Finance costs (income) 28,879 (1,404)
Current income tax expense 8,717
Deferred income tax recovery (7,715)
Net gain on foreign exchange transactions (2,385)
Amortization of inventory fair value increment 3,355
Changes in non-cash working capital (17,207) 1,091
Net cash flows provided by (used in) operating activities $65,786 $(985)
Income taxes paid (2,671)
Cash provided by (used in) operating activities $63,115 $(985)
Investing activities
Additions to loans receivable $(158,135) $—
Additions to property, plant and equipment (309,000)
Additions to intangible assets (68,464)
Proceeds on disposal of property, plant and equipment 53,979
Interest received on restricted cash held in escrow 1,409
Proceeds on maturity of restricted cash held in escrow 1,614,437
Investment in restricted cash and cash equivalents held in escrow (1,615,846)
Proceeds from restricted cash to finance acquisitions 106,240
Acquisition of Apollo (161,545)
Acquisition of JemPak (55,448)
Acquisition of Stellwagen (84,946)
Cash used in investing activities $(677,319) $—
Financing activities
Proceeds from long-term debt and credit facilities $592,460 $—
Repayment of long-term debt (77,114)
Payment of debt issuance costs (20,542)
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 (23,776)
Cash provided by financing activities $629,443 $—
Net increase (decrease) in cash and cash equivalents during the period $15,239 $(985)
Foreign exchange impact on cash and cash equivalents held in foreign currencies 2,892
Cash and cash equivalents, beginning of period 187 3,096
Cash and cash equivalents, end of period $18,318 $2,111
 

Acasta Enterprises Inc.
Ian Kidson, 1-647-725-6707
Chief Financial Officer and Chief Operating Officer
www.acastaenterprises.com