/THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT AUTHORIZED FOR
DISTRIBUTION TO THE UNITED STATES
NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
CALGARY, Aug. 18, 2014 /CNW/ - Northern Frontier Corp.
(TSX-V: FFF) (the "Corporation" or "Northern
Frontier") is pleased to announce its second quarter 2014
financial results.
Financial Results
For the three months ended June 30, 2014 ("Q2 2014"), management
continued to focus on developing its civil service and logistics
business, evaluating our pipeline of acquisition opportunities and
sourcing the capital to execute on our growth strategy. During Q2
2014 Northern Frontier:
- generated revenue of $11.6
million, a decrease of $6.3
million or 36% from the three months ended March 31, 2014 ("Q1 2014");
- realized EBITDA of $0.8 million
(7% of revenue) as compared to $3.5
million (20% of revenue) for Q1 2014;
- negotiated the proposed acquisition of Central Water and
Equipment Services Ltd. ("Central Water"); and
- was evaluating financing options to restructure the
Corporation's balance sheet and to close the acquisition of Central
Water.
Selected Financial Information
|
(in 000's CAD, except as
noted) |
3 months
ended
Jun 30, 2014 |
3
months ended
Jun 30, 2014 |
6 months
ended
Jun 30, 2014 |
7
months ended
Jun 30, 2013 |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
11,572 |
$ |
- |
$ |
29,431 |
$ |
- |
|
|
|
|
|
|
|
|
|
Gross Profit |
|
1,946 |
|
- |
|
6,479 |
|
- |
as a % of revenue |
|
17% |
|
N/A |
|
22% |
|
N/A |
|
|
|
|
|
|
|
|
|
EBITDA (1) |
|
814 |
|
(24) |
|
4,298 |
|
(140) |
per share
as a % of revenue |
$ |
0.07
7% |
$ |
(0.03)
N/A |
$ |
0.38
15% |
$ |
(0.15)
N/A |
|
|
|
|
|
|
|
|
|
Net loss and comprehensive loss |
|
(2,493) |
|
(561) |
|
(2,162) |
|
(1,167) |
per share - basic and diluted |
$ |
(0.22) |
$ |
(0.61) |
$ |
(0.19) |
$ |
(1.27) |
|
|
|
|
|
|
|
|
|
Dividends declared |
|
729 |
|
- |
|
1,458 |
|
- |
per share |
$ |
0.065 |
|
N/A |
$ |
0.130 |
|
N/A |
|
|
|
|
|
|
|
|
|
Cash generated by (used in)
operations (before non-cash
working capital) |
|
(1,023) |
|
(561) |
|
1,734 |
|
(1,167) |
per share |
$ |
(0.09) |
$ |
(0.61) |
$ |
0.15 |
$ |
(1.27) |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
3,606 |
|
- |
|
7,570 |
|
- |
|
|
|
|
|
|
|
|
|
Capital management: (2) |
|
|
|
|
|
|
|
|
Cash flow coverage ratio
(3) |
|
|
|
|
|
1.90 |
|
N/A |
Funded debt to EBITDA |
|
|
|
|
|
3.18 |
|
N/A |
Weighted average common shares outstanding -
basic |
|
11,220,409 |
|
918,533 |
|
11,208,125 |
|
918,533 |
Weighted average common share outstanding -
diluted |
|
11,220,409 |
|
918,533 |
|
11,208,125 |
|
918,533 |
Financial Position
|
(in 000's CAD, except as noted) |
Jun 30, 2014 |
Dec 31, 2013 |
|
|
|
Working Capital (4) |
$
5,524 |
$ 5,149 |
Total assets |
75,134 |
75,463 |
Funded Debt (5) |
38,206 |
32,723 |
Equity |
28,347 |
31,592 |
Common shares outstanding |
11,220,409 |
11,160,609 |
Common share purchase warrants outstanding |
5,115,639 |
5,115,639 |
(1) |
EBITDA (earnings before finance costs, taxes, depreciation
and amortization, gain/loss on disposal of property and equipment,
share-based compensation and other specified costs) is not a
recognized measure under IFRS. Refer to "Non-GAAP
Measures". |
(2) |
The definition of these measures are in accordance with the
lending agreements and are calculated based on the lenders'
interpretation, which may not be equal to individual financial
statement amounts. |
(3) |
Cash flow coverage ratio is defined as EBITDA less unfunded
capital expenditures and distributions to required principal and
interest payments on funded debt. |
(4) |
Working Capital (current assets excluding cash and cash
equivalents less current liabilities excluding current portion of
loans and borrowings and obligations under finance lease) is not a
recognized measure under IFRS. Refer to "Non-GAAP
Measures". |
(5) |
Funded Debt (loans and borrowings (before unamortized debt
issue costs) and obligations under finance lease less cash and cash
equivalents) is not a recognized measure under IFRS. Refer to
"Non-GAAP Measures". |
Northern Frontier did not have active operations
until September 27, 2013 when it
completed its platform acquisition of 794522 Alberta Ltd.
("NEC") and certain operating assets of CRC Open Camp &
Catering Ltd. ("CRC"). As a result, the Corporation does not
have a prior year comparable period, hence the Corporation has used
the prior quarter for variance purposes. Furthermore, operating
activities are negatively impacted by wet and / or unstable ground
conditions due to rain and thawing in the spring. As such, the
second quarter is typically weaker than the first quarter of the
year.
The decrease in revenue and EBITDA for Q2 2014
as compared to Q1 2014 was the result of customer programs
transitioning from winter to summer, wet conditions experienced
during the quarter, revenue mix and certain project deferrals by
our key customers.
The Corporation was in breach of certain
financial covenants under its credit facilities at June 30, 2014 (effective with the release of the
June 30, 2014 financial statements).
Subsequent to June 30, 2014, the
Corporation negotiated a series of proposed debt and equity
transactions, in part, to refinance its current debt facilities
outstanding (herein referred to as the "Refinancing"). It is
expected that the Refinancing will close on or about August 28, 2014 and that it will remedy the
financial covenant breaches. If the proposed Refinancing does not
close as contemplated, the Corporation will remain in breach of the
aforementioned covenants and there is no assurance that the parties
to the credit facilities will not exercise their rights under their
respective agreements which could negatively impact the
Corporation's liquidity.
Proposed Acquisition of Central Water
As previously announced (May 20, 2014, June 27,
2014 and August 11, 2014) the
Corporation agreed to acquire Central Water (the
"Acquisition"), a leading provider of water and fluids
transfer services in the oil and natural gas and industrial sectors
in western Canada. The purchase
price of $24.1 million, subject to an
adjustment for current year growth capital expenditures made by
Central Water, currently estimated to be approximately $0.6 million, which is subject to change and will
be finalized on closing (before giving effect to certain
post-closing adjustments) is approximately 3.65x Central Water's
trailing EBITDA for the 12 months ended June
30, 2014. The purchase price also has certain earn-out
adjustments, as detailed in our previous news releases referenced
above.
Central Water provides a variety of equipment
and services for storage tank and pipeline hydro-testing, site
maintenance, dewatering, emergency and remote site water transfer
and water and fluid disposal. Management's acquisition rationale
included:
- highly profitable business with low capital intensity;
- complementary to Northern Frontier's existing operations,
adding diversification to services and revenue sources;
- opportunity to cross-sell and cross-utilize service offerings
across the respective customer bases; and
- meaningful organic growth potential within the bulk water and
fluids transfer segment via existing and ancillary services.
Refinancing of Existing Credit
Facilities
As announced on August
11, 2014, The Corporation has executed a term sheet with its
existing senior lender for up to $80.6
million of new committed syndicated senior credit facilities
(the "New Senior Credit Facilities") and expects to
establish the New Senior Credit Facilities in conjunction with and
as conditions of closing the Acquisition and the Offering (as
defined herein). The New Senior Credit Facilities are expected to
consist of:
- a $15.0 million committed
revolving credit facility;
- a $42.6 million committed
non-revolving term loan; and
- a $20.0 million committed
revolving reducing term loan.
The New Senior Credit Facilities will be subject
to a pricing grid based on the then applicable ratio of senior
funded debt to EBITDA. The interest rate grid for the New Credit
Facilities will be set at market rates in line with other senior
credit facilities of this size and nature. The New Senior Credit
Facilities is expected to have maturities of four years
As conditions of closing of the Offering and the
Corporation entering into the New Senior Credit Facilities, the
Corporation intends to repay and terminate all of its existing
Senior Facility and Subordinated Facility (the
"Refinancing"), exclusive of existing finance leases.
Bought Deal Equity Financing
As announced on August
11, 2014, concurrent with the completion of the Acquisition,
the Corporation intends to complete a bought deal equity offering
(the "Offering") with a syndicate of investment dealers
co-led by Cormark Securities Inc., Acumen Capital Finance Partners
Limited and GMP Securities L.P. and including M Partners Inc. (the
"Underwriters"). The Corporation has entered into an
agreement with the Underwriters pursuant to which the Underwriters
have agreed to purchase 9,303,000 Units from the treasury of the
Corporation at a price of $2.15 per
Unit (the "Offering Price") and offer them to the public by
way of short form prospectus for gross proceeds to the Corporation
of approximately $20.0 million.
Each Warrant will entitle the holder to acquire one common share of
the Corporation (a "Warrant Share") at a price of
$3.40 per Warrant Share for 18 months
following the Closing Date. Additionally, the Corporation has
granted the Underwriters an option to purchase up to an additional
1,395,450 Units from the treasury of the Corporation at the
Offering Price for additional gross proceeds to the Corporation of
up to approximately $3.0 million,
exercisable at any time up to 30 days following the Closing Date,
for market stabilization purposes and to cover over-allotments, if
any.
As of August 18,
2014, the Acquisition, New Senior Credit Facilities,
Offering and Refinancing have not been completed and there is no
assurance that they will be completed in the future.
Outlook
Northern Frontier expects demand for our
services to increase for the second half of fiscal 2014 based on
discussions with our customers, driven by new construction and
successful production results from existing facilities within the
SAGD market that the Corporation participates in. Furthermore,
management expects Central Water to contribute significantly to
revenue and gross margin immediately following the close of the
transaction which is expected to occur on or about August 28, 2014.
Additional Information
Northern Frontier's unaudited condensed interim
financial statements for the three and six months ended
June 30, 2014 and management
discussion and analysis ("MD&A") for the three and six
months ended June 30, 2014 have been
filed with the Canadian securities regulatory authorities and may
be accessed under the Corporation's profile on SEDAR at
www.sedar.com.
Conference call
Management of Northern Frontier will hold a
conference call on Tuesday, August 19,
2014, at 9:30 a.m.
Calgary / 11:30 a.m. Toronto time. The call will feature
remarks by Chris Yellowega,
President and CEO and Monty
Balderston, Executive Vice President and CFO regarding the
financial results.
Conference dial-in instructions are as
follows:
Toronto: 416.764.8609
North America: 888.390.0605
Conference ID: 48884002
A replay of the call will be available 24 hours
after the event until 11:59 p.m.
EST on August 26, 2014.
To access the archived conference call, please dial 1.888.390.0541
and enter passcode 884002.
About Northern Frontier Corp.
Northern Frontier's strategic objective is to
create a large industrial and environmental services business
through a buy and build growth strategy. Currently, the Corporation
provides civil construction and excavation services to the
industrial industry, primarily in the in situ Oilsands
region south of Fort McMurray,
Alberta. Through providing these services to large
industrial customers in the steam assisted gravity drainage
("SAGD") region of northeastern Alberta, the Corporation focuses on the
ongoing demand for services to support operating facilities,
sustaining capital expenditures to maintain production levels of
those facilities and the development of new production
capacity.
The Corporation's common shares and common share
purchase warrants are listed on the TSX Venture Exchange under the
trading symbol "FFF" and "FFF.WT", respectively.
Reader Advisory
Securities Law Matters
This news release does not constitute an
offer to sell or the solicitation of an offer to buy any security
and shall not constitute an offer, solicitation or sale of any
securities in any jurisdiction in which such offering, solicitation
or sale would be unlawful.
Forward-Looking Statements
This news release includes certain statements
that constitute forward-looking statements under applicable
securities legislation. All statements other than statements of
historical fact are forward-looking statements. In some cases,
forward-looking statements can be identified by terminology such as
"may", "will", "should", "expect", "plan", "anticipate", "believe",
"estimate", "predict", "potential", "continue", or the negative of
these terms or other comparable terminology. These
forward-looking statements include, among other things, statements
in respect of:
- completion of the Acquisition, New Credit Facilities,
Offering and Refinancing;
- anticipated use of net proceeds from the New Credit
Facilities, Offering and Refinancing;
- terms of the Acquisition, New Credit Facilities, Offering
and Refinancing;
- anticipated benefits of completing the Acquisition, New
Credit Facilities, Offering and Refinancing;
- expectations of future financial performance of the
Corporation; and
- the diversification of the Corporation's
operations.
These statements are only predictions and are
based upon current expectations, estimates, projections and
assumptions, which the Corporation believes are reasonable but
which may prove to be incorrect and therefore such forward-looking
statements should not be unduly relied upon. In making such
forward-looking statements, assumptions have been made regarding,
among other things, industry activity, the state of financial
markets, business conditions, continued availability of capital and
financing, future oil and natural gas prices and the ability of the
Corporation to obtain necessary regulatory approvals. Although the
Corporation believes the expectations expressed in such
forward-looking statements are based on reasonable assumptions,
such statements are not guarantees of future performance and actual
results or developments may differ materially from those in the
forward-looking statements.
By its nature, forward-looking information
involves numerous assumptions, known and unknown risks and
uncertainties, both general and specific, that contribute to the
possibility that the predictions, forecasts, projections and other
forward-looking statements will not occur. These risks and
uncertainties include: the possibility that the parties will not
proceed with the Acquisition, New Credit Facilities, Offering and
Refinancing, that the ultimate terms of the Acquisition, New Credit
Facilities, Offering and Refinancing will differ from those that
are currently contemplated, that the Acquisition, New Credit
Facilities, Offering and Refinancing will not be successfully
completed for any reason (including the failure to obtain the
required approvals from regulatory authorities) and regulatory
changes. Investors are cautioned that forward-looking statements
are not guarantees of future performance and actual results or
developments may differ materially from those projected in the
forward-looking statements. The Corporation has no obligation
to update any forward-looking statements set out in this news
release, except as required by applicable law.
Non-GAAP Measures
Selected financial information for the three
and six months ended June 30, 2014 is
set out above and includes the following measures that are not
recognized under International Financial Reporting Standards
("IFRS") and are non-generally accepted accounting
principles ("non-GAAP") measures: EBITDA, Working Capital
and Funded Debt. This information should be read in conjunction
with the consolidated financial statements for the three and six
months ended June 30, 2014 and the
Corporation's MD&A for the three and six months ended
June 30, 2014 available under the
Corporation's profile on SEDAR at www.sedar.com. Further
information regarding these non-GAAP measures is contained in the
Corporation's MD&A.
Neither TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in policies
of the TSX Venture Exchange) accepts responsibility for the
adequacy or accuracy of this release.
SOURCE Northern Frontier Corp.