ENTREC Corporation Announces 2017 Year End Financial Results

  • 2017 revenue increased by 30% to $148.7 million from $114.1 million last year
  • US growth strategy continued to accelerate – US revenue up 216% from 2016
  • Adjusted EBITDA more than doubled to $11.6 million
  • Completed five year extension of senior credit facility

ACHESON, Alberta, March 06, 2018 (GLOBE NEWSWIRE) -- ENTREC Corporation (“ENTREC” or the “Company”), a heavy haul transportation and crane solutions provider, today announced financial results for the fourth quarter and year ended December 31, 2017.

Three Months Ended
Year Ended
$ thousands, except per share amounts and margin percentDec 31 Dec 31 Dec 31 Dec 31
2017 2016 2017 2016
Revenue38,798 30,027 148,686 114,070
Gross profit7,041 3,478 25,068 18,560
Gross margin18.1% 11.6% 16.9% 16.3%
Adjusted EBITDA(1)3,811 338 11,578 5,015
Adjusted EBITDA margin(1)9.8% 1.1% 7.8% 4.4%
Per share(1)0.03 0.00 0.11 0.05
Adjusted net loss(1)(2,660) (8,707) (13,656) (24,284)
Per share(1)(0.02) (0.08) (0.12) (0.22)
Net loss(2,929) (10,791) (14,316) (23,888)
Per share – basic(0.03) (0.10) (0.13) (0.22)
Per share – diluted(0.03) (0.10) (0.13) (0.22)
Cash (used in) provided by operating activities(559) (2,067) (4,809) 180
Funds from operations(1)1,623 (1,132) 3,931 (2,236)
Per share(1)0.01 (0.01) 0.04 (0.02)
Basic weighted average shares outstanding109,581 109,474 109,538 108,855
As at December 31 December 31
$ thousands 2017 2016
Working capital(1) 27,052 14,155
Total assets 227,496 242,664
Total liabilities 182,705 183,561
Shareholders’ equity 44,791 59,103

Note 1: See “Non-IFRS Financial Measures” section of the Company’s Management Discussion & Analysis for the year ended December 31, 2017.

ENTREC’s revenue for the year ended December 31, 2017 increased by 30% to $148.7 million from $114.1 million in 2016 due to significant growth from the Company’s operations in the United States. US revenue increased to $53.4 million in 2017 from just $16.9 million last year. ENTREC’s 2016 expansion into the Permian Basin of western Texas, combined with increased activity levels in North Dakota, were the primary drivers of this growth.

ENTREC also achieved higher activity levels in Canada from several sectors, including oil sands maintenance, repair and operations (MRO), conventional oil and gas, and power. Unfortunately, this growth was offset by a significant decline in construction-related activity in the Alberta oil sands region. Overall, ENTREC’s revenue in Canada declined slightly to $95.3 million in fiscal 2017 from $97.2 million in 2016.

With the higher revenue in fiscal 2017, adjusted EBITDA more than doubled to $11.6 million from $5.0 million in 2016 and adjusted net loss improved to $13.7 million from $24.3 million last year. With the higher revenue, adjusted EBITDA margin also increased to 7.8% from 4.4% last year.

Outlook for 2018

“Moving into 2018, the outlook for our business is positive,” said John M. Stevens, ENTREC’s President and CEO. “Growing demand for our services in a recovering oil and gas sector is leading to both increased utilization levels for our equipment fleet as well as higher customer pricing. Assuming the price of oil can continue to stabilize as 2018 progresses, we should continue to see higher industry activity levels in both western Canada and the United States that should result in further customer pricing improvements. These improvements, together with executing on our strategy to grow through geographic and industry diversification, should result in significant improvements in both revenue and adjusted EBITDA in 2018.”

ENTREC’s strategy to grow its business through geographic and industry diversification in fiscal 2018 will continue to be focused on the following initiatives:

  • Significantly expanding its business in the United States;
  • Obtaining additional MRO work with existing and new clients;
  • Pursuing construction project work related to infrastructure, power generation, and other industries;
  • Cross-selling crane services and specialized transportation services to existing clients; and
  • Acquiring new customers through a continued focus on safety and customer service.

US expansion

ENTREC expects revenue from its operations in the United States will continue to grow in fiscal 2018. In addition to on-going growth from existing operations in North Dakota and Texas, the Company recently expanded its operations into Colorado. ENTREC’s new operations in Colorado are focused on supporting several industries, including the oil and gas sector, wind power, and other general construction. In addition, in Q4 2017 and Q1 2018, the Company executed its first industrial construction project in the Gulf Coast region. ENTREC is currently working on capturing additional industrial construction projects in this area.

Growing MRO and power work

ENTREC continues to grow its presence in MRO work in the Alberta oil sands region. This work represents a growing market and is typically less susceptible to changes in near-term commodity prices. MRO work should contribute to over 30% of ENTREC’s Canadian revenue in fiscal 2018. In addition, the Company’s revenue from infrastructure and power projects has also been increasing. The Company’s 2016 expansion into Manitoba and Newfoundland & Labrador has strongly positioning ENTREC to capture more power-related opportunities.

Senior Credit Facility Extension

As previously announced, on October 10, 2017, ENTREC completed a five year extension to its senior secured asset-based credit facility (the “ABL Facility”) with a syndicate of lenders led by Wells Fargo Capital Finance Corporation Canada. The syndicate of lenders also includes Bank of Nova Scotia, Canadian Western Bank and Toronto-Dominion Bank.

The ABL Facility now matures on October 10, 2022 and will continue to require payments of interest only. Along with the extension, a number of amendments were made to the ABL Facility, including, among other items:

  • A voluntary reduction in the ABL Facility to $172.5 million from $240 million previously, which will result in lower stand-by fees;
  • The removal of the accordion feature to increase the ABL Facility by a further $75 million;
  • Revisions to the sliding scale pricing levels. These revisions generally resulted in a 75 basis point increase in the interest rate applicable at each pricing level;
  • Elimination of the springing senior leverage ratio covenant, which was replaced with a springing fixed charge coverage ratio (“FCCR”) covenant of 1.0x;
  • An added requirement to maintain a minimum excess borrowing capacity of $15.0 million at all times; and
  • Requirement that ENTREC’s Debentures due June 30, 2021 be repaid or extended prior to March 31, 2021. If the Debentures are not repaid or extended prior to March 31, 2021, the maturity date of the ABL Facility will also be March 31, 2021.

A complete set of ENTREC’s most recent financial statements and Management’s Discussion and Analysis will be filed on SEDAR (www.sedar.com) and posted on the Company’s website (www.entrec.com).

About ENTREC

ENTREC is a heavy haul transportation and crane solutions provider to the oil and natural gas, construction, petrochemical, mining and power generation industries. ENTREC is listed on the Toronto Stock Exchange under the symbol ENT.

Non-IFRS Financial Measures

Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization, loss (gain) on disposal of property, plant and equipment, foreign exchange loss (gain) on long-term debt, loss (gain) on convertible debentures, share-based compensation, bargain purchase gains, impairment of long-lived assets, and non-recurring business acquisition and integration costs. ENTREC believes that, in addition to net income, adjusted EBITDA is a useful measure as it provides an indication of the financial results generated by its principal business activities prior to consideration of how these activities are financed or how the results are taxed in various jurisdictions and before certain non-cash expenses such as depreciation, amortization, loss (gain) on disposal of property, plant and equipment, share-based compensation, bargain purchase gains, and impairment of long-lived assets. Adjusted EBITDA also illustrates what adjusted EBITDA is, excluding the effect of non-recurring business acquisition and integration costs.

Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue. Adjusted EBITDA per share is calculated as adjusted EBITDA divided by the basic weighted average number of shares outstanding during the period.

Adjusted net loss is calculated excluding the after-tax amortization of acquisition-related intangible assets, impairment of long-lived assets, notional interest accretion expense arising from convertible debentures, foreign exchange loss (gain) on long-term debt, bargain purchase gain, and gain on extinguishment of convertible debentures. These exclusions represent non-cash charges that the Company does not consider indicative of ongoing business performance. The Company also believes the elimination of amortization of acquisition-related intangible assets provides management and investors an improved view of its business results by providing a degree of comparability to internally developed intangible assets for which the related costs are expensed as incurred. Adjusted loss per share is calculated as adjusted net loss divided by the basic weighted average number of shares outstanding during the applicable period.

Funds from operations is derived from the consolidated statement of cash flows and is calculated as cash provided by operating activities before changes in non-cash operating working capital. Per share amounts refer to funds from operations divided by the basic weighted average number of shares outstanding during the period. The Company believes funds from operations is a useful supplement measure as it provides an indication of its ability to generate cash flow and is a useful measure in analyzing operating performance.

Working capital is calculated as current assets less current liabilities. The Company believes working capital is a useful supplemental measure as it provides an indication of its ability to settle debts as they come due.

Please see ENTREC's Management Discussion & Analysis for the year ended December 31, 2017 for reconciliations of each of adjusted EBITDA and adjusted net loss to net loss and of funds from operations to cash provided by operating activities, the most directly comparable financial measures calculated and presented in accordance with IFRS.

Forward-looking Statements

This press release contains forward-looking statements which reflect ENTREC’s current beliefs and are based on information currently available to ENTREC. These statements require ENTREC to make assumptions it believes are reasonable and are subject to inherent risks and uncertainties. Actual results and developments may differ materially from the results and developments discussed in the forward-looking statements as certain of these risks and uncertainties are beyond ENTREC's control.

Examples of forward-looking statements in this press release and the key assumptions and risk factors involved in such statements include, but are not limited to the following: (i) ENTREC’s expectation that assuming the price of oil can continue to stabilize as 2018 progresses, the Company should continue to see higher industry activity levels in both western Canada and the United States that should result in further customer pricing improvements that, together with executing on its strategy to grow through geographic and industry diversification, should result in significant improvements in both revenue and adjusted EBITDA in 2018. This expectation is subject to the assumption that oil prices will be high enough in 2018 to encourage additional spending by oil and gas companies. The Company’s ability to achieve this growth is subject to a number of risks, including volatility of the oil and natural gas sector, economy and cyclicality, and competition; (ii) ENTREC’s expectation that revenue from its operations in the United States will continue to grow in fiscal 2018. This expectation is subject to the assumption that oil prices will be sustained at a level that will allow oil producers in the United States to achieve sufficient economic returns in order to increase their activity levels. This expectation is also partially subject to the Company’s ability to successfully expand its operations into Colorado as well as execute additional construction projects in the Gulf Coast region. ENTREC’s ability to achieve this growth is subject to a number of risks, including volatility of the oil and natural gas sector, economy and cyclicality, and competition; (iii) ENTREC’s belief that MRO work in the Alberta oil sands region could contribute to over 30% of its Canadian revenue in fiscal 2018. This belief is based on the assumption that ENTREC’s MRO customers will continue to utilize its services for their ongoing operational activities in the Alberta oil sands and that these activity levels will increase from current levels. This assumption is subject to a number of risks, including volatility of the oil and natural gas sector, Alberta oil sands exposure, economy and cyclicality, and competition; and (iv) ENTREC’s belief that it is strongly positioned to capture more power-related opportunities in the future. This belief is subject to a number of risks and uncertainties, including economy and cyclicality and competition.

Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected effects on ENTREC. These forward-looking statements are made as of the date of this press release. Except as required by applicable securities legislation, the Company assumes no obligation to update publicly or revise any forward-looking statements to reflect subsequent information, events, or circumstances.

For further information, please contact:

John M. Stevens - President & CEO
Telephone: (780) 960-5625

Jason Vandenberg – CFO
Telephone: (780) 960-5630

www.entrec.com

Source:ENTREC Corporation