MCR Earnings Surprise
Posted: Wednesday Aug 19 12:06:30PM 2015
Well, among the sea of losses being posted by oil and gas and service cos., Macro Enterprises released quite strong earnings today, showing considerable year over year growth. NR below.
Macro earns $3.81-million in Q2
2015-08-18 20:50 ET - News Release
Mr. Frank Miles reports
MACRO ENTERPRISES INC. ANNOUNCES 2015 SECOND QUARTER RESULTS
Macro Enterprises Inc. has released its second quarter 2015 results.
SUMMARY OF FINANCIAL RESULTS (thousands of dollars except per-share amounts) Three months ended Six months ended June 30, June 30, 2015 2014 2015 2014 Revenue $45,842 $36,698 $76,080 $124,477 EBITDA 7,371 2,726 11,440 7,830 Net earnings 3,812 495 5,340 2,648 Net earnings per share $0.12 $0.01 $0.17 $0.08
- The company continues to materially exceed industry standard safety averages. As at June 30, 2015, Macro Enterprises has now exceeded eight quarters and 2.0 million man-hours worked without a single lost-time injury.
- The company is reporting its 16th consecutive profitable quarter with net income of $3.8-million and earnings before interest, taxes, depreciation and amortization of $7.4-million despite challenging market conditions and an early spring breakup.
- During the quarter, the company elected to extinguish all term and mortgage debt due to the strength of its balance sheet and enhanced liquidity.
- The company is reporting shareholders' equity of $91.3-million or $3.03 per share based on common shares issued and outstanding as at June 30, 2015.
- Subsequent to quarter-end, the company completed its move into the new office facilities and disposed of its existing office space as anticipated.
Second quarter results
Consolidated revenue increased $9.1-million or 25 per cent to $45.8-million compared with $36.7-million in the second quarter last year. The increase in revenues realized in the quarter was due to higher volumes of work being performed during the seasonally slower spring breakup period. Most of the revenue in the quarter was derived from a large pipeline project and a new facilities job, along with recurring revenues from integrity and maintenance work from its existing clients under master service agreements. In the second quarter last year, the company worked on two larger facility jobs, the completion of a big-inch pipeline job and a series of integrity digs for one of the company's key clients.
Operating expenses were $36.1-million or 79 per cent of revenue compared with $31.9-million or 87 per cent of revenue in the second quarter last year. Operating expenses remained in line with historical averages and were comparable with margins in the first quarter of fiscal 2015. The company has been successful at maintaining its operating margins through safe, timely and efficient execution of work and will continue to tightly monitor all operating costs under its control in an effort to remain competitive during this period of challenging market conditions. Margins in the prior-year second quarter were negatively impacted by unanticipated problems and higher than expected costs from a larger project.
General and administrative expenses were down slightly or approximately $100,000 to $2.3-million from $2.4-million being recorded last year. The company's general and administrative expenditures reflect cost 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. Despite challenging market conditions, the company will remain active bidding and pursuing large-scale jobs, along with maintaining its master service agreements with existing clients and, as such, will continue to invest in business development initiatives. General and administrative costs should remain consistent going forward.
Depreciation of property, plant and equipment was $1.9-million and comparable with the prior-year second quarter. Depreciation is calculated at various declining balance methods across the company's multiple categories of property, plant and equipment and is used in guiding the annual capital expenditure estimates. Residual values, methods of amortization and useful lives of the assets are reviewed annually and adjusted, if appropriate.
During the second quarter, the company recognized non-cash stock-based compensation charges of $309,000 relating to options granted prior year. The company anticipates recognizing an additional $700,000 in stock-based compensation pertaining to the 2014 option grant over the next four quarters.
Finance costs were down $43,000 from the prior-year second quarter costs of $198,000 despite incurring an additional interest charge of $35,000 on the prepayment of the company's mortgage during the quarter. As a result of a strong working capital position and in anticipation of its new $115-million senior secured credit facility, the company elected to extinguish all of its existing term debt and its mortgage allowing for future annual interest savings of $200,000.
Income tax expense in the quarter of $1.5-million was in line with current enacted tax rates of approximately 28 per cent.
Net income was $3.8-million (12 cents per share) compared with $500,000 (one cent per share) recognized during the three months ended June 30, 2015. The increase in net income was a result of a stronger than anticipated second quarter with increased levels of work activity and improved operating margins being realized over the prior-year results.
Activity levels in the oil and gas industry have been materially impacted across Western Canada as a result of the volatility in commodity prices. Although the pricing uncertainty is affecting activity and many projects have been delayed, large oil and gas companies are continuing to request bids on significant projects, both liquefied natural gas related and not. With a solid balance sheet, enhanced liquidity, and its industry-leading health, safety and environmental practices, the company is in excellent financial shape to address these uncertain times.
Macro will remain geographically focused and financially disciplined. The company will maintain its focus on working with blue-chip pipeline owners and operators to carry out their construction and maintenance programs. However, as a result of challenging market conditions and client project scheduling delays, the company is currently anticipating a protracted slower second half for fiscal 2015. With operating margins expected to remain consistent, revenues in the third quarter should average what was achieved in the first two quarters of this year. Recurring revenues from its multiple existing master service agreements will represent the bulk of activity.
As part of its overall strategy to develop a significant backlog of work and revenue certainty, including seeking its new credit facilities, the company is seeking out pipeline and facilities construction contracts in connection with the liquefied natural gas 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.
The company's new revolving operating facility will provide enhanced flexibility and essential financing support as the company works to realize on those large-scale potential growth opportunities. The secured letter of credit facility is intended to facilitate the issuance of letters of credit to support qualifying projects.
Macro has also been approached by a number of its clients to assist with budget and constructability estimates, on fee-based recovery arrangements, and for major pipeline and facility projects, including LNG-related opportunities. These projects are scheduled for approvals by late 2015 to early 2016.
New $115-million senior secured credit facility
On July 31, 2015, the company closed in escrow its new $65-million three-year revolving operating credit facility pursuant to a credit agreement with Toronto-Dominion Bank, National Bank of Canada and Export Development Canada. A separate agreement with TD Bank for the provision of a $50-million letter of credit facility will close upon the final sign-off of intercreditor subordination and indemnity agreements. Macro's obligations under the credit agreement are secured in first priority against all the assets of the company and of its material subsidiaries.
The company has the right, subject to customary conditions, to increase the amount of the operating facility by up to $20-million by securing increased commitments from one or more of the initial lenders or by securing one or more new lenders.