May 14, 2018 - 5:00 PM EDT
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ENTREC Corporation Announces 2018 First Quarter Financial Results

ACHESON, Alberta, May 14, 2018 (GLOBE NEWSWIRE) -- ENTREC Corporation (TSX:ENT) (“ENTREC” or the “Company”), a heavy haul transportation and crane solutions provider, today announced financial results for the first quarter ended March 31, 2018. 

Revenue for the three months ended March 31, 2018 increased by 7% to $40.1 million from $37.3 million in 2017 due to significant growth from ENTREC’s operations in the United States. ENTREC’s US revenue increased by 69% to $16.3 million in 2018 from just $9.7 million last year. Higher activity levels related to oil and natural gas in North Dakota and Texas, along with improved customer pricing, were the primary drivers of this growth. In addition, the Company’s recent expansion into Colorado generated additional revenue of $1.1 million in the quarter.

ENTREC’s revenue in Canada declined to $23.7 million in the first quarter of 2018 from $27.6 million last year due to lower activity levels in the conventional oil and gas sector. The slower start to the year in conventional oil and gas was due to lower revenue from construction project activity as well as lower spending on upstream activities by ENTREC’s customers. Offsetting a portion of the revenue decline in Canada was higher revenue related to oil sands maintenance repair and operation (MRO) work in the quarter.

JV Driver loss provision

In the first quarter of 2018, ENTREC deferred recognizing revenue of $1.9 million with the JV Driver Group of Companies (“JV Driver”). This adjustment (the “JV Driver loss provision”) reduced ENTREC’s adjusted EBITDA in Q1 2018 from $2.8 million to $0.9 million and increased adjusted net loss from $3.3 million to $5.2 million. JV Driver is a group of companies under common control that owns approximately 20% of ENTREC’s issued and outstanding common shares and of which one of ENTREC’s directors is also an officer and director.

ENTREC provided heavy haul transportation services to JV Driver related to a construction project in the United States that was completed in March 2018. For this project, JV Driver also requested that ENTREC hire a specific 3rd party sub-contractor to provide crane services to JV Driver on the project. The amount owing from JV Driver at March 31, 2018 was $3.1 million USD ($4.0 million CAD) related to this project.

JV Driver is now disputing a significant portion of this amount and asserting back charges to ENTREC related to the lack of performance by the 3rd party sub-contractor. ENTREC believes that all of the amounts owing from JV Driver are valid and will pursue all remedies to collect these balances owing, including continued good-faith negotiations with JV Driver and, if required, litigation.

ENTREC will vigorously assert its rights in this matter and will recognize additional revenue as more certainty over collection of the disputed amounts is achieved, whether through negotiation or litigation.

Included in trade and other payables is also $1.5 million USD ($1.9 million CAD) payable to the noted 3rd party sub-contractor. ENTREC is disputing a significant portion of these amounts due to the sub-contractor’s non-performance. ENTREC has not yet recognized any recovery related to these disputed amounts.

Adjusted EBITDA and net loss

Adjusted EBITDA declined to $0.9 million in the first quarter of 2018 due to the JV Driver loss provision of $1.9 million. Excluding this adjustment, adjusted EBITDA would have improved to $2.8 million from $2.3 million in the first quarter of 2017 due to the higher US revenue.

Adjusted net loss increased to $5.2 million for the three months ended March 31, 2018, again also due to the JV Driver loss provision. Excluding this provision, adjusted net loss would have improved slightly to $3.3 million from $3.7 million last year.

A summary of ENTREC’s financial results for the first quarter of 2018 was as follows:

       
Three months ended
$ thousands, except per share amounts and margin percent
  March 31
2018
 March 31
2017
 
     
     
Revenue  40,067 37,298 
     
Gross profit  4,522 5,559 
Gross margin  11.3%14.9%
     
Adjusted EBITDA(1)(2)  921 2,281 
Adjusted EBITDA margin(1)  2.3%6.1%
  Per share(1)  0.01 0.02 
     
Adjusted net loss(1)  (5,217)(3,683)
  Per share(1)  (0.05)(0.03)
     
Net loss  (5,078)(3,404)
  Per share – basic  (0.05)(0.03)
  Per share – diluted  (0.05)(0.03)
     
Basic weighted average shares outstanding  109,627 109,491 
     
As at
$ thousands
  March 31
2018
 December 31
2017
 
     
Working capital(1)  22,758 27,052 
Total assets  224,804 227,496 
Total liabilities  184,597 182,705 
Shareholders’ equity  40,207 44,791 

Note 1:     See “Non-IFRS Financial Measures” section of the Company’s Management Discussion & Analysis for the three months ended March 31, 2018.
Note 2:     Adjusted EBITDA excluding the JV Driver loss provision of $1.9 million would have been $2.8 million for the quarter ended March 31, 2018.

2018 Outlook

Overall, 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.

“As we move through 2018, the outlook for our US business continues to be very 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 activity levels as well as higher customer pricing. Assuming oil prices can be maintained at current levels or increase further as 2018 progresses, we should continue to see higher industry activity levels in the United States that should result in further customer pricing improvements and improved profitability.”

In addition to the on-going growth from its operations in North Dakota and Texas, ENTREC recently expanded its operations into Colorado in the fourth quarter of 2017. The Company’s new operations in Colorado are focused on supporting several industries, including the oil and gas sector, wind power, and other general construction. ENTREC anticipates its revenue will continue to grow in the Colorado market over the balance of 2018.

"Due to macro-economic factors and low natural gas prices, we remain cautious on the oil and natural gas industry in western Canada in the short-term,” said Mr. Stevens. “These macro-economic factors include current pipeline constraints, which have contributed to significant discounts in the market price for the oil produced in western Canada compared with other jurisdictions. Other negative macro-economic factors include rising carbon taxes and increasing regulatory requirements to achieve government approvals for large industrial projects. Until the industry environment improves, producers will continue to be hesitant to invest in oil and gas developments in western Canada.”

ENTREC expects revenue from its MRO work in the Alberta oil sands region will continue to be steady throughout 2018. A final investment decision on the $40 Billion LNG Canada project in Kitimat is also expected later this year. If approved, this project would be positive for the natural gas industry in Canada and ENTREC.

Over the longer-term, ENTREC’s competitive position continues to be positive. The Company is well-positioned geographically, with a complete range of crane and specialized transportation services in each of its key markets in Canada, North Dakota, and Texas. ENTREC also continues to be the industry leader in customer service, employee engagement and safety, which will be key contributors to its success in the long-term.

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.

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 three months ended March 31, 2018 for reconciliations of each of adjusted EBITDA and adjusted net loss to net loss, the most directly comparable financial measure 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 oil prices can be maintained at current levels or increase further as 2018 progresses, it should continue to see higher industry activity levels in the United States that should result in further customer pricing improvements and improved profitability. 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. ENTREC’s ability to achieve this growth is subject to a number of risks. The risks most likely to affect this growth include volatility of the oil and natural gas sector, economy and cyclicality, and competition; (ii) ENTREC’s expectation that revenue from its operations in Colorado will continue to grow over the balance of 2018. This expectation is subject to the Company’s ability to successfully expand its operations in Colorado. The Company’s ability to achieve this growth is subject to a number of risks. The risks most likely to affect revenue growth in Colorado include volatility of the oil and natural gas sector, economy and cyclicality, and competition; (iii) ENTREC’s cautious outlook on the oil and natural gas industry in western Canada in the short-term. This cautious outlook is based on current negative macro-economic factors that are hindering investment in the western Canadian oil and natural gas industry; (iv) ENTREC’s expectation that revenue from its MRO work in the Alberta oil sands region will be steady throughout 2018. This belief is based on the assumption that oil and natural gas prices will be high enough in 2018 to maintain current levels of spending by oil and gas companies in the Alberta oil sands region. This assumption is also subject to a number of risks. The risks most likely to affect this assumption include volatility of the oil and natural gas sector, Alberta oil sands exposure, economy and cyclicality, and competition; (v) ENTREC’s expectation that a positive final investment decision on the $40 Billion LNG Canada project would be beneficial for the natural gas industry in Canada and ENTREC. This expectation is based on the assumption that a positive decision will encourage additional investment in the natural gas industry in western Canada and ENTREC will obtain additional work in the natural gas sector and in supporting construction activity related to the proposed LNG project. This expectation is also completely subject to a positive final investment decision by LNG Canada. There is no certainty of this. These assumptions are subject to a number of risks. The risks most likely to affect this assumption include volatility of the oil and natural gas sector, economy and cyclicality, and competition; and (vi) ENTREC’s expectations related to recovering additional revenue from JV Driver and disputing costs with its 3rd party sub-contractor. These expectations are subject to uncertainty due to the wide range of outcomes that can arise in contract disputes and litigation. There can be no assurance that ENTREC will be successful in these disputes.

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: GlobeNewswire (May 14, 2018 - 5:00 PM EDT)

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