TORONTO, Nov. 13, 2023 (GLOBE NEWSWIRE) -- Shawcor Ltd., dba Mattr Infratech ("Mattr" or the "Company") (TSX: MATR) reported today its operational and financial results for the three and nine months ended September 30, 2023. This press release should be read in conjunction with the Company's Management Discussion and Analysis ("MD&A") and interim consolidated financial statements for the three and nine months ended September 30, 2023, which are available on the Company's website and at www.sedarplus.com.
Highlights from the third quarter include1:
- The Company entered into a definitive agreement to sell a substantial part of its Pipeline Performance Group ("PPG") business which was previously reported under the Pipeline and Pipe Services ("PPS") segment for $166 million USD, or approximately $230 million CAD at October 31, 2023 exchange rates, to Tenaris S.A. ("Tenaris"). This transaction is subject to normal working capital adjustments, is currently expected to close by the middle of the first quarter of 2024 and largely completes the Company's portfolio transformation and strategic review process. Consequently, the Company is now reporting those elements of the PPG business covered by this agreement as held for sale and their results as discontinued operations, while the remaining active businesses are reported as continuing operations. Accordingly, prior period information has been retrospectively revised to reflect Continuing Operations and Discontinued Operations;
- Continuing Operations revenue was $225 million, operating income from continuing operations was $26 million and Adjusted EBITDA from continuing operations was $41 million;
- Composite Technologies (formerly known as Composite Systems) segment revenue decreased by 5% to $140 million compared to $148 million in the prior year's quarter. Excluding $14 million of revenue in the third quarter of 2022 from the Oilfield Asset Management ("OAM") business unit (sold in the fourth quarter of 2022), the segment's revenue increased by $6 million or 5%;
- Connection Technologies (formerly known as Automotive & Industrial) segment revenue was $82 million, unchanged compared to the prior year's quarter;
- Discontinued Operations revenue was $289 million, operating income from discontinued operations was $80 million and Adjusted EBITDA from discontinued operations was $87 million, including the results from the Southeast Gateway Pipeline ("SGP") project in Altamira, Mexico, for which coating operations were approximately 40% complete as of quarter end;
- On a consolidated basis, (including Continuing Operations and Discontinued Operations) Mattr reported Net Income of $72 million, Adjusted EBITDA of $128 million, fully diluted Earnings Per Share ("EPS") of $1.03 and fully diluted Adjusted EPS of $1.13;
- A net repayment of $9 million was made on the Credit Facility (as defined herein). As at September 30, 2023, the Company had total net debt of $152 million and a Net Debt-to-EBITDA1 ratio (using a trailing twelve-month consolidated Adjusted EBITDA1) of approximately 0.50 times;
- Subsequent to the quarter, the Company repaid an additional $30 million on the Credit Facility, bringing the outstanding balance to zero. Including this subsequent repayment, since the beginning of 2021 the Company has reduced its Credit Facility balance by $291 million, reducing annual cash interest payments by approximately $20 million at current rates;
- Subsequent to the quarter, the Company completed the sale of its facility in Pozzallo, Italy yielding gross proceeds of approximately $6 million.
1 EBITDA, Adjusted EBITDA, Net- Debt to EBITDA and Adjusted EPS are non-GAAP measures. Order backlog is a supplementary financial measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. See "Section 5.0 - Reconciliation of Non-GAAP Measure and Other Financial Measures" for further details and a reconciliation of these non-GAAP measures. Adjusted EBITDA is adjusted for all periods presented as the Company updated this non-GAAP measure to include adjustments for share-based incentive compensation cost and foreign exchange (gain) loss. See Section 5.0 - Reconciliation of Non-GAAP Measures for further details on this modification. The amounts presented above reflect restated figures for all prior periods to align with the current presentation. The Company expects the current calculation methodology of Adjusted EBITDA to be consistently applied in future periods.
"During the quarter Mattr continued to execute on its strategy to deliver long-term growth, margin expansion and volatility reduction, announcing a definitive agreement to divest nearly all of our pipe coating business, which is now reported as Discontinued Operations. This transaction is expected to close by the middle of the first quarter of 2024 and represents the final step in our transformation into an infrastructure products provider, delivering high-value solutions used in harsh environments by customers as they expand and renew critical infrastructure around the world," said Mike Reeves, President & CEO of Mattr.
"Our consolidated Adjusted EBITDA margins reached 25% during Q3, with Continuing Operations delivering Adjusted EBITDA margins1 in excess of 18%, despite some unfavourable near-term market conditions which weighed on our Composite Technologies segment in the quarter. In the face of these short-term headwinds, Mattr continues to lower its cost base and enhance production efficiency throughout the organization. The Company's positive longer-term outlook across our remaining portfolio is unchanged."
"Our Discontinued Operations delivered substantial revenue growth on a sequential basis, driven primarily by a full quarter of coating activity on the SGP project. The efficiency of execution on this project, and several others, drove Adjusted EBITDA margin1 in Discontinued Operations to exceed 30% during Q3."
"The Company maintains its disciplined, returns-focused capital allocation strategy, progressing the establishment of four new North American production sites which are expected, over time, to further accelerate revenue growth and expand Adjusted EBITDA margins1 in our Composite Technologies and Connection Technologies segments. In parallel, the Company has accelerated share repurchases under its recently renewed and increased NCIB."
"We believe Mattr is very well positioned to deliver substantial value creation for shareholders over the coming years given its strong balance sheet, clear opportunities for high return organic and inorganic growth, and pending completion of its portfolio optimization process. While we expect Continuing Operations Adjusted EBITDA1 will move down in the fourth quarter as normal seasonal impacts combine with ongoing lower activity levels in North American oilfield activity and delayed fuel project execution, we anticipate our total consolidated Adjusted EBITDA1 (Continuing Operations and Discontinued Operations) will rise, driven primarily by the impact of sequentially stronger pipe coating activity."
1 EBITDA, Adjusted EBITDA, Adjusted EPS, Adjusted EBITDA margin and Net debt-to-EBITDA are non-GAAP measures. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. See "Section 5.0 - Reconciliation of Non-GAAP Measure and Other Financial Measures" for further details and a reconciliation of these non-GAAP measures. Adjusted EBITDA is adjusted for all periods presented as the Company updated this non-GAAP measure in the first quarter of 2023 to include adjustments for share-based incentive compensation cost and foreign exchange (gain) loss. See Section 5.0 - Reconciliation of Non-GAAP Measures for further details on this modification. The amounts presented above reflect restated figures for all prior periods to align with the current presentation. The Company expects the current calculation methodology of Adjusted EBITDA to be consistently applied in future periods.
Selected Financial Highlights
| (in thousands of Canadian dollars, except per share amounts and percentages) | Three Months Ended September 30 | Nine Months Ended September 30 | |||||||
| 2023 | 2022 | 2023 | 2022 | ||||||
| $ | % | $ | % | $ | % | $ | % | ||
| Revenue | 225,407 | 234,227 | 714,504 | 636,035 | |||||
| Gross profit | 73,397 | 33% | 72,868 | 31% | 230,566 | 32% | 188,679 | 30% | |
| Income from Continuing Operations(a) | 25,975 | 11% | 30,805 | 13% | 79,223 | 11% | 98,588 | 16% | |
| Net Income (Loss) from Continuing Operations(b) | 18,145 | 29,211 | 53,523 | 79,858 | |||||
| Net Income (Loss) from Discontinued Operations | 53,829 | (6,208) | 56,702 | (44,024) | |||||
| Net Income (loss) for the period | 71,974 | 23,003 | 110,225 | 35,834 | |||||
| Earnings per share: | |||||||||
| Basic | 1.04 | 0.33 | 1.59 | 0.52 | |||||
| Diluted | 1.03 | 0.33 | 1.57 | 0.52 | |||||
| Adjusted EBITDA from Continuing Operations(c)(d) | 41,061 | 18% | 43,442 | 19% | 132,290 | 18% | 100,412 | 16% | |
| Adjusted EBITDA from Discontinued Operations(c)(d) | 87,379 | 30% | (535) | (1%) | 117,953 | 21% | (5,132) | (2%) | |
| Total Adjusted EBITDA from Operations(c)(d) | 128,440 | 25% | 42,909 | 13% | 250,243 | 20% | 95,280 | 11% | |
| Total Adjusted EPS from Operations:(c) | |||||||||
| Basic | 1.14 | 0.46 | 1.96 | 0.39 | |||||
| Diluted | 1.13 | 0.46 | 1.95 | 0.39 | |||||
| (a) | Operating income in the three months ended September 30, 2023, includes impairment charges of $8.7 million and no restructuring costs and other, net; while operating income in the three months ended September 30, 2022, includes no impairment charges and $2.1 million in restructuring costs and other, net. Operating income in nine months ended September 30, 2023, includes impairment charges of $8.7 million and no gain on sale of land and other or restructuring costs and other, net; while operating income in the nine months ended September 30, 2022, includes $43.0 million in gain on sale of land and other, $7.3 million in impairment charges and $5.6 million in restructuring costs and other, net. | ||||||||
| (b) | Attributable to shareholders of the Company. | ||||||||
| (c) | Adjusted EBITDA and Adjusted EPS are non-GAAP measures. Non-GAAP measures do not have standardized meanings prescribed by GAAP and are not necessarily comparable to similar measures provided by other companies. See Section 5.0 - Reconciliation of Non-GAAP Measures for further details and a reconciliation of these non-GAAP measures. | ||||||||
| (d) | Adjusted EBITDA is adjusted for all periods presented as the Company updated this non-GAAP measure in the first quarter of 2023 to include adjustments for share-based incentive compensation cost and foreign exchange (gain) loss. See Section 5.0 - Reconciliation of Non-GAAP Measures for further details on the changes in the composition in Adjusted EBITDA. The amounts presented above reflect restated figures for all prior periods to align with the current presentation. | ||||||||
1.0THIRD QUARTER HIGHLIGHTS
The Company delivered operating income from Continuing Operations of $26.0 million and Adjusted EBITDA1 from Continuing Operations of $41.1 million in the third quarter of 2023, a reduction of $4.8 million and $2.4 million, respectively, compared to the third quarter of 2022. Income from Continuing Operations results included a foreign exchange loss of $1.0 million which compares to a $5.7 million gain in the comparative period. Additionally, an impairment charge of $8.7 million related to certain real estate assets in Western Canada was recorded against operating income from Continuing Operations during the third quarter of 2023, while operating income from Continuing Operations in the prior year's third quarter included a $2.1 million restructuring charge. Continuing Operations Adjusted EBITDA in the third quarter of 2022 included $1.9 million attributable to the OAM business unit, which was sold during the fourth quarter of 2022. The vast majority of the Company's continuing revenue during the third quarter of 2023 was derived from sales into infrastructure and industrial end markets.
The Company continues to execute on its strategy to optimize its portfolio, while exploring organic and inorganic investment opportunities. During the quarter, the Company entered into a definitive agreement to sell the majority of its PPG business to Tenaris for a purchase price of US $166 million, approximately $230 million at October 31, 2023 exchange rates on cash-free, debt-free basis, subject to normal working capital adjustments and customary closing conditions. As of the date hereof, the transaction has received regulatory approval in one of the two required jurisdictions and is expected to secure the remaining approval and subsequently close by the middle of the first quarter of 2024. The completion of this transaction will conclude the Company's previously communicated strategic review and portfolio transformation process.
As at September 30, 2023, the Company had cash and cash equivalents totaling $98 million (December 31, 2022 - $264.0 million). The decrease in cash from year-end 2022 was driven by (i) an investment of $29.9 million in working capital mostly in support of continued activity in the Composite Technologies and Connection Technologies segments, (ii) a repayment of $39.0 million of the Company's syndicated credit facility (the "Credit Facility"), (iii) $22.6 million of share acquisitions under the NCIB, (iv) $57.5 million of growth and maintenance capital expenditures for continuing operations, (v) $8.1 million spent on the acquisition of Triton Stormwater Solutions and (vi) $113.6 million in items related to discontinued operations including capital in support of the SGP project. This was offset by $6.5 million received from the divesture of the Shaw Pipeline Services ("SPS") and UK Coating businesses net of transaction expenses. Since the beginning of 2021 and up to September 30, 2023, the Company has repaid $261.5 million against the Credit Facility. Subsequent to the quarter, the Company repaid the outstanding Credit Facility balance of $30.0 million. The Company will continue to focus on maximizing the conversion of operating income into cash, optimizing its capital structure, investing in organic and inorganic growth opportunities, and maximizing returns to shareholders.
1 EBITDA, Adjusted EBITDA, Adjusted EPS, and net debt-to-Adjusted EBITDA are non-GAAP measures. Order backlog is a supplementary financial measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. See "Section 5.0 - Reconciliation of Non-GAAP Measures" for further details and a reconciliation of these non-GAAP measures. Adjusted EBITDA is adjusted for all periods presented as the Company updated this non-GAAP measure to include adjustments for share-based incentive compensation cost and foreign exchange (gain) loss. See "Section 5.0 - Reconciliation of Non-GAAP Measures" for further details on the changes in composition of Adjusted EBITDA. The amounts presented above reflect restated figures for all prior periods to align with the current presentation. The Company expects the current calculation methodology of Adjusted EBITDA to be consistently applied in future periods.
Selected Segment Financial Highlights
| (in thousands of Canadian dollars, except percentages) | Three Months Ended September 30 | Nine Months Ended September 30 | |||||||
| 2023 | 2022 | 2023 | 2022 | ||||||
| $ | % | $ | % | $ | % | $ | % | ||
| Revenue | |||||||||
| Composite Technologies | 140,130 | 147,696 | 423,060 | 389,552 | |||||
| Connection Technologies | 81,762 | 81,623 | 265,998 | 239,191 | |||||
| Financial, Corporate, and Others | 3,515 | 4,908 | 25,446 | 7,292 | |||||
| Revenue from Continuing Operations | 225,407 | 234,227 | 714,504 | 636,035 | |||||
| Revenue from Discontinued Operations | 288,576 | 100,792 | 564,516 | 273,796 | |||||
| Operating income | |||||||||
| Composite Technologies | 25,483 | 18.2% | 21,747 | 14.7% | 71,785 | 17.0% | 38,142 | 9.8% | |
| Connection Technologies | 13,910 | 17.0% | 13,915 | 17.0% | 48,565 | 18.3% | 43,634 | 18.2% | |
| Financial and Corporate | (13,418) | (4,857) | (41,127) | 16,812 | |||||
| Operating income from Continuing Operations | 25,975 | 30,805 | 79,223 | 98,588 | |||||
| Operating Income from Discontinued Operations | 80,087 | 27.8% | (7,935) | (8.0%) | 90,915 | 16.1% | (40,667) | (15.2%) | |
| Adjusted EBITDA | |||||||||
| Composite Technologies | 32,446 | 23.2% | 32,197 | 21.8% | 93,985 | 22.2% | 70,345 | 18.1% | |
| Connection Technologies | 15,218 | 18.6% | 15,811 | 19.4% | 54,805 | 20.6% | 48,233 | 20.2% | |
| Financial and Corporate | (6,603) | (4,566) | (16,500) | (18,166) | |||||
| Adjusted EBITDA from Continuing Operations(a) | 41,061 | 18.2% | 43,442 | 18.5% | 132,290 | 18.5% | 100,412 | 15.8% | |
| Adjusted EBITDA from Discontinued Operations(a) | 87,379 | 30.3% | (532) | (0.6%) | 117,953 | 20.9% | (5,132) | (1.9%) | |
| (a) | Adjusted EBITDA is a non-GAAP measure. Non-GAAP measures do not have a standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures provided by other companies. See Section 5.0 - Reconciliation of Non-GAAP Measures for further details and a reconciliation of these non-GAAP measures. Adjusted EBITDA is adjusted for all periods presented as the Company updated this non-GAAP measure in the first quarter of 2023 to include adjustments for share-based incentive compensation cost and foreign exchange (gain) loss. See Section 5.0 - Reconciliation of Non-GAAP Measures for further details on the changes in composition for Adjusted EBITDA. The amounts presented above reflect restated figures for all prior periods to align with the current presentation. | ||||||||
Composite Technologies segment revenue in the third quarter of 2023 was $140.1 million, a decrease of $7.6 million, or 5%, compared to the third quarter of 2022, with an operating income of $25.5 million. The decrease in revenue was largely attributed to the absence of the OAM business unit which was sold during the fourth quarter of 2022. Demand for composite pipe products lowered slightly, as North American onshore rig counts declined by over 10% during the quarter. The Company also observed a modest decline in underground fiberglass reinforced plastic ("FRP") tank shipments driven primarily by permitting delays for customer installations. The segment also incurred idle costs of approximately $0.5 million associated with the establishment of its new North American production sites during the quarter. Adjusted EBITDA1 in the third quarter of 2023 was $32.4 million, relatively unchanged compared to $32.2 million in the third quarter of 2022 despite the absence of the previously sold OAM business unit.
The Connection Technologies segment delivered revenue of $81.8 million in the third quarter of 2023 which was approximately the same as the third quarter of 2022. Its operating income in the third quarter of 2023 was $13.9 million. In the wire and cable business, the segment was impacted by earlier than usual destocking activity from its Canadian distributors as they carefully managed inventories in the face of elevated interest rates. Offsetting this decrease, the segment was able to leverage shorter lead times to capture increased sales into Canadian and US utility markets. Deliveries to the segment's automotive customers were only marginally impacted by the United Auto Workers ("UAW") strike in North America. The segment also incurred idle costs of less than half a million dollars associated with the relocation of its North American footprint during the quarter. The segment delivered Adjusted EBITDA1 of $15.2 million during the third quarter of 2023, a 4% decrease versus the prior year quarter.
Discontinued Operations, which consists of the businesses formerly reported under the PPS segment excluding the entities not within the perimeter of the pending transaction with Tenaris, generated revenue of $288.6 million in the third quarter of 2023, representing an increase of 186% versus the same quarter of 2022. Operating income in the third quarter of 2023 was $80.1 million. This significant increase was a result of strong performance in pipe coating facilities across all regions bolstered by a full quarter of coating activity at the SGP project. As at the end of the third quarter of 2023, approximately 40% of the total anticipated SGP project revenue had been recognized. Discontinued Operations generated $87.4 million of Adjusted EBITDA1 in the third quarter of 2023, a substantial increase from the negative $0.5 million reported in the prior year's third quarter. Execution efficiency and favourable revenue mix resulted in Adjusted EBITDA margins1 of 30.3% during the quarter, compared to a modestly negative Adjusted EBITDA margin1 in the prior year's third quarter.
The assets and liabilities of the PPG business which is now reported as Discontinued Operations are measured at the lower of their carrying amount and fair value less cost of disposal ("FVLCD"). The Company determined FVLCD based on management's best estimate of future proceeds of purchase price and remaining future cash flows from certain existing contracts, net of estimated selling costs. The Company determined that the carrying amount of the net assets of PPS segment to be recoverable as at September 30, 2023. Upon closing, the Company will reassess the determination of FVLCD and any gain or loss on the sale will be recognized in discontinued operations in the consolidated statements of income (loss).
The Company's total backlog for Continuing Operations as at September 30, 2023 was $392.5 million, a decrease of $40.5 million from $433.0 million as of June 30, 2023 primarily driven by lower North American onshore drilling and completion activity levels, the execution of projects in the backlog for the pipe coating business components reported under Continuing Operations, and the lower level of orders from Canadian wire and cable distributors as they carefully mange inventory.
The PPG business which has historically comprised the vast majority of the Company's bid and budgetary estimates is now reported as Discontinued Operations and thus the Company no longer reports these metrics.
2.0OUTLOOK
The Company expects to experience modest slowing of activity in its Continuing Operations during the final quarter of 2023, as normal seasonal effects in both the Composite Technologies and Connection Technologies segments are combined with anticipated sequentially lower demand for products in the Composite Technologies segment. The Composite Technologies segment's outlook is driven by expectations for North American onshore drilling and completion activity to remain approximately in-line with the Q3 exit run-rate and continued permitting delay impacts on fuel storage tank shipments throughout the quarter. The Connection Technologies segment is expected to see a slight decline in profitability compared to the third quarter, predominantly related to product mix, modest impacts to its automotive sales from UAW strike action and slight increases in one-time costs associated with its North American production facility relocation project.
In management's view, the underlying mid and long-term market trends for all of Mattr's primary businesses remain favourable. Despite elevated interest rates, demand for products in support of critical infrastructure renewal and expansion is expected to remain robust; its fuel tank customers have made adjustments to accommodate elongated permitting timelines which are expected to result in a return to more normal FRP tank shipment patterns during the first half of 2024; the tentative resolution of labour disputes in the North American automotive sector should result in normalized sales activity resumption during the first quarter of 2024; and anticipated continuing healthy oil and gas commodity prices combined with a new annual capital spending cycle for North American oil and gas producers is expected to drive a gradual increase in demand for oilfield products moving through the first half of next year. More broadly, management expects that demand for its differentiated, harsh environment, products will continue to rise in the coming years, as a result of the global need to renew and expand critical infrastructure, including energy generation and distribution, electrification, transportation network enhancement and storm water management. The Company continues to closely monitor raw material and labour costs and, accordingly, will continue to ensure its pricing appropriately reflects the value of its products and its cost inputs.
During the second quarter of 2023, the Company detailed several planned 2023 and 2024 capital investments into high-return growth and efficiency improvement opportunities in both segments. These investments include the construction of new composite pipe, FRP tanks, and heat shrink tubing production facilities in the US, as well as a new wire and cable facility in Canada, the latter two facilities replacing and expanding the Company's existing North American footprint for the Connection Technologies segment. The Company expects to continue to make sizeable organic investments during the remainder of 2023 and into 2024 to expand capacity in targeted geographies and improve efficiency within its Composite Technologies and Connection Technologies segments. In aggregate, once completed, these planned growth capital investments are expected to result in the Company creating at least $150 million per year of incremental revenue generating capacity with comparable margins to those realized in its Composite Technologies and Connection Technologies segments. These levels of outputs are expected to be realized over the 3-5-year period following completion, as the facilities reach efficient utilization levels in accordance with their currently expected timelines.
The Company continues to take an "all of the above" approach to capital allocation, skewed towards investment in organic opportunities viewed as having the highest risk-adjusted return on investment potential. While disciplined capital investment in all areas continues, high-return potential growth capital investments, recurring lease liabilities and share repurchases under the Company's recently renewed NCIB are expected to consume a majority of the cash generated from Continuing Operations during the final quarter of 2023, with cash generated from Discontinued Operations expected to enhance the Company's balance sheet.
Continuing Operations total order backlog1 is expected to modestly decline through the fourth quarter of the year as customers maintain tight controls around inventory levels, followed by a gradual rebuild in early 2024 as new budgeting cycles begin.
1 Order backlog is a supplementary financial measure. See "Section 5.0 - Reconciliation of Non-GAAP Measures" for additional information.
1 EBITDA, Adjusted EBITDA, adjusted EBITDA margins and net debt-to-Adjusted EBITDA are non-GAAP measures. Order backlog is a supplementary financial measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. See "Section 5.0 - Reconciliation of Non-GAAP Measures" for further details and a reconciliation of these non-GAAP measures. Adjusted EBITDA is adjusted for all periods presented as the Company updated this non-GAAP measure in the first quarter of 2023 to include adjustments for share-based incentive compensation cost and foreign exchange (gain) loss. See "Section 5.0 - Reconciliation of Non-GAAP Measures" for further details on the changes in composition of Adjusted EBITDA. The amounts presented above reflect restated figures for all prior periods to align with the current presentation. The Company expects the current calculation methodology of Adjusted EBITDA to be consistently applied in future periods.
Composite Technologies Segment
The Company is expecting a decline in demand for underground FRP tanks in the fourth quarter of 2023 driven by normal seasonal cycles in customer installation activity, modestly intensified by the continued impact of permitting delays. This is anticipated to continue into the first quarter of 2024 as ground conditions remain unfavorable to installation activity, with a rebound in demand expected in the second quarter as ground conditions improve and normal customer purchasing patterns are combined with the impacts of changes in permitting approaches to overcome recently observed permit issuance timeline extension. The Company expects demand for its water and storm-water storage and treatment systems to follow a similar trajectory. With many North American oil and gas operators facing 2023 calendar year budget exhaustion, the Company anticipates North American drilling and completion activity levels in the majority of the fourth quarter will be similar to the third quarter exit rate, before lowering further over the year-end period as normally observed, causing a sequentially lower demand for the Company's Flexpipe product line. With new calendar year capital budgets taking effect early in 2024, the Company expects a gradual rise in North American onshore drilling and completion activity to drive increasing demand for its Flexpipe product line moving through the first half of 2024, with overall market activity enhanced by continued adoption of the Company's recently introduced larger diameter product portfolio. International sales of composite pipe products are expected to generally trend upwards, although the tender-based nature of many international orders means timing of order delivery and related revenue recognition is likely to remain irregular. The segment continues to execute the establishment of two new US production sites, with its Texas Flexpipe and South Carolina FRP tank facilities progressing on-time and on-budget. First production from both sites is still expected during the second half of 2024. The segment continues to closely monitor raw material and labour costs and, as a result, will continue to ensure its pricing appropriately reflects the value of its products and its cost inputs. Additionally, the segment remains intensely focused on cost controls and ensuring its fixed cost base is appropriate.
Connection Technologies Segment
The Company is expecting generally stable levels of demand for its Connection Technologies segment products through the fourth quarter of 2023, although profitability is expected to be slightly lower as a result of less favourable product mix, modest ongoing impacts to its automotive sales from UAW strike action and a slight increase in idle costs associated with facility relocations. The Company continues to monitor recessionary concerns and broad supply chain impacts. Its outlook does not incorporate any expectation of meaningful growth in total global vehicle output within the automotive end markets, which represented approximately 28% of the segment's revenue in the third quarter of 2023. Despite the macroeconomic backdrop, demand for the Company's automotive products is expected to continue to outpace overall automotive production as a result of electronic content growth in premium, hybrid and full electric vehicle markets, particularly in the Asia Pacific and Europe, Middle East and Africa regions. The Company is expecting to benefit from continued infrastructure spending in 2024 and beyond as new and upgraded utility and communication networks are constructed, nuclear refurbishments continue in Canada, and federal stimulus packages are rolled out. The segment continues to execute the establishment of two new production sites, with its Toronto area and Ohio facilities progressing on-time and on-budget. First production from both sites is still expected during the first half of 2025. The segment continues to closely monitor raw material and labour costs, particularly copper, and, as a result, will continue to ensure its pricing appropriately reflects the value of its products and its cost inputs.
Strategic Review Update
On September 12, 2022, the Company announced that it had commenced a review of strategic alternatives (the "Strategic Review") for its PPG, SPS, and OAM operating units. In connection with the Strategic Review, the Company also announced its intent to re-brand and rename the Company from "Shawcor Ltd" to "Mattr Corp", subject to necessary regulatory and shareholder approvals.
Since the commencement of the Strategic Review the Company has considered and explored a range of options for each of the operating units, including the sale of such units. To date, the Strategic Review process (including the sale of a non-material business unit preceding the formal launch of the Strategic Review) has resulted in the successful completion of the following:
- the sale of its Lake Superior Consulting business (which formed part of what was previously the PPS segment) in September 2022;
- the sale of its OAM business (which formed part of the Composite Technologies segment) in November 2022;
- the sale of its Socotherm subsidiary (which formed part of what was previously the PPS segment) in December 2022;
- the sale of its specialty pipe coating facility in Ellon, Scotland in the second quarter of 2023;
- the sale of its SPS business (which formed part of what was previously the PPS segment) at the end of May 2023;
- the sale of its facility in Pozzallo, Italy subsequent to the third quarter of 2023;
- the entry into a definitive agreement with Tenaris for the sale of the substantial majority of its PPG operating unit (which currently forms the entirety of what was previously the PPS segment) in September of 2023, which is expected to close by the middle of the first quarter of 2024.
The Company will provide further details on the sale of the majority of its PPG operating unit when the transaction closes. With respect to the entities within the PPG operating unit that are outside the perimeter of the transaction with Tenaris, the Company remains committed to divest of these entities, though proceeds are not expected to be material to the Company or its financial results.
Additionally, at the beginning of June 2023, the Company announced its official rebrand to "Mattr", reflecting its transformation from an energy services organization, into a materials technology company, providing differentiated, high-performance products to critical infrastructure markets around the world.
Discontinued Operations (Pipeline and Pipe Services Segment)
The Company expects that its Discontinued Operations will see further elevation of activity levels during the fourth quarter of 2023, primarily driven by the sequencing of coating operations within the SGP project and high levels of activity across virtually all geographies. The Company anticipates that SGP project coating activity will be completed during the first quarter of 2024.
The Company anticipates the sale of the majority of its PPG business, which represents substantially all of its Discontinued Operations, to Tenaris to conclude by the middle of the first quarter of 2024.
3.0CONFERENCE CALL AND ADDITIONAL INFORMATION
Mattr will be hosting a Shareholder and Analyst Conference Call and Webcast on Tuesday, November 14th, 2023 at 9:00 AM ET, which will discuss the Company's Third Quarter 2023 Financial Results. To participate via telephone, please register at https://register.vevent.com/register/BIa67b64ace22546ff812334947749c7c7and a telephone number and pin will be provided.
Alternatively, please go to the following website address to participate via webcast: https://edge.media-server.com/mmc/p/z3w9gu27. The webcast recording will be available within 24 hours of the live presentation and will be accessible for 90 days.
About Mattr
Mattr is a growth-oriented, global materials technology company broadly serving critical infrastructure markets, including transportation, communication, water management, energy and electrification. The Company operates through a network of fixed manufacturing facilities. Its two business segments, Composite Technologies and Connection Technologies, enable responsible renewal and enhancement of critical infrastructure while lowering risk and environmental impact.
For further information, please contact:
Meghan MacEachern
Director, External Communications & ESG
Tel: 437-341-1848
Email: meghan.maceachern@mattr.com
Website: www.mattr.com
Source: Shawcor Ltd,. dba Mattr Infratech
Mattr.ER
4.0FORWARD-LOOKING INFORMATION
This news release includes certain statements that reflect management's expectations and objectives for the Company's future performance, opportunities and growth, which statements constitute "forward-looking information" and "forward-looking statements" (collectively "forward-looking information") under applicable securities laws. Such statements, other than statements of historical fact, are predictive in nature or depend on future events or conditions. Forward-looking information involves estimates, assumptions, judgements and uncertainties. These statements may be identified by the use of forward-looking terminology such as "may", "will", "should", "anticipate", "expect", "believe", "predict", "estimate", "continue", "intend", "plan" and variations of these words or other similar expressions. Specifically, this news release includes forward-looking information in the Outlook Section and elsewhere in respect of, among other things, the ability of the Company to deliver higher returns to all shareholders; the evolution of the Company's portfolio of products and services beyond the energy sector; the completion of the remaining portion of the Strategic Review process, as well as the timing of the closing of the Tenaris transaction in connection therewith; the expected market dynamics during the first quarter of 2024; the Company's intention to change its legal name from "Shawcor Ltd." to "Mattr Corp."; the favourability of underlying business trends of the Company; the Company's ability to execute on its portfolio optimization strategy; the Company's ability to execute projects under contract; the Company's ability to execute on its business plan and strategies, including the pursuit, execution and integration of potential organic and inorganic growth opportunities, as applicable; the expected order backlog decline through the fourth quarter of 2023 and the expected gradual increase in early 2024; the level of financial performance through the remainder of 2023 and throughout 2024; the expected gradual increase in demand for oilfield products in the first half of 2024; the demand for, and activity in, the Company's products in the Composite Technologies and the Connection Technologies segments of the Company's business; Company's expected investments during the remainder of 2023 and 2024 to expand capacity within the Composite Technologies and Connection Technologies segments; continued share repurchases under the NCIB; the anticipated timeline of the SGP project coating and the level of coating activity through the remainder of 2023 and its anticipated completion in the first quarter of 2024; the anticipated results and timing of the Company's capital expenditures investments and the expected impact on the Company's revenue generating capacity, operational efficiencies, margin profile enhancement, and financial results; the expected activity levels of the Company's Discontinued Operations during the fourth quarter of 2023; expected production levels following the 2024 and 2025 facility relocation and capacity expansion programs; statements regarding timing for completion of the new facilities, and timing of achievement of anticipated production levels; the seasonal impacts to, and increased demand in, the Company's Composite Technologies and Connection Technologies segments; the anticipated lower activity levels in North American oilfield activity and fuel project execution during the fourth quarter of 2023; the anticipated normalized product shipment patterns during the first half of 2024; the anticipated demand for the Company's Flexpipe product line; the growth in premium, hybrid and full electric vehicle markets and the impact thereof on the Company's financial performance; the impact of continued infrastructure spending, including in the areas of water management, communication networks and nuclear refurbishment on the Company's financial performance; the Company's management of raw material and labour costs; the impact of labour disputes in the North American automotive sector; the impact of global economic activity on the demand for the Company's products; the impact of continuing demand for oil and gas; the impact of global oil and gas commodity prices and the annual capital spending cycle for North American oil and gas producers; the global need to renew and expand critical infrastructure; the execution of definitive contracts on outstanding bids for and the timing to complete certain pipe coating projects;; the ability of the Company to fund its operating and capital requirements; the ability of the Company to comply with its debt covenants; and the ability to finance increases in working capital.
Forward-looking information involves known and unknown risks and uncertainties that could cause actual results to differ materially from those predicted by the forward-looking information. Readers are cautioned not to place undue reliance on forward-looking information as a number of factors could cause actual events, results and prospects to differ materially from those expressed in or implied by the forward-looking information. Significant risks facing the Company include but are not limited to: the risks and uncertainties described in the Company's Management Discussion and Analysis under "Risks and Uncertainties" and in the Company's Annual Information Form under "Risk Factors".
These statements of forward-looking information are based on assumptions, estimates and analysis made by management in light of its experience and perception of trends, current conditions and expected developments as well as other factors believed to be reasonable and relevant in the circumstances.
These assumptions include those in respect of the Company's ability to manage supply chain disruptions caused by pandemics, other health crises or by natural disasters; the Company's ability to manage supply chain disruptions and other business impacts caused by, among other things, geopolitical events or conflicts, such as the conflict in Ukraine and related sanctions on Russia; global oil and gas prices stabilizing at current levels; improved pipe-coating activity throughout the remainder of 2023; the impact of the war in Ukraine and related sanctions on Russia; the current escalating Israel-Palestine conflict; the impact of the UAW strike; the Company's demand for products and the strength of its and its customers supply chains; the impact of raw material shortages on the Company; the costs of raw materials and labour, including as a result of labour shortages and capacity constraints; seasonal impacts on the Company's FRP tanks business due to North American ground conditions; sustained strong demand for the Company's FRP tanks, including for retail fuel storage and water treatment and storage; seasonal impacts to the Company's composite pipe business due to spring break-up conditions; the increased demand for composite pipe products and the Company's products within the Connection Technologies markets; heightened demand for electric and hybrid vehicles and for electronic content within those vehicles; the growth in demand for water and storm-water storage and treatment systems; heightened infrastructure spending in Canada, including in respect of commercial and municipal water projects, transportation networks, communication networks and nuclear refurbishments; the recommencement of increased capital expenditures in the global offshore oil and gas pipeline segment to replace, maintain and rehabilitate existing infrastructure, replace production due to reservoir depletion and to address geopolitical challenges impacting several producing regions; the continued recovery of the global economy; a gradual recovery of oil and gas markets in North America; the Company's ability to execute projects under contract; the Company's continuing ability to provide new and enhanced product offerings to its customers; that the Company will continue to be able to optimize its portfolio and identify and successfully execute on opportunities for acquisitions and dispositions in alignment with its strategic plan; the effect of the Strategic Review process on the Company; the higher level of investment in working capital by the Company; the easing of supply chain shortages and the continued supply of and stable pricing or the ability to pass on higher prices to its customers for commodities used by the Company; the availability of personnel resources sufficient for the Company to operate its businesses; the maintenance of operations by the Company in major oil and gas producing regions; the adequacy of the Company's existing accruals in respect of environmental compliance and in respect of litigation and tax matters and other claims generally; the increase in order backlog and contracts; the adequacy of the impairment charges taken; and the ability of the Company to satisfy all covenants under its Credit Facility (as defined herein) and other debt obligations and having sufficient liquidity to fund its obligations and planned initiatives. The Company believes that the expectations reflected in the forward-looking information are based on reasonable assumptions in light of currently available information. However, should one or more risks materialize, or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward-looking information included in this document and the Company can give no assurance that such expectations will be achieved.
When considering the forward-looking information in making decisions with respect to the Company, readers should carefully consider the foregoing factors and other uncertainties and potential events. The Company does not assume the obligation to revise or update forward-looking information after the date of this document or to revise it to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.
To the extent any forward-looking information in this document constitutes future oriented financial information or financial outlooks, within the meaning of securities laws, such information is being provided to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. Future oriented financial information and financial outlooks, as with forward-looking information generally, are based on the assumptions and subject to the risks noted above.
5.0RECONCILIATION OF NON-GAAP MEASURES
The Company reports on certain non-GAAP measures that are used to evaluate its performance and segments, as well as to determine compliance with debt covenants and to manage its capital structure. These non-GAAP measures do not have standardized meanings under IFRS and are not necessarily comparable to similar measures provided by other companies. The Company discloses these measures because it believes that they provide further information and assist readers in understanding the results of the Company's operations and financial position. These measures should not be considered in isolation or used in substitution for other measures of performance prepared in accordance with GAAP. The following is a reconciliation of the non-GAAP measures reported by the Company.
EBITDA and Adjusted EBITDA
In an effort to reduce the volatility of the Adjusted EBITDA metric imposed by factors outside of the Company's control and to provide enhanced comparability of the Company's results from its principal business activities with those of the Company's peer group, the Company has modified the composition of Adjusted EBITDA. Beginning in the first quarter of 2023, Adjusted EBITDA includes adjustments for share-based incentive compensation costs and foreign exchange (gains) losses. Share-based incentive compensation costs have recently experienced a high degree of volatility derived from movements in the market value of the Company's shares and the related impact on such plans. Given the Company's global presence and its exposure to several foreign currency rates, the Company experiences fluctuation from foreign exchange gains or losses outside of its control. The Company believes this modified composition will present a more accurate representation of the Company's results from principal business activities. The amounts presented below reflect restated figures for prior periods as needed to align with the updated definition.
EBITDA is a non-GAAP measure defined as earnings before interest, income taxes, depreciation and amortization. Adjusted EBITDA is also a non-GAAP measure defined as EBITDA adjusted for items which do not impact day to day operations. Adjusted EBITDA is calculated by adding back to EBITDA the sum of impairments, costs associated with refinancing of long-term debt and credit facilities, gain on sale of land and other, gain on sale of investment in associates, gain on sale of operating unit, acquisition costs, restructuring costs, share-based incentive compensation cost, foreign exchange (gain) loss and other, net and hyperinflationary adjustments. The Company believes that EBITDA and Adjusted EBITDA are useful supplemental measures that provide a meaningful indication of the Company's results from principal business activities prior to the consideration of how these activities are financed or the tax impacts in various jurisdictions and for comparing its operating performance with the performance of other companies that have different financing, capital or tax structures. The Company presents Adjusted EBITDA as a measure of EBITDA that excludes the impact of transactions that are outside the Company's normal course of business or day to day operations. Adjusted EBITDA is used by many analysts as one of several important analytical tools to evaluate financial performance and is a key metric in business valuations. It is also considered important by lenders to the Company and is included in the financial covenants of the Credit Facility.
Continuing Operations
(in thousands of Canadian dollars) | Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Net Income from Continuing Operations | $ | 18,145 | $ | 29,211 | $ | 53,523 | $ | 79,858 | ||||
| Add: | ||||||||||||
| Income tax expense (recovery) | 2,486 | (4,446) | 10,398 | 2,808 | ||||||||
| Finance costs, net | 5,344 | 6,040 | 15,302 | 15,922 | ||||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 9,785 | 9,102 | 27,976 | 28,564 | ||||||||
| EBITDA from Continuing Operations | $ | 35,760 | $ | 39,907 | $ | 107,199 | $ | 127,152 | ||||
| Share-based incentive compensation (recovery) cost | (2,414) | 8,182 | 16,211 | 13,112 | ||||||||
| Foreign exchange loss (gain) | 952 | (5,664) | 2,117 | (8,640) | ||||||||
| Gain on sale of land and other | - | - | - | (43,017) | ||||||||
| Curtailment of defined benefit plan | (1,889) | - | (1,889) | - | ||||||||
| 2019 ZCL Composites Inc. purchase trust | - | (1,059) | - | (1,059) | ||||||||
| Impairment | 8,652 | - | 8,652 | 7,293 | ||||||||
| Restructuring costs and other, net | - | 2,076 | - | 5,571 | ||||||||
| Adjusted EBITDA from Continuing Operations | $ | 41,061 | $ | 43,442 | $ | 132,290 | $ | 100,412 | ||||
| (in thousands of Canadian dollars) | Three Months Ended | |||||
| March 31, | June 30, | |||||
| 2023 | 2023 | |||||
| Net Income from Continuing Operations | $ | 20,708 | $ | 14,670 | ||
| Add: | ||||||
| Income tax expense | 4,585 | 3,327 | ||||
| Finance costs, net | 4,984 | 4,974 | ||||
| Amortization of property, plant, equipment, intangible and ROU assets | 9,021 | 9,170 | ||||
| EBITDA from Continuing Operations | $ | 39,298 | $ | 32,141 | ||
| Share-based incentive compensation (recovery) cost | (42) | 18,668 | ||||
| Foreign exchange loss (gain) | 1,210 | (45) | ||||
| Gain on sale of land and other | - | - | ||||
| Acquisition cost | - | - | ||||
| Impairment | - | - | ||||
| Restructuring costs and other, net | - | - | ||||
| Adjusted EBITDA from Continuing Operations | $ | 40,466 | $ | 50,764 | ||
| (in thousands of Canadian dollars) | Three Months Ended | |||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||
| 2022 | 2022 | 2022 | 2022 | |||||||||
| Net Income from Continuing Operations | $ | 10,017 | $ | 40,629 | $ | 29,211 | $ | 13,485 | ||||
| Add: | ||||||||||||
| Income tax expense (recovery) | 249 | 7,006 | (4,446) | (6,963) | ||||||||
| Finance costs, net | 3,948 | 5,934 | 6,040 | 4,530 | ||||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 9,464 | 9,998 | 9,102 | 9,064 | ||||||||
| EBITDA from Continuing Operations | $ | 23,678 | $ | 63,567 | $ | 39,907 | $ | 20,116 | ||||
| Share-based incentive compensation cost | 2,346 | 2,584 | 8,182 | 12,899 | ||||||||
| Foreign exchange (gain) loss | (2,625) | (351) | (5,664) | 769 | ||||||||
| Gain on sale of land and other | - | (43,017) | - | - | ||||||||
| Loss on sale of operating unit | - | - | - | 1,327 | ||||||||
| Impairment | - | 7,293 | - | 2,165 | ||||||||
| 2019 ZCL Composites Inc. purchase trust release | - | - | (1,059) | - | ||||||||
| Restructuring costs and other, net | 1,075 | 2,420 | 2,076 | 4,133 | ||||||||
| Adjusted EBITDA from Continuing Operations | $ | 24,474 | $ | 32,496 | $ | 43,442 | $ | 41,409 | ||||
Composite Technologies Segment
(in thousands of Canadian dollars) | Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Operating Income | $ | 25,483 | $ | 21,747 | $ | 71,785 | $ | 38,142 | ||||
| Add: | ||||||||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 7,398 | 7,189 | 20,787 | 22,508 | ||||||||
| EBITDA | $ | 32,881 | $ | 28,936 | $ | 92,572 | $ | 60,650 | ||||
| Share-based incentive compensation (recovery) cost | (435) | 1,173 | 1,413 | 1,744 | ||||||||
| Gain on sale of property plant & equipment | - | - | - | (3,820) | ||||||||
| Impairment | - | - | - | 7,293 | ||||||||
| Restructuring costs and other | - | 2,088 | - | 4,478 | ||||||||
| Adjusted EBITDA | $ | 32,448 | $ | 32,197 | $ | 93,985 | $ | 70,345 | ||||
(in thousands of Canadian dollars) | Three Months Ended | |||||
| March 31, | June 30, | |||||
| 2023 | 2023 | |||||
| Operating Income | $ | 20,722 | $ | 25,580 | ||
| Add: | ||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 6,627 | 6,762 | ||||
| EBITDA | $ | 27,349 | $ | 32,342 | ||
| Share-based incentive compensation (recovery) cost | (601) | 2,449 | ||||
| Gain on sale of property plant & equipment | - | - | ||||
| Impairment | - | - | ||||
| Restructuring costs and other | - | - | ||||
| Adjusted EBITDA | $ | 26,748 | $ | 34,791 | ||
| (in thousands of Canadian dollars) | Three Months Ended | |||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||
| 2022 | 2022 | 2022 | 2022 | |||||||||
| Operating Income | $ | 6,874 | $ | 9,521 | $ | 21,747 | $ | 15,205 | ||||
| Add: | ||||||||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 7,409 | 7,910 | 7,189 | 7,250 | ||||||||
| EBITDA | $ | 14,283 | $ | 17,431 | $ | 28,936 | $ | 22,455 | ||||
| Share-based incentive compensation cost | 278 | 293 | 1,173 | 2,724 | ||||||||
| Gain on sale of property plant & equipment | - | (3,820) | - | - | ||||||||
| Impairment | - | 7,293 | - | 2,164 | ||||||||
| Restructuring costs and other, net | 423 | 1,967 | 2,088 | - | ||||||||
| Adjusted EBITDA | $ | 14,984 | $ | 23,164 | $ | 32,197 | $ | 27,343 | ||||
Connection Technologies Segment
| (in thousands of Canadian dollars) | Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Operating Income | $ | 13,910 | $ | 13,915 | $ | 48,565 | $ | 43,624 | ||||
| Add: | ||||||||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 1,356 | 1,076 | 4,038 | 3,220 | ||||||||
| EBITDA | $ | 15,266 | $ | 14,991 | $ | 52,603 | $ | 46,854 | ||||
| Share-based incentive compensation (recovery) cost | (48) | 820 | 2,202 | 1,298 | ||||||||
| Restructuring costs and other | - | - | - | 81 | ||||||||
| Adjusted EBITDA | $ | 15,218 | $ | 15,811 | $ | 54,805 | $ | 48,223 | ||||
(in thousands of Canadian dollars) | Three Months Ended | |||||
| March 31, | June 30, | |||||
| 2023 | 2023 | |||||
| Operating Income | $ | 17,650 | $ | 17,005 | ||
| Add: | ||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 1,333 | 1,349 | ||||
| EBITDA | $ | 18,983 | $ | 18,354 | ||
| Share-based incentive compensation cost | 26 | 2,224 | ||||
| Adjusted EBITDA | $ | 19,009 | $ | 20,578 | ||
(in thousands of Canadian dollars) | Three Months Ended | |||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||
| 2022 | 2022 | 2022 | 2022 | |||||||||
| Operating Income | $ | 14,887 | $ | 14,832 | $ | 13,915 | $ | 11,594 | ||||
| Add: | ||||||||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 1,085 | 1,059 | 1,076 | 1,143 | ||||||||
| EBITDA | $ | 15,972 | $ | 15,891 | $ | 14,991 | $ | 12,757 | ||||
| Share-based incentive compensation cost | 209 | 269 | 820 | 1,766 | ||||||||
| Restructuring costs and other, net | 27 | 54 | - | - | ||||||||
| Adjusted EBITDA | $ | 16,208 | $ | 16,214 | $ | 15,811 | $ | 14,503 | ||||
Discontinued Operations
| (in thousands of Canadian dollars) | Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Net Income from Discontinued Operations | $ | 53,829 | $ | (6,208) | $ | 56,702 | $ | (44,024) | ||||
| Add: | ||||||||||||
| Income tax expense (recovery) | 23,769 | (13,919) | 27,272 | (12,737) | ||||||||
| Finance costs, net | 400 | 455 | 1,114 | 980 | ||||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 6,480 | 7,340 | 27,549 | 22,833 | ||||||||
| EBITDA from Discontinued Operations | $ | 84,478 | $ | (12,332) | $ | 112,637 | $ | (32,948) | ||||
| Share-based incentive compensation cost (recovery) cost | (498) | 1,284 | 2,238 | 1,761 | ||||||||
| Foreign exchange loss (gain) | 1,310 | (920) | (2,749) | (2,487) | ||||||||
| Loss on sale of operating unit and subsidiary | 2,089 | 5,932 | 5,827 | 5,932 | ||||||||
| Hyperinflation adjustment for Argentina | - | 5,510 | - | 8,933 | ||||||||
| Impairment | - | - | - | 12,976 | ||||||||
| Restructuring costs and other, net | - | (6) | - | 701 | ||||||||
| Adjusted EBITDA from Discontinued Operations | $ | 87,379 | $ | (532) | $ | 117,953 | $ | (5,132) | ||||
(in thousands of Canadian dollars) | Three Months Ended | |||||
| March 31, | June 30, | |||||
| 2023 | 2023 | |||||
| Net Income (loss) from Discontinued Operations | $ | 4,521 | $ | (1,648 | ) | |
| Add: | ||||||
| Income tax expense | 672 | 2,831 | ||||
| Finance costs, net | 160 | 554 | ||||
| Amortization of property, plant, equipment, intangible and ROU assets | 10,209 | 10,860 | ||||
| EBITDA from Discontinued Operations | $ | 15,562 | $ | 12,597 | ||
| Share-based incentive compensation (recovery) cost | (561 | ) | 3,296 | |||
| Foreign exchange gain | (939 | ) | (3,120 | ) | ||
| Loss on sale of operating unit and subsidiary | - | 3,738 | ||||
| Adjusted EBITDA from Discontinued Operations | $ | 14,062 | $ | 16,511 | ||
(in thousands of Canadian dollars) | Three Months Ended | |||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||
| 2022 | 2022 | 2022 | 2022 | |||||||||
| Net Loss from Discontinued Operations | $ | (17,133) | $ | (20,682) | $ | (6,208) | $ | (80,299) | ||||
| Add: | ||||||||||||
| Income tax expense (recovery) | 1,988 | (807) | (13,919) | (2,386) | ||||||||
| Finance costs, net | 397 | 128 | 455 | 284 | ||||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 8,008 | 7,485 | 7,340 | 10,955 | ||||||||
| EBITDA from Discontinued Operations | $ | (6,740) | $ | (13,876) | $ | (12,332) | $ | (71,447) | ||||
| Share-based incentive compensation | 339 | 138 | 1,284 | 3,719 | ||||||||
| Foreign exchange (gain) loss | (411) | (1,155) | (920) | 645 | ||||||||
| Loss on sale of operating unit and subsidiary | - | - | 5,932 | - | ||||||||
| Hyperinflation adjustment for Argentina | 1,890 | 1,533 | 5,510 | 3,843 | ||||||||
| Loss from sale of Subsidiaries | - | - | - | 77,492 | ||||||||
| Impairment | - | 12,976 | - | - | ||||||||
| Restructuring costs and other, net | 131 | 576 | (6) | 793 | ||||||||
| Adjusted EBITDA from Discontinued Operations | $ | (4,791) | $ | 192 | $ | (532) | $ | 15,046 | ||||
Total Consolidated Mattr (Continuing and Discontinued Operations)
(in thousands of Canadian dollars) | Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Net Income | $ | 71,974 | $ | 23,003 | $ | 110,225 | $ | 35,834 | ||||
| Add: | ||||||||||||
| Income tax expense (recovery) | 26,255 | (18,365) | 37,670 | (9,929) | ||||||||
| Finance costs, net | 5,744 | 6,495 | 16,416 | 16,902 | ||||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 16,265 | 16,442 | 55,525 | 51,397 | ||||||||
| EBITDA | $ | 120,238 | $ | 27,575 | $ | 219,836 | $ | 94,204 | ||||
| Share-based incentive compensation recovery) cost | (2,912) | 9,466 | 18,449 | 14,873 | ||||||||
| Foreign exchange loss (gain) | 2,262 | (6,585) | (632) | (11,127) | ||||||||
| Gain on sale of land and other | - | - | - | (43,017) | ||||||||
| Acquisition Costs | - | (1,059) | - | (1,059) | ||||||||
| Loss on sale of operating unit and subsidiary | 2,089 | 5,932 | 5,827 | 5,932 | ||||||||
| Adjustment on Defined Benefit plan | (1,889) | - | (1,889) | - | ||||||||
| Hyperinflation adjustment for Argentina | - | 5,510 | - | 8,933 | ||||||||
| Impairment | 8,652 | - | 8,652 | 20,269 | ||||||||
| Restructuring costs and other, net | - | 2,070 | - | 6,272 | ||||||||
| Adjusted EBITDA | $ | 128,440 | $ | 42,909 | $ | 250,243 | $ | 95,280 | ||||
(in thousands of Canadian dollars) | Three Months Ended | |||||
| March 31, | June 30, | |||||
| 2023 | 2023 | |||||
| Net Income | $ | 25,229 | $ | 13,022 | ||
| Add: | ||||||
| Income tax expense | 5,257 | 6,158 | ||||
| Finance costs, net | 5,144 | 5,528 | ||||
| Amortization of property, plant, equipment, intangible and ROU assets | 19,230 | 20,030 | ||||
| EBITDA | $ | 54,860 | $ | 44,738 | ||
| Share-based incentive compensation (recovery) cost | (603) | 21,964 | ||||
| Foreign exchange loss (gain) | 271 | (3,165) | ||||
| Loss on sale of operating unit and subsidiary | - | 3,738 | ||||
| Adjusted EBITDA | $ | 54,528 | $ | 67,275 | ||
(in thousands of Canadian dollars) | Three Months Ended | |||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||
| 2022 | 2022 | 2022 | 2022 | |||||||||
| Net (Loss) Income | $ | (7,116) | $ | 19,947 | $ | 23,003 | $ | (66,814) | ||||
| Add: | ||||||||||||
| Income tax expense (recovery) | 2,237 | 6,199 | (18,365) | (9,349) | ||||||||
| Finance costs, net | 4,345 | 6,062 | 6,495 | 4,813 | ||||||||
| Amortization of property, plant, equipment, intangible and ROU assets | 17,472 | 17,483 | 16,442 | 20,019 | ||||||||
| EBITDA | $ | 16,938 | $ | 49,691 | $ | 27,575 | $ | (51,331) | ||||
| Share-based incentive compensation cost (recovery) | 2,685 | 2,722 | 9,466 | 16,618 | ||||||||
| Foreign exchange (gain) loss | (3,036) | (1,506) | (6,585) | 1,414 | ||||||||
| Gain on sale of land and other | - | (43,017) | - | - | ||||||||
| Acquisition Costs | - | - | 5,932 | 78,819 | ||||||||
| Loss on sale of operating unit and subsidiary | 1,890 | 1,533 | 5,510 | 3,843 | ||||||||
| Hyperinflation adjustment for Argentina | - | 20,269 | - | 2,164 | ||||||||
| Impairment | - | - | (1,059) | - | ||||||||
| Restructuring costs and other, net | 1,206 | 2,996 | 2,070 | 4,927 | ||||||||
| Adjusted EBITDA | $ | 19,683 | $ | 32,688 | $ | 42,909 | $ | 56,454 | ||||
Adjusted EBITDA Margin
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue and is a non-GAAP measure. The Company believes that Adjusted EBITDA margin is a useful supplemental measure that provides meaningful assessment of the business results of the Company and its Operating Segments from principal business activities excluding the impact of transactions that are outside of the Company's normal course of business.
See reconciliation above for the changes in composition of Adjusted EBITDA, as a result of which the table below reflects restated figures for the prior year quarter to align with the updated composition.
Operating Margin
Operating margin is defined as operating (loss) income divided by revenue and is a non-GAAP measure. The Company believes that operating margin is a useful supplemental measure that provides meaningful assessment of the business performance of the Company and its Operating Segments. The Company uses this measure as a key indicator of financial performance, operating efficiency and cost control based on volume of business generated.
Adjusted Net Income (attributable to shareholders)
Adjusted Net Income (attributable to shareholders) is a non-GAAP measure defined as Net Income (attributable to shareholders) adjusted for items which do not impact day to day operations. Adjusted Net Income (attributable to shareholders) is calculated by adding back to Net Income (attributable to shareholders) the after tax impact of the sum of impairments, costs associated with refinancing of long-term debt and credit facilities, gain on sale of land and other, gain on sale of investment in associates, gain on sale of operating unit, acquisition costs, restructuring costs, share-based incentive compensation cost, foreign exchange (gain) loss and other, net and hyperinflationary adjustments. The Company believes that Adjusted Net Income (attributable to shareholders) is a useful supplemental measure that provides a meaningful indication of the Company's results from principal business activities for comparing its operating performance with the performance of other companies that have different financing, capital or tax structures.
Adjusted Earnings Per Share ("Adjusted EPS")
Adjusted EPS (basic) is a non-GAAP measure defined as Adjusted Net Income (attributable to shareholders) divided by the number of common shares outstanding. Adjusted EPS (diluted) is a non-GAAP measure defined as Adjusted Net Income (attributable to shareholders) divided by the number of common shares outstanding, further adjusted for potential dilutive impacts of outstanding securities which are convertible to common shares. The Company presents Adjusted EPS as a measure of Earning Per Share that excludes the impact of transactions that are outside the Company's normal course of business or day to day operations. Adjusted EPS indicates the amount of Adjusted Net Income the Company makes for each share of its stock and is used by many analysts as one of several important analytical tools to evaluate financial performance and is a key metric in business valuations.
Total Consolidated Mattr Adjusted EPS (Continuing and Discontinued Operations)
| Three Months Ended | |||
| September 30, | |||
| 000s except for per share amounts | 2023 | ||
| $ CAD | Earnings Per Share - Basic | Earnings Per Share - Diluted | |
| Net Income(a) | 71,917 | 1.04 | 1.03 |
| Adjustments (before tax): | |||
| Share-based incentive compensation cost | (2,912) | ||
| Foreign exchange loss | 2,262 | ||
| Gain on sale of land and other | - | ||
| Loss on sale of operating unit and subsidiary | 2,089 | ||
| Adjustment on Defined Benefit plan | (1,889) | ||
| Hyperinflation adjustment for Argentina | - | ||
| Impairment | 8,652 | ||
| Restructuring costs and other, net | - | ||
| Tax effect of above adjustments | (1,204) | ||
| Adjusted Net Income (non-GAAP)(a) | 78,915 | 1.14 | 1.13 |
| (a) attributable to Shareholders of the Company | |||
| Three Months Ended | ||||
| September 30, | ||||
| 000s except for per share amounts | 2022 | |||
| $ CAD | Earnings Per Share - Basic | Earnings Per Share - Diluted | ||
| Net Income(a) | 23,014 | 0.33 | 0.33 | |
| Adjustments (before tax): | ||||
| Share-based incentive compensation cost | 9,466 | |||
| Foreign exchange gain | (6,585) | |||
| Gain on sale of land and other | - | |||
| Loss on sale of operating unit and subsidiary | 5,932 | |||
| Adjustment on Defined Benefit plan | - | |||
| Hyperinflation adjustment for Argentina | - | |||
| Impairment | - | |||
| Restructuring costs and other, net | 2,070 | |||
| Tax effect of above adjustments | (1,226) | |||
| Adjusted Net Income (non-GAAP)(a) | 32,671 | 0.46 | 0.46 | |
| (a) attributable to Shareholders of the Company | ||||
| Nine Months Ended | |||
| September 30, | |||
| 000s except for per share amounts | 2023 | ||
| $ CAD | Earnings Per Share - Basic | Earnings Per Share - Diluted | |
| Net Income(a) | 110,209 | 1.58 | 1.57 |
| Adjustments (before tax): | |||
| Share-based incentive compensation cost | 18,449 | ||
| Foreign exchange gain | (632) | ||
| Gain on sale of land and other | - | ||
| Loss on sale of operating unit and subsidiary | 5,827 | ||
| Adjustment on Defined Benefit plan | (1,889) | ||
| Hyperinflation adjustment for Argentina | - | ||
| Impairment | 8,652 | ||
| Restructuring costs and other, net | - | ||
| Tax effect of above adjustments | (3,837) | ||
| Adjusted Net Income (non-GAAP)(a) | 136,779 | 1.96 | 1.95 |
| (a) attributable to Shareholders of the Company | |||
| Nine Months Ended | |||
| September 30, | |||
| 000s except for per share amounts | 2022 | ||
| $ CAD | Earnings Per Share - Basic | Earnings Per Share - Diluted | |
| Net Income(a) | 36,424 | 0.52 | 0.52 |
| Adjustments (before tax): | |||
| Share-based incentive compensation cost | 14,873 | ||
| Foreign exchange gain | (11,127) | ||
| Gain on sale of land and other | (43,017) | ||
| Loss on sale of operating unit and subsidiary | 5,932 | ||
| Adjustment on Defined Benefit plan | - | ||
| Hyperinflation adjustment for Argentina | - | ||
| Impairment | 20,269 | ||
| Restructuring costs and other, net | 6,272 | ||
| Tax effect of above adjustments | (2,005) | ||
| Adjusted Net Income (non-GAAP)(a) | 27,621 | 0.39 | 0.39 |
| (a) attributable to Shareholders of the Company | |||
Total Net debt-to-Adjusted EBITDA
Total net debt-to-Adjusted EBITDA is a non-GAAP measure defined as the sum of long-term debt, current lease liabilities and long-term lease liabilities, less cash and cash equivalents, divided by the Consolidated Adjusted EBITDA (Continuing and Discontinued Operations), as defined above, for the trailing twelve-month period. The Company believes total net debt-to-Adjusted EBITDA is a useful supplementary measure to assess the borrowing capacity of the Company. Total net debt-to-Adjusted EBITDA is used by many analysts as one of several important analytical tools to evaluate how long a company would need to operate at its current level to pay of all its debt. It is also considered important by credit rating agencies to determine the probability of a company defaulting on its debt.
See discussion above for the changes in composition of Adjusted EBITDA. The table below reflects restated figures for the prior year quarters to align with the updated composition.
(in thousands of Canadian dollars, except Net debt-to-EBITDA ratio) | September 30, | December 31, | ||||
| 2023 | 2022 | |||||
| Long-term debt | $ | 173,585 | $ | 210,832 | ||
| Lease liabilities | 76,405 | 59,439 | ||||
| Cash and cash equivalents | (97,977) | (263,990) | ||||
| Total Net Debt | $ | 152,013 | $ | 6,281 | ||
| Q1 2022 Adjusted EBITDA | $ | - | $ | 19,683 | ||
| Q2 2022 Adjusted EBITDA | - | 32,688 | ||||
| Q3 2022 Adjusted EBITDA | - | 42,909 | ||||
| Q4 2022 Adjusted EBITDA | 56,454 | 56,454 | ||||
| Q1 2023 Adjusted EBITDA | 54,528 | - | ||||
| Q2 2023 Adjusted EBITDA | 67,275 | - | ||||
| Q3 2023 Adjusted EBITDA | 128,440 | - | ||||
| Trailing twelve-month Adjusted EBITDA | $ | 306,697 | $ | 151,734 | ||
| Total Net debt-to-Adjusted EBITDA | 0.50 | 0.04 | ||||
Total Interest Coverage Ratio
Total Interest Coverage Ratio is a non-GAAP measure defined as Consolidated Adjusted EBITDA (Continuing and Discontinued Operations), as defined above, for the trailing twelve-month period, divided by Finance costs, net, for the trailing twelve-month period. The Company believes Total Interest Coverage Ratio is a useful supplementary measure to assess the Company's ability to honour its debt payments. Total Interest Coverage Ratio is used by many analysts as one of several important analytical tools to judge a company's ability to pay interest on its outstanding debt. It is also considered important by credit rating agencies to determine a company's riskiness relative to its current debt or for future borrowing.
| (in thousands of Canadian dollars, except Net debt-to-EBITDA ratio) | September 30 | December 31, | ||||
| 2023 | 2022 | |||||
| Q1 2022 Adjusted EBITDA | $ | - | $ | 19,683 | ||
| Q2 2022 Adjusted EBITDA | - | 32,688 | ||||
| Q3 2022 Adjusted EBITDA | - | 42,909 | ||||
| Q4 2022 Adjusted EBITDA | 56,454 | 56,454 | ||||
| Q1 2023 Adjusted EBITDA | 54,528 | - | ||||
| Q2 2023 Adjusted EBITDA | 67,275 | - | ||||
| Q3 2023 Adjusted EBITDA | 128,440 | - | ||||
| Trailing twelve-month Adjusted EBITDA | $ | 306,697 | $ | 151,734 | ||
| Q1 2022 Finance costs, net | $ | - | $ | 4,345 | ||
| Q2 2022 Finance costs, net | - | 6,062 | ||||
| Q3 2022 Finance costs, net | - | 6,495 | ||||
| Q4 2022 Finance costs, net | 4,813 | 4,813 | ||||
| Q1 2023 Finance costs, net | 5,144 | - | ||||
| Q2 2023 Finance costs, net | 5,528 | - | ||||
| Q3 2023 Finance costs, net | 5,744 | - | ||||
| Trailing twelve-month finance costs, net | $ | 21,229 | $ | 21,715 | ||
| Total Interest Coverage Ratio | 14.45 | 6.99 |
