Canadian Equipment Rentals Corp. Announces 2016 Third Quarter Results and Fourth Amending Credit Agreement
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 11/24/16 -- Canadian Equipment Rentals Corp. (the "Company") (TSX VENTURE: CFL) today announced its financial and operating results for the three and nine months ended September 30, 2016. The Company also announces that it has entered into a Fourth Amending Agreement with its lenders which expires on December 15, 2016.
Austin Fraser, Canadian Equipment Rentals Corp., President, stated that "the third quarter of 2016 was challenging for the Company as the combination of intense competition, a challenging price environment and unseasonably wet weather delaying projects, all negatively impacted revenues and earnings and resulted in a third quarter covenant breach with our senior lenders. The recently announced sale of our Waste Management division, which is expected to close on December 1, 2016, is a material step forward in our commitment to reduce our balance sheet leverage. We are currently executing on our commitment to our lenders to sell down underutilized equipment. The Company is seeing strong demand for our oilfield rental equipment going into the winter drilling season which is in turn improving pricing and is a positive sign for our energy service division."
HIGHLIGHTS
Amounts in the following tables are presented in thousands of dollars, except for per share amounts and percentages.
OUTLOOK
The continued uncertain and challenging economic environment resulting from the decline and instability of commodity prices currently shows no signs of significantly improving. This environment has caused the Company's customers to reduce their 2016 capital expenditure programs and delay investment decisions which has directly impacted the utilization and day rates of equipment in the Company's Energy Services and General Rentals segments. In response management has reduced headcount, including many senior positions, reduced labor hours, consolidated operating facilities and made reductions in discretionary spending to align the cost structure to the level of activity currently experienced.
The third quarter of 2016 has however seen improvements in equipment utilization when compared to the prior quarter, albeit at historically low rental rates. It is too early to assess if this increase in drilling activity is the start of a longer-term trend in increased demand. Currently management expects activity levels and pricing for Energy Services to remain low until such time that commodity prices stabilize at a level that results in increased producer spending.
The Company's operational performance, service quality and best-in-class equipment rental fleet are instrumental to maintain and grow its market share. The continued sales of under-utilized equipment has resulted in the Company having the newest fleet of oilfield accommodation and power generation units in the energy services industry. The Company continues to expand its market reach and customer base from beyond its traditional energy services and general commercial customers to new industry segments including industrial facilities and pipeline construction. The assets acquired in the Summit Star acquisition this quarter are experiencing full utilization and are the first steps to adding more diverse revenue streams.
Subsequent to the end of the third quarter the Company announced the signing of a share purchase agreement to sell the Waste Management segment. The transaction is expected to close on December 1, 2016. This transaction advances the Company's strategy of focusing on the core rentals divisions while concurrently reducing balance sheet leverage which in turn should provide more alternative financing options.
Due to the third quarter breach of the senior lending financial ratio covenants, the Company is currently working with its senior lenders under a new Fourth Amending Agreement which provides forbearance so as to allow the Company sufficient time to negotiate and arrange a longer term amending agreement. As the Company is currently expecting to generate positive cash flow through the next 18 months, management expects to be able to either obtain long term support from the current lenders or re-finance with alternative lenders. See Liquidity and Capital Resources section for further explanation.
SELECT FINANCIAL RESULTS
SELECT OPERATING RESULTS
Energy Services Division
General Rentals Division
Waste Management Division
SELECTED QUARTERLY FINANCIAL INFORMATION
LIQUIDITY AND CAPITAL RESOURCES
On April 28, 2016, the Company's Syndicated Bank Credit Facility was amended under the Third Amending Agreement to amend the Debt to EBITDA and Interest Coverage ratios as follows.
For the quarter ended September 30, 2016, the Company is in breach of its financial leverage and interest coverage covenants included in the April 28, 2016 Third Amending Credit Agreement. The leverage covenant measures the Company's financial leverage (long term senior debt less cash) as a multiple of its EBITDA. Management forecasts the leverage covenant breaches will persist through the fourth quarter of 2016. The interest coverage covenant, which measures the Company's ability to service the debt, is forecasted to remain in breach through 2017.
A breach constitutes an event of default under the Agreement, which provides the lenders several alternatives including a waiver of the breach, an amendment to the Agreement to reset the covenant or a requirement to repay the borrowings.
On November 24, 2016, the Company signed a Fourth Amending Agreement in which the lender agrees to forbear from demanding repayment or enforcing its security under the Agreement. This will allow for the Company to provide the lender with a go forward plan that will show reduced debt, improved leverage ratios, and if needed, alternative financing solutions. Assuming the plan is acceptable to the lender, it is then expected that a longer amending agreement will be executed which will provide the Company time to execute on the plan. Based on the discussions to date, and the Company's current and forecasted financial condition, management expects to have an acceptable amendment in place during the first quarter of 2017. The Company is concurrently exploring alternative external financing in the event the lenders elect to call the loan upon expiry of the Fourth Amending Agreement.
Under the terms of the amending agreement the authorized amount of the revolving facility is reduced to $46.1 million at November 24, 2016, while the authorized amount of the revolving capex facility remains at $6.5 million. The authorized amount of both facilities will be reduced by amounts equal to the net proceeds realized from the disposition of assets, with reductions first to the capex facility and then to the operating facility. Interest payable on loans drawn under the Fourth Amending Agreement will be bank prime rate plus 600 bps.
Despite the foregoing, since the lenders have the right to, and may, after the expiration of the forbearance agreement, demand repayment, the current situation gives rise to a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern.
NON-IFRS MEASURES RECONCILIATION
The Company uses certain measures in this MD&A which do not have any standardized meaning as prescribed by International Financial Reporting Standards ("IFRS"). These measures which are derived from information reported in the consolidated statements of operations and comprehensive income may not be comparable to similar measures presented by other reporting issuers. These measures have been described and presented in this MD&A in order to provide shareholders and potential investors with additional information regarding the Company.
Investors are cautioned that EBITDA, adjusted EBITDA and adjusted EBITDA per share, adjusted free cash flow and payout ratio are not acceptable alternatives to net income or net income per share, a measurement of liquidity, or comparable measures as determined in accordance with IFRS.
EBITDA and Adjusted EBITDA
EBITDA refers to net income before finance costs, income taxes, depreciation, amortization, and gains or losses on disposal of property and equipment. Adjusted EBITDA is calculated as EBITDA before costs associated with business acquisition costs and share based compensation. These measures do not have a standardized definition prescribed by IFRS and therefore may not be comparable to similar captioned terms presented by other issuers.
Management believes that EBITDA and Adjusted EBITDA are useful measures of performance as they eliminate non-recurring items and the impact of finance and tax structure variables that exist between entities. "Adjusted EBITDA per share - basic" refers to Adjusted EBITDA divided by the weighted average basic number of shares outstanding during the relevant periods.
A reconciliation of net income to Adjusted EBITDA is provided below:
Adjusted EBIT
Adjusted EBIT refers to earnings before interest and finance charges, taxes, amortization, impairment of intangibles, purchase gain, other gain, severance costs and business acquisition costs.
A reconciliation of net income to Adjusted EBIT is provided below:
No Conference Call
No conference call will be held in conjunction with this release. Full details of the Company's financial results, in the form of the condensed consolidated interim financial statements and notes for the three and nine months ended September 30, 2016 and Management's Discussion and Analysis of the results are available on SEDAR at and on the Company's website at .
About Canadian Equipment Rentals Corp.
Canadian Equipment Rentals Corp. is a Canadian public corporation with three operating divisions: Energy Services, General Rentals and Waste Management. The Energy Services division is engaged in the rental of surface rentals and accommodations to the Western Canadian Oil and Gas Industry. The General Rentals division is engaged in the rental of industrial and construction equipment. And the Waste Management division is engaged in waste facilities management and collections. The Company trades on the TSX Venture Exchange under the symbol "CFL".
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this press release constitute forward-looking statements or forward-looking information, including management's assessment of expected activity levels continuing through 2016, and expected decrease in demand for rental equipment over the next year as well as forecasted economic measures for the Province of Alberta and oil and natural gas prices and the effect on drilling programs as a result of the decline in oil prices. Forward-looking statements or information may contain statements with the words "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "budget", "should", "project", "would have realized', "may have been" or similar words suggesting future outcomes or expectations. Although the Company believes that the expectations implied in such forward-looking statements or information are reasonable, undue reliance should not be placed on these forward-looking statements because the Company can give no assurance that such statements will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of assumptions about the future and uncertainties. These assumptions include that demand for industrial rental equipment, will remain relatively constant or grow marginally through 2016, that the economic downturn caused by the low oil price environment will not affect the performance of the waste management segment, that the Company's proactive cost cutting measures currently being implemented will protect future margins and that the Company's diverse operations will protect against profound down swings in the economic environment. Although management believes these assumptions are reasonable, there can be no assurance that they will be proved to be correct, and actual results will differ materially from those anticipated. For this purpose, any statements herein that are not statements of historical fact may be deemed to be forward-looking statements. The forward-looking statements or information contained in this press release are made as of the date hereof and the Company assumes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new contrary information, future events or any other reason, unless it is required by any applicable securities laws. The forward-looking statements or information contained in this press release are expressly qualified by this cautionary statement.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Canadian Equipment Rentals Corp.
Austin Fraser
President
(403) 930-5433
Canadian Equipment Rentals Corp.
Ken Olson
Chief Financial Officer
(403) 930-5434
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Datum: 24.11.2016 - 23:00 Uhr
Sprache: Deutsch
News-ID 509065
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contact information:
Town:
CALGARY, ALBERTA
Kategorie:
Equipment
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