Badger Daylighting Ltd. announces results for the second quarter ended June 30, 2013

Calgary, Alberta – Badger Daylighting Ltd. (the “Company” or “Badger”) is pleased to announce its results for the six and three months ended June 30, 2013

Highlights for the three months ended June 30, 2013:

  • Revenues increased by approximately 36 percent to $73.7 million from $54.0 million for the comparable quarter of 2012 due to a 33 percent increase in Canadian revenues and a 40 percent increase in United States revenues. As a result of the increase in revenues, the Company’s quarterly EBITDA and funds generated from operations also increased from the same period in 2012;
  • EBITDA increased by approximately 48 percent to $20.3 million from $13.7 million in the same quarter of 2012;
  • Funds generated from operations increased by approximately 49 percent period-over-period to $17.1 million from $11.5 million in the comparable quarter of 2012;
  • EBITDA margins in Canada decreased to 24 percent from 28 percent for the comparable period of last year substantially due to an additional accrual of $1.6 million of executive, director and employee incentive compensation to account for the increase in the obligation for payments under the company’s Deferred Unit Plan, due to the increase in Badger’s share price. EBITDA margins in the United States increased to 31 percent from 23 percent for the comparable period of last year due to improvements in operational efficiencies; and
  • Badger had 707 daylighting units at the end of the second quarter of 2013, reflecting the addition of 84 daylighting units to the fleet to date in 2013 (41 units in the first quarter and 43 in the second quarter) and the retirement of seven units. Of the total, 330 units were operating in Canada and 377 in the United States at quarter-end. Badger had 277 units in Canada and 293 in the United States for a total of 570 units at June 30, 2012. The new units were financed from cash generated from operations and existing credit facilities.

Management’s Discussion and Analysis

The following Management’s Discussion and Analysis (MD&A) should be read in conjunction with the attached unaudited interim consolidated financial statements of Badger Daylighting Ltd. (the “Company” or “Badger”). The interim consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS). Readers should also refer to the audited consolidated financial statements and MD&A for the year ended December 31, 2012, which along with all previous public filings, including the Company’s Annual Information Form for the year ended December 31, 2012,may be found on SEDAR at  ww.sedar.com.

Revenue and expense variance analysis in the MD&A focuses primarily on the year-over-year changes during the second quarter. Year-over-year variances for the six months ended June 30, 2013 and 2012 are explained by the same general factors as those contributing to the second-quarter variance, unless otherwise indicated.

This MD&A has been prepared taking into consideration information available to August 12, 2013.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements and information contained in this MD&A and other continuous disclosure documents of the Company referenced herein, including statements related to the Company’s capital expenditures, projected growth, view and outlook toward margins, cash dividends, customer pricing, future market opportunities and statements, and information that contain words such as “could”, “should”, “can”, “anticipate”, “expect”, “believe”, “will”, “may” and similar expressions relating to matters that are not historical facts, constitute “forward-looking information” within the meaning of applicable Canadian securities legislation. These statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements and information. The Company believes the expectations reflected in such forward-looking statements and information are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements and information included in this MD&A should not be unduly relied upon. These forward-looking statements and information speak only as of the date of this MD&A.

In particular, forward-looking information and statements include discussion reflecting the Company’s belief that:

  • Internal preparations for anticipated growth in 2013 will be completed;
  • As long as overall activity in the economy and the oil and natural gas industry remains essentially constant, Badger will be able to continue to grow the business in 2013;
  • Badger in 2013 can further develop the organization to position itself to be able to handle the planned future growth;
  • The new locations opened in the United States will provide an increased contribution to cash flows from operations and net profit during 2013;
  • The current business development initiative will provide Badger with the additional new customers necessary to grow the business in 2013 and the future;
  • Eastern Canada will continue with steady growth in 2013, driven by anticipated stable activity levels in the utility and construction segments;
  • There will be an increase in Western Canada revenue during 2013 due to anticipated project volume and spending in the oil and natural gas sector; and,
  • An increase in Company capital will be required to finance the anticipated capital expenditure program.

The forward-looking statements rely on certain expected economic conditions and overall demand for Badger’s services and are based on certain assumptions. The assumptions used to generate forwardlooking statements are, among other things, that:

  • Badger has the ability to achieve its revenue, net profit and cash flow forecasts for 2013;
  • There will be long-term demand for hydrovac services from oil refineries, petro-chemical plants, power plants and other large industrial facilities throughout North America;
  • Badger will maintain relationships with current customers and develop successful relationships with new customers;
  • The Company will collect customer payments in a timely manner; and
  • Badger will execute its growth strategy.

Risk factors and other uncertainties that could cause actual results to differ materially from those anticipated in such forward-looking statements include, but are not limited to: price fluctuations for oil and natural gas and related products and services; political and economic conditions; industry competition; Badger’s ability to attract and retain key personnel; the availability of future debt and equity financing; changes in laws or regulations, including taxation and environmental regulations; and fluctuations in foreign exchange or interest rates.

Readers are cautioned that the foregoing factors are not exhaustive. Additional information on these and other factors that could affect the Company’s operations and financial results is included in reports on file with securities regulatory authorities in Canada and may be accessed through the SEDAR website  (www.sedar.com) or at the Company’s website. The forward-looking statements and information contained in this MD&A are expressly qualified by this cautionary statement. The Company does not undertake any obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

NON-IFRS FINANCIAL MEASURES

This MD&A contains references to certain financial measures, including some that do not have any standardized meaning prescribed by IFRS and that may not be comparable to similar measures presented by other corporations or entities. These financial measures are identified and defined below:

“Cash available for growth and dividends” is used by management to supplement cash flow as a measure of operating performance and leverage. The objective of this measure is to calculate the amount available for growth and/or dividends to shareholders. It is defined as funds generated from operations less required debt repayments and maintenance capital expenditures, plus any proceeds received on the disposal of assets.

“EBITDA” is earnings before interest, taxes, depreciation and amortization. It is a measure of the Company’s operating profitability and is therefore useful to management and investors. EBITDA provides an indication of the financial results generated by the Company’s principal business activities prior to how these activities are financed, assets are amortized or the results are taxed in various jurisdictions. EBITDA is calculated from the consolidated statement of comprehensive income as gross profit less selling, general and administrative costs. It is calculated as follows:

EBITDA

“Funded debt” is a measure of Badger’s long-term debt position. Funded debt is long-term debt.

“Funds generated from operations” is used to assist management and investors in analyzing operating performance and leverage. It is not intended to represent operating cash flow or operating profits for the period nor should it be viewed as an alternative to cash flow from operating activities, net profit or other measures of financial performance calculated in accordance with IFRS. Funds generated from operations are derived from the consolidated statement of cash flows and is calculated as follows:

FundsGeneratedFromOperations

“Growth capital expenditures” are capital expenditures that are intended to improve Badger’s  efficiency, productivity or overall capacity and thereby allow Badger to access new markets. They generally represent any net additions to the daylighting fleet. Growth capital expenditures exclude acquisitions.

“Maintenance capital expenditures” are any amounts incurred during a reporting period to keep the Company’s daylighting fleet at the same number of units, plus any other capital expenditures required to  maintain the capacities of the existing business. They also include any costs incurred to extend the operational life of a daylighting unit. The amount will fluctuate period-to-period depending on the number of units retired from the fleet.

“Net debt” is funded debt less cash and cash equivalents.
Cash available for growth and dividends, EBITDA, funded debt, funds generated from operations, growth capital expenditures,  maintenance capital expenditures and net debt throughout this document have the meanings set out above.

FINANCIAL HIGHLIGHTS
($ thousands, except per share and total shares outstanding information)

FINANCIAL HIGHLIGHTS

OVERVIEW

Highlights for the three months ended June 30, 2013:

  • Revenues increased by approximately 36 percent to $73.7 million from $54.0 million for the comparable quarter of 2012 due to a 33 percent increase in Canadian revenues and a 40 percent increase in United States revenues. As a result of the increase in revenues, the Company’s quarterly EBITDA and funds generated from operations also increased from the same period in 2012;
  • EBITDA increased by approximately 48 percent to $20.3 million from $13.7 million in the same quarter of 2012;
  • Funds generated from operations increased by approximately 49 percent period-over-period to $17.1 million from $11.5 million in the comparable quarter of 2012;
  • EBITDA margins in Canada decreased to 24 percent from 28 percent for the comparable period  of last year substantially due to an additional accrual of $1.6 million of executive, director and employee incentive compensation to account for the increase in the obligation for payments under the company’s Deferred Unit Plan, due to the increase in Badger’s share price. EBITDA  argins
    in the United States increased to 31 percent from 23 percent for the comparable period of last year due to improvements in operational efficiencies; and
  • Badger had 707 daylighting units at the end of the second quarter of 2013, reflecting the addition of 84 daylighting units to the fleet to date in 2013 (41 units in the first quarter and 43 in the second quarter) and the retirement of seven units. Of the total, 330 units were operating in Canada and 377 in the United States at quarter-end. Badger had 277 units in Canada and 293 in
    the United States for a total of 570 units at June 30, 2012. The new units were financed from cash generated from operations and existing credit facilities.

OUTLOOK

There are no changes in Badger’s outlook from the outlook provided following the first quarter of 2013. Badger is pleased with its business growth, financial results, improvements in operational efficiencies and efforts made to grow the customer. Provided the North American economy and activity in the oil and natural gas industry remain roughly the same, Badger expects to continue to  achieve profitable growth forthe foreseeable future.

Major initiatives for the remainder of 2013 are as follows:

1. Improve the Company’s business development group in order to achieve further expansion Badger’s customer base throughout the United States and Canada.

2. Build the organization by adding people and skills to meet the requirements associated with the Company’s planned growth. This remains the most important task for Badger.

3. Improve underperforming areas. A lot of progress has been made in this area to date but there is more to be done.
4. Streamline Badger’s administration system through the use of electronic forms and other measures that transfer data electronically from the field to offices and from offices to Badger’s customers.

5. Continue to build Badger units at the same pace as the first six months of the year. The build rate is a minimum of three trucks per week. Badger expects to retire 15 to 25 trucks in 2013. Seven were retired in the first six months of this year.

 

Visit Us On LinkedinVisit Us On FacebookVisit Us On TwitterVisit Us On Youtube