Market Overview

Acasta Enterprises Reports Second Quarter Results

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Acasta Enterprises Inc. (TSX:AEF) ("Acasta" or the "Company")
today announced its consolidated financial results for the quarter ended
June 30, 2018 and provided the following corporate update.

Financial and Operating Highlights

  • Acasta's results from continuing operations for the three-month period
    ended June 30, 2018 included revenues of $44.1 million, a net loss of
    $96.9 million or $1.49 per share (basic and diluted), an adjusted net
    loss of $17.6 million or $0.27 per share (basic and diluted) and
    adjusted EBITDA of ($9.8) million compared to revenues of $43.4
    million, a net loss of $0.5 million or $0.01 per share (basic and
    diluted), adjusted net loss of $2.2 million or $0.02 per share (basic
    and diluted) and adjusted EBITDA of $6.4 million for the three-month
    period ended June 30, 2017.
  • On June 1, 2018, the Company sold 100% of its shares held in JemPak
    Corporation ("JemPak Sale Transaction") at a purchase price of $118.0
    million. Net cash proceeds were used to reduce debt outstanding and
    pay fees and accrued interest to lenders.
  • On May 15, 2018, Acasta monetized its interest in the Stelloan profit
    participating notes ("PPNs") for net proceeds of US $25.8
    million. These proceeds exclude the additional U.S. $5.0 million in
    downside protection due from the purchaser of Stellwagen pursuant to
    the sale agreement.
  • Proceeds from the sales of JemPak, Stellwagen and the monetization of
    the PPNs were primarily used to repay debt. As a result, Acasta has
    effectively reduced its total indebtedness by approximately $911.3
    million from $983.9 million at December 31, 2017 to $72.6 million at
    June 30, 2018.

Second Quarter 2018 Results Conference Call:

Acasta's senior management will host a conference call on Friday, August
10, 2018 at 9:00 a.m. (E.D.T.) to discuss the Company's financial and
operating results. Please dial +1 (416) 340-2217 or toll-free
(Canada/US) +1 (800) 806-5484 with passcode 2398339#. To ensure your
participation, please join approximately five minutes prior to the
scheduled start of the conference call.

The conference call will be available for replay at +1 (905) 694-9451 or
toll-free (Canada/US) +1 (800) 408-3053 with passcode 4939925#, expiring
on September 14, 2018.

Advisories:

Cautionary Note Concerning Forward-Looking Statements

This news release includes forward-looking statements. All such
statements constitute forward-looking information within the meaning of
applicable securities law and are made pursuant to the "safe harbour"
provisions of applicable securities laws. Forward-looking statements
include, but are not limited to, statements about other anticipated
future events or results, including comments with respect to Company's
future financial performance and condition. Forward-looking statements
are statements that are predictive in nature, depend upon or refer to
future events or conditions and are identified by words such as "will",
"expects", "anticipates", "intends", "plans", "believes", "estimates" or
similar expressions concerning matters that are not historical facts.
Such statements are based on current expectations of the Company's
management and inherently involve numerous risks and uncertainties,
known and unknown, including economic factors. The forward-looking
information contained in this news release is presented for the purpose
of assisting readers in understanding the Company's business and
strategic priorities and objectives. A number of risks, uncertainties
and other factors may cause actual outcomes or financial results to
differ materially from the forward-looking statements contained in this
news release, including, among other factors, those referenced in the
section entitled "Risk Factors" in the Company's annual information form
for the year ended December 31, 2017, a copy of which is available on
the SEDAR website at www.sedar.com
under the Company's profile. Forward-looking statements contained in
this news release are not guarantees of future outcomes performance and,
while forward-looking statements are based on certain assumptions that
the Company considers reasonable, actual events could differ materially
from those expressed or implied by forward-looking statements made by
the Company. Readers are cautioned to consider these and other factors
carefully when making decisions with respect to the Company and to not
place undue reliance on forward-looking statements. Circumstances
affecting the Company may change rapidly. Except as may be expressly
required by the applicable law, Acasta does not undertake any obligation
to update publicly or revise any such forward-looking statements,
whether as a result of new information, future events or otherwise.
These cautionary statements expressly qualify all forward-looking
statements in this new release.

Non-IFRS Financial Performance Measures (Unaudited)

Adjusted net income (loss), EBITDA and adjusted EBITDA are not
recognized measures under IFRS and this data may not be comparable to
data presented by other companies.

Adjusted net income (loss) is calculated by adjusting net income (loss)
as recorded in the unaudited condensed consolidated interim statements
of income (loss) and comprehensive income (loss) for the exclusion of
certain other income and expense items determined in accordance with
IFRS. The Company believes that this generally accepted measure allows
the evaluation of the results of continuing operations and is useful in
making comparisons between periods. Adjusted net income (loss) is
intended to provide investors with information about the Company's
continuing income generating capabilities. Management uses this measure
to monitor and plan for the operating performance of the Company in
conjunction with other data prepared in accordance with IFRS.

EBITDA is calculated by adjusting net income (loss) as recorded in the
unaudited condensed consolidated interim statements of income (loss) and
comprehensive income (loss) for finance costs, current and deferred
income tax, depreciation and amortization expenses. The Company believes
that this measure allows the evaluation of the results of continuing
operations and is useful in making comparisons between periods. EBITDA
is intended to provide investors with information about the Company's
continuing income generating capabilities. Management uses this measure
to monitor and plan for the operating performance of the Company in
conjunction with other data prepared in accordance with IFRS.

Adjusted EBITDA is calculated by adjusting net income (loss) as recorded
in the unaudited condensed consolidated interim statements of income
(loss) and comprehensive income (loss) for the exclusion of certain
other income and expense items determined in accordance with IFRS, being
the calculation for adjusted net income (loss) and then further
adjusting for finance costs, current and deferred income tax,
depreciation and amortization expenses, foreign exchange and impairment
charges. The Company believes that this generally accepted measure
allows the evaluation of the results of continuing operations and is
useful in making comparisons between periods. Adjusted EBITDA is
intended to provide investors with information about the Company's
continuing income generating capabilities. Management uses this measure
to monitor and plan for the operating performance of the Company in
conjunction with other data prepared in accordance with IFRS.

 
ACASTA ENTERPRISES INC.
 
NON-IFRS FINANCIAL PERFORMANCE MEASURES RECONCILIATION
(In thousands of Canadian dollars, except share and per share
amounts)
 
  Three months ended June 30, 2018   Three months ended June 30, 2017
Continuing
Operations
  Discontinued
Operations
  Continuing
Operations
  Discontinued
Operations
Reportable Segments   Reportable Segments  
NON-IFRS FINANCIAL PERFORMANCE MEASURES
(in thousands
of Canadian dollars,

except share and per share amounts)
Consumer
Products
  Other Consumer
Products
Acasta
Consolidated
Consumer
Products
Other   Consumer
Products
Aviation Acasta
Consolidated
Net income (loss) $(75,756) $(21,115) $— $(96,871) $3,769 $(4,294) $— $— $(525)
Net income (loss) from discontinued operations (2,227) (2,227) (320) (397) (717)
Impairment of goodwill 79,775 79,775
Loss on revaluation of Profit Participating Notes
Gain on redemption of Class A Shares
Gain on disposal of property, plant and equipment (1,289)
Qualifying Acquisition transaction costs
ECN Acquisition transaction costs 628
Costs to prepare aircraft for sale
Net loss (gain) on foreign exchange (1,417) 880 151 (537) (1,329) (314) 149 26 (1,643)
Amortization of inventory fair value increment
Other non-recurring costs
Adjusted net income (loss) from continuing operations $2,602 $(20,235) $— $(17,633) $2,440 $(4,608) $— $— $(2,168)
Adjusted net income (loss) from discontinued operations $— $— $(2,076) $(2,076) $— $— $(171) $(1,032) $(1,203)
Finance costs $1,911 $8,133 $803 $10,044 $1,021 $934 $1,161 $6,929 $1,955
Current income tax expense (1,871) 476 (1,871) 2,390 257 847 2,390
Deferred income tax recovery (5,824) (196) (5,824) (1,085) (339) (820) (1,085)
Depreciation of property, plant and equipment and amortization of
intangible assets
5,438 1,124 5,438 5,270 2,390 14,721 5,270
EBITDA from continuing operations $(76,102) $(12,982) $— $(89,084) $11,365 $(3,360) $— $— $8,005
EBITDA from discontinued operations (20) (20) 3,149 21,280 24,429
EBITDA $(76,102) $(12,982) $(20) $(89,104) $11,365 $(3,360) $3,149 $21,280 $32,434
Adjusted EBITDA from continuing operations $2,256 $(12,102) $— $(9,846) $10,036 $(3,674) $— $— $6,362
Adjusted EBITDA from discontinued operations 131 131 3,298 20,645 23,943
Adjusted EBITDA $2,256 $(12,102) $131 $(9,715) $10,036 $(3,674) $3,298 $20,645 $30,305
 
 
ACASTA ENTERPRISES INC.
 
NON-IFRS FINANCIAL PERFORMANCE MEASURES RECONCILIATION (Continued)
(In thousands of Canadian dollars, except share and per share
amounts)
 
  Three months ended June 30, 2018   Three months ended June 30, 2017
Continuing
Operations
  Discontinued
Operations
  Continuing
Operations
  Discontinued
Operations
Reportable Segments   Reportable Segments  
NON-IFRS FINANCIAL PERFORMANCE MEASURES
(in thousands
of Canadian dollars,

except share and per share amounts)
Consumer
Products
  Other Consumer
Products
Acasta
Consolidated
Consumer
Products
Other   Consumer
Products
Aviation Acasta
Consolidated
Net loss from continuing operations per share — basic (1.49) (0.01)
Net income (loss) from discontinued operations per share — basic (0.03) (0.01)
Net loss from continuing operations per share — diluted(1) (1.49) (0.01)
Net income (loss) from discontinued operations per share — diluted(1) (0.03) (0.01)
Adjusted net income (loss) from continuing operations per share —
basic
(0.27) (0.02)
Adjusted net income (loss) from discontinued operations per share
— basic
(0.03) (0.02)
Adjusted net income (loss) from continuing operations per share —
diluted
(1)
(0.27) (0.02)
Adjusted net income (loss) from discontinued operations per share
— diluted
(1)
(0.03) (0.02)
Weighted average number of Class B shares outstanding — basic 64,972,060 88,435,533
Weighted average number of Class B shares outstanding — diluted 64,972,060 88,435,533
(1)   The dilutive impact of Class B Shares related to the Company's DSU
Plan was excluded from the computation of diluted weighted average
number of Class B Shares outstanding where the Company reported a
net loss or adjusted net loss because their effect would have been
anti-dilutive.
 
   
Six months ended June 30, 2018 Six months ended June 30, 2017

Continuing
Operations

  Discontinued
Operations
 

Continuing
Operations

  Discontinued
Operations
 
Reportable Segments Reportable Segments
NON-IFRS FINANCIAL PERFORMANCE MEASURES
(in thousands
of Canadian dollars,

except share and per share amounts)
Consumer
Products
  Other Consumer
Products
  Aviation Acasta
Consolidated
Consumer
Products
  Other Consumer
Products
  Aviation Acasta
Consolidated
Net income (loss) from continuing operations $(79,471) $(43,843) $— $— $(123,314) $5,996 $(6,436) $— $— $(440)
Net income (loss) from discontinued operations (14,653) (129,945) (144,598) (678) 4,074 3,396
Impairment of goodwill 79,775 12,248 79,775
Loss on revaluation of Profit Participating Notes 33,121
Gain on redemption of Class A Shares (3,699) (3,699)
Gain on disposal of property, plant and equipment (206)
Qualifying Acquisition transaction costs 4,627 4,627
ECN Acquisition transaction costs 628
Costs to prepare aircraft for sale 706
Net (gain) loss on foreign exchange (1,738) 2,886 (85) 61 1,148 (1,146) (409) 210 1 (1,555)
Amortization of inventory fair value increment 1,203 743 1,203
Other non-recurring costs 359
Adjusted net income (loss) from continuing operations $(1,434) $(40,957) $— $— $(42,391) $6,053 $(5,917) $— $— $136
Adjusted net income (loss) from discontinued operations $— $— $(2,490) $(96,763) $(99,253) $— $— $634 $5,203 $5,837
Finance costs $2,576 $20,763 $1,356 $7,342 $23,339 $1,760 $1,126 $1,468 $12,343 $2,886
Current income tax expense (1,871) 1,023 (379) (1,871) 4,929 734 1,865 4,929
Deferred income tax recovery (7,103) (660) (71) (7,103) (2,842) (935) (1,557) (2,842)
Depreciation of property, plant and equipment and amortization of
intangible assets
10,824 3,644 8,008 10,824 10,434 4,781 27,257 10,434
EBITDA from continuing operations $(75,045) $(23,080) $— $— $(98,125) $20,277 $(5,310) $— $— $14,967
EBITDA from discontinued operations (9,290) (115,045) (124,335) 5,370 43,982 49,352
EBITDA $(75,045) $(23,080) $(9,290) $(115,045) $(222,460) $20,277 $(5,310) $5,370 $43,982 $64,319
Adjusted EBITDA from continuing operations $2,992 $(20,194) $— $— $(17,202) $20,334 $(4,791) $— $— $15,543
Adjusted EBITDA from discontinued operations 2,873 (81,863) (78,990) 6,682 45,111 51,793
Adjusted EBITDA $2,992 $(20,194) $2,873 $(81,863) $(96,192) $20,334 $(4,791) $6,682 $45,111 $67,336
 
   
Six months ended June 30, 2018 Six months ended June 30, 2017

Continuing
Operations

  Discontinued
Operations
 

Continuing
Operations

 

Discontinued
Operations

 
Reportable Segments Reportable Segments
NON-IFRS FINANCIAL PERFORMANCE MEASURES
(in thousands
of Canadian dollars,

except share and per share amounts)
Consumer
Products
  Other Consumer
Products
  Aviation Acasta
Consolidated
Consumer
Products
  Other Consumer
Products
  Aviation Acasta
Consolidated
Net loss from continuing operations per share — basic (1.60) (0.01)
Net income (loss) from discontinued operations per share — basic (1.88) 0.04
Net loss from continuing operations per share — diluted(1) (1.60) (0.01)
Net income (loss) from discontinued operations per share — diluted(1) (1.88) 0.04
Adjusted net income (loss) from continuing operations per share —
basic
(0.55) 0.00
Adjusted net income (loss) from discontinued operations per share
— basic
(1.29) 0.07
Adjusted net income (loss) from continuing operations per share —
diluted
(1)
(0.55) 0.00
Adjusted net income (loss) from discontinued operations per share
— diluted
(1)
(1.29) 0.07
Weighted average number of Class B shares outstanding — basic 77,035,949 87,049,295
Weighted average number of Class B shares outstanding — diluted 77,035,949 87,049,295
(1)   The dilutive impact of Class B Shares related to the Company's DSU
Plan was excluded from the computation of diluted weighted average
number of Class B Shares outstanding where the Company reported a
net loss or adjusted net loss because their effect would have been
anti-dilutive.
 
 
ACASTA ENTERPRISES INC.
 
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL
POSITION
(in thousands of Canadian dollars)
 
  As at
June 30, 2018
  As at
December 31, 2017
Assets
Current assets
Cash and cash equivalents $2,974 $26,139
Trade and other receivables 27,519 39,644
Inventories 42,491 48,423
Prepaid expenses and deposits 3,372 54,548
Other current assets 6,445 5,534
Current portion of loans receivable 11,257
$82,801 $185,545
Non-current assets
Property, plant and equipment $37,608 $617,594
Intangible assets 60,168 275,469
Goodwill 176,552
Long-term loans receivable 189,974
Non-current deposits 5,077
Other non-current assets 12,889
$97,776 $1,277,555
Total assets $180,577 $1,463,100
Liabilities
Current liabilities
Accounts payable and accrued liabilities $28,182 $37,107
Current debt obligations 72,562 276,735
Income taxes payable 5,362 7,232
Other current liabilities 477 14,333
$106,583 $335,407
Non-current liabilities
Deferred tax liabilities $3,262 $20,306
Other non-current liabilities 31,520
Long-term debt 707,211
$3,262 $759,037
Total liabilities $109,845 $1,094,444
Shareholders' equity
Share capital $594,246 $849,383
Contributed surplus 197,946 300
Warrants 3,939 3,939
Deficiency (725,399) (457,104)
Accumulated other comprehensive loss (27,862)
Total shareholders' equity $70,732 $368,656
Total liabilities and shareholders' equity $180,577 $1,463,100
 
ACASTA ENTERPRISES INC.
 
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(in thousands of Canadian dollars, except share and per share
amounts)
 
  Three months ended
June 30,
  Six months ended
June 30,
2018   2017 2018   2017
Revenue $44,094 $43,381 $86,398 $85,426
Cost of revenue, expenses, and other items
Cost of revenue 35,186 26,966 69,364 54,843
Selling, general and administrative expense 24,817 15,321 43,709 31,537
Finance costs, net 10,044 1,955 23,339 2,886
Impairment of goodwill and intangible assets 79,775 79,775
Net unrealized loss on change in fair value of financial instruments 92 92
Net loss (gain) on foreign exchange (537) (1,643) 1,148 (1,555)
Other loss (income) loss, net (717) 2 1,259 (3,932)
Income (loss) before income tax $(104,566) $780 $(132,288) $1,647
Current income tax expense (recovery) (1,871) 2,390 (1,871) 4,929
Deferred income tax recovery (5,824) (1,085) (7,103) (2,842)
Net loss from continuing operations $(96,871) $(525) $(123,314) $(440)
Net income (loss) from discontinued operations, net of tax (2,227) (717) (144,598) 3,396
Net income (loss) $(99,098) $(1,242) $(267,912) $2,956
Other comprehensive income (loss) from discontinued operations,
net of tax
$— $(12,607) $— $(14,136)
Total comprehensive loss $(99,098) $(13,849) $(267,912) $(11,180)
Net income (loss) per share
Basic — continuing operations $(1.49) $(0.01) $(1.60) $(0.01)
Basic — discontinued operations $(0.03) $(0.01) $(1.88) $0.04
Diluted — continuing operations $(1.49) $(0.01) $(1.60) $(0.01)
Diluted — discontinued operations $(0.03) $(0.01) $(1.88) $0.04
 
 
ACASTA ENTERPRISES INC.
 
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
 
  Six months ended
June 30, 2018
  Six months ended
June 30, 2017
Operating activities
Net (loss) income $(267,912) $2,956
Adjustments for non-cash items and other adjustments:
Share-based compensation 1,036
Depreciation of property, plant and equipment 8,141 12,714
Amortization of intangible assets 14,364 29,758
Net unrealized loss (gain) on change in fair value of financial
instruments
92 (236)
Finance costs 23,339 16,697
Current income tax expense (recovery) (1,227) 7,528
Deferred income tax recovery (7,834) (5,334)
ECN consideration paid in Class B Shares 1,005
Impairment of goodwill and intangible assets 92,023
Loss on disposal of Aviation reportable segment 97,721
Loss on disposal of JemPak 2,649
Gain on fair value remeasurement of Profit Participating Notes (621)
Net loss (gain) on foreign exchange 1,126 (1,344)
Gain on redemption of Class A Restricted Voting Shares (3,699)
Gain on disposal of property, plant and equipment (206)
Amortization of inventory fair value increment 3,355
Changes in non-cash working capital (3,175) (42,225)
Cash (used in) provided by operating activities $(39,273) $19,964
Income taxes paid (1,632) (3,620)
Net cash flows provided by (used in) operating activities $(40,905) $16,344
Investing activities
Additions to property, plant and equipment $(5,923) $(305,746)
Proceeds on disposition of Aviation reportable segment, net 32,727
Proceeds on disposition of JemPak, net 114,062
Proceeds on monetization of Profit Participating Notes 33,215
Additions to intangible assets (68,463)
Proceeds on disposal of property, plant and equipment 53,744
Proceeds from restricted cash to finance acquisitions 106,240
Acquisition of Apollo (161,545)
Acquisition of JemPak (55,448)
Acquisition of Stellwagen (90,772)
Cash provided by (used in) investing activities $174,081 $(521,990)
Financing activities
Proceeds from debt and credit facilities $39,362 $475,630
Repayment of debt (182,098) (62,724)
Payment of debt issuance costs (1,000) (20,362)
Proceeds from restricted cash to fund redemption of Class A
Restricted Voting Shares and deferred underwriters' commission
298,761
Redemption of Class A Restricted Voting Shares (285,680)
Proceeds from private placement of Class B Shares 159,551
Payment of deferred underwriters' commission (13,081)
Payment of share issuance costs related to private placement (1,136)
Interest paid (12,605) (14,040)
Cash provided by (used in) financing activities $(156,341) $536,919
Net increase (decrease) in cash during the period $(23,165) $31,273
Foreign exchange impact on cash held in foreign currencies 1,967
Cash and cash equivalents, beginning of period 26,139 187
Cash and cash equivalents, end of period $2,974 $33,427
 

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