Acasta Enterprises Reports Third Quarter Results

TORONTO–(BUSINESS WIRE)–Acasta Enterprises Inc. (TSX: AEF) (“Acasta” or the “Company”)
today announced its consolidated financial results for the quarter ended
September 30, 2018 and provided the following corporate update.

Financial and Operating Highlights

  • Acasta’s results from continuing operations for the three-month period
    ended September 30, 2018 included revenues of $45.9 million, a net
    loss of $3.6 million or $0.06 per share (basic and diluted), an
    adjusted net loss of $3.7 million or $0.06 per share (basic and
    diluted) and adjusted EBITDA of $1.0 million compared to revenues of
    $43.6 million, a net loss of $6.9 million or $0.08 per share (basic
    and diluted), adjusted net loss of $8.4 million or $0.09 per share
    (basic and diluted) and adjusted EBITDA of $1.7 million for the
    three-month period ended September 30, 2017.

Third Quarter 2018 Results Conference Call:

Acasta’s senior management will host a conference call on Friday,
November 9, 2018 at 9:00 a.m. (Toronto time) 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 9561089#. 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 1921051#, expiring
on December 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 September 30, 2018   Three Months Ended September 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) $(1,085)   $(2,502) $— $(3,587) $(1,475)   $(5,459) $—   $— $(6,934)

Net income (loss) from discontinued operations

(296) (296) (259) (2,546) (2,805)
Net (gain) loss on foreign exchange 96   (197)     (101)   1,085   (2,524)   361   37   (1,439)
Adjusted net income (loss) from continuing operations $(989)   $(2,699)   $—   $(3,688)   $(390)   $(7,983)   $—   $—   $(8,373)
Adjusted net income (loss) from discontinued operations $—   $—   $(296)   $(296)   $—   $—   $102   $(2,509)   $(2,407)
Finance costs $960 $503 $— $1,463 $570 $4,607 $612 $6,393 $5,177
Current income tax expense (459) (459) 571 329 289 571
Deferred income tax recovery (1,085) (365) (931) (1,085)
Depreciation of property, plant and equipment and amortization of
intangible assets
3,660       3,660   5,365     2,462   12,622   5,365
EBITDA from continuing operations $3,076   $(1,999)   $—   $1,077   $3,946   $(852)   $—   $—   $3,094
EBITDA from discontinued operations     (296)   (296)       2,779   15,827   18,606
EBITDA $3,076   $(1,999)   $(296)   $781   $3,946   $(852)   $2,779   $15,827   $21,700
Adjusted EBITDA from continuing operations $3,172 $(2,196) $— $976 $5,031 $(3,376) $— $— $1,655
Adjusted EBITDA from discontinued operations     (296)   (296)       3,140   15,864   19,004
Adjusted EBITDA $3,172   $(2,196)   $(296)   $680   $5,031   $(3,376)   $3,140   $15,864   $20,659

ACASTA ENTERPRISES INC.

NON-IFRS FINANCIAL PERFORMANCE MEASURES RECONCILIATION (Continued)
(In
thousands of Canadian dollars, except share and per share amounts)

  Three Months Ended September 30, 2018   Three Months Ended September 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   (0.06)     (0.08)
Net income (loss) from discontinued operations per share — basic (0.00) (0.03)
Net loss from continuing operations per share — diluted(1) (0.06) (0.08)
Net income (loss) from discontinued operations per share —
diluted(1)
(0.00) (0.03)
Adjusted net income (loss) from continuing operations per share —
basic
(0.06) (0.09)
Adjusted net income (loss) from discontinued operations per share
— basic
(0.00) (0.03)
Adjusted net income (loss) from continuing operations per share —
diluted(1)
(0.06) (0.09)
Adjusted net income (loss) from discontinued operations per share
— diluted(1)
(0.00) (0.03)
Weighted average number of Class B shares outstanding — basic 64,994,283 90,494,283
Weighted average number of Class B shares outstanding — diluted 64,994,283 90,494,283

(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.

  Nine Months Ended September 30, 2018   Nine Months Ended September 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 $(80,556)   $(46,345) $—   $— $(126,901) $4,521   $(11,895) $—   $— $(7,374)
Net income (loss) from discontinued operations (14,949) (129,945) (144,894) (937) 1,528 591
Impairment of goodwill 79,775 12,248 79,775
Loss on revaluation of Profit Participating Notes 33,121 (236) (236)
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 (1,642) 2,689 (85) 61 1,047 (61) (2,933) 571 38 (2,994)
Amortization of inventory fair value increment 1,203 743 1,203
Other non-recurring costs               359    
Adjusted net income (loss) from continuing operations $(2,423)   $(43,656)   $—   $—   $(46,079)   $5,663   $(14,136)   $—   $—   $(8,473)
Adjusted net income (loss) from discontinued operations $—   $—   $(2,786)   $(96,763)   $(99,549)   $—   $—   $736   $2,694   $3,430
Finance costs $3,536 $21,266 $1,356 $7,342 $24,802 $2,330 $5,733 $2,080 $18,736 $8,063
Current income tax expense (2,330) 1,023 (379) (2,330) 5,500 1,063 2,154 5,500
Deferred income tax recovery (7,103) (660) (71) (7,103) (3,927) (1,300) (2,488) (3,927)
Depreciation of property, plant and equipment and amortization of
intangible assets
14,484     3,644   8,008   14,484   15,799     7,243   39,879   15,799
EBITDA from continuing operations $(71,969) $(25,079) $— $— $(97,048) $24,223 $(6,162) $— $— $18,061
EBITDA from discontinued operations     (9,586)   (115,045)   (124,631)       8,149   59,809   67,958
EBITDA $(71,969)   $(25,079)   $(9,586)   $(115,045)   $(221,679)   $24,223   $(6,162)   $8,149   $59,809   $86,019
Adjusted EBITDA from continuing operations $6,164 $(22,390) $— $— $(16,226) $25,365 $(8,403) $— $— $16,962
Adjusted EBITDA from discontinued operations     2,577   (81,863)   (79,286)       9,822   60,975   70,797
Adjusted EBITDA $6,164   $(22,390)   $2,577   $(81,863)   $(95,512)   $25,365   $(8,403)   $9,822   $60,975   $87,759
 
Nine Months Ended September 30, 2018 Nine Months Ended September 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 (1.74) (0.08)
Net income (loss) from discontinued operations per share — basic (1.99) 0.01
Net loss from continuing operations per share — diluted(1) (1.74) (0.08)
Net income (loss) from discontinued operations per share — diluted (1.99) 0.01
Adjusted net income (loss) from continuing operations per share —
basic
(0.63) (0.10)
Adjusted net income (loss) from discontinued operations per share
— basic
(1.36) 0.04
Adjusted net income (loss) from continuing operations per share —
diluted
(1)
(0.63) (0.10)
Adjusted net income (loss) from discontinued operations per share
— diluted
(1.36) 0.04
Weighted average number of Class B shares outstanding — basic 72,963,033 88,214,511
Weighted average number of Class B shares outstanding — diluted 72,963,033 88,219,082

(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
September 30, 2018
  As at
December 31, 2017
Assets
Current assets
Cash and cash equivalents $786 $26,139
Trade and other receivables 27,037 39,644
Inventories 40,545 48,423
Prepaid expenses and deposits 2,969 54,548
Other current assets 7,099 5,534
Current portion of loans receivable 11,257
$78,436 $185,545
Non-current assets
Property, plant and equipment $37,340 $617,594
Intangible assets 57,854 275,469
Goodwill 176,552
Long-term loans receivable 189,974
Non-current deposits 5,077
Other non-current assets 12,889
$95,194 $1,277,555
Total assets $173,630 $1,463,100
Liabilities
Current liabilities
Accounts payable and accrued liabilities $26,465 $37,107
Debt obligations 73,488 276,735
Income taxes payable 2,913 7,232
Other current liabilities 477 14,333
$103,343 $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 $106,605 $1,094,444
Shareholders’ equity
Share capital $594,246 $849,383
Contributed surplus 198,122 300
Warrants 3,939 3,939
Deficiency (729,282) (457,104)
Accumulated other comprehensive loss (27,862)
Total shareholders’ equity $67,025 $368,656
Total liabilities and shareholders’ equity $173,630 $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
September 30,
  Nine months ended
September 30,
2018   2017 2018   2017
Revenue $45,877   $43,607 $132,275   $129,033
Cost of revenue, expenses, and other items
Cost of revenue 37,896 32,293 107,260 87,136
Selling, general and administrative expense 11,624 17,129 55,333 48,666
Finance costs, net 1,463 5,177 24,802 8,063
Impairment of goodwill and intangible assets 79,775
Net unrealized gain on change in fair value of financial instruments (655) (563) (236)
Net loss (gain) on foreign exchange (101) (1,439) 1,047 (2,994)
Other (income) loss, net (304)   (2,105)   955   (5,801)
Loss before income tax $(4,046) $(7,448) $(136,334) $(5,801)
Current income tax expense (recovery) (459) 571 (2,330) 5,500
Deferred income tax recovery   (1,085)   (7,103)   (3,927)
Net loss from continuing operations $(3,587) $(6,934) $(126,901) $(7,374)
Net income (loss) from discontinued operations, net of tax (296)   (2,805)   (144,894)   591
Net loss $(3,883)   $(9,739)   $(271,795)   (6,783)
Other comprehensive income (loss) from discontinued operations,
net of tax
$—   $(14,616)   $—   $(28,752)
Total comprehensive loss $(3,883)   $(24,355)   $(271,795)   $(35,535)
Net income (loss) per share
Basic — continuing operations $(0.06) $(0.08) $(1.74) $(0.08)
Basic — discontinued operations $ $(0.03) $(1.99) $0.01
Diluted — continuing operations $(0.06) $(0.08) $(1.74) $(0.08)
Diluted — discontinued operations $ $(0.03) $(1.99) $0.01

ACASTA ENTERPRISES INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(in thousands
of Canadian dollars)

  Nine months ended
September 30, 2018
  Nine months ended
September 30, 2017
Operating activities  
Net loss $(271,795) $(6,783)
Adjustments for non-cash items and other adjustments:
Share-based compensation 1,212 150
Depreciation of property, plant and equipment 9,486 19,417
Amortization of intangible assets 16,678 43,504
Net unrealized loss (gain) on change in fair value of financial
instruments
(563) (236)
Finance costs 24,802 28,879
Current income tax expense (recovery) (1,686) 8,717
Deferred income tax recovery (7,834) (7,715)
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 2,945
Gain on fair value remeasurement of Profit Participating Notes (621)
Net loss (gain) on foreign exchange 881 (2,385)
Gain on redemption of Class A Restricted Voting Shares (3,699)
Gain on disposal of property, plant and equipment (211)
Amortization of inventory fair value increment 3,355
Changes in non-cash working capital (1,948)   (17,207)
Cash (used in) provided by operating activities $(37,694)   $65,786
Income taxes paid (3,623)   (2,671)
Net cash flows provided by (used in) operating activities $(41,317)   $63,115
Investing activities
Additions to loans receivable, net $— $(158,135)
Additions to property, plant and equipment (7,000) (309,000)
Proceeds on disposition of Aviation reportable segment, net 32,727
Proceeds on disposition of JemPak, net 113,765
Proceeds on monetization of Profit Participating Notes 33,215
Additions to intangible assets (68,464)
Proceeds on disposal of property, plant and equipment 53,979
Proceeds from restricted cash to finance acquisitions 106,240
Acquisition of Apollo (161,545)
Acquisition of JemPak (55,448)
Acquisition of Stellwagen   (84,946)
Cash provided by (used in) investing activities $172,707   $(677,319)
Financing activities
Proceeds from debt and credit facilities $44,362 $592,460
Repayment of debt (186,369) (77,114)
Payment of debt issuance costs (1,000) (20,542)
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 and related fees paid (13,880)   (23,776)
Cash provided by (used in) financing activities $(156,887)   $629,443
Net increase (decrease) in cash during the period $(25,497) $15,239
Foreign exchange impact on cash held in foreign currencies 144 2,892
Cash and cash equivalents, beginning of period 26,139   187
Cash and cash equivalents, end of period $786   $18,318

Contacts

Acasta Enterprises Inc.
Ian Kidson, 1-647-725-6707
Interim
Chief Executive Officer
www.acastaenterprises.com

leverton

I have been involved with publishing and marketing for the past 32 years. My passion is helping people share their voice. I am able to do this through two important venues: One, with Area-Info.net where people can share everything from opinions to events to news. It is your choice! What do you want to share? Two, through a new program called America's Real Deal I am involved with to help business owners get their voice heard.I schedule speaking engagements with community groups and business groups to share my passion about the importance of "sharing your voice".Contact me directly at lee@leeeverton.coom for scheduling information.