£ | REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 |
S | ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 31, 2013 | Commission File Number 001-33161 |
Title of each class | Name of each exchange on which registered | |
Common Shares | Toronto Stock Exchange | |
The New York Stock Exchange |
S | Annual information form | S | Audited annual financial statements |
/S/ Martin Ferron | ||
Martin Ferron | ||
President and Chief Executive Officer |
99.1 | Annual Information Form for the fiscal year ended March 31, 2013. | |
99.2 | Audited Annual Consolidated Financial Statements for the fiscal year ended March 31, 2013. | |
99.3 | Management’s Discussion and Analysis for the fiscal year ended March 31, 2013. | |
99.4 | Consent of KPMG LLP. | |
99.5 | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934. | |
99.6 | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934. | |
99.7 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
99.8 | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | The following financial information from North American Energy Partners Inc.’s audited Consolidated Financial Statements, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations and Comprehensive (Loss) Income; (iii) the Consolidated Statements of Changes in Shareholders’ Equity; (iv) the Consolidated Statements of Cash Flows; and (v) Notes to the Consolidated Financial Statements, tagged as blocks of text. |
2013 Annual Information Form | 1 |
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2013 Annual Information Form | 3 |
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• | Enhance safety culture: We are committed to elevating the standard of excellence in health, safety and environmental protection with continuous improvement along with greater accountability and compliance. Our aim is to have zero incidents. |
• | Increase customer satisfaction: We intend to continue strengthening our relationships with new and existing customers to win an increased share of the services outsourced in connection with their projects. |
• | Improve productivity and profitability: We plan to increase productivity and profitability by identifying operating efficiencies, reducing direct and indirect costs and right-sizing our equipment fleet. |
• | Improve cash flow: We expect to manage our profitability, working capital and capital investments to ensure positive cash flow generation. |
• | Strengthen the balance sheet: We intend to continue with our disciplined debt reduction program to increase financial capacity and support future growth. |
• | Increase our presence outside the oil sands: We intend to extend our services to other resource industries across Canada. Canada has significant natural resources and we believe that we have the equipment and the expertise to assist with extracting those resources. |
• | At the start of fiscal 2013, we established a set of strategic priorities to better serve our customers and restore shareholder confidence and value. These priorities are: |
1. | strengthen our balance sheet and liquidity; |
2. | significantly lower our cost structure; |
3. | improve the risk profile of our business; and |
4. | regain profitability. |
• | Demand for our services has been impacted by a more cautious approach by the oil sands industry to capital spending. In some cases, this has resulted in delayed project approvals and construction start dates. We have also seen our customers take a more disciplined approach to project engineering and construction in an effort to better control costs and we have seem a shift towards phased project construction, resulting in smaller contract awards. We have been successful, however, in securing a significant share of the construction contracts in the sector and maintaining a strong project backlog with awards at new and existing oil sands mines and various in situ projects. Over the past three years we have been awarded construction contracts with major oil sands customers including: |
6 | 2013 Annual Information Form |
• | the initial site development contract for the BlackGold steam assisted, gravity driven ("SAGD") Project; |
• | Overall industry demand for operations support services in the oil sands has remained relatively steady over the past three years, although we have seen a decline in our operations support services revenues as a result of increased competition and insourcing of certain services. Despite this, we have been awarded several new multi-year operations support services agreements over the past few years with major oil sands customers including: |
• | In addition to these master services contracts, we reached an agreement in 2012 on amendments to our 10-year overburden removal and tailings dyke construction services contract with Canadian Natural (“the Canadian Natural contract”). The amending agreement included a $34.1 million settlement of past claims under the original contract. The general terms of the original contract related to work scope remained in place; however, these services are now being performed under a revised payment structure that carries less risk to us than the unit-rate structure it replaces. The new payment structure carries a base margin and provides for the opportunity to enhance margins, by meeting mutually agreed upon performance targets. |
• | As part of our evaluation of operations, we made the decision to investigate the possible sale ("Piling Sale") of our piling related assets and liabilities and exit the piling, foundation, pipeline anchor and tank services businesses. On June 10, 2013, we reached an agreement with Keller Group plc (the "Keller Group" or the "Purchaser") to sell our piling assets for consideration of $227.5 million, plus or minus customary working capital adjustments, less approximately $5.0 million for the assumption of capital leases. In addition, we will receive up to $92.5 million in additional proceeds, contingent on the Purchaser achieving prescribed Consolidated EBITDA thresholds from the assets and liabilities sold. Closing costs for the Piling Sale are expected to be approximately $12.5 million.t |
• | A maximum of $30.0 million cash paid no later than September 30, 2014, with the full amount being paid in the event that the business earns annualized Consolidated EBITDA (“First Year Consolidated EBITDA”) of $45.0 million or more in the period from closing to June 30, 2014. The amount payable will be $2 for every $1 that First Year Consolidated EBITDA is greater than $30.0 million (with the maximum payment of $30.0 million where First Year Consolidated EBITDA is $45.0 million or greater). |
• | A maximum of $27.5 million cash paid no later than September 30, 2015, with the full amount being paid in the event that the business earns Consolidated EBITDA (“Second Year Consolidated EBITDA”) of $45.0 million or more in the period from July 1, 2014 to June 30, 2015. The amount payable will be $1.833 for every $1 that Second Year Consolidated EBITDA is greater than $30.0 million (with the maximum payment of $27.5 million where Second Year Consolidated EBITDA is $45.0 million or greater) |
2013 Annual Information Form | 7 |
a. | no later than September 30, 2014, the Purchaser will pay the vendor an amount equal to $0.375 for every $1 by which First Year Consolidated EBITDA exceeds $45.0 million;; |
b. | no later than September 30, 2015, the Purchaser will pay the vendor an amount equal to $0.375 for every $1 by which the aggregate of First Year Consolidated EBITDA and Second Year Consolidated EBITDA exceeds $90.0 million, less any monies paid to the vendor under (a) above; and |
c. | no later than September 30, 2016, the Purchaser will pay the vendor an amount equal to $0.5 for every $1 by which the aggregate of First Year Consolidated EBITDA, Second Year Consolidated EBITDA and Consolidated EBITDA for the period from July 1, 2015 to June 30, 2016 exceeds $135.0 million, less any monies paid to the vendor under (a) and (b) above. |
• | property, plant and equipment; |
• | intangible assets; |
• | working capital (excluding the outstanding accounts receivable and unbilled revenue on a certain customer contract); and |
• | capital and operating lease commitments. |
8 | 2013 Annual Information Form |
2013 Annual Information Form | 9 |
10 | 2013 Annual Information Form |
Category | Capacity Range | Horsepower Range | Number Owned | Number Leased | |||||||
Heavy Construction and Mining: | |||||||||||
Articulating trucks | 30 to 40 tons | 305 ‑ 406 | 19 | 10 | |||||||
Mining trucks | 40 to 330 tons | 476 ‑ 2,700 | 104 | 46 | |||||||
Shovels | 35‑80 cubic yards | 2,600 ‑ 3,760 | 4 | 2 | |||||||
Excavators | 1 to 29 cubic yards | 90 ‑ 1,944 | 84 | 14 | |||||||
Dozers | 20,741 lbs to 230,100 lbs | 96 - 850 | 71 | 38 | |||||||
Graders | 14 to 24 feet | 150 ‑ 500 | 17 | 8 | |||||||
Loaders | 1.5 to 16 cubic yards | 110‑ 690 | 50 | 2 | |||||||
Packers | 14,175 to 68,796 lbs | 216 ‑3 15 | 6 | — | |||||||
Articulating Water Trucks | 8,000 gallon | 406,000 | 3 | — | |||||||
Scraper Water Wagons | 10,000 gallon | 462,000 | 2 | — | |||||||
Float Trucks | 250 tons | 703,000 | 4 | — | |||||||
Heavy Oil Recovery Barge | 30,000 US gal per hour | 125,000 | 9 | — | |||||||
Tractors | 43,000 lbs | 460,000 | 2 | — | |||||||
Total | 375 | 120 |
2013 Annual Information Form | 11 |
Location | Function | Owned or Leased | Lease Expiration Date | |||
Acheson, Alberta (Corporate Office) | Corporate head office, Administrative office and major equipment repair facility | Leased | 11/30/2017 | |||
Edmonton, Alberta (Mayfield) | Administrative and operations support office | Leased | 3/31/2017 | |||
Fort McMurray, Alberta (Timberlea) | Regional office for mining operations | Leased | 2/28/2022 | |||
Fort McMurray, Alberta (Canadian Natural site) | Site office and maintenance facility | Facility and land provided by customer | Term of CNRL contract (6/30/2014) | |||
Fort McMurray, Alberta (Syncrude Ruth Lake site) | Regional office and maintenance facility for all operations | Building owned, land provided | 8/31/2021 |
• | the timing and size of capital projects undertaken by our customers on large oil sands projects; |
• | seasonal weather and ground conditions; |
• | the timing of equipment maintenance and repairs; |
• | claims and change-orders; and |
• | the accounting for unrealized non-cash gains and losses related to foreign exchange and derivative financial instruments. |
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Toronto Stock Exchange | |||||||||
Date | High ($) | Low ($) | Volume | ||||||
May 2013 | 4.65 | 3.61 | 80,417 | ||||||
April 2013 | 4.69 | 4.00 | 120,755 | ||||||
March 2013 | 4.76 | 4.30 | 95,357 | ||||||
February 2013 | 4.63 | 3.72 | 349,366 | ||||||
January 2013 | 3.95 | 3.32 | 310,994 | ||||||
December 2012 | 3.88 | 3.17 | 143,304 | ||||||
November 2012 | 3.90 | 2.94 | 424,372 | ||||||
October 2012 | 3.26 | 2.76 | 405,636 | ||||||
September 2012 | 3.04 | 2.40 | 149,778 | ||||||
August 2012 | 3.12 | 2.37 | 396,734 | ||||||
July 2012 | 3.01 | 2.56 | 487,944 | ||||||
June 2012 | 3.15 | 2.47 | 606,506 | ||||||
May 2012 | 4.00 | 2.31 | 435,648 | ||||||
April 2012 | 5.03 | 3.85 | 143,430 | ||||||
New York Stock Exchange | |||||||||
Date | High ($) | Low ($) | Volume | ||||||
May 2013 | 4.50 | 3.57 | 1,239,979 | ||||||
April 2013 | 4.63 | 3.95 | 941,195 | ||||||
March 2013 | 4.70 | 4.30 | 1,933,723 | ||||||
February 2013 | 4.52 | 3.71 | 2,632,862 | ||||||
January 2013 | 3.94 | 3.37 | 1,738,401 | ||||||
December 2012 | 3.94 | 3.20 | 1,118,470 | ||||||
November 2012 | 3.84 | 2.92 | 1,017,193 | ||||||
October 2012 | 3.28 | 2.77 | 1,820,835 | ||||||
September 2012 | 3.04 | 2.40 | 1,411,346 | ||||||
August 2012 | 3.13 | 2.38 | 2,609,449 | ||||||
July 2012 | 3.00 | 2.52 | 1,900,925 | ||||||
June 2012 | 3.00 | 2.41 | 3,178,457 | ||||||
May 2012 | 4.06 | 2.23 | 2,314,440 | ||||||
April 2012 | 4.98 | 3.86 | 1,755,320 |
2013 Annual Information Form | 15 |
• | up to 120 days following a request for a demand registration if: |
• | we have decided to file a registration statement for an underwritten public offering of our common shares, from which we expect to receive net proceeds of at least US$20.0 million; or |
• | we have initiated discussions with underwriters in preparation for a public offering of our common shares from which we expect to receive net proceeds of at least US$20.0 million and the demand registration, in the underwriters’ opinion, would have a material adverse effect on the offering; or |
• | up to 90 days following a request for a demand registration if we are in possession of material information that we reasonably deem advisable not to disclose in a registration statement. |
16 | 2013 Annual Information Form |
• | Indemnity Agreement between NACG Holdings Inc., NACG Preferred Corp., North American Energy Partners Inc., North American Construction Group Inc. and their respective officers and directors. Please refer to the most recently filed Notice of Annual and Special Meeting and Management Information Circular (the "management information circular") for details; |
• | Indenture, dated as of April 7, 2010, among North American Energy Partners Inc., the guarantors named therein and CIBC Mellon Trust Company, as Trustee, and Supplemental Indenture dated as of April 7, 2010, among North American Energy Partners Inc., the guarantors named therein and CIBC Mellon Trust Company, as Trustee. Please refer to “Description of Certain Indebtedness – 9.125% Series 1 Debentures” for details; |
• | Registration Rights Agreement, dated as of November 26, 2003, among NACG Holdings Inc. and the shareholders party thereto. Please refer to “Interest of Management and Others in Material Transactions – Registration Rights Agreement” for details; |
• | Amended and Restated 2004 Share Option Plan dated November 3, 2006. Please refer to the most recently filed management information circular for details; |
• | Directors Deferred Share Unit plan, dated January 1, 2008. Please refer to the most recently filed management information circular for details; |
• | Restricted Share Unit plan dated April 1, 2008. Please refer to the most recently filed management information circular for details; |
• | Overburden Removal and Mining Services Contract, dated November 17, 2004, between Canadian Natural Resources Ltd. and Noramac Ventures Inc., with the latter’s interest having been assigned to North American Construction Group Inc. by an Assignment Agreement dated February 27, 2006, all as amended by an Amending Agreement dated March 19, 2012. Please see “Projects – Active Projects – Canadian Natural: Overburden Removal Project; |
• | Lease dated December 1, 1997, between NAR Group Holdings Ltd., as landlord, and North American Construction Group Inc., as tenant, as renewed by a Renewal Lease Agreement dated December 1, 2002, between Norama Inc. (successor to NAR Group Holdings Ltd.), as landlord, and North American Construction Group Inc., as tenant, as amended by a Lease Amendment and Consent Agreement dated November 26, 2003, between Acheson Properties Ltd. (successor to Norama Inc.), as landlord, and North American Construction Group Inc., as tenant, and as further amended by an Amending Agreement to Lease Amendment and Consent Agreement dated September 29, 2006, between Acheson Properties Ltd., as landlord, and North American Construction Group Inc., as tenant. This lease is for our offices in Acheson, Alberta. Please refer to “Resources and Key Trends—Facilities” for details; and |
• | Fourth Amended and Restated Credit Agreement dated as of April 30, 2010, among North American Energy Partners Inc., Canadian Imperial Bank of Commerce, HSBC Bank Canada, and the lenders party thereto from time to time, as amended by that First Amending Agreement dated June 8, 2011, that Second Amending |
2013 Annual Information Form | 17 |
Name and Municipality of Residence | Age | Position | In Role Since | |||
Martin R. Ferron | 56 | President and Chief Executive Officer | June 7, 2012 | |||
Edmonton, Alberta, Canada | ||||||
David Blackley | 52 | Chief Financial Officer | June 10, 2009 | |||
Sherwood Park, Alberta, Canada | ||||||
Joseph C. Lambert | 48 | Chief Operating Officer | June 1, 2013 | |||
St. Albert, Alberta, Canada | ||||||
Barry W. Palmer | 52 | Vice-President, Heavy Construction and Mining Operations | December 15, 2011 | |||
Morinville, Alberta, Canada | ||||||
Ronald A. McIntosh | 71 | Chairman of the Board | May 20, 2004 | |||
Calgary, Alberta, Canada | ||||||
George R. Brokaw | 45 | Director | June 28, 2006 | |||
New York, NY, United States | ||||||
Carl Giesler Jr. | 41 | Director | April 24, 2012 | |||
Houston, Texas United States | ||||||
William C. Oehmig | 63 | Director | May 20, 2004 | |||
Houston, Texas, United States | ||||||
Allen R. Sello | 73 | Director | January 26, 2006 | |||
West Vancouver, British Columbia, Canada | ||||||
Jay W. Thornton | 56 | Director | June 7, 2012 | |||
Calgary, Alberta, Canada | ||||||
Peter W. Tomsett | 55 | Director | September 19, 2006 | |||
West Vancouver, British Columbia, Canada | ||||||
K. Rick Turner | 55 | Director | November 26, 2003 | |||
Houston, Texas, United States |
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2013 Annual Information Form | 19 |
20 | 2013 Annual Information Form |
• | Audit Fees – KPMG billed us for $878,005, $1,139,900 and $1,130,800 for audit fees during the years ended March 31, 2013, 2012 and 2011, respectively. Audit fees were incurred for the audit of our annual financial statements, the audit of internal controls over financial reporting, related audit work in connection with registration statements and other filings with various regulatory authorities and the quarterly interim reviews of the consolidated financial statements. |
2013 Annual Information Form | 21 |
• | Audit Related Fees – No audit related fees were incurred for the years ended March 31, 2013, 2012 and 2011, respectively. |
• | Tax Fees – No income tax advisory and compliance services fees were incurred for the years ended March 31, 2013, 2012 and 2011, respectively. |
22 | 2013 Annual Information Form |
1. | Our belief that we operate the largest fleet of equipment of any contract resource services provider in the oil sands. |
2. | Our belief that we have demonstrated our ability to successfully apply our oil sands knowledge and technology and put it to work in other resource development projects. |
3. | Our belief that we are positioned to respond to the needs of a wide range of other resource developers. |
4. | Our belief that our excellent safety record, coupled with our significant oil sands knowledge, experience, long-term customer relationships, equipment capacity, scale of operations and broad service offering, differentiate us from our competition and provide significant value to our customers. |
5. | Our belief that we are the largest provider of contract services in the Canadian oil sands. |
6. | Our belief that the combination of our significant size, extensive experience and broad service offerings makes us one of only a few companies capable of taking on long-term, large-scale mining and heavy construction projects in the oil sands. |
7. | Our belief that we have an unmatched, modern fleet of equipment to service our clients' needs. |
8. | Our belief that our combination of onsite and offsite service capabilities increases our efficiency, reduces our costs and increases our equipment utilization, thereby enhancing our competitive edge and profitability. |
9. | Our belief that our combination of onsite and offsite service capabilities increases our efficiency. This, in turn, reduces costs and increases our equipment utilization, thereby enhancing our competitive edge and profitability. |
10. | Our belief that our broad service offering has enabled us to establish ongoing relationships with our customers through a continuous supply of services as we transition from one stage of the project to the next. |
11. | The anticipated total consideration of approximately $227.5 million, adjusted for customary working capital and the assumption of capital leases, realized for the Piling Sale. |
12. | The anticipated closing costs of $12.5 million related to the Piling Sale. |
13. | The anticipation that the Purchaser will achieve a minimum of $45.0 million in Consolidated EBITDA in each year and the piling business will continue to grow under the management of the Purchaser, thus allowing us to realize all of the contingent proceeds. |
14. | The anticipation that the Purchaser will continue to grow the piling business, resulting in the payment of some or all of the contingent proceeds. |
15. | The expectation that the Purchaser will receive all required approvals to complete the Piling Sale and this sale will close during the first half of fiscal 2014; |
16. | Our expectation that we will recognize a gain from the sale of piling related assets, net of a $32.9 million reduction in goodwill, related to the piling business. |
17. | The expectation that the balance of the Term A Facility will be repaid with the net proceeds from the Piling Sale. |
18. | Future planned mining expansions, while not imminent, are expected to potentially increase total production capacity to 500,000 BPD. |
19. | Future planned expansions of Syncrude’s operations include the development of a new mine, MLX, on the existing Base Plant lease by 2010 and the development of the Aurora South mine, which is expected to potentially increase total production capacity to 600,000 BPD by 2025. |
2013 Annual Information Form | 23 |
20. | Our expectation to transition to the second phase of a mine relocation project at Syncrude’s Base Mine as work on the shear key foundation nears completion in late 2013. |
21. | The Joslyn Mine Project is not expected to commence production until 2018. |
22. | The earthworks contract for the Joslyn North Mine Project is expected to be completed in December 2013. |
23. | The Kearl oil sands project has an initial target production capacity of approximately 110,000 BPD with regulatory approval for up to 345,000 BPD of production. |
24. | We do not anticipate a tire shortfall. |
25. | Our belief that we have all material required permits and licenses to conduct our operations and are in substantial compliance with applicable regulatory requirements relating to our operations. |
26. | We do not currently anticipate any material adverse effect on our business or financial position because of future compliance with applicable environmental laws and regulations; and future events such as changes in existing laws and regulations may require us to make additional expenditures which may or may not be material. |
27. | We believe that, taking into account reserves and insurance coverage, none of the litigation or legal proceedings in which we are currently involved or know to be contemplated could reasonably be expected to have a material adverse effect on our business, financial condition or results of operations or could likely be considered important to a reasonable investor in making an investment decision; however, we may become involved in material legal proceedings in the future that could have such a material adverse effect. |
1. | We will be awarded work under our current master services agreements. |
2. | The work on the shear key foundations will near completion late in 2013. |
3. | We will be successful in negotiating an extension to our contract with Shell. |
4. | Our tire contracts, allocations and inventory will meet our tire supply needs. |
24 | 2013 Annual Information Form |
• | There can be no certainty that all conditions precedent to the Piling Sale will be satisfied. Failure to complete the Piling Sale could negatively impact the market price of the Common Shares. |
• | There can be no certainty that any or all of the contingent consideration will be received. Failure to receive the contingent consideration could negatively impact the market price of the Common Shares. |
• | Short-notice customer communication of reduction in their mine development or support service requirements, in which we are participating, could lead to our inability to secure replacement work for our dormant equipment and could subject us to non-recoverable costs. |
• | If we are unable to obtain surety bonds or letters of credit required by some of our customers, our business could be impaired. |
2013 Annual Information Form | 25 |
• | Lump-sum and unit-price contracts expose us to losses when our estimates of project costs are lower than actual costs. |
• | site conditions differing from those assumed in the original bid; |
• | scope modifications during the execution of the project; |
• | the availability and cost of skilled workers; |
• | the availability and proximity of materials; |
• | unfavourable weather conditions hindering productivity; |
• | inability or failure of our customers to perform their contractual commitments; |
• | equipment availability, productivity and timing differences resulting from project construction not starting on time; and |
• | the general coordination of work inherent in all large projects we undertake. |
• | A change in strategy by our customers to reduce outsourcing could adversely affect our results. |
• | Unanticipated short-term shutdowns of our customers' operating facilities may result in temporary cessation or cancellation of projects in which we are participating. |
• | An unfavourable resolution to our significant project claims could result in a revenue write down in future periods. |
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• | Our operations are subject to weather-related and environmental factors that may cause delays in our project work. |
• | Our ability to maintain planned project margins on projects with longer-term contracts with fixed or indexed price escalators may be hampered by the price escalators not accurately reflecting increases in our costs over the life of the contract. |
• | Our customer base is concentrated, and the loss of or a significant reduction in business from a major customer could adversely affect our financial condition |
• | A significant amount of our revenue is generated by providing construction services. |
• | Anticipated new major capital projects in the oil sands may not materialize. |
• | technological advancements improve the economic viability of alternative sources of heavy and light crude oil |
• | changes in the perception of the economic viability of these projects; |
• | shortage of pipeline capacity to transport production to major markets; |
• | lack of sufficient governmental infrastructure funding to support growth; |
2013 Annual Information Form | 27 |
• | delays in issuing environmental permits or refusal to grant such permits; |
• | shortage of skilled workers in this remote region of Canada; |
• | cost overruns on announced projects; and |
• | reductions in available credit for customers to fund capital projects. |
• | Our ability to grow our operations in the future may be hampered by our inability to obtain long lead time equipment and tires, which can be in limited supply during strong economic times. |
• | Reduced availability or increased cost of leasing our equipment fleet could adversely affect our results. |
• | We may not be able to access sufficient funds to finance a growth in our working capital or equipment requirements. |
• | limits our ability to obtain additional financing to fund our working capital, capital expenditures, debt service requirements, potential growth or other purposes; |
• | limits our ability to use operating cash flow in other areas of our business; |
• | limits our ability to post surety bonds required by some of our customers; |
• | places us at a competitive disadvantage compared to competitors with less debt; |
• | increases our vulnerability to, and reduces our flexibility in planning for, adverse changes in economic, industry and competitive conditions; and |
• | increases our vulnerability to increases in interest rates because borrowings under our revolving credit facility and payments under some of our equipment leases are subject to variable interest rates. |
• | Our business is highly competitive and competitors may outbid us on major projects that are awarded based on bid proposals. |
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• | An upturn in the Canadian economy, resulting in an increased demand for our services from the Canadian energy industry, could lead to a new shortage of qualified personnel. |
• | Changes in our customers' perception of oil prices over the long-term could cause our customers to defer, reduce or stop their investment in oil sands capital projects, which would, in turn, reduce our revenue from capital projects from those customers. |
• | Cost overruns by our customers on their projects may cause our customers to terminate future projects or expansions that could adversely affect the amount of work we receive from those customers. |
• | Because most of our customers are Canadian energy companies, a downturn in the Canadian energy industry or a global reduction in the demand for oil and related commodities could result in a decrease in the demand for our services. |
2013 Annual Information Form | 29 |
• | Failure by our customers to obtain required permits and licenses due to complex and stringent environmental protection laws and regulations may affect the demand for our services. |
• | Insufficient pipeline, upgrading and refining capacity could cause our customers to delay, reduce or cancel plans to construct new oil sands projects or expand existing projects, which would, in turn, reduce our revenue from those customers. |
• | Demand for our services may be adversely impacted by regulations affecting the energy industry. |
• | Environmental laws and regulations may expose us to liability arising out of our operations or the operations of our customers. |
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• | Lack of sufficient governmental infrastructure to support the growth in the oil sands region could cause our customers to delay, reduce or cancel their future expansions, which would, in turn, reduce our revenue from those customers. |
• | Significant labour disputes could adversely affect our business. |
• | We may not be able to generate sufficient cash flow to meet our debt service and other obligations due to events beyond our control. |
• | The terms of our debt agreements may restrict our current and future operations, particularly our ability to respond to changes in our business or take certain actions. |
• | incur or guarantee additional debt, issue certain equity securities or enter into sale and leaseback transactions; |
• | pay dividends or distributions on our shares or repurchase our shares, redeem subordinated debt or make other restricted payments; |
• | incur dividend or other payment restrictions affecting certain of our subsidiaries; |
• | issue equity securities of subsidiaries; |
• | make certain investments or acquisitions; |
• | create liens on our assets; |
• | enter into transactions with affiliates; |
• | consolidate, merge or transfer all or substantially all of our assets; and |
• | transfer or sell assets, including shares of our subsidiaries. |
2013 Annual Information Form | 31 |
• | Aboriginal peoples may make claims against our customers or their projects regarding the lands on which customer projects are located. |
• | Our projects expose us to potential professional liability, product liability, warranty or other claims. |
• | We may not be able to achieve the expected benefits from any future acquisitions, which would adversely affect our financial condition and results of operations. |
• | If our share price fluctuates, an investor could lose a significant part of their investment. |
• | changes in projections as to the level of capital spending in the oil sands region; |
• | changes in stock market analyst recommendations or earnings estimates regarding our common shares, other comparable companies or the construction or oil and gas industries generally; |
32 | 2013 Annual Information Form |
• | actual or anticipated fluctuations in our operating results or future prospects; |
• | reaction to our public announcements; |
• | strategic actions taken by us or our competitors, such as acquisitions or restructuring; |
• | new laws or regulations or new interpretations of existing laws or regulations applicable to our business and operations; |
• | changes in accounting standards, policies, guidance, interpretations or principles; |
• | adverse conditions in the financial markets or general economic conditions, including those resulting from war, incidents of terrorism and responses to such events; |
• | sales of common shares by us, members of our management team or our existing shareholders; and |
• | the extent of analysts’ interest in following our company. |
• | Future sales or the perception of future sales of a substantial amount of our common shares may depress the price of our common shares. |
• | We may issue additional common shares, which would dilute the percentage ownership interest of our existing shareholders. |
• | Our principal shareholders are in a position to affect our ongoing operations, corporate transactions and other matters, and their interests may conflict with or differ from the interests of our other common shareholders. |
2013 Annual Information Form | 33 |
• | Fluctuations in the value of the Canadian and US dollars can affect the value of our common shares and future dividends, if any. |
• | We currently do not intend to pay dividends on our common shares, and our ability to pay dividends is limited by the indenture that governs our notes, our subsidiaries’ ability to distribute to us and Canadian law. |
• | We are a holding company and rely on our subsidiaries for our operating funds, and our subsidiaries have no obligation to supply us with any funds |
• | Actions against us and some of our directors and officers may not be enforceable under US federal securities laws. |
• | Unsecured nature of the Series 1 Debentures |
34 | 2013 Annual Information Form |
• | Unsecured nature of obligations under guarantees |
• | Lack of liquidity |
• | Credit risk |
• | Restrictions on our ability to incur debt |
• | Change of control |
• | Credit ratings may not reflect all risks of an investment in debt securities and may change |
2013 Annual Information Form | 35 |
• | Interest rates |
• | Exchange rates |
36 | 2013 Annual Information Form |
2013 Annual Information Form | 37 |
1. | PURPOSE |
2. | AUTHORITY |
(a) | conduct or authorize investigations into any matter within its scope of responsibility; |
(b) | retain and compensate independent counsel, accountants and others to advise the Committee or assist it with respect to its responsibilities; |
(c) | pre-approve all audit services and permitted non-audit services performed by the Company’s external auditors and negotiate the compensation to be paid for such services; |
(d) | resolve any disagreements between management and the Company’s external auditors regarding financial reporting; |
(e) | seek any information it requires from employees of the Company, all of whom will be directed by management to co-operate with the Committee’s requests; |
(f) | meet and communicate directly with the Company’s officers, external auditors, internal auditor, outside counsel and consultants, all as the Committee may deem necessary; |
(g) | direct the Company’s internal auditor to carry out such activities as the Committee may require; |
(h) | access all documents of the Company that the Committee may deem relevant to it in carrying out its responsibilities; and |
(i) | undertake any other activity that may be reasonably necessary in order for the Committee to carry out its responsibilities as set out in this Charter. |
3. | COMPOSITION |
3.1. | The Board will appoint annually, from among its members, the Committee and its Chair. The Committee will consist of at least three and not more than six members. |
3.2. | Each member of the Committee must be “independent” as that term is defined under the requirements of applicable securities laws and the standards of any stock exchange on which the Company’s securities are listed. |
3.3. | Each member of the Committee must be “financially literate” in that he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to that which can reasonably be expected to be raised by the Company’s financial statements. |
3.4. | At least one member of the Committee will be an “audit committee financial expert” who will possess the attributes outlined in Appendix A. |
3.5. | No director currently serving on the Committee will serve on the audit committees of more than two additional public companies. |
4 | MEETINGS |
4.1. | The Committee will meet at least once each fiscal quarter, with authority to convene additional meetings as circumstances require. A meeting may be convened by the Chair, any member of the |
38 | 2013 Annual Information Form |
4.2. | A majority of the members of the Committee will constitute a quorum. Members of the Committee may participate in a meeting through any means which permits all parties to communicate adequately with each other. Any members not physically present but participating in the meeting through such means is deemed to be present at the meeting. A quorum, once established, is maintained even if members of the Committee leave before the meeting concludes. |
4.3. | In the event of a tie vote on a resolution, the issue will be forwarded to the full board for a vote. |
4.4. | A resolution signed (including signatures communicated by fax or electronic mail) by all members of the Committee entitled to vote on that resolution is as valid as if it had been passed at a meeting of the Committee. |
4.5. | The Committee may invite such officers, directors and employees of the Company as it may see fit from time to time to attend at meetings and provide information pertinent to any matter being discussed. Any director of the Company is entitled to attend Committee meetings, however, only members of the Committee are eligible to vote or establish a quorum. The external auditors will be entitled to receive notice of every meeting of the Committee and to attend and be heard at the same. The Committee will periodically meet in camera alone and separately with each of the external auditors, the internal auditor and management. |
4.6. | The Chair will ensure that meeting agendas are prepared and provided in advance to members of the Committee, along with appropriate briefing materials. The Committee will keep and approve minutes of each meeting which record the decisions reached by the Committee. Once approved, the minutes will be distributed to Committee members with copies provided to the Board, the chief executive officer of the Company, the chief financial officer of the Company, the external auditors and the internal auditor. |
5. | RESPONSIBILITIES |
5.1. | Financial Reporting |
(a) | Review with management and the external auditors any issues of concern with respect to financial reporting, including proposed changes in the selection or application of major accounting policies and the reasons for such changes, any complex or unusual transactions, any issues depending on management’s judgment, proposed changes to or adoption of disclosure practices, and the effects of any recent or proposed regulatory or accounting initiatives or pronouncements, all to the extent that the foregoing may be material to financial reporting. |
(b) | Review with management and the external auditors their qualitative judgments about the appropriateness, not just the acceptability, of accounting principles and accounting disclosure practices used or proposed to be used, particularly the degree of aggressiveness or conservatism of the Company’s accounting principles and underlying estimates. |
(c) | In reviewing with management and the external auditors the results of their year-end audit and quarterly reviews, and management's responses, review any problems or difficulties experienced by the external auditors in performing the audit and reviews, including any restrictions or limitations imposed by management and resolve any disagreements between management and the external auditors regarding these matters. |
(d) | Review with management, the external auditors and legal counsel, as necessary, any litigation, claim or other contingency, including tax assessments, that could have a material effect on the financial position or operating results of the Company, and the manner in which these matters have been disclosed or reflected in the financial statements. |
(e) | Review with management and the external auditors the annual audited financial statements and the related management discussion and analysis (“MD&A”) and press release; make recommendations to the Board with respect to approval thereof before being released to the |
2013 Annual Information Form | 39 |
(f) | Approve the quarterly unaudited financial statements and the related MD&A and press release prior to their release to the public. |
(g) | Review with management and the external auditors any other matter required to be communicated to the Committee by the external auditors under applicable generally accepted auditing standards, applicable law and listing standards. |
5.2. | Internal Controls |
(a) | Review and consider the adequacy and effectiveness of the Company’s internal controls over accounting and financial reporting, including information technology security and control, and any material non-compliance with such controls. |
(b) | Understand the scope of internal audits and the external auditors’ review of internal control over financial reporting and obtain reports on significant findings and recommendations, together with management’s responses. |
(c) | Review management’s internal control report and the related attestation by the external auditors and discuss the same with management, the internal auditor and external auditors. |
(d) | Obtain from the chief financial officer and chief executive officer confirmation that each is prepared to sign all required annual and quarterly certificates under applicable securities law in relation to internal controls over accounting and financial reporting. Review any disclosures made by the chief financial officer and chief executive officer regarding significant deficiencies or material weaknesses in the design or operation of internal controls or any fraud that involves management or other employees who have a significant role in the Company’s internal controls. |
(e) | Consider any special audit steps to be taken in light of any material internal control deficiencies. |
5.3. | Disclosure Controls |
(a) | Review and consider the adequacy and effectiveness of the Company’s disclosure controls and procedures, including any material non-compliance with such controls and procedures. |
(b) | Review and approve the disclosure policy of the Company and periodically assess the adequacy of such policy for completeness and accuracy. |
(c) | Ensure that the Company has satisfactory procedures in place for the review of the Company’s public disclosure of financial information extracted or derived from the Company’s financial statements. |
(d) | Monitor the activities of the Company’s Disclosure Committee. |
(e) | Review and approve, and in some instances recommend approval to the Board, material financial disclosures prior to their public release or filing with securities regulators that are contained within the following documents: |
(i) | any prospectus or offering document; |
(ii) | annual information forms; |
(iii) | all material financial information required by securities regulations (e.g., Forms 6-K, 20-F and F-4) including all exhibits thereto (including the certifications required of the Company’s principal executive officer and principal financial officer); |
(iv) | any correspondence with securities regulators or government financial agencies; and |
(v) | news or press releases containing audited or unaudited financial information, including the type and presentation of information and in particular any pro-forma or non-GAAP information. |
40 | 2013 Annual Information Form |
(f) | Review and approve, and in some instances recommend approval to the Board, material financial disclosures prior to their public release or filing with securities regulators that relate to related-party transactions or off balance sheet structures. |
5.4. | Internal Audit |
(a) | Review with management, the internal auditor and the external auditors the charter, activities, budget, staffing and organizational structure of the internal audit function. |
(b) | Review management’s proposed appointment, termination or replacement of the internal auditor. |
(c) | Review and approve the annual internal audit plan and scope of work and ensure that the internal audit plan is coordinated with the activities of the external auditors. |
(d) | Review all internal audit reports and management’s responses. |
(e) | Ensure that the internal auditor has direct and open communication with the Committee and that the internal auditor meets at least twice annually with the Committee without the presence of management to discuss any matters that the Committee or the internal auditor believe should be discussed privately, such as problems or difficulties encountered in the course of internal audit work, any unjustified restrictions or limitations imposed on the internal auditor or any other disagreements with management. |
(f) | Review the effectiveness of the internal audit function on an annual basis, including a review of reporting relationships, resources, qualifications of internal audit staff, the internal auditor’s independence from management, the internal auditor’s working relationship with the external auditors and compliance by the internal auditor with the relevant codes and standards of The Institute of Internal Auditors. The internal auditor currently reports functionally to the Chair of the Audit Committee and administratively to the Chief Financial Officer. |
5.5. | External Audit |
(a) | Advise the board with respect to the selection, appointment, retention, compensation and replacement of the external auditors. In the event of a change of external auditors, review all issues and provide documentation to the Board related to the change, including the information to be included in the Notice of Change of Auditors and the planned steps for an orderly transition period. |
(b) | Oversee the work and evaluate the qualifications and performance of the external auditors, in the course of which evaluation the Committee will: |
(i) | annually obtain and review a report by the external auditors describing: (A) the external auditors’ internal quality control procedures; (B) any material issues raised by the most recent internal quality control review, or peer review, of the external auditors or by any inquiry or investigation by government or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the external auditors and any steps taken to deal with such issues; and (C) all relationships between the external auditors and the Company (in order to assess the auditors’ independence); |
(ii) | annually review and evaluate senior members of the external audit team, including their expertise and qualifications and take into consideration the opinions of management and the internal auditor in that regard; and |
(iii) | report all of its findings and conclusions with respect to the external auditors to the Board. |
(c) | Annually review and confirm with management and the external auditors the independence of the external auditors, which review will include but will not be limited to: |
(i) | ensuring receipt at least annually from the external auditors of a formal written statement delineating all relationships between the external auditors and the Company, including non-audit services provided to the Company, and outlining the extent to which the compensation of the audit partners of the external auditors is based upon selling non-audit services; |
2013 Annual Information Form | 41 |
(ii) | considering and discussing with the external auditors any disclosed relationships or services, including non-audit services, that may impact the objectivity and independence of the external auditors; |
(iii) | enquiring into and determining the appropriate resolution of any conflict of interest in respect of the external auditors; |
(iv) | reviewing the timing and process for implementing the rotation of the lead audit partner, the reviewing partner and other partners providing audit services to the Company; |
(v) | considering whether there should be a regular rotation of the audit firm itself; |
(vi) | reviewing and approving the Company’s hiring policies regarding the hiring of partners, employees and former partners and employees of the Company’s existing and former external auditors and ensuring a “cooling off” period of at least one year before any such persons can become employees of the Company in a financial oversight role. |
(d) | Ensure that the external auditors report directly to the Committee and that they are ultimately accountable to the Committee and to the Board as representatives of the shareholders of the Company. |
(e) | Review and approve the annual audit plan prior to the annual audit of the Company’s financial statements being undertaken by the external auditors, including review of the proposed scope and approach of the external auditors and the coordination of effort with internal audit. |
(f) | Ensure that the external auditors have direct and open communication with the Committee and that the external auditors meet regularly with the Committee without the presence of management to discuss any matters that the Committee or the external auditors believe should be discussed privately. |
(g) | Review and approve the basis and amount of the external auditors’ fees with respect to the annual audit and the quarterly reviews. |
(h) | Review and pre-approve all non-audit services to be provided to the Company or its subsidiaries by the external auditors and the engagement fees in respect to such services, provided that the Chair of the Committee, on behalf of the Committee, is authorized to pre-approve any non-audit services and the related engagement fees up to an amount of $20,000 per engagement. At the next Committee meeting, the Chair will report to the Committee any such pre-approval given. |
5.6. | Financial Risk Management |
(a) | Review the Company’s major financial risk exposures and approve the Company’s policies to manage such financial risk. |
(b) | Monitor management of hedging, debt and credit, make recommendations to the Board respecting management of such risks and review the Company’s compliance with the same. |
(c) | Monitor management’s communication and implementation of the Anti-Fraud Policy and review compliance with such Policy by, among other things, receiving reports from management on: |
(i) | any investigations of fraudulent activity; |
(ii) | monitoring activities in relation to fraud risks and controls; and |
(iii) | assessments of fraud risk. |
(d) | Periodically review and approve the adequacy and appropriateness of the Anti-Fraud Policy and management’s implementation of the same. |
5.7. | Code of Conduct and Ethics Reporting |
(a) | Review the policies and procedures established by management for: |
(i) | the receipt, retention and treatment of complaints received by the Company regarding financial reporting, accounting, internal accounting controls or auditing matters; and |
(ii) | the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. |
42 | 2013 Annual Information Form |
(b) | Monitor management’s communication and implementation of the Code of Conduct and Ethics Policy and review compliance with such Policy by, among other things: |
(i) | reviewing on a timely basis serious violations of the Code of Conduct and Ethics Policy; and |
(ii) | reviewing on a summary basis at least quarterly all reported violations of the Code of Conduct and Ethics Policy. |
(c) | Periodically review the adequacy and appropriateness of the Code of Conduct and Ethics Policy and management’s implementation of the same and make recommendations to the Board in that regard. |
5.8. | Legal and Regulatory Compliance |
(a) | Review the effectiveness of the system for monitoring compliance with laws and regulations (other than those related to health, environment and safety matters) and the results of management’s investigation and follow-up (including disciplinary action) of any instances of non-compliance. Review the findings of any examination by regulatory authorities and any external auditors’ observations relating to such matters. |
(b) | Obtain regular updates from management and legal counsel regarding compliance matters, including compliance with applicable financial, tax or securities regulations and the accuracy and timeliness of filings with regulators. |
(c) | Review any litigation, claim or other contingent liability, including any tax reassessment that could have a material effect on the financial statements. |
(d) | Monitor compliance by the Company with all payments and remittances required to be made in accordance with applicable law, where the failure to make such payments could render the directors of the Company personally liable. |
5.9. | Other Responsibilities |
(a) | Regularly report to the Board about Committee activities, issues and related recommendations, including such matters as the Board may from time to time refer or delegate to the Committee. |
(b) | Annually assess the adequacy of this Charter, submit such evaluation to the Governance Committee and recommend any proposed changes to the Governance Committee to bring forward to the Board for approval. |
(c) | Evaluate the performance and effectiveness of the Committee on an annual basis. |
(d) | Provide an open avenue of communication between internal audit, the external auditors and the Board. |
(e) | Perform any other activities consistent with the Committee’s mandate, the Company’s governing laws and the regulations of relevant stock exchanges as he Committee or the Board deems necessary or appropriate. |
6. | GENERAL |
6.1. | While the Committee will have the responsibilities and powers set forth in this Charter, it will not be the responsibility of the Committee to determine whether the Company’s financial statements are complete, accurate or prepared in accordance with generally accepted accounting principles, to manage financial risks or to conduct audits. These are the responsibilities of management and the external auditors in accordance with their respective roles. |
6.2. | The Committee will take reasonable steps to ensure that management establishes and maintains the controls, procedures and processes that comply with all appropriate laws, regulations or policies of the Company. It is not the responsibility of the Committee to conduct investigations or to ensure compliance with laws, regulations or Company policies. |
2013 Annual Information Form | 43 |
Prepared By: | Approved By: | Date of Approval and Issue: | ||
/s/ Jordan Slator | /s/ Allen Sello | December 1, 2011 | ||
Jordan Slator | Allen Sello, Chair | |||
General Counsel | Audit Committee | |||
and Secretary | ||||
1. | An understanding of generally accepted accounting principles and financial statements; |
2. | The ability to assess the general application of generally accepted accounting principles in connection with the accounting for estimates, accruals and reserves; |
3. | Experience in preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company's financial statements, or experience in actively supervising one or more persons engaged in such activities; |
4. | An understanding of internal control over financial reporting; and |
5. | An understanding of audit committee functions. |
a) | education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions; |
b) | experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions; |
c) | experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or |
d) | other relevant experience. |
44 | 2013 Annual Information Form |
![]() | KPMG LLP | Telephone | (780) 429-7300 | |||
Chartered Accountants | Fax | (780) 429-7379 | ||||
10125 – 102 Street | Internet | www.kpmg.ca | ||||
Edmonton AB T5J 3V8 | ||||||
Canada |
KPMG LLP, is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. KPMG Canada provides services to KPMG LLP. KPMG Confidential |
2 | 2013 Consolidated Financial Statements |
KPMG Confidential |
2013 Consolidated Financial Statements | 3 |
![]() | KPMG LLP | Telephone | (780) 429-7300 | |||
Chartered Accountants | Fax | (780) 429-7379 | ||||
10125 – 102 Street | Internet | www.kpmg.ca | ||||
Edmonton AB T5J 3V8 | ||||||
Canada |
KPMG LLP, is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. KPMG Canada provides services to KPMG LLP. KPMG Confidential |
4 | 2013 Consolidated Financial Statements |
KPMG Confidential |
2013 Consolidated Financial Statements | 5 |
2013 | 2012 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 598 | $ | 1,400 | ||||
Accounts receivable, net (note 5 and 17(d)) | 100,469 | 214,129 | ||||||
Unbilled revenue (note 6) | 56,183 | 86,859 | ||||||
Inventories (note 7) | 5,751 | 11,855 | ||||||
Prepaid expenses and deposits (note 8) | 2,498 | 6,315 | ||||||
Investment in and advances to unconsolidated joint venture (note 9) | — | 1,574 | ||||||
Assets held for sale (note 10, 23(b) and 17(a)) | 157,464 | 1,841 | ||||||
Deferred tax assets (note 11) | 33,694 | 2,991 | ||||||
356,657 | 326,964 | |||||||
Property, plant and equipment, net (note 12) | 274,246 | 312,775 | ||||||
Other assets (note 13(a)) | 14,362 | 19,902 | ||||||
Goodwill (note 14) | — | 32,901 | ||||||
Deferred tax assets (note 11) | 14,673 | 57,451 | ||||||
Total Assets | $ | 659,938 | $ | 749,993 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 73,727 | $ | 171,130 | ||||
Accrued liabilities (note 15) | 32,482 | 36,795 | ||||||
Billings in excess of costs incurred and estimated earnings on uncompleted contracts (note 6) | 7,085 | 7,514 | ||||||
Current portion of long term debt (note 16(a)) | 21,409 | 14,402 | ||||||
Current portion of derivative financial instruments (note 17(a)) | 4,261 | 3,220 | ||||||
Liabilities held for sale (note 23(b)) | 38,846 | — | ||||||
Deferred tax liabilities (note 11) | 13,392 | 21,512 | ||||||
191,202 | 254,573 | |||||||
Long term debt (note 16(a)) | 290,655 | 300,066 | ||||||
Derivative financial instruments (note 17(a)) | 2,180 | 5,926 | ||||||
Other long term obligations (note 18(a)) | 6,746 | 8,860 | ||||||
Deferred tax liabilities (note 11) | 41,211 | 52,788 | ||||||
531,994 | 622,213 | |||||||
Shareholders' equity | ||||||||
Common shares (authorized – unlimited number of voting common shares; issued and outstanding – March 31, 2013 - 36,251,006 (March 31, 2012 - 36,251,006) (note 19(a)) | 304,908 | 304,908 | ||||||
Additional paid-in capital | 10,307 | 8,711 | ||||||
Deficit | (187,283 | ) | (185,820 | ) | ||||
Accumulated other comprehensive income (loss) | 12 | (19 | ) | |||||
127,944 | 127,780 | |||||||
Total liabilities and shareholders' equity | $ | 659,938 | $ | 749,993 | ||||
Commitments (note 20) | ||||||||
Contingencies (note 21) |
/s/ Ronald A. McIntosh | /s/ Allen R. Sello | |||
Ronald A. Mclntosh, Director | Allen R. Sello, Director |
6 | 2013 Consolidated Financial Statements |
2013 | 2012 | 2011 | ||||||||||
Revenue | $ | 544,609 | $ | 670,720 | $ | 667,037 | ||||||
Project costs | 244,444 | 310,463 | 284,241 | |||||||||
Equipment costs | 193,843 | 220,738 | 234,933 | |||||||||
Equipment operating lease expense | 34,723 | 62,870 | 68,349 | |||||||||
Depreciation | 37,722 | 44,642 | 35,062 | |||||||||
Gross profit | 33,877 | 32,007 | 44,452 | |||||||||
General and administrative expenses | 44,076 | 41,333 | 48,725 | |||||||||
Loss on disposal of property, plant and equipment | 2,628 | 1,741 | 1,948 | |||||||||
Loss (gain) on disposal of assets held for sale (note 10) | 98 | (466 | ) | 825 | ||||||||
Amortization of intangible assets (note 13(b)) | 3,694 | 4,287 | 2,150 | |||||||||
Equity in (earnings) loss of unconsolidated joint venture (note 9) | (596 | ) | (86 | ) | 2,720 | |||||||
Operating (loss) income before the undernoted | (16,023 | ) | (14,802 | ) | (11,916 | ) | ||||||
Interest expense (note 22) | 23,743 | 22,146 | 22,533 | |||||||||
Foreign exchange loss (gain) | 84 | 52 | (1,659 | ) | ||||||||
Unrealized gain on derivative financial instruments (note 17(a)) | (2,705 | ) | (2,382 | ) | (2,305 | ) | ||||||
Loss on debt extinguishment (note 16(d)) | — | — | 4,346 | |||||||||
Loss from continuing operations before income taxes | (37,145 | ) | (34,618 | ) | (34,831 | ) | ||||||
Income tax (note 11): | ||||||||||||
Current (benefit) expense | (2,209 | ) | (677 | ) | 2,892 | |||||||
Deferred (benefit) | (6,627 | ) | (8,558 | ) | (7,997 | ) | ||||||
Net loss from continuing operations | (28,309 | ) | (25,383 | ) | (29,726 | ) | ||||||
Income (loss) from discontinued operations, net of tax (note 23) | 26,846 | 4,221 | (4,924 | ) | ||||||||
Net loss | (1,463 | ) | (21,162 | ) | (34,650 | ) | ||||||
Other comprehensive income (loss) | ||||||||||||
Unrealized foreign currency translation gain (loss) | 31 | 40 | (59 | ) | ||||||||
Comprehensive loss | (1,432 | ) | (21,122 | ) | (34,709 | ) | ||||||
Per share information (note 19(b)) | ||||||||||||
Net loss from continuing operations - basic and diluted | $ | (0.78 | ) | $ | (0.70 | ) | $ | (0.82 | ) | |||
Net income (loss) from discontinued operations - basic and diluted | $ | 0.74 | $ | 0.12 | $ | (0.14 | ) | |||||
Net loss - basic and diluted | $ | (0.04 | ) | $ | (0.58 | ) | $ | (0.96 | ) |
2013 Consolidated Financial Statements | 7 |
Common shares | Additional paid-in capital | Deficit | Accumulated other comprehensive (loss) income | Total | ||||||||||||||||
Balance at March 31, 2010 | $ | 303,505 | $ | 7,439 | $ | (129,886 | ) | $ | — | $ | 181,058 | |||||||||
Net loss | — | — | (34,650 | ) | — | (34,650 | ) | |||||||||||||
Unrealized foreign currency translation loss | — | — | — | (59 | ) | (59 | ) | |||||||||||||
Share option plan | — | 1,455 | — | — | 1,455 | |||||||||||||||
Deferred performance share unit plan | — | (44 | ) | — | — | (44 | ) | |||||||||||||
Stock award plan | — | 780 | — | — | 780 | |||||||||||||||
Exercised stock options | 1,349 | (386 | ) | — | — | 963 | ||||||||||||||
Senior executive stock option plan | — | (2,237 | ) | — | — | (2,237 | ) | |||||||||||||
Balance at March 31, 2011 | $ | 304,854 | $ | 7,007 | $ | (164,536 | ) | (59 | ) | $ | 147,266 | |||||||||
Net loss | — | — | (21,162 | ) | — | (21,162 | ) | |||||||||||||
Unrealized foreign currency translation gain | — | — | — | 40 | 40 | |||||||||||||||
Share option plan | — | 1,373 | — | — | 1,373 | |||||||||||||||
Reclassified to restricted share unit liability | — | (121 | ) | — | — | (121 | ) | |||||||||||||
Stock award plan | — | 256 | — | — | 256 | |||||||||||||||
Exercised stock options | 54 | (19 | ) | — | — | 35 | ||||||||||||||
Repurchase of shares to settle stock award plan | — | (700 | ) | (122 | ) | — | (822 | ) | ||||||||||||
Senior executive stock option plan | — | 915 | — | — | 915 | |||||||||||||||
Balance at March 31, 2012 | $ | 304,908 | $ | 8,711 | $ | (185,820 | ) | $ | (19 | ) | $ | 127,780 | ||||||||
Net loss | — | — | (1,463 | ) | — | (1,463 | ) | |||||||||||||
Unrealized foreign currency translation gain | — | — | — | 31 | 31 | |||||||||||||||
Share option plan | — | 1,333 | — | — | 1,333 | |||||||||||||||
Stock award plan | — | 14 | — | — | 14 | |||||||||||||||
Repurchase of shares to settle stock award plan | — | (148 | ) | — | — | (148 | ) | |||||||||||||
Senior executive stock option plan | — | 397 | — | — | 397 | |||||||||||||||
Balance at March 31, 2013 | $ | 304,908 | $ | 10,307 | $ | (187,283 | ) | $ | 12 | $ | 127,944 |
8 | 2013 Consolidated Financial Statements |
2013 | 2012 | 2011 | ||||||||||
Cash (used in) provided by: | ||||||||||||
Operating activities: | ||||||||||||
Net loss from continuing operations | $ | (28,309 | ) | $ | (25,383 | ) | $ | (29,726 | ) | |||
Adjustments to reconcile to net cash from operating activities: | ||||||||||||
Depreciation | 37,722 | 44,642 | 35,062 | |||||||||
Equity in (earnings) loss of unconsolidated joint venture (note 9) | (596 | ) | (86 | ) | 2,720 | |||||||
Amortization of intangible assets (note 13(b)) | 3,694 | 4,287 | 2,150 | |||||||||
Amortization of deferred lease inducements (note 18(b)) | (107 | ) | (107 | ) | (107 | ) | ||||||
Amortization of deferred financing costs (note 13(c)) | 1,607 | 1,591 | 1,609 | |||||||||
Loss on disposal of property, plant and equipment | 2,628 | 1,741 | 1,948 | |||||||||
Loss (gain) on disposal of assets held for sale (note 10) | 98 | (466 | ) | 825 | ||||||||
Unrealized foreign exchange gain on 8 3/4% senior notes | — | — | (732 | ) | ||||||||
Unrealized gain on derivative financial instruments (note 17(a)) | (2,705 | ) | (2,382 | ) | (2,305 | ) | ||||||
Loss on debt extinguishment (note 16(d)) | — | — | 4,346 | |||||||||
Stock-based compensation expense (recovery) (note 24(a)) | 3,619 | (2,263 | ) | 8,156 | ||||||||
Cash settlement of restricted share unit plan (note 24(e)) | (1,677 | ) | (318 | ) | — | |||||||
Cash settlement of directors' deferred share unit plan (note 24(f)) | (175 | ) | — | — | ||||||||
Settlement of stock award plan (note 24(g)) | (148 | ) | (822 | ) | — | |||||||
Accretion of asset retirement obligation (note 18(c)) | 43 | 39 | 35 | |||||||||
Deferred income tax (benefit) (note 11) | (6,627 | ) | (8,558 | ) | (7,997 | ) | ||||||
Net changes in non-cash working capital (note 25(b)) | 43,862 | 45,183 | (28,162 | ) | ||||||||
52,929 | 57,098 | (12,178 | ) | |||||||||
Investing activities: | ||||||||||||
Purchase of property, plant and equipment | (32,639 | ) | (49,465 | ) | (32,596 | ) | ||||||
Additions to intangible assets (note 13(b)) | (5,081 | ) | (3,537 | ) | (4,748 | ) | ||||||
Investment in and advances to unconsolidated joint venture (note 9) | — | — | (1,291 | ) | ||||||||
Proceeds on the wind up of unconsolidated joint venture (note 9) | 2,170 | — | — | |||||||||
Proceeds on disposal of property, plant and equipment | 9,301 | 176 | 499 | |||||||||
Proceeds on disposal of assets held for sale | 2,014 | 920 | 826 | |||||||||
(24,235 | ) | (51,906 | ) | (37,310 | ) | |||||||
Financing activities: | ||||||||||||
Repayment of credit facilities | (390,921 | ) | (196,203 | ) | (85,000 | ) | ||||||
Increase in credit facilities | 357,396 | 203,000 | 128,524 | |||||||||
Financing costs (note 13(c)) | (439 | ) | (60 | ) | (7,920 | ) | ||||||
Redemption of 8 3/4% senior notes (note 16(d)) | — | — | (202,410 | ) | ||||||||
Issuance of Series 1 Debentures (note 16(e)) | — | — | 225,000 | |||||||||
Settlement of swap liabilities (note 17(a)) | — | — | (91,125 | ) | ||||||||
Proceeds from stock options exercised (note 24(b)) | — | 35 | 963 | |||||||||
Repayment of capital lease obligations | (10,845 | ) | (4,870 | ) | (5,127 | ) | ||||||
(44,809 | ) | 1,902 | (37,095 | ) | ||||||||
(Decrease) increase in cash and cash equivalents from continuing operations | (16,115 | ) | 7,094 | (86,583 | ) | |||||||
Cash provided by (used in) discontinued operations (note 23) | ||||||||||||
Operating activities | 38,191 | 6,175 | 11,681 | |||||||||
Investing activities | (22,061 | ) | (12,294 | ) | (27,322 | ) | ||||||
Financing activities | (848 | ) | (337 | ) | — | |||||||
15,282 | (6,456 | ) | (15,641 | ) | ||||||||
(Decrease) increase in cash and cash equivalents | (833 | ) | 638 | (102,224 | ) | |||||||
Effect of exchange rate on changes in cash and cash equivalents | 31 | 40 | (59 | ) | ||||||||
Cash and cash equivalents, beginning of year | 1,400 | 722 | 103,005 | |||||||||
Cash and cash equivalents, end of year | $ | 598 | $ | 1,400 | $ | 722 |
2013 Consolidated Financial Statements | 9 |
• North American Caisson Ltd. | • North American Site Development Ltd. | |
• North American Engineering Inc. | • North American Tailings and Environmental Ltd. | |
• North American Enterprises Ltd. | • DF Investments Limited | |
• North American Foundation Engineering Inc. | • Drillco Foundation Co. Ltd. | |
• North American Maintenance Ltd. | • Cyntech Canada Inc. | |
• North American Mining Inc. | • Cyntech Services Inc. | |
• North American Pile Driving Inc. | • Cyntech U.S. Inc. | |
• North American Services Inc. |
• | the completeness and accuracy of the original bid; |
• | costs associated with added scope changes; |
• | extended overhead due to owner, weather and other delays; |
10 | 2013 Consolidated Financial Statements |
• | subcontractor performance issues; |
• | changes in economic indices used for the determination of escalation or de-escalation for contractual rates on long-term contracts; |
• | changes in productivity expectations; |
• | site conditions that differ from those assumed in the original bid; |
• | contract incentive and penalty provisions; |
• | the availability and skill level of workers in the geographic location of the project; and |
• | a change in the availability and proximity of equipment and materials. |
• | a bona fide addition to contract value; and |
• | revenues can be reliably estimated. |
• | the contract or other evidence provides a legal basis for the unapproved change order or claim, or a legal opinion is obtained providing a reasonable basis to support the unapproved change order or claim; |
• | additional costs incurred were caused by unforeseen circumstances and are not the result of deficiencies in the Company’s performance; |
• | costs associated with the unapproved change order or claim are identifiable and reasonable in view of work performed; and |
2013 Consolidated Financial Statements | 11 |
• | evidence supporting the unapproved change order or claim is objective and verifiable. |
12 | 2013 Consolidated Financial Statements |
Assets | Basis | Rate | ||
Heavy equipment | Straight-line | Operating hours | ||
Major component parts in use | Straight-line | Operating hours | ||
Other equipment | Straight-line | 5 – 10 years | ||
Licensed motor vehicles | Declining balance | 30% | ||
Office and computer equipment | Straight-line | 4 years | ||
Buildings | Straight-line | 10 years | ||
Leasehold improvements | Straight-line | Over shorter of estimated useful life and lease term |
• | Customer relationships and backlog, which are being amortized over the remaining lives of the related contracts and relationships; |
• | trade names, which are being amortized on a straight-line basis over their estimated useful lives of between five and ten years; |
• | non-competition agreements, which are being amortized on a straight-line basis between the three and five-year terms of the respective agreements; |
• | capitalized computer software and development costs, which are being amortized on a straight-line basis over a maximum period of four years; and |
• | patents, which are being amortized on a straight-line basis over estimated useful lives of up to six years. |
2013 Consolidated Financial Statements | 13 |
• | management, having the authority to approve the action, commits to a plan to sell the assets; |
• | the assets are available for immediate sale in their present condition; |
• | an active program to locate buyers and other actions to sell the assets have been initiated; |
• | the sale of the assets is probable and their transfer is expected to qualify for recognition as a completed sale within one year; |
• | the assets are being actively marketed at reasonable prices in relation to their fair value; and |
• | it is unlikely that significant changes will be made to the plan to sell the assets or that the plan will be withdrawn. |
14 | 2013 Consolidated Financial Statements |
2013 Consolidated Financial Statements | 15 |
16 | 2013 Consolidated Financial Statements |
2013 Consolidated Financial Statements | 17 |
March 31, 2013 | March 31, 2012 | |||||||
Accounts receivable – trade | $ | 66,823 | $ | 180,917 | ||||
Accounts receivable – holdbacks | 26,628 | 32,134 | ||||||
Income and other taxes receivable | 3,375 | — | ||||||
Accounts receivable – other | 3,643 | 1,288 | ||||||
Allowance for doubtful accounts (note 17(d)) | — | (210 | ) | |||||
$ | 100,469 | $ | 214,129 |
March 31, 2013 | March 31, 2012 | |||||||
Costs incurred and estimated earnings on uncompleted contracts | $ | 512,339 | $ | 587,220 | ||||
Less billings to date | (463,241 | ) | (509,511 | ) | ||||
$ | 49,098 | $ | 77,709 |
March 31, 2013 | March 31, 2012 | |||||||
Unbilled revenue | $ | 56,183 | $ | 86,859 | ||||
Billings in excess of costs incurred and estimated earnings on uncompleted contracts | (7,085 | ) | (7,514 | ) | ||||
$ | 49,098 | $ | 79,345 |
March 31, 2013 | March 31, 2012 | |||||||
Spare tires | $ | 5,751 | $ | 6,620 | ||||
Job materials | — | 2,188 | ||||||
Manufacturing raw materials | — | 1,669 | ||||||
Finished goods | — | 1,378 | ||||||
$ | 5,751 | $ | 11,855 |
18 | 2013 Consolidated Financial Statements |
Current: | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Prepaid insurance and property taxes | $ | 793 | $ | 1,257 | ||||
Prepaid lease payments | 1,408 | 4,624 | ||||||
Prepaid interest | 297 | 434 | ||||||
$ | 2,498 | $ | 6,315 | |||||
Long term: | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Prepaid lease payments (note 13(a)) | $ | 764 | $ | 895 |
March 31, 2013 | March 31, 2012 | |||||||||||
Current assets | $ | — | $ | 6,556 | ||||||||
Current liabilities | — | 10,716 | ||||||||||
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Gross revenues | $ | 1,192 | $ | 1,922 | $ | 12,196 | ||||||
Gross (profit) loss | (1,192 | ) | (1,922 | ) | 2,483 | |||||||
Net (income) loss | (1,192 | ) | (172 | ) | 5,440 | |||||||
Equity in (earnings) loss of unconsolidated joint venture | $ | (596 | ) | $ | (86 | ) | $ | 2,720 |
2013 Consolidated Financial Statements | 19 |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Loss from continuing operations before income taxes | $ | (37,145 | ) | $ | (34,618 | ) | $ | (34,831 | ) | |||
Tax rate | 25.12 | % | 26.25 | % | 27.75 | % | ||||||
Expected benefit | $ | (9,331 | ) | $ | (9,087 | ) | $ | (9,666 | ) | |||
Increase (decrease) related to: | ||||||||||||
Impact of enacted future statutory income tax rates | 9 | 151 | 134 | |||||||||
Income tax adjustments and reassessments | 82 | 170 | 742 | |||||||||
Valuation allowance | — | (91 | ) | 962 | ||||||||
Stock-based compensation | 344 | (393 | ) | 1,443 | ||||||||
Non deductible portion of capital losses | — | — | 932 | |||||||||
Other | 60 | 15 | 348 | |||||||||
Income tax benefit | $ | (8,836 | ) | $ | (9,235 | ) | $ | (5,105 | ) |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Current income tax (benefit) expense | $ | (2,209 | ) | $ | (677 | ) | $ | 2,892 | ||||
Deferred income tax (benefit) | (6,627 | ) | (8,558 | ) | (7,997 | ) | ||||||
$ | (8,836 | ) | $ | (9,235 | ) | $ | (5,105 | ) |
March 31, 2013 | March 31, 2012 | |||||||
Deferred tax assets: | ||||||||
Non-capital losses carried forward | $ | 43,307 | $ | 51,614 | ||||
Derivative financial instruments | 1,618 | 2,296 | ||||||
Billings in excess of costs on uncompleted contracts | 1,781 | 1,887 | ||||||
Capital lease obligations | 10,508 | 2,689 | ||||||
Deferred lease inducements | 111 | 134 | ||||||
Stock-based compensation | 1,508 | 1,402 | ||||||
Other | 539 | 420 | ||||||
$ | 59,372 | $ | 60,442 |
March 31, 2013 | March 31, 2012 | |||||||
Deferred tax liabilities: | ||||||||
Unbilled revenue and uncertified revenue included in accounts receivable | $ | 7,965 | $ | 13,039 | ||||
Assets held for sale | 684 | 462 | ||||||
Accounts receivable – holdbacks | 6,787 | 8,071 | ||||||
Property, plant and equipment | 49,864 | 52,323 | ||||||
Deferred financing costs | 300 | 224 | ||||||
Intangible assets | 8 | 8 | ||||||
Other | — | 173 | ||||||
$ | 65,608 | $ | 74,300 | |||||
Net deferred income tax liability | $ | (6,236 | ) | $ | (13,858 | ) |
20 | 2013 Consolidated Financial Statements |
March 31, 2013 | March 31, 2012 | |||||||
Current asset | $ | 33,694 | $ | 2,991 | ||||
Long term asset | 14,673 | 57,451 | ||||||
Current liability | (13,392 | ) | (21,512 | ) | ||||
Long term liability | (41,211 | ) | (52,788 | ) | ||||
$ | (6,236 | ) | $ | (13,858 | ) |
March 31, 2013 | ||||
2027 | $ | 158 | ||
2028 | 128 | |||
2029 | 13,676 | |||
2030 | 360 | |||
2031 | 41,074 | |||
2032 | 25,357 | |||
2033 | 91,619 | |||
$ | 172,372 |
March 31, 2013 | Cost | Accumulated Deprecation | Net Book Value | |||||||||
Heavy equipment | $ | 259,711 | $ | 96,046 | $ | 163,665 | ||||||
Major component parts in use | 58,763 | 23,512 | 35,251 | |||||||||
Other equipment | 25,193 | 9,970 | 15,223 | |||||||||
Licensed motor vehicles | 28,862 | 22,996 | 5,866 | |||||||||
Office and computer equipment | 13,931 | 11,488 | 2,443 | |||||||||
Buildings | 4,015 | 2,943 | 1,072 | |||||||||
Leasehold improvements | 9,512 | 5,682 | 3,830 | |||||||||
Assets under capital lease | 59,160 | 12,264 | 46,896 | |||||||||
$ | 459,147 | $ | 184,901 | $ | 274,246 |
March 31, 2012 | Cost | Accumulated Deprecation | Net Book Value | |||||||||
Heavy equipment | $ | 347,699 | $ | 124,982 | $ | 222,717 | ||||||
Major component parts in use | 74,444 | 28,741 | 45,703 | |||||||||
Other equipment | 35,736 | 17,017 | 18,719 | |||||||||
Licensed motor vehicles | 27,120 | 19,775 | 7,345 | |||||||||
Office and computer equipment | 13,438 | 8,977 | 4,461 | |||||||||
Buildings | 4,355 | 3,235 | 1,120 | |||||||||
Land | 281 | — | 281 | |||||||||
Leasehold improvements | 6,620 | 2,232 | 4,388 | |||||||||
Assets under capital lease | 16,579 | 8,538 | 8,041 | |||||||||
$ | 526,272 | $ | 213,497 | $ | 312,775 |
2013 Consolidated Financial Statements | 21 |
March 31, 2013 | March 31, 2012 | |||||||
Prepaid lease payments (note 8) | $ | 764 | $ | 895 | ||||
Intangible assets (note 13(b)) | 8,625 | 12,866 | ||||||
Deferred financing costs (note 13(c)) | 4,973 | 6,141 | ||||||
$ | 14,362 | $ | 19,902 |
March 31, 2013 | Cost | Accumulated Amortization | Net Book Value | |||||||||
Other intangible assets | $ | 350 | $ | 328 | $ | 22 | ||||||
Internal-use software | 21,914 | 13,311 | 8,603 | |||||||||
$ | 22,264 | $ | 13,639 | $ | 8,625 |
March 31, 2012 | Cost | Accumulated Amortization | Net Book Value | |||||||||
Customer relationships and backlog | $ | 4,442 | $ | 1,445 | $ | 2,997 | ||||||
Other intangible assets | 2,364 | 1,204 | 1,160 | |||||||||
Internal-use software | 16,825 | 9,644 | 7,181 | |||||||||
Patents | 2,017 | 489 | 1,528 | |||||||||
$ | 25,648 | $ | 12,782 | $ | 12,866 |
For the year ending March 31, | ||||
2014 | $ | 3,430 | ||
2015 | 2,612 | |||
2016 | 1,801 | |||
2017 | 782 | |||
2018 and thereafter | — | |||
$ | 8,625 |
22 | 2013 Consolidated Financial Statements |
March 31, 2013 | Cost | Accumulated Amortization | Net Book Value | |||||||||
Term and Revolving Facilities | $ | 5,861 | $ | 5,384 | $ | 477 | ||||||
Series 1 Debentures | 6,886 | 2,390 | 4,496 | |||||||||
$ | 12,747 | $ | 7,774 | $ | 4,973 |
March 31, 2012 | Cost | Accumulated Amortization | Net Book Value | |||||||||
Term and Revolving Facilities | $ | 5,422 | $ | 4,652 | $ | 770 | ||||||
Series 1 Debentures | 6,886 | 1,515 | 5,371 | |||||||||
$ | 12,308 | $ | 6,167 | $ | 6,141 |
March 31, 2013 | March 31, 2012 | |||||||
Accrued interest payable | $ | 9,863 | $ | 9,866 | ||||
Payroll liabilities | 19,040 | 15,228 | ||||||
Liabilities related to equipment leases | 687 | 4,238 | ||||||
Income and other taxes payable | 2,892 | 7,463 | ||||||
$ | 32,482 | $ | 36,795 |
2013 Consolidated Financial Statements | 23 |
Current: | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Credit facilities (note 16(b)) | $ | 9,392 | $ | 10,000 | ||||
Capital lease obligations (note 16(c)) | 12,017 | 4,402 | ||||||
$ | 21,409 | $ | 14,402 | |||||
Long term: | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Credit facilities (note 16(b)) | $ | 35,850 | $ | 68,767 | ||||
Capital lease obligations (note 16(c)) | 29,805 | 6,299 | ||||||
Series 1 Debentures (note 16(e)) | 225,000 | 225,000 | ||||||
$ | 290,655 | $ | 300,066 |
March 31, 2013 | March 31, 2012 | |||||||
Term A Facility | $ | 17,202 | $ | 20,950 | ||||
Term B Facility | 5,644 | 37,496 | ||||||
Total Term Facilities | $ | 22,846 | $ | 58,446 | ||||
Revolving Facility | 22,396 | 20,321 | ||||||
Total credit facilities | $ | 45,242 | $ | 78,767 | ||||
Less: current portion of Term Facilities | (9,392 | ) | (10,000 | ) | ||||
$ | 35,850 | $ | 68,767 |
24 | 2013 Consolidated Financial Statements |
2014 | $ | 14,442 | ||
2015 | 13,490 | |||
2016 | 12,156 | |||
2017 | 6,887 | |||
2018 | — | |||
Subtotal: | $ | 46,975 | ||
Less: amount representing interest | (5,153 | ) | ||
Present value of minimum lease payments | $ | 41,822 | ||
Less: current portion | (12,017 | ) | ||
Long term portion | $ | 29,805 |
2013 Consolidated Financial Statements | 25 |
March 31, 2013 | March 31, 2012 | |||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||
Capital lease obligations (i) | $ | 41,822 | $ | 37,369 | $ | 10,701 | $ | 10,657 | ||||||||
Series 1 Debentures (ii) | 225,000 | 220,079 | 225,000 | 203,624 |
(i) | The fair values of amounts due under capital leases are based on management estimates which are determined by discounting cash flows required under the instruments at the interest rates currently estimated to be available for instruments with similar terms. |
(ii) | The fair value of the Series 1 Debentures is based upon the expected discounted cash flows and the period end market price of similar financial instruments. |
March 31, 2013 | Carrying Amount | |||
Embedded price escalation features in certain long term supplier contracts | $ | 6,441 | ||
Less: current portion | (4,261 | ) | ||
$ | 2,180 |
March 31, 2012 | Carrying Amount | |||
Embedded price escalation features in certain long term supplier contracts | $ | 9,146 | ||
Less: current portion | (3,220 | ) | ||
$ | 5,926 |
26 | 2013 Consolidated Financial Statements |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Unrealized loss on cross-currency and interest rate swaps | $ | — | $ | — | $ | 2,111 | ||||||
Unrealized gain on embedded price escalation features in a long term customer construction contract | — | (5,877 | ) | (604 | ) | |||||||
Unrealized (gain) loss on embedded price escalation features in certain long term supplier contracts | (2,705 | ) | 3,495 | (3,812 | ) | |||||||
$ | (2,705 | ) | $ | (2,382 | ) | $ | (2,305 | ) |
March 31, 2013 | March 31, 2012 | |||||||||||||||
Carrying Amount | Change in Fair Value | Carrying Amount | Change in Fair Value | |||||||||||||
Assets held for sale | $ | 157,464 | $ | (3,346 | ) | $ | 1,841 | $ | (8,748 | ) |
2013 Consolidated Financial Statements | 27 |
Year ended March 31, | 2013 | 2012 | 2011 | ||||||
Customer A | 25 | % | 15 | % | 30 | % | |||
Customer B | 23 | % | 23 | % | 10 | % | |||
Customer C | 17 | % | 6 | % | — | ||||
Customer D | 8 | % | 10 | % | 13 | % | |||
Customer E | 6 | % | 31 | % | 38 | % |
March 31, 2013 | March 31, 2012 | |||||
Customer A | 23 | % | 4 | % | ||
Customer B | 20 | % | 31 | % | ||
Customer C | 11 | % | 10 | % | ||
Customer D | 11 | % | 4 | % | ||
Customer E | 8 | % | 11 | % |
March 31, 2013 | March 31, 2012 | |||||||
Trade accounts receivables | $ | 93,451 | $ | 213,051 | ||||
Other receivables | 7,018 | 1,078 | ||||||
Total accounts receivable | $ | 100,469 | $ | 214,129 | ||||
Unbilled revenue | $ | 56,183 | $ | 86,859 |
28 | 2013 Consolidated Financial Statements |
March 31, 2013 | March 31, 2012 | |||||||
Not past due | $ | 76,646 | $ | 166,362 | ||||
Past due 1-30 days | 14,203 | 27,617 | ||||||
Past due 31-60 days | 957 | 8,476 | ||||||
More than 61 days | 1,645 | 10,596 | ||||||
Total | $ | 93,451 | $ | 213,051 |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Opening balance | $ | 210 | $ | 30 | $ | 1,691 | ||||||
Payments received on provided balances | (1 | ) | — | (682 | ) | |||||||
Current year allowance | 365 | 180 | 518 | |||||||||
Write-offs | (574 | ) | — | (1,497 | ) | |||||||
Ending balance | $ | — | $ | 210 | $ | 30 |
March 31, 2013 | March 31, 2012 | |||||||
Liabilities related to equipment leases | $ | 104 | $ | 3,169 | ||||
Deferred lease inducements (note 18(b)) | 440 | 547 | ||||||
Asset retirement obligation (note 18(c)) | 477 | 434 | ||||||
Senior executive stock option plan (note 24(c)) | 925 | 1,322 | ||||||
Restricted share unit plan (note 24(e)) | 2,768 | 3,170 | ||||||
Directors' deferred stock unit plan (note 24(f)) | 3,106 | 2,284 | ||||||
$ | 7,820 | $ | 10,926 | |||||
Less current portion of: | ||||||||
Restricted share unit plan (note 24(e)) | (719 | ) | (2,066 | ) | ||||
Directors' deferred share unit plan (note 24(f)) | (355 | ) | — | |||||
$ | 6,746 | $ | 8,860 |
March 31, 2013 | March 31, 2012 | |||||||
Balance, beginning of year | $ | 547 | $ | 654 | ||||
Amortization of deferred lease inducements | (107 | ) | (107 | ) | ||||
Balance, end of year | $ | 440 | $ | 547 |
2013 Consolidated Financial Statements | 29 |
March 31, 2013 | March 31, 2012 | |||||||
Balance, beginning of year | $ | 434 | $ | 395 | ||||
Accretion expense | 43 | 39 | ||||||
Balance, end of year | $ | 477 | $ | 434 |
Number of Shares | Amount | ||||||
Voting common shares | |||||||
Issued and outstanding at March 31, 2010 | 36,049,276 | $ | 303,505 | ||||
Issued upon exercise of stock options | 193,250 | 963 | |||||
Transferred from additional paid-in capital on exercise of stock options | — | 386 | |||||
Issued and outstanding at March 31, 2011 | 36,242,526 | $ | 304,854 | ||||
Issued upon exercise of stock options | 8,480 | 35 | |||||
Transferred from additional paid-in capital on exercise of stock options | — | 19 | |||||
Issued and outstanding at March 31, 2012 and 2013 | 36,251,006 | $ | 304,908 |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Net loss from continuing operations | $ | (28,309 | ) | $ | (25,383 | ) | $ | (29,726 | ) | |||
Net income (loss) from discontinued operations | 26,846 | 4,221 | (4,924 | ) | ||||||||
Net loss | $ | (1,463 | ) | $ | (21,162 | ) | $ | (34,650 | ) | |||
Weighted average number of common shares (no dilutive effect) | 36,251,006 | 36,249,082 | 36,119,356 | |||||||||
Basic per share information (no dilutive effect) | ||||||||||||
Net loss from continuing operations | $ | (0.78 | ) | $ | (0.70 | ) | $ | (0.82 | ) | |||
Net income (loss) from discontinued operations | 0.74 | 0.12 | (0.14 | ) | ||||||||
Net loss | $ | (0.04 | ) | $ | (0.58 | ) | $ | (0.96 | ) |
30 | 2013 Consolidated Financial Statements |
For the year ending March 31, | |||
2014 | $ | 25,729 | |
2015 | 16,928 | ||
2016 | 4,720 | ||
2017 | 2,601 | ||
2018 and thereafter | 12,081 | ||
$ | 62,059 |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Interest on 8 3/4% senior notes and swaps | $ | — | $ | — | $ | 1,238 | ||||||
Interest on capital lease obligations | 1,925 | 425 | 643 | |||||||||
Amortization of deferred financing costs | 1,607 | 1,591 | 1,609 | |||||||||
Interest on credit facilities | 4,414 | 4,547 | 2,992 | |||||||||
Interest on Series 1 Debentures | 15,230 | 15,255 | 15,089 | |||||||||
Interest on long term debt | $ | 23,176 | $ | 21,818 | $ | 21,571 | ||||||
Other interest | 567 | 328 | 962 | |||||||||
$ | 23,743 | $ | 22,146 | $ | 22,533 |
Inventory | $ | 1,254 | |
Property, plant and equipment, gross | 17,491 | ||
Accumulated depreciation | (5,459 | ) | |
Pipeline related assets | $ | 13,286 |
2013 Consolidated Financial Statements | 31 |
Year ended March 31, | 2013 | 2012 | 2011 | ||||||||
Revenue | $ | 35,901 | $ | 150,504 | $ | 85,452 | |||||
Project costs | 36,090 | 164,278 | 87,703 | ||||||||
Depreciation | 196 | 1,045 | 550 | ||||||||
Gross loss | $ | (385 | ) | $ | (14,819 | ) | $ | (2,801 | ) | ||
General and administrative expenses | 1,246 | 1,371 | 1,449 | ||||||||
Gain on disposal of property, plant and equipment | (375 | ) | — | — | |||||||
Recovery of previously expensed tools, supplies and equipment parts | (1,095 | ) | — | — | |||||||
Gain on sale of inventory | (714 | ) | — | — | |||||||
Operating Income (loss) | $ | 553 | $ | (16,190 | ) | $ | (4,250 | ) | |||
Interest expense | 700 | 1,050 | 1,050 | ||||||||
Loss before income taxes | $ | (147 | ) | $ | (17,240 | ) | $ | (5,300 | ) | ||
Deferred income tax expense (benefit) | 173 | (4,282 | ) | (1,389 | ) | ||||||
Net loss from discontinued operations | $ | (320 | ) | $ | (12,958 | ) | $ | (3,911 | ) |
Year ended March 31, | 2013 | 2012 | 2011 | ||||||||
Operating activities | $ | 928 | $ | (16,195 | ) | $ | (4,750 | ) | |||
Investing activities | 11,986 | (4,110 | ) | (1,124 | ) | ||||||
$ | 12,914 | $ | (20,305 | ) | $ | (5,874 | ) |
2013 Consolidated Financial Statements | 32 |
Accounts receivable, net | $ | 44,297 | |
Unbilled revenue | 9,324 | ||
Inventories | 7,754 | ||
Prepaid expenses | 181 | ||
Intangible assets | 4,220 | ||
Property, plant and equipment, gross | 83,359 | ||
Accumulated depreciation | (29,566 | ) | |
Goodwill | 32,901 | ||
Deferred tax assets | 2,270 | ||
Assets held for sale | $ | 154,740 |
Accounts payable | $ | 17,048 | |
Accrued liabilities | 23 | ||
Billings in excess | 3,115 | ||
Capital lease obligation | 5,927 | ||
Deferred tax liabilities | 12,733 | ||
Liabilities held for sale | $ | 38,846 |
Year ended March 31, | 2013 | 2012 | 2011 | ||||||||
Revenue | $ | 236,459 | $ | 185,321 | $ | 105,559 | |||||
Project costs | 172,593 | 136,080 | 84,175 | ||||||||
Equipment operating lease expense | 2,315 | 2,315 | 1,071 | ||||||||
Depreciation | 3,592 | 3,213 | 3,828 | ||||||||
Gross profit | $ | 57,959 | $ | 43,713 | $ | 16,485 | |||||
General and administrative expenses | 12,451 | 11,696 | 9,654 | ||||||||
Amortization of intangible assets | 1,408 | 1,415 | 1,390 | ||||||||
Operating income | $ | 44,100 | $ | 30,602 | $ | 5,441 | |||||
Interest expense | 7,639 | 7,129 | 6,408 | ||||||||
Income (loss) before income taxes | $ | 36,461 | $ | 23,473 | $ | (967 | ) | ||||
Deferred income tax expense | 9,295 | 6,294 | 46 | ||||||||
Net income (loss) from discontinued operations | $ | 27,166 | $ | 17,179 | $ | (1,013 | ) |
Year ended March 31, | 2013 | 2012 | 2011 | ||||||||
Operating activities | $ | 37,263 | $ | 22,370 | $ | 16,431 | |||||
Investing activities | (34,047 | ) | (8,184 | ) | (26,198 | ) | |||||
Financing activities | (848 | ) | (337 | ) | — | ||||||
$ | 2,368 | $ | 13,849 | $ | (9,767 | ) |
2013 Consolidated Financial Statements | 33 |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Share option plan (note 24(b)) | $ | 1,333 | $ | 1,373 | $ | 1,455 | ||||||
Senior executive stock option plan (note 24(c)) | — | (2,878 | ) | 2,878 | ||||||||
Deferred performance share unit plan (note 24(d)) | — | — | (44 | ) | ||||||||
Restricted share unit plan (note 24(e)) | 1,275 | 733 | 1,603 | |||||||||
Directors' deferred stock unit plan (note 24(f)) | 997 | (1,747 | ) | 1,484 | ||||||||
Stock award plan (note 24(g)) | 14 | 256 | 780 | |||||||||
$ | 3,619 | $ | (2,263 | ) | $ | 8,156 |
Number of options | Weighted average exercise price $ per share | |||||
Outstanding at March 31, 2010 | 2,250,804 | 7.84 | ||||
Granted | 260,000 | 9.77 | ||||
Exercised(i) | (193,250 | ) | 4.98 | |||
Forfeited | (120,080 | ) | 10.30 | |||
Modified(ii) | (550,000 | ) | 5.00 | |||
Outstanding at March 31, 2011 | 1,647,474 | 9.25 | ||||
Granted | 287,700 | 6.56 | ||||
Exercised(i) | (8,480 | ) | 4.15 | |||
Forfeited | (91,900 | ) | 10.42 | |||
Outstanding at March 31, 2012 | 1,834,794 | 8.79 | ||||
Granted | 1,517,400 | 2.83 | ||||
Forfeited | (366,472 | ) | 9.10 | |||
Outstanding at March 31, 2013 | 2,985,722 | 5.72 |
(i) | All stock options exercised resulted in new common shares being issued (note 19(a)); |
(ii) | 550,000 stock options were modified as senior executive stock options on September 22, 2010 (note 24(c)). |
34 | 2013 Consolidated Financial Statements |
Options outstanding | Options exercisable | ||||||||||||||||||
Exercise price | Number | Weighted average remaining life | Weighted average exercise price | Number | Weighted average remaining life | Weighted average exercise price | |||||||||||||
$2.75 | 705,600 | 9.5 years | $ | 2.75 | — | — | — | ||||||||||||
$2.79 | 750,000 | 9.2 years | $ | 2.79 | — | — | — | ||||||||||||
$3.69 | 115,840 | 6.4 years | $ | 3.69 | 91,700 | 6.6 years | $ | 3.69 | |||||||||||
$4.90 | 40,000 | 9 years | $ | 4.90 | — | — | — | ||||||||||||
$5.00 | 403,982 | 1.8 years | $ | 5.00 | 403,982 | 1.8 years | $ | 5.00 | |||||||||||
$6.56 | 188,260 | 8.1 years | $ | 6.56 | 42,140 | 7.4 years | $ | 6.56 | |||||||||||
$8.28 | 80,000 | 6.2 years | $ | 8.28 | 48,000 | 6.2 years | $ | 8.28 | |||||||||||
$8.58 | 60,000 | 7.5 years | $ | 8.58 | 24,000 | 7.5 years | $ | 8.58 | |||||||||||
$9.33 | 125,560 | 6.5 years | $ | 9.33 | 79,200 | 6.6 years | $ | 9.33 | |||||||||||
$10.13 | 128,780 | 7.4 years | $ | 10.13 | 55,640 | 7.3 years | $ | 10.13 | |||||||||||
$13.21 | 75,000 | 4.8 years | $ | 13.21 | 75,000 | 4.8 years | $ | 13.21 | |||||||||||
$13.50 | 194,940 | 4.6 years | $ | 13.50 | 194,940 | 4.6 years | $ | 13.50 | |||||||||||
$15.37 | 40,000 | 5 years | $ | 15.37 | 40,000 | 5 years | $ | 15.37 | |||||||||||
$16.46 | 50,000 | 5 years | $ | 16.46 | 40,000 | 5 years | $ | 16.46 | |||||||||||
$16.75 | 27,760 | 3.5 years | $ | 16.75 | 27,760 | 3.5 years | $ | 16.75 | |||||||||||
2,985,722 | 7.1 years | $ | 5.72 | 1,122,362 | 4.2 years | $ | 8.82 |
Year ended March 31, | 2013 | 2012 | 2011 | ||||||
Number of options granted | 1,517,400 | 287,700 | 260,000 | ||||||
Weighted average fair value per option granted ($) | 1.88 | 4.38 | 6.79 | ||||||
Weighted average assumptions: | |||||||||
Dividend yield | Nil | % | Nil | % | Nil | % | |||
Expected volatility | 74.52 | % | 75.22 | % | 78.59 | % | |||
Risk-free interest rate | 1.02 | % | 1.32 | % | 2.65 | % | |||
Expected life (years) | 6.4 | 6.3 | 6.1 |
2013 Consolidated Financial Statements | 35 |
Year ended March 31, | 2013 | 2012 | 2011 | ||||||
Number of senior executive stock options | 550,000 | 550,000 | 550,000 | ||||||
Weighted average fair value per option granted ($) | 1.68 | 2.40 | 9.30 | ||||||
Weighted average assumptions: | |||||||||
Dividend yield | Nil | % | Nil | % | Nil | % | |||
Expected volatility | 71.74 | % | 74.99 | % | 76.74 | % | |||
Risk-free interest rate | 0.26 | % | 0.54 | % | 1.77 | % | |||
Expected life (years) | 2.1 | 3.1 | 6.1 |
Number of units | |||
Outstanding at March 31, 2010 | 507,295 | ||
Forfeited | (74,776 | ) | |
Outstanding at March 31, 2011 | 432,519 | ||
Expired | (41,117 | ) | |
Converted to RSUs (note 24(e)) | (391,402 | ) | |
Outstanding at March 31, 2012 and 2013 | — |
36 | 2013 Consolidated Financial Statements |
Number of units | |||
Outstanding at March 31, 2010 | 468,815 | ||
Forfeited | (86,339 | ) | |
Outstanding at March 31, 2011 | 382,476 | ||
Granted | 695,086 | ||
Settled | (27,850 | ) | |
Forfeited | (102,022 | ) | |
Converted from DPSUs (note 24(d)) | 227,875 | ||
Outstanding at March 31, 2012 | 1,175,565 | ||
Granted | 625,405 | ||
Settled | (345,679 | ) | |
Forfeited | (364,446 | ) | |
Outstanding at March 31, 2013 | 1,090,845 |
Number of units | |||
Outstanding at March 31, 2010 | 263,266 | ||
Issued | 73,752 | ||
Outstanding at March 31, 2011 | 337,018 | ||
Issued | 128,248 | ||
Outstanding at March 31, 2012 | 465,266 | ||
Issued | 266,091 | ||
Redeemed | (63,413 | ) | |
Outstanding at March 31, 2013 | 667,944 |
2013 Consolidated Financial Statements | 37 |
• | 50,000 shares on May 8, 2011; |
• | 50,000 shares on November 8, 2011; and |
• | 50,000 shares on May 8, 2012. |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Cash paid during the year for: | ||||||||||||
Interest, including realized interest on interest rate swap | $ | 29,783 | $ | 27,521 | $ | 33,559 | ||||||
Income taxes | 4,833 | 1,415 | 4,149 | |||||||||
Cash received during the year for: | ||||||||||||
Interest | 10 | 1 | 1,168 | |||||||||
Income taxes | 518 | 5,347 | 2,260 |
38 | 2013 Consolidated Financial Statements |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Non-cash transactions: | ||||||||||||
Acquisition of property, plant and equipment for continuing operations by means of capital leases | $ | 42,229 | $ | 6,614 | $ | 427 | ||||||
Acquisition of property, plant and equipment for discontinued operations by means of capital leases | 6,512 | 601 | — | |||||||||
Additions to assets held for sale | (2,995 | ) | (10,322 | ) | (1,675 | ) | ||||||
Additions to assets held for sale from discontinued piling operations | (152,470 | ) | — | — | ||||||||
Additions to liabilities held for sale from discontinued piling operations | 26,113 | — | — | |||||||||
Net increase (decrease) in accounts payable related to purchase of property, plant and equipment | 4,294 | 1,380 | (3,879 | ) | ||||||||
Net decrease in current portion of equipment lease liabilities included in accrued liabilities related to the purchase of property, plant and equipment | (1,574 | ) | — | — | ||||||||
Net decrease in long term portion of equipment lease liabilities related to the purchase of property, plant and equipment | (1,712 | ) | — | — | ||||||||
Decrease in property, plant and equipment resulting from reclassification to inventory | (2,219 | ) | — | — | ||||||||
(Decrease) increase in accrued liabilities related to current portion of RSU liability | (1,347 | ) | 2,066 | — | ||||||||
Increase in accrued liabilities related to current portion of DDSU liability | 355 | — | — | |||||||||
Change in non-cash working capital related to piling discontinued operations, excluded from non-cash working capital for continuing operations: | ||||||||||||
Accounts receivable | 1,849 | 17,773 | 4,277 | |||||||||
Unbilled revenue | 236 | 3,082 | 883 | |||||||||
Inventories | 3,900 | 1,026 | 1,731 | |||||||||
Prepaid expenses | (47 | ) | 51 | 5,502 | ||||||||
Accounts payable | 27,857 | (14,135 | ) | (23,444 | ) | |||||||
Accrued liabilities | 103 | 252 | (132 | ) | ||||||||
Billings in excess of costs and earnings | 1,207 | (2,318 | ) | (997 | ) | |||||||
Non-cash transactions related to the buyout of contract-related assets during the year ended March 31, 2012: | ||||||||||||
Disposition of property, plant and equipment related to the buyout of contract-related assets | — | (27,063 | ) | — | ||||||||
Disposition of intangible assets related to the buyout of contract-related assets | — | (1,119 | ) | — | ||||||||
Increase in accounts receivable related to the buyout of contract-related assets | — | 66,055 | — | |||||||||
Decrease in unbilled revenue related to the buyout of contract-related assets | — | (16,457 | ) | — | ||||||||
Decrease in inventory related to the buyout of contract-related assets | — | (8,483 | ) | — | ||||||||
Increase in accounts payable related to the buyout of contract-related assets | — | 12,933 | — |
2013 Consolidated Financial Statements | 39 |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Operating activities: | ||||||||||||
Accounts receivable, net | $ | 71,212 | $ | (1,819 | ) | $ | (5,257 | ) | ||||
Unbilled revenue | 21,588 | 2,705 | (17,354 | ) | ||||||||
Inventories | 3,215 | (11,577 | ) | (930 | ) | |||||||
Prepaid expenses and deposits | 3,720 | 3,464 | 5,810 | |||||||||
Accounts payable | (56,792 | ) | 56,629 | (2,062 | ) | |||||||
Accrued liabilities | (1,621 | ) | 2,167 | (5,566 | ) | |||||||
Long term portion of liabilities related to equipment leases | (1,353 | ) | (9,578 | ) | (2,196 | ) | ||||||
Billings in excess of costs incurred and estimated earnings on uncompleted contracts | 3,893 | 3,192 | (607 | ) | ||||||||
$ | 43,862 | $ | 45,183 | $ | (28,162 | ) |
Year ended March 31, | 2013 | 2012 | 2011 | |||||||||
Claims revenue recognized | $ | 20,994 | $ | 32,612 | $ | 2,521 | ||||||
Claims revenue uncollected (classified as unbilled revenue) | 18,426 | 22,393 | 1,742 |
40 | 2013 Consolidated Financial Statements |
1. | Strengthen our balance sheet and liquidity; |
2. | Lower our cost structure; |
3. | Improve the risk profile of our business; and |
4. | Regain profitability. |
• | The investigation of a possible sale of our piling related assets and liabilities, with the proceeds targeted to significantly strengthen our balance sheet and liquidity. |
• | The restructuring of our debt to strengthen our balance sheet. |
• | The sale of under-utilized heavy equipment assets and the reduction of our capital spend, to lower our cost structure. |
• | The restructuring of our General and Administrative ("G&A") and operations support organizations to lower our cost structure. |
• | The sale of our pipeline assets, thus eliminating business risk in a non-core business. |
• | A maximum of $30.0 million cash paid no later than September 30, 2014, with the full amount being paid in the event that the business earns annualized Consolidated EBITDA (“First Year Consolidated EBITDA”) of $45.0 million or more in the period from closing to June 30, 2014. The amount payable will be $2 for every $1 that First Year Consolidated EBITDA is greater than $30.0 million (with the maximum payment of $30.0 million where First Year Consolidated EBITDA is $45.0 million or greater). |
• | A maximum of $27.5 million cash paid no later than September 30, 2015, with the full amount being paid in the event that the business earns Consolidated EBITDA (“Second Year Consolidated EBITDA”) of $45.0 million or more in the period from July 1, 2014 to June 30, 2015. The amount payable will be $1.833 for every $1 that Second Year Consolidated EBITDA is greater than $30.0 million (with the maximum payment of $27.5 million where Second Year Consolidated EBITDA is $45.0 million or greater). |
a. | no later than September 30, 2014, the Purchaser will pay the vendor an amount equal to $0.375 for every $1 by which First Year Consolidated EBITDA exceeds $45.0 million; |
b. | no later than September 30, 2015, the Purchaser will pay the vendor an amount equal to $0.375 for every $1 by which the aggregate of First Year Consolidated EBITDA and Second Year Consolidated EBITDA exceeds $90.0 million, less any monies paid to the vendor under (a) above; and |
c. | no later than September 30, 2016, the Purchaser will pay the vendor an amount equal to $0.5 for every $1 by which the aggregate of First Year Consolidated EBITDA, Second Year Consolidated EBITDA and Consolidated EBITDA for the period from July 1, 2015 to June 30, 2016 exceeds $135.0 million, less any monies paid to the vendor under (a) and (b) above. |
• | property, plant and equipment; |
• | intangible assets; |
• | working capital (excluding the outstanding accounts receivable and unbilled revenue on a certain customer contract); and |
• | capital and operating lease commitments. |
• | Increasing the capital lease debt limit to $75.0 million from $30.0 million. |
• | Temporary relief to the Consolidated EBITDA related covenants: |
◦ | Senior Debt Ratio (Senior Debt to trailing 12-month Consolidated EBITDA) temporarily increased from the original “must not exceed 2.0 times” to “must not exceed 2.25 times (for the twelve months ended September 30, 2012)”. |
◦ | Interest Coverage Ratio (trailing 12-month Consolidated EBITDA to trailing 12-month Cash Interest Expense) temporarily reduced from the original “must be greater than 2.50 times” to “must be greater than 1.50 times for the twelve months ended September 30 and December 31, 2012, respectively” and to “must be greater than 2.25 times for the twelve months ended March 31, 2013”. |
• | Application of net asset sale proceeds to the permanent reduction and repayment of the two Term Facilities in the following order and manner: |
◦ | 100% of the net proceeds applied to the Term B Facility until such time as it is repaid in full; and then |
◦ | 50% of the net proceeds applied to the Term A Facility until such time as it is repaid in full. |
▪ | Upon closing of the Piling Sale, a portion of the net proceeds will be used to repay the outstanding balance of the Term A Facility which, at March 31, 2013, was $17.2 million. |
• | Permanent reduction and repayment of the full balance of the Term B Facility by April 30, 2013. |
◦ | As at March 31, 2013, we have applied $10.2 million of net proceeds from asset sales and $15.4 million of net proceeds from the sale of pipeline related assets to the repayment of the Term B Facility, leaving $5.6 million outstanding on the Term B Facility. |
◦ | We completed the payment of the remainder of the Term B facility in April 2013 in compliance with our Bank covenants. This was funded by $2.0 million in asset sales and through cash generated from working capital. |
◦ | Extension of the maturity date of the credit agreement by one year to October 31, 2014, provided the Term B Facility was repaid by April 30, 2013. |
• | Extension of the maturity date of the credit agreement by one year to October 31, 2014, provided the Term B Facility was repaid by April 30, 2013. |
• | Net annual capital expenditures limited to an amount equal to annual Consolidated EBITDA less the sum of: |
◦ | Scheduled annual repayments of debt; |
◦ | Consolidated annual cash interest expense; and |
◦ | Current annual taxes for the fiscal year. |
Balance for the period ended | |||||||||||||||
(dollars in thousands) | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | ||||||||||
Debentures and term loans | |||||||||||||||
Series 1 Debentures | 225,000 | 225,000 | 225,000 | 225,000 | 225,000 | ||||||||||
Term A Facility | 17,202 | 18,139 | 19,076 | 20,013 | 20,950 | ||||||||||
Term B Facility | 5,644 | 9,107 | 25,670 | 35,933 | 37,496 | ||||||||||
Total debentures and term loans | $ | 247,846 | $ | 252,246 | $ | 269,746 | $ | 280,946 | $ | 283,446 | |||||
Equipment / building financing | |||||||||||||||
Operating lease commitments | 61,589 | 63,884 | 75,831 | 112,653 | 127,569 | ||||||||||
Capital leases (including interest) | 46,975 | 49,547 | 44,453 | 9,948 | 10,701 | ||||||||||
Total equipment / building financing | $ | 108,564 | $ | 113,431 | $ | 120,284 | $ | 122,601 | $ | 138,270 |
• | net proceeds of $10.1 million; |
◦ | Proceeds collected of $23.6 million offset by a $13.5 million buyout of operating leases; |
• | a reduction in the net book value of equipment of $4.5 million; |
• | a recovery of $4.1 million of operating lease expense; |
• | the recording of a gain on sale of assets of $1.5 million; and |
• | an expected annual reduction in our operating lease expense of approximately $5.6 million.t |
• | Hiring a new President and Chief Executive Office, Martin Ferron; |
• | Re-aligning our G&A, Asset Management and Operations Support departments with a focus on supporting our new business model, thus eliminating over 60 salaried positions; |
• | Closing our corporate office in Calgary, Alberta and relocating our senior executive team to our Acheson, Alberta office; |
• | Reducing outsourced equipment maintenance activities and increasing the utilization of our Acheson, Alberta maintenance facility for the more cost effective self-performance of major equipment overhauls; |
• | Reducing our equipment maintenance hourly labour costs through a restructuring of our maintenance shift schedule and overtime strategy; and |
• | Reducing our site related overhead and camp accommodation costs in Fort McMurray. |
• | The elimination of two Vice Presidents from our Executive team; |
• | Further re-alignment of our G&A, Asset Management and Operating Support departments with the size and needs of the new business structure, thus reducing our staffing levels by over 30 salaried positions; and |
• | The reduction of our Edmonton, Alberta office space. |
Year ended March 31, | |||||||||||||||||||
(dollars in thousands except ratios and per share amounts) | 2013 | 2012 | 2011(1) | 2010 | 2009 | ||||||||||||||
Operating Data | |||||||||||||||||||
Revenue | $ | 544,609 | $ | 670,720 | $ | 667,037 | $ | 665,514 | $ | 716,053 | |||||||||
Gross profit | 33,877 | 32,007 | 44,452 | 133,118 | 109,037 | ||||||||||||||
Gross profit margin | 6.2 | % | 4.8 | % | 6.7 | % | 20.0 | % | 15.2 | % | |||||||||
Operating (loss) income(2) | (16,023 | ) | (14,802 | ) | (11,916 | ) | 78,542 | (136,240 | ) | ||||||||||
Net (loss) income from continuing operations(2) | (28,309 | ) | (25,383 | ) | (29,726 | ) | 32,023 | (190,418 | ) | ||||||||||
Net income (loss) from discontinued operations(2) | 26,846 | 4,221 | (4,924 | ) | (3,804 | ) | 55,014 | ||||||||||||
Net (loss) income(2) | (1,463 | ) | (21,162 | ) | (34,650 | ) | 28,219 | (135,404 | ) | ||||||||||
Consolidated EBITDA for continuing operations(3) | 28,786 | 36,893 | 77,142 | 123,566 | 86,121 | ||||||||||||||
Consolidated EBITDA for discontinued operations(3) | 49,474 | 20,085 | 6,959 | (1,922 | ) | 53,325 | |||||||||||||
Consolidated EBITDA(3) | 78,260 | 56,978 | 84,101 | 121,644 | 139,446 | ||||||||||||||
Per share information for continuing operations | |||||||||||||||||||
Net (loss) income - basic | $ | (0.78 | ) | $ | (0.70 | ) | $ | (0.82 | ) | $ | 0.89 | $ | (5.29 | ) | |||||
Net (loss) income - diluted | (0.78 | ) | (0.70 | ) | (0.82 | ) | 0.87 | (5.29 | ) | ||||||||||
Per share information for discontinued operations | |||||||||||||||||||
Net income (loss) - basic | $ | 0.74 | $ | 0.12 | $ | (0.14 | ) | $ | (0.11 | ) | $ | 1.53 | |||||||
Net income (loss) - diluted | 0.74 | 0.12 | (0.14 | ) | (0.10 | ) | 1.53 | ||||||||||||
Per share information | |||||||||||||||||||
Net (loss) income - basic | $ | (0.04 | ) | $ | (0.58 | ) | $ | (0.96 | ) | $ | 0.78 | $ | (3.76 | ) | |||||
Net (loss) income - diluted | (0.04 | ) | (0.58 | ) | (0.96 | ) | 0.77 | (3.76 | ) | ||||||||||
Balance Sheet Data | |||||||||||||||||||
Total assets(4) | $ | 507,468 | $ | 537,260 | $ | 529,281 | $ | 599,175 | $ | 532,469 | |||||||||
Total shareholders' equity | 127,944 | 127,780 | 147,266 | 181,058 | 150,792 | ||||||||||||||
Net debt to shareholders' equity(4)(5) | 2.4:1 | 2.4:1 | 2.1:1 | 1.2:1 | 1.4:1 |
1 | Financial results for the year ended March 31, 2011 include a $42.5 million revenue writedown related to the Canadian Natural contract. | |
2 | Financial results for the year ended March 31, 2009 include a goodwill impairment charge of $176.2 million. | |
3 | For a definition of Consolidated EBITDA and reconciliation to net income see "Non-GAAP Financial Measures" and "Consolidated EBITDA" in this MD&A. | |
4 | Total assets and net debt to shareholder's equity have been adjusted to only include assets and net debt associated with continuing operations for all periods presented. | |
5 | Net debt is calculated as the net of Series 1 Debentures, 8 3/4% senior notes, current and non-recurring portion of swap liability, capital lease obligations and credit facilities, less cash equivalents. |
• | leading market position in contract mining services; |
• | large, well-maintained equipment fleet; |
• | broad service offering across a project's lifecycle; |
• | long-term customer relationships; and |
• | operational flexibility. |
• | Operations support services |
• | Construction services |
▪ | Long-term contracts. This category consists of contracts with a term of greater than one year and a value of greater than $20.0 million. These are typically unit-price or target-price contracts for overburden removal or reclamation and are reflected in our backlog. |
▪ | Site services contracts. This category includes our master services agreements and typically does not include a commitment to the volume or scope of services over the life of the contract. Work under the agreement is instead awarded through shorter-term work authorizations under the general terms of the agreement. Only the committed volumes under the work authorizations are included in our calculation of backlog. |
• | Canadian oil sands |
• | Industrial construction |
Year Ended March 31, | ||||||||||||||||||||||||||||
(dollars in thousands, except per share amounts) | 2013 | % of Revenue | 2012 | % of Revenue | 2011 | % of Revenue | 2013 vs 2012 Change | 2013 vs 2011 Change | ||||||||||||||||||||
Revenue | $ | 544,609 | 100.0 | % | $ | 670,720 | 100.0 | % | $ | 667,037 | 100.0 | % | $ | (126,111 | ) | $ | (122,428 | ) | ||||||||||
Project costs | 244,444 | 44.9 | % | 310,463 | 46.3 | % | 284,241 | 42.6 | % | (66,019 | ) | (39,797 | ) | |||||||||||||||
Equipment costs | 193,843 | 35.6 | % | 220,738 | 32.9 | % | 234,933 | 35.2 | % | (26,895 | ) | (41,090 | ) | |||||||||||||||
Equipment operating lease expense | 34,723 | 6.4 | % | 62,870 | 9.4 | % | 68,349 | 10.2 | % | (28,147 | ) | (33,626 | ) | |||||||||||||||
Depreciation | 37,722 | 6.9 | % | 44,642 | 6.7 | % | 35,062 | 5.3 | % | (6,920 | ) | 2,660 | ||||||||||||||||
Gross profit | 33,877 | 6.2 | % | 32,007 | 4.8 | % | 44,452 | 6.7 | % | 1,870 | (10,575 | ) | ||||||||||||||||
Select financial information: | ||||||||||||||||||||||||||||
General and administrative expenses (excluding stock based compensation) | 40,457 | 7.4 | % | 43,596 | 6.5 | % | 40,569 | 6.1 | % | (3,139 | ) | (112 | ) | |||||||||||||||
Stock based compensation expense (benefit) | 3,619 | 0.7 | % | (2,263 | ) | (0.3 | )% | 8,156 | 1.2 | % | 5,882 | (4,537 | ) | |||||||||||||||
Operating loss | (16,023 | ) | (2.9 | )% | (14,802 | ) | (2.2 | )% | (11,916 | ) | (1.8 | )% | (1,221 | ) | (4,107 | ) | ||||||||||||
Interest expense | 23,743 | 4.4 | % | 22,146 | 3.3 | % | 22,533 | 3.4 | % | 1,597 | 1,210 | |||||||||||||||||
Net loss from continuing operations | (28,309 | ) | (5.2 | )% | (25,383 | ) | (3.8 | )% | (29,726 | ) | (4.5 | )% | (2,926 | ) | 1,417 | |||||||||||||
Net income (loss) from discontinued operations | 26,846 | 4.9 | % | 4,221 | 0.6 | % | (4,924 | ) | (0.7 | )% | 22,625 | 31,770 | ||||||||||||||||
Net loss | (1,463 | ) | (0.3 | )% | (21,162 | ) | (3.2 | )% | (34,650 | ) | (5.2 | )% | 19,699 | 33,187 | ||||||||||||||
Basic per share information (no dilutive effect): | ||||||||||||||||||||||||||||
Net loss from continuing operations | $ | (0.78 | ) | $ | (0.70 | ) | $ | (0.82 | ) | $ | (0.08 | ) | $ | 0.04 | ||||||||||||||
Net income (loss) from discontinued operations | $ | 0.74 | $ | 0.12 | $ | (0.14 | ) | $ | 0.62 | $ | 0.88 | |||||||||||||||||
Net loss | $ | (0.04 | ) | $ | (0.58 | ) | $ | (0.96 | ) | $ | 0.54 | $ | 0.92 | |||||||||||||||
EBITDA(1) | $ | 77,863 | 14.3 | % | $ | 56,542 | 8.4 | % | $ | 31,873 | 4.8 | % | $ | 21,321 | $ | 45,990 | ||||||||||||
Consolidated EBITDA(1)(as defined within the credit agreement) | $ | 78,260 | 14.4 | % | $ | 56,978 | 8.5 | % | $ | 84,101 | 12.6 | % | $ | 21,282 | $ | (5,841 | ) |
(1) | A reconciliation of net loss to EBITDA and Consolidated EBITDA is as follows: |
Year Ended March 31, | |||||||||||
(dollars in thousands) | 2013 | 2012 | 2011 | ||||||||
Net loss from continuing operations | $ | (28,309 | ) | $ | (25,383 | ) | $ | (29,726 | ) | ||
Adjustments: | |||||||||||
Interest expense | 23,743 | 22,146 | 22,533 | ||||||||
Income tax benefit | (8,836 | ) | (9,235 | ) | (5,105 | ) | |||||
Depreciation | 37,722 | 44,642 | 35,062 | ||||||||
Amortization of intangible assets | 3,694 | 4,287 | 2,150 | ||||||||
EBITDA from continuing operations | $ | 28,014 | $ | 36,457 | $ | 24,914 | |||||
Adjustments: | |||||||||||
Unrealized gain on derivative financial instruments | (2,705 | ) | (2,382 | ) | (2,305 | ) | |||||
Loss on disposal of property, plant and equipment | 2,628 | 1,741 | 1,948 | ||||||||
Loss (gain) on disposal of assets held for sale | 98 | (466 | ) | 825 | |||||||
Stock-based compensation expense | 1,347 | 1,629 | 2,191 | ||||||||
Equity in (earnings) loss of unconsolidated joint venture | (596 | ) | (86 | ) | 2,720 | ||||||
Loss on debt extinguishment | — | — | 4,324 | ||||||||
Revenue writedown on Canadian Natural project | — | — | 42,525 | ||||||||
Consolidated EBITDA from continuing operations | $ | 28,786 | $ | 36,893 | $ | 77,142 | |||||
Consolidated EBITDA from discontinued operations | $ | 49,474 | $ | 20,085 | $ | 6,959 | |||||
Consolidated EBITDA | $ | 78,260 | $ | 56,978 | $ | 84,101 |
Three Months Ended March 31, | |||||||||||||||||
(dollars in thousands, except per share amounts) | 2013 | % of Revenue | 2012 | % of Revenue | Change | ||||||||||||
Revenue | $ | 130,281 | 100.0 | % | $ | 181,094 | 100.0 | % | $ | (50,813 | ) | ||||||
Project costs | 51,784 | 39.7 | % | 85,606 | 47.3 | % | (33,822 | ) | |||||||||
Equipment costs | 50,999 | 39.1 | % | 61,631 | 34.0 | % | (10,632 | ) | |||||||||
Equipment operating lease expense | 6,414 | 4.9 | % | 14,977 | 8.3 | % | (8,563 | ) | |||||||||
Depreciation | 12,138 | 9.3 | % | 19,781 | 10.9 | % | (7,643 | ) | |||||||||
Gross profit (loss) | 8,946 | 6.9 | % | (901 | ) | (0.5 | )% | 9,847 | |||||||||
Select financial information: | |||||||||||||||||
General and administrative expenses (excluding stock based compensation) | 10,122 | 7.8 | % | 11,713 | 6.5 | % | (1,591 | ) | |||||||||
Stock based compensation expense (recovery) | 2,410 | 1.8 | % | (679 | ) | (0.4 | )% | 3,089 | |||||||||
Operating loss | (6,489 | ) | (5.0 | )% | (13,601 | ) | (7.5 | )% | 7,112 | ||||||||
Interest expense | 5,892 | 4.5 | % | 5,690 | 3.1 | % | 202 | ||||||||||
Net loss from continuing operations | (9,226 | ) | (7.1 | )% | (13,413 | ) | (7.4 | )% | 4,187 | ||||||||
Net income (loss) from discontinued operations | 4,559 | 3.5 | % | (3,464 | ) | (1.9 | )% | 8,023 | |||||||||
Net loss | (4,667 | ) | (3.6 | )% | (16,877 | ) | (9.3 | )% | 12,210 | ||||||||
Basic per share information (no dilutive effect): | |||||||||||||||||
Net loss from continuing operations | $ | (0.26 | ) | $ | (0.37 | ) | $ | 0.11 | |||||||||
Net income (loss) from discontinued operations | $ | 0.13 | $ | (0.10 | ) | $ | 0.23 | ||||||||||
Net loss | $ | (0.13 | ) | $ | (0.47 | ) | $ | 0.34 | |||||||||
EBITDA(1) | $ | 15,693 | 12.0 | % | $ | 7,828 | 4.3 | % | $ | 7,865 | |||||||
Consolidated EBITDA(1)(as defined within the credit agreement) | $ | 18,003 | 13.8 | % | $ | 7,561 | 4.2 | % | $ | 10,442 |
(1) | A reconciliation of net loss to EBITDA and Consolidated EBITDA is as follows: |
Three Months Ended March 31, | ||||||||
(dollars in thousands) | 2013 | 2012 | ||||||
Net loss from continuing operations | $ | (9,226 | ) | $ | (13,413 | ) | ||
Adjustments: | ||||||||
Interest expense | 5,892 | 5,690 | ||||||
Income tax benefit | (2,992 | ) | (4,438 | ) | ||||
Depreciation | 12,138 | 19,781 | ||||||
Amortization of intangible assets | 894 | 886 | ||||||
EBITDA from continuing operations | $ | 6,706 | $ | 8,506 | ||||
Adjustments: | ||||||||
Unrealized gain on derivative financial instruments | (110 | ) | (1,422 | ) | ||||
Loss on disposal of property, plant and equipment | 1,831 | 1,040 | ||||||
Gain (loss) on disposal of assets held for sale | 178 | (10 | ) | |||||
Stock-based compensation expense | 348 | 375 | ||||||
Equity in earnings on consolidated joint venture | — | (250 | ) | |||||
Consolidated EBITDA for continuing operations | $ | 8,953 | $ | 8,239 | ||||
Consolidated EBITDA for discontinued operations | $ | 9,050 | $ | (678 | ) | |||
Consolidated EBITDA | $ | 18,003 | $ | 7,561 |
Three months ended March 31, | Year ended March 31, | ||||||||||||||||||
(dollars in thousands, except per share amounts) | 2013 | 2012 | 2013 | 2012 | 2011 | ||||||||||||||
Revenue | $ | 47,267 | $ | 52,914 | $ | 236,459 | $ | 185,321 | $ | 105,559 | |||||||||
Project costs | 32,833 | 39,210 | 172,593 | 136,080 | 84,175 | ||||||||||||||
Equipment operating lease expense | 579 | 579 | 2,315 | 2,315 | 1,071 | ||||||||||||||
Depreciation | 706 | 820 | 3,592 | 3,213 | 3,828 | ||||||||||||||
Gross profit | $ | 13,149 | $ | 12,305 | $ | 57,959 | $ | 43,713 | $ | 16,485 | |||||||||
General and administrative expenses | 3,218 | 3,285 | 12,451 | 11,696 | 9,654 | ||||||||||||||
Amortization of intangible assets | 351 | 353 | 1,408 | 1,415 | 1,390 | ||||||||||||||
Operating income | $ | 9,580 | $ | 8,667 | $ | 44,100 | $ | 30,602 | $ | 5,441 | |||||||||
Interest expense | 1,931 | 1,849 | 7,639 | 7,129 | 6,408 | ||||||||||||||
Income (loss) before income taxes | $ | 7,649 | $ | 6,818 | $ | 36,461 | $ | 23,473 | $ | (967 | ) | ||||||||
Deferred income tax expense | 1,950 | 1,828 | 9,295 | 6,294 | 46 | ||||||||||||||
Net income (loss) from discontinued operations | $ | 5,699 | $ | 4,990 | $ | 27,166 | $ | 17,179 | $ | (1,013 | ) | ||||||||
Net income (loss) per share | $ | 0.16 | $ | 0.14 | $ | 0.75 | $ | 0.47 | $ | (0.03 | ) |
Three months ended March 31, | Year ended March 31, | ||||||||||||||||||
(dollars in thousands, except per share amounts) | 2013 | 2012 | 2013 | 2012 | 2011 | ||||||||||||||
Revenue | $ | (3,279 | ) | $ | 48,498 | $ | 35,901 | $ | 150,504 | $ | 85,452 | ||||||||
Project costs | (1,958 | ) | 58,673 | 36,090 | 164,278 | 87,703 | |||||||||||||
Depreciation | — | 360 | 196 | 1,045 | 550 | ||||||||||||||
Gross loss | $ | (1,321 | ) | $ | (10,535 | ) | $ | (385 | ) | $ | (14,819 | ) | $ | (2,801 | ) | ||||
General and administrative expenses | 312 | 343 | 1,246 | 1,371 | 1,449 | ||||||||||||||
Gain on disposal of property, plant and equipment | 63 | — | (375 | ) | — | — | |||||||||||||
Recovery of previously expensed tools, supplies and equipment parts | — | — | (1,095 | ) | — | — | |||||||||||||
Gain on sale of inventory | (46 | ) | — | (714 | ) | — | — | ||||||||||||
Operating (loss) income | $ | (1,650 | ) | $ | (10,878 | ) | $ | 553 | $ | (16,190 | ) | $ | (4,250 | ) | |||||
Interest expense | — | 262 | 700 | 1,050 | 1,050 | ||||||||||||||
Loss before income taxes | $ | (1,650 | ) | $ | (11,140 | ) | $ | (147 | ) | $ | (17,240 | ) | $ | (5,300 | ) | ||||
Deferred income tax (benefit) expense | (510 | ) | (2,686 | ) | 173 | (4,282 | ) | (1,389 | ) | ||||||||||
Net loss from discontinued operations | $ | (1,140 | ) | $ | (8,454 | ) | $ | (320 | ) | $ | (12,958 | ) | $ | (3,911 | ) | ||||
Net loss per share from discontinued operations | $ | (0.03 | ) | $ | (0.23 | ) | $ | (0.01 | ) | $ | (0.36 | ) | $ | (0.11 | ) |
Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | 2013 | 2012 | 2011 | ||||||||||||||
Net income (loss) from discontinued operations | $ | 4,559 | $ | (3,464 | ) | $ | 26,846 | $ | 4,221 | $ | (4,924 | ) | |||||||
Adjustments: | |||||||||||||||||||
Interest expense | 1,931 | 2,111 | 8,339 | 8,179 | 7,458 | ||||||||||||||
Income tax expense (benefit) | 1,440 | (858 | ) | 9,468 | 2,012 | (1,343 | ) | ||||||||||||
Depreciation | 706 | 1,180 | 3,788 | 4,258 | 4,378 | ||||||||||||||
Amortization of intangible assets | 351 | 353 | 1,408 | 1,415 | 1,390 | ||||||||||||||
EBITDA from discontinued operations | $ | 8,987 | $ | (678 | ) | $ | 49,849 | $ | 20,085 | $ | 6,959 | ||||||||
Adjustments: | |||||||||||||||||||
Loss (gain) on disposal of property, plant and equipment | 63 | — | (375 | ) | — | — | |||||||||||||
Consolidated EBITDA from discontinued operations | $ | 9,050 | $ | (678 | ) | $ | 49,474 | $ | 20,085 | $ | 6,959 |
Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | Change | 2013 | 2012 | 2011 | Change 2013 vs 2012 | Change 2013 vs 2011 | |||||||||||||||||||||||||
Interest expense | |||||||||||||||||||||||||||||||||
Long term debt | |||||||||||||||||||||||||||||||||
Interest on 8 3/4% senior notes and swaps | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,238 | $ | — | $ | (1,238 | ) | ||||||||||||||||
Interest on capital lease obligations | 696 | 97 | 599 | 1,925 | 425 | 643 | 1,500 | 1,282 | |||||||||||||||||||||||||
Amortization of deferred financing costs | 377 | 393 | (16 | ) | 1,607 | 1,591 | 1,609 | 16 | (2 | ) | |||||||||||||||||||||||
Interest on credit facilities | 1,008 | 1,353 | (345 | ) | 4,414 | 4,547 | 2,992 | (133 | ) | 1,422 | |||||||||||||||||||||||
Interest on Series 1 Debentures | 3,833 | 3,811 | 22 | 15,230 | 15,255 | 15,089 | (25 | ) | 141 | ||||||||||||||||||||||||
Interest on long term debt | $ | 5,914 | $ | 5,654 | $ | 260 | $ | 23,176 | $ | 21,818 | $ | 21,571 | $ | 1,358 | $ | 1,605 | |||||||||||||||||
Other interest | (22 | ) | 36 | (58 | ) | 567 | 328 | 962 | 239 | (395 | ) | ||||||||||||||||||||||
Total Interest expense | $ | 5,892 | $ | 5,690 | $ | 202 | $ | 23,743 | $ | 22,146 | $ | 22,533 | $ | 1,597 | $ | 1,210 | |||||||||||||||||
Foreign exchange (gain) loss | (53 | ) | (18 | ) | (35 | ) | 84 | 52 | (1,659 | ) | 32 | 1,743 | |||||||||||||||||||||
Unrealized loss (gain) on derivative financial instruments | |||||||||||||||||||||||||||||||||
Unrealized loss on cross-currency and interest rate swaps | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2,111 | $ | — | $ | (2,111 | ) | ||||||||||||||||
Unrealized gain on embedded price escalation features in a long term customer construction contract | — | — | — | — | (5,877 | ) | (604 | ) | 5,877 | 604 | |||||||||||||||||||||||
Unrealized (gain) loss on embedded price escalation features in certain long term supplier contracts | (110 | ) | (1,422 | ) | 1,312 | (2,705 | ) | 3,495 | (3,812 | ) | (6,200 | ) | 1,107 | ||||||||||||||||||||
Total unrealized gain on derivative financial instruments | $ | (110 | ) | $ | (1,422 | ) | $ | 1,312 | $ | (2,705 | ) | $ | (2,382 | ) | $ | (2,305 | ) | $ | (323 | ) | $ | (400 | ) | ||||||||||
Loss on debt extinguishment | — | — | — | — | — | 4,346 | — | (4,346 | ) | ||||||||||||||||||||||||
Income tax (benefit) expense | (2,992 | ) | (4,438 | ) | 1,446 | (8,836 | ) | (9,235 | ) | (5,105 | ) | 399 | (3,731 | ) |
(dollars in thousands) | March 31, 2013 | December 31, 2012 | March 31, 2012 | March 31, 2011 | ||||||||||||
By Contract Type | ||||||||||||||||
Unit-Price | $ | 77,861 | $ | 139,949 | $ | 230,782 | $ | 561,724 | ||||||||
Lump-Sum | 5,031 | 4,086 | 4,703 | 6,327 | ||||||||||||
Time-and-Material, Cost-Plus | 292,182 | 295,912 | 418,799 | 665 | ||||||||||||
Total | $ | 375,074 | $ | 439,947 | $ | 654,284 | $ | 568,716 |
• | changes in client requirements, specifications and design; |
• | changes in materials and work schedules; and |
• | changes in ground and weather conditions. |
• | the timing and size of capital projects undertaken by our customers on large oil sands projects; |
• | seasonal weather and ground conditions; |
• | the timing of equipment maintenance and repairs; |
• | claims and change-orders; and |
• | the accounting for unrealized non-cash gains and losses related to foreign exchange and derivative financial instruments. |
Three Months Ended | ||||||||||||||||||||||||||||||||
Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | |||||||||||||||||||||||||
(dollars in millions, except per share amounts) | Fiscal 2013 | Fiscal 2012 | ||||||||||||||||||||||||||||||
Revenue | $ | 130.3 | $ | 116.8 | $ | 123.5 | $ | 174.0 | $ | 181.1 | $ | 166.5 | $ | 159.7 | $ | 163.4 | ||||||||||||||||
Gross profit (loss) | 8.9 | 9.8 | 8.3 | 6.9 | (0.9 | ) | 8.7 | 17.0 | 7.2 | |||||||||||||||||||||||
Operating (loss) income | (6.5 | ) | (1.5 | ) | (0.8 | ) | (7.2 | ) | (13.5 | ) | (4.9 | ) | 5.3 | (1.7 | ) | |||||||||||||||||
Net loss from continuing operations | (9.2 | ) | (5.5 | ) | (5.2 | ) | (8.4 | ) | (13.4 | ) | (5.9 | ) | (1.4 | ) | (4.7 | ) | ||||||||||||||||
Net income (loss) from discontinued operations | 4.6 | 10.2 | 8.9 | 3.2 | (3.5 | ) | 4.0 | 8.0 | (4.3 | ) | ||||||||||||||||||||||
Net (loss) income | (4.7 | ) | 4.6 | 3.7 | (5.1 | ) | (16.9 | ) | (1.9 | ) | 6.6 | (9.0 | ) | |||||||||||||||||||
Net (loss) income per share‡ | ||||||||||||||||||||||||||||||||
From continuing operations - basic & diluted | $ | (0.26 | ) | $ | (0.15 | ) | $ | (0.14 | ) | $ | (0.23 | ) | $ | (0.37 | ) | $ | (0.16 | ) | $ | (0.04 | ) | $ | (0.13 | ) | ||||||||
From discontinued operations - basic & diluted | $ | 0.13 | $ | 0.28 | $ | 0.25 | $ | 0.09 | $ | (0.10 | ) | $ | 0.11 | $ | 0.22 | $ | (0.12 | ) | ||||||||||||||
Total - basic & diluted | $ | (0.13 | ) | $ | 0.13 | $ | 0.10 | $ | (0.14 | ) | $ | (0.47 | ) | $ | (0.05 | ) | $ | 0.18 | $ | (0.25 | ) |
‡ | Net (loss) income per share for each quarter has been computed based on the weighted average number of shares issued and outstanding during the respective quarter; therefore, quarterly amounts may not add to the annual total. Per-share calculations are based on full dollar and share amounts. |
Year Ended March 31, | |||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | 2011 | Change 2013 vs 2012 | Change 2013 vs 2011 | ||||||||||||||
Cash | $ | 598 | $ | 1,400 | $ | 722 | $ | (802 | ) | $ | (124 | ) | |||||||
Current assets (excluding cash) | 356,059 | 325,564 | 251,363 | 30,495 | 104,696 | ||||||||||||||
Current liabilities | (191,202 | ) | (254,573 | ) | (165,819 | ) | 63,371 | (25,383 | ) | ||||||||||
Net working capital | $ | 165,455 | $ | 72,391 | $ | 86,266 | $ | 93,064 | $ | 79,189 | |||||||||
Property, plant and equipment | 274,246 | 312,775 | 321,864 | (38,529 | ) | (47,618 | ) | ||||||||||||
Total assets | 659,938 | 749,993 | 682,957 | (90,055 | ) | (23,019 | ) | ||||||||||||
Capital lease obligations (including current portion) | (41,822 | ) | (10,701 | ) | (8,693 | ) | (31,121 | ) | (33,129 | ) | |||||||||
Total long term financial liabilities ‡ | (299,530 | ) | (309,599 | ) | (324,382 | ) | 10,069 | 24,852 |
‡ | Total long-term financial liabilities exclude the current portions of capital lease obligations, current portions of derivative financial instruments, long-term lease inducements, asset retirement obligations and both current and non-current deferred income tax balances. |
• | Current assets (excluding cash) includes: |
◦ | $154.7 million of assets held for sale related to the sale of the piling business |
◦ | $53.8 million property, plant and equipment re-classified to assets held for sale in current assets |
◦ | $32.9 million goodwill re-classified to assets held for sale in current assets |
• | Current liabilities includes: |
◦ | $38.8 million of liabilities held for sale related to the sale of the piling business |
◦ | $4.6 million non-current capital lease obligations re-classified to liabilities held for sale in current liabilities |
Accounts receivable, net | $ | 44,297 | |
Unbilled revenue | 9,324 | ||
Inventories | 7,754 | ||
Prepaid expenses | 181 | ||
Current portion of deferred tax assets | 1,106 | ||
Current assets | $ | 62,662 | |
Intangible assets | $ | 4,220 | |
Property, plant and equipment, gross | 83,359 | ||
Accumulated depreciation | (29,566 | ) | |
Goodwill | 32,901 | ||
Deferred tax assets | 1,164 | ||
Non-current assets, net | $ | 92,078 | |
Assets held for sale | $ | 154,740 |
Accounts payable | $ | 17,048 | |
Accrued liabilities | 23 | ||
Billings in excess | 3,115 | ||
Current portion of capital lease obligation | 1,292 | ||
Current portion of deferred tax liabilities | 3,018 | ||
Current liabilities | $ | 24,496 | |
Capital lease obligation | 4,635 | ||
Deferred tax liabilities | 9,715 | ||
Non-current liabilities | $ | 14,350 | |
Liabilities held for sale | $ | 38,846 |
• | Current liabilities includes $1.3 million of current portion of capital lease obligations |
• | Goodwill included in assets held for sale will be offset against the gain on sale of the piling related assets. |
• | sustaining capital additions – PP&E and intangible asset additions that are needed to keep our existing fleet of equipment and intangible assets at their optimal useful life through capital maintenance or replacement; or |
• | growth capital additions – PP&E additions that are needed to increase equipment capacity to perform larger or a greater number of projects and those intangible asset additions needed to increase capacity, performance or efficiency. |
Three months ended March 31, | Year ended March 31, | ||||||||||||||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | Change | 2013 | 2012 | 2011 | Change 2013 vs 2012 | Change 2013 vs 2011 | |||||||||||||||||||||||
New PP&E - capital expenditures | |||||||||||||||||||||||||||||||
Sustaining | $ | 6,222 | $ | 9,687 | $ | (3,465 | ) | $ | 23,183 | $ | 30,248 | $ | 14,408 | $ | (7,065 | ) | $ | 8,775 | |||||||||||||
Growth | 1,684 | 6,801 | (5,117 | ) | 6,471 | 10,937 | 14,309 | (4,466 | ) | (7,838 | ) | ||||||||||||||||||||
Subtotal | 7,906 | 16,488 | (8,582 | ) | 29,654 | 41,185 | 28,717 | (11,531 | ) | 937 | |||||||||||||||||||||
New intangible assets - capital expenditures | |||||||||||||||||||||||||||||||
Sustaining | 1,102 | 252 | 850 | 2,565 | 418 | 1,202 | 2,147 | 1,363 | |||||||||||||||||||||||
Growth | 925 | 999 | (74 | ) | 2,516 | 3,119 | 3,546 | (603 | ) | (1,030 | ) | ||||||||||||||||||||
Subtotal | 2,027 | 1,251 | 776 | 5,081 | 3,537 | 4,748 | 1,544 | 333 | |||||||||||||||||||||||
Total new additions to capital assets | 9,933 | 17,739 | (7,806 | ) | 34,735 | 44,722 | 33,465 | (9,987 | ) | 1,270 | |||||||||||||||||||||
Items affecting cash additions to capital assets: | |||||||||||||||||||||||||||||||
Equipment buyouts | — | 9,660 | (9,660 | ) | 3,993 | 9,660 | — | (5,667 | ) | 3,993 | |||||||||||||||||||||
Change in non-cash working capital | (1,660 | ) | 1,546 | (3,206 | ) | (1,008 | ) | (1,380 | ) | 3,879 | 372 | (4,887 | ) | ||||||||||||||||||
Cash outflow on additions to PP&E and intangible assets | 8,273 | 28,945 | (20,672 | ) | 37,720 | 53,002 | 37,344 | (15,282 | ) | 376 | |||||||||||||||||||||
Capital asset disposal | |||||||||||||||||||||||||||||||
Proceeds on disposal of PP&E | 543 | 48 | 495 | 9,301 | 176 | 499 | 9,125 | 8,802 | |||||||||||||||||||||||
Proceeds on disposal of assets held for sale | 87 | 10 | 77 | 2,014 | 920 | 826 | 1,094 | 1,188 | |||||||||||||||||||||||
Cash inflow for proceeds on disposal of capital assets | 630 | 58 | 572 | 11,315 | 1,096 | 1,325 | 10,219 | 9,990 | |||||||||||||||||||||||
Net decrease in cash related to capital assets | 7,643 | 28,887 | (21,244 | ) | 26,405 | 51,906 | 36,019 | (25,501 | ) | (9,614 | ) |
Three months ended March 31, | Year ended March 31, | ||||||||||||||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | Change | 2013 | 2012 | 2.011 | Change 2013 vs 2012 | Change 2013 vs 2011 | |||||||||||||||||||||||
PP&E – Capital leases additions | |||||||||||||||||||||||||||||||
Sustaining | $ | 77 | $ | 4,195 | $ | (4,118 | ) | $ | 758 | $ | 4,236 | $ | — | $ | (3,478 | ) | $ | 758 | |||||||||||||
Growth | — | 2,417 | (2,417 | ) | 39 | 2,803 | 427 | (2,764 | ) | (388 | ) | ||||||||||||||||||||
Subtotal | 77 | 6,612 | (6,535 | ) | 797 | 7,039 | 427 | (6,242 | ) | 370 | |||||||||||||||||||||
PP&E – Operating leases additions | |||||||||||||||||||||||||||||||
Sustaining | — | 8,102 | (8,102 | ) | — | 8,102 | 30,118 | (8,102 | ) | (30,118 | ) | ||||||||||||||||||||
Growth | — | 5,735 | (5,735 | ) | — | 5,735 | 16,166 | (5,735 | ) | (16,166 | ) | ||||||||||||||||||||
Subtotal | — | 13,837 | (13,837 | ) | — | 13,837 | 46,284 | (13,837 | ) | (46,284 | ) | ||||||||||||||||||||
Total non-cash capital additions | 77 | 20,449 | (20,372 | ) | 797 | 20,876 | 46,711 | (20,079 | ) | (45,914 | ) |
Three months ended March 31, | Year ended March 31, | ||||||||||||||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | Change | 2013 | 2012 | 2.011 | Change 2013 vs 2012 | Change 2013 vs 2011 | |||||||||||||||||||||||
Total sustaining capital additions | $ | 7,401 | $ | 22,236 | $ | (14,835 | ) | $ | 26,506 | $ | 43,004 | $ | 45,728 | $ | (16,498 | ) | $ | (19,222 | ) | ||||||||||||
Total growth capital additions | 2,609 | 15,952 | (13,343 | ) | 9,026 | 22,594 | 34,448 | (13,568 | ) | (25,422 | ) | ||||||||||||||||||||
Total capital additions | 10,010 | 38,188 | (28,178 | ) | 35,532 | 65,598 | 80,176 | (30,066 | ) | (44,644 | ) |
Three months ended March 31, | Year ended March 31, | ||||||||||||||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | Change | 2013 | 2012 | 2011 | Change 2013 vs 2012 | Change 2013 vs 2011 | |||||||||||||||||||||||
Cash provided by (used in) operating activities | $ | 21,081 | $ | 55,327 | $ | (34,246 | ) | $ | 52,929 | $ | 57,098 | $ | (12,178 | ) | $ | (4,169 | ) | $ | 65,107 | ||||||||||||
Cash used in investing activities | (7,643 | ) | (28,887 | ) | 21,244 | (24,235 | ) | (51,906 | ) | (37,310 | ) | 27,671 | 13,075 | ||||||||||||||||||
Cash (used in) provided by financing activities | (20,387 | ) | (21,188 | ) | 801 | (44,809 | ) | 1,902 | (37,095 | ) | (46,711 | ) | (7,714 | ) | |||||||||||||||||
Net (decrease) increase in cash and cash equivalents from continuing operations | $ | (6,949 | ) | $ | 5,252 | $ | (12,201 | ) | $ | (16,115 | ) | $ | 7,094 | $ | (86,583 | ) | $ | (23,209 | ) | $ | 70,468 | ||||||||||
Cash provided by (used in) discontinued operations | 6,344 | (5,625 | ) | 11,969 | 15,282 | (6,456 | ) | (15,641 | ) | 21,738 | 30,923 | ||||||||||||||||||||
Effect of exchange rate on changes in cash | 39 | (24 | ) | 63 | 31 | 40 | (59 | ) | (9 | ) | 90 | ||||||||||||||||||||
Net (decrease) increase in cash and cash equivalents | $ | (566 | ) | $ | (397 | ) | $ | (169 | ) | $ | (802 | ) | $ | 678 | $ | (102,283 | ) | $ | (1,480 | ) | $ | 101,481 |
Three months ended March 31, | Year ended March 31, | ||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | 2013 | 2012 | 2011 | ||||||||||||||
Operating activities | $ | 38,332 | $ | (1,753 | ) | $ | 38,191 | $ | 6,175 | $ | 11,681 | ||||||||
Investing activities | (31,776 | ) | (3,788 | ) | (22,061 | ) | (12,294 | ) | (27,322 | ) | |||||||||
Financing activities | (212 | ) | (84 | ) | (848 | ) | (337 | ) | — | ||||||||||
$ | 6,344 | $ | (5,625 | ) | $ | 15,282 | $ | (6,456 | ) | $ | (15,641 | ) |
• | Pursuing operational excellence in safety, productivity, and customer satisfaction; |
• | Strengthening our balance sheet through further debt reduction, fleet rationalization, and cash-flow improvement; and |
• | Gaining first-on-site advantage on new oil sands and resource mining sites.t |
• | 9.125% Series 1 Debentures at an aggregate principle amount not to exceed $225.0 million (see "9.125% Series 1 Debentures", below); |
• | Capital leases aggregating to a maximum of $75.0 million at any one time; |
• | Operating leases entered into in the normal course of business; and |
• | Contingent obligations under our performance bonding program. |
i. | Senior Debt Ratio (Senior Debt to trailing 12-month Consolidated EBITDA) which must not exceed 2.0 times; |
ii. | Interest Coverage Ratio (trailing 12-month Consolidated EBITDA to trailing 12-month Cash Interest Expense) which must be greater than 2.5 times (temporarily reduced to "must be greater than 2.25 times for the period ended March 31, 2013"); and |
iii. | Current Ratio (Current Assets to Current Liabilities) which must be greater than 1.25 times. |
i. | Application of net asset sale proceeds to the permanent reduction and repayment of the two Term Facilities in the following order and manner: |
1. | 100% of the net proceeds applied to the Term B Facility until such time as it is repaid in full; and then |
2. | 50% of the net proceeds applied to the Term A Facility until such time as it is repaid in full. |
• | Upon closing of the Piling Sale, a portion of the net proceeds will be used to repay the outstanding balance of the Term A Facility. |
ii. | Permanent reduction and repayment of the full balance of the Term B Facility by April 30, 2013. |
• | As at March 31, 2013, we have applied $10.2 million of net proceeds from equipment sales and $15.4 million of net proceeds from the sale of pipeline related assets to the repayment of the Term B Facility, leaving $5.6 million outstanding on the Term B Facility. |
• | As at April 30, 2013, the full balance of the Term B Facility was repaid. |
iii. | Net annual capital expenditures limited to an amount equal to annual Consolidated EBITDA less the sum of: |
• | Scheduled annual repayments of debt; |
• | Consolidated annual cash interest expense; and |
• | Current annual taxes for the fiscal year. |
i. | 100% of the net cash proceeds of certain asset dispositions; |
ii. | 100% of the net cash proceeds from our issuance of equity (unless the use of such securities' proceeds is otherwise designated by the applicable offering document); and |
iii. | 100% of all casualty insurance and condemnation proceeds, subject to exceptions. |
i. | Cash drawn under the revolving facility: During the year ended March 31, 2013, we used our Revolving Facility to finance our working capital requirements. At March 31, 2013, we had $22.4 million of borrowings outstanding on our Revolving Facility ($20.3 million at March 31, 2012). For the three months ended March 31, 2013, the average amount of our borrowing on the Revolving Facility was $43.4 million with a weighted average interest rate of 8.0% ($57.1 million for three months ended March 31, 2012 at an average interest rate of 6.8%). For the year ended March 31, 2013, the average amount of our borrowing on the Revolving Facility was $40.9 million with a weighted average interest rate of 8.0% ($40.4 million and $8.1 million, respectively, for the years ended March 31, 2012 and 2011, at an average rate of 6.6% and 6.5%, respectively). The average amount of our borrowing on the Revolving Facility is calculated based on the weighted average of the outstanding balances in the three months and year periods, respectively. The maximum end of month balance for any single month during both the three months and year ended March 31, 2013 was $65.0 million. |
ii. | Letters of credit drawn under the revolving facility: As of March 31, 2013, we had issued $3.2 million ($15.0 million at March 31, 2012 and $12.3 million at March 31, 2011) in letters of credit under the Revolving Facility to support performance guarantees associated with customer contracts. One of our major long-term contracts allows the customer to require that we provide up to $15.0 million in letters of credit. As at March 31, 2013, we had no letters of credit outstanding in connection with this contract. This customer must provide a 60-day prior written notice to request any change in their letter of credit requirements. |
Payments due by fiscal year | |||||||||||||||||||||||
(dollars in thousands) | Total | 2014 | 2015 | 2016 | 2017 | 2018 and thereafter | |||||||||||||||||
Series 1 Debentures | $ | 225,000 | $ | — | $ | — | $ | — | $ | 225,000 | $ | — | |||||||||||
Term facilities | 22,846 | 9,392 | 13,454 | — | — | — | |||||||||||||||||
Revolving facility | 22,396 | — | 22,396 | — | — | — | |||||||||||||||||
Capital leases (including interest) | 46,975 | 14,442 | 13,490 | 12,156 | 6,887 | — | |||||||||||||||||
Equipment and building operating leases | 61,589 | 25,466 | 16,762 | 4,682 | 2,598 | 12,081 | |||||||||||||||||
Supplier contracts | 25,266 | 22,484 | 2,782 | — | — | — | |||||||||||||||||
Total contractual obligations | 404,072 | 71,784 | 68,884 | 16,838 | 234,485 | 12,081 |
Category | Standard & Poor's | Moody's | ||
Corporate Rating | B-('stable' outlook) | B3 ('Rating Under Review' outlook) | ||
Series 1 Debentures | B-(recovery rating of "4") | Caa1 (LGD# rating of "4") |
# | Loss Given Default |
• | provide them copies of all documents, reports, financial data and other information regarding us; |
• | permit them to consult with and advise our management on matters relating to our operations; |
• | permit them to discuss our company's affairs, finances and accounts with our officers, directors and outside accountants; |
• | permit them to visit and inspect any of our properties and facilities, including but not limited to books of account; |
• | to the extent that a director is not related to the significant shareholder, to permit them to designate and send a representative to attend all meetings of our board of directors in a non-voting observer capacity; |
• | provide them copies of certain of our financial statements and reports; and |
• | provide them copies of all materials sent by us to our board of directors, other than materials relating to transactions in which the significant shareholder has an interest. |
• | Assessment of the percentage of completion on time-and-materials, unit-price and lump-sum contracts (including estimated total costs and provisions for estimated losses) and the recognition of claims and change orders on revenue contracts; |
• | Assumptions used to value free standing and embedded derivatives and other financial instruments; |
• | Assumptions used in periodic impairment testing; and |
• | Estimates and assumptions used in the determination of the allowance for doubtful accounts, the recoverability of deferred tax assets and the useful lives of property, plant and equipment and intangible assets. |
• | the completeness and accuracy of the original bid; |
• | costs associated with added scope changes (to the extent contract remedies are unavailable); |
• | extended overhead due to owner, weather and other delays (to the extent contract remedies are unavailable); |
• | subcontractor performance issues; |
• | changes in economic indices used to estimate future costs-to-complete on longer-term contracts; |
• | changes in productivity expectations; |
• | site conditions that differ from those assumed in the original bid (to the extent contract remedies are unavailable); |
• | contract incentive and penalty provisions; |
• | the availability and skill level of workers in the geographic location of the project; and |
• | a change in the availability and proximity of equipment and materials. |
i. | a bona fide addition to contract value; and |
ii. | revenue that can be reliably estimated. |
• | the contract or other evidence provides a legal basis for the unapproved change order or claim or a legal opinion is obtained providing a reasonable basis to support the unapproved change order or claim; |
• | additional costs incurred were caused by unforeseen circumstances and are not the result of deficiencies in our performance; |
• | costs associated with the unapproved change order or claim are identifiable and reasonable in view of work performed; and |
• | evidence supporting the unapproved change order or claim is objective and verifiable. |
1. | The anticipated total consideration of approximately $227.5 million, adjusted for customary working capital and the assumption of capital leases, realized for the Piling Sale. |
2. | The anticipated closing costs of $12.5 million related to the Piling Sale. |
3. | The anticipation that the Purchaser will achieve a minimum of $45.0 million in Consolidated EBITDA in each year and the piling business will continue to grow under the management of the Purchaser, thus allowing us to realize all of the contingent proceeds. |
4. | The anticipation that the Purchaser will continue to grow the piling business, resulting in the payment of some or all of the contingent proceeds. |
5. | The expectation that the Purchaser will receive all required approvals to complete the Piling Sale and this sale will close during the first half of fiscal 2014; |
6. | Our expectation that we will recognize a gain from the sale of piling related assets, net of a $32.9 million reduction in goodwill, related to the piling business. |
7. | The expectation that the balance of the Term A Facility will be repaid with net proceeds from the Piling Sale. |
8. | The expectation that the lease refinancing will reduce future near-term annual operating lease cost by approximately $20.9 million, increase annual cash interest by approximately $2.1 million, increase depreciation expense in proportion to the utilization of the refinanced equipment and reduce cash lease payments by approximately $4.6 million. |
9. | The expectation that we will realize the full amount of the working capital associated with our discontinued pipeline business. |
10. | The expectation that the right-sizing of our fleet and the buy-out and sale of certain pieces of leased equipment will reduce our annual operating lease expense by approximately $5.6 million. |
11. | The anticipated total reduction of approximately $6.0 million in G&A costs in fiscal 2014. |
12. | Our belief that we operate the largest fleet of equipment of any contract resource services provider in the oil sands. |
13. | Our belief that we have demonstrated our ability to successfully apply our oil sands knowledge and technology and put it to work in other resource development projects. |
14. | Our belief that we are positioned to respond to the needs of a wide range of other resource developers. |
15. | Our belief that our excellent safety record, coupled with our significant oil sands knowledge, experience, long-term customer relationships, equipment capacity, scale of operations and broad service offering, differentiate us from our competition and provide significant value to our customers. |
16. | Our belief that our competitive strengths include a leading market position in contract mining services; a large, well-maintained equipment fleet; broad service offering across a project's lifecycle; long-term customer relationships; and operational flexibility. |
17. | The estimate according to CAPP and other industry estimates that future total production from mining and in situ technology will to remain approximately equal to the 2011 oil sands production, which was approximately half extracted from five active mining projects, while the remaining half was extracted from approximately 17 active in situ projects. |
18. | Our belief that we are in a position to benefit from the resurgence in mineral exploration spending. |
19. | Our expectation that approximately $249.0 million of total backlog will likely be performed and realized in the 12 months ending March 31, 2014, together with a significant volume of work available but not included in the backlog calculation. |
20. | Our belief that we are well positioned to respond to changing market conditions, while maintaining profitability levels. |
21. | Our anticipation of an increase in operations support services to help offset a potential reduction in construction services resulting from continued project approval delays and cost control effort of our clients. |
22. | The expected benefit to operations support services revenues from the ramp up of activity at the Kearl site under our new five year agreement. |
23. | Our expectation of comparable activity levels supporting production at the Horizon mine, Base mine and the Millennium and Steepbank mines. |
24. | Our intention to pursue heavy civil contracts at both SAGD and new mining projects in the oil sands and with other major resource companies in Canada. |
25. | Our expectation to continue progressing toward our goal of delivering consistent financial and operating performance by focusing on three key areas: pursuing operational excellence in safety, productivity, and customer satisfaction; strengthening our balance sheet through further debt reduction, fleet rationalization, and cash-flow improvement; and gaining first-on-site advantage on new oil sands and resource mining sites. |
26. | Our belief that the outlook for fiscal 2014 is positive. |
27. | Our intention to improve profitability. |
28. | Our belief that we have all material required permits and licenses to conduct our operations and are in substantial compliance with applicable regulatory requirements relating to our operations. |
29. | We do not currently anticipate any material adverse effect on our business or financial position because of future compliance with applicable environmental laws and regulations; and future events such as changes in existing laws and regulations may require us to make additional expenditures which may or may not be material. |
30. | Our belief that cash flow from operations and net proceeds from the sale of under-utilized equipment will be sufficient to meet our requirements for capital expenditure. |
31. | Our estimate with respect to equipment additions and other capital needs; that our operating and capital lease facilities and capacity and cash flow from operations will likely be sufficient to meet these needs; but if we require additional funding for our expenses, this could be satisfied by our credit facilities. |
32. | Our belief that accounting pronouncements recently adopted or yet to be adopted, as discussed herein, will not have a material impact on our consolidated financial statements. |
1. | That the Keller Group shareholders will approve the Piling Sale. |
2. | That the Purchaser will obtain certain majority shareholder and anti-trust approvals. |
3. | That the Piling Sale will be executed in the first half of fiscal 2014. |
4. | That the Purchaser will meet the prescribed Consolidated EBITDA thresholds over the next three years, thus allowing us to realize the contingent proceeds of the Piling Sale. |
5. | That work will continue to be required under the contract with Canadian Natural. |
6. | That work will continue to be required under our master services agreements with various customers; |
7. | The demand for construction services remaining strong; |
8. | The continuing development of new mines and the expansion of existing mines; |
9. | The continuing resurgence in mineral resource spending; |
10. | That we will realize all of our backlog; |
11. | Our customers' ability to pay in timely fashion; |
12. | Our ability to successfully resolve all claims and unsigned change orders with our customers; |
13. | The oil sands continuing to be an economically viable source of energy; |
14. | Our customers and potential customers continuing to invest in the oil sands and other resource developments and to outsource activities for which we are capable of providing services; |
15. | The continuing construction of the southern and western pipelines; |
16. | Our ability to benefit from increased construction services revenue and to maintain operations support services revenue tied to the operational activities of the oil sands; |
17. | Our ability to maintain the right size and mix of equipment in our fleet and to secure specific types of rental equipment to support project development activity enables us to meet our customers' variable service requirements while balancing the need to maximize utilization of our own equipment; |
18. | Our ability to access sufficient funds to meet our funding requirements will not be significantly impaired; |
19. | Our success in executing our business strategy, identifying and capitalizing on opportunities, managing our business, maintaining and growing our relationships with customers, retaining new customers, integrating our acquisitions, competing in the bidding process to secure new projects and identifying and implementing improvements in our maintenance and fleet management practices; and |
20. | Our success in improving profitability and continuing to strengthen our balance sheet through a focus on performance, efficiency and risk management. |
• | There can be no certainty that all conditions precedent to the Piling Sale will be satisfied. Failure to complete the Piling Sale could negatively impact the market price of the Common Shares. |
• | There can be no certainty that any or all of the contingent consideration will be received. Failure to receive the contingent consideration could negatively impact the market price of the Common Shares. |
• | Anticipated new major capital projects in the oil sands may not materialize. |
• | technological advancements improve the economic viability of alternative sources of heavy and light crude oil |
• | changes in the perception of the economic viability of these projects; |
• | shortage of pipeline capacity to transport production to major markets; |
• | lack of sufficient governmental infrastructure funding to support growth; |
• | delays in issuing environmental permits or refusal to grant such permits; |
• | shortage of skilled workers in this remote region of Canada; |
• | cost overruns on announced projects; and |
• | reductions in available credit for customers to fund capital projects. |
• | Short-notice customer communication of reduction in their mine development or support service requirements, in which we are participating, could lead to our inability to secure replacement work for our dormant equipment and could subject us to non-recoverable costs. |
• | Unanticipated short-term shutdowns of our customers' operating facilities may result in temporary cessation or cancellation of projects in which we are participating. |
• | An unfavourable resolution to our significant project claims could result in a revenue write down in future periods. |
• | Our operations are subject to weather-related and environmental factors that may cause delays in our project work. |
• | Our ability to maintain planned project margins on projects with longer-term contracts with fixed or indexed price escalators may be hampered by the price escalators not accurately reflecting increases in our costs over the life of the contract. |
• | Our customer base is concentrated, and the loss of or a significant reduction in business from a major customer could adversely affect our financial condition |
• | A significant amount of our revenue is generated by providing construction services. |
• | A change in strategy by our customers to reduce outsourcing could adversely affect our results. |
• | Our ability to grow our operations in the future may be hampered by our inability to obtain long lead time equipment and tires, which can be in limited supply during strong economic times. |
• | Reduced availability or increased cost of leasing our equipment fleet could adversely affect our results. |
• | We may not be able to access sufficient funds to finance a growth in our working capital or equipment requirements. |
• | limits our ability to obtain additional financing to fund our working capital, capital expenditures, debt service requirements, potential growth or other purposes; |
• | limits our ability to use operating cash flow in other areas of our business; |
• | limits our ability to post surety bonds required by some of our customers; |
• | places us at a competitive disadvantage compared to competitors with less debt; |
• | increases our vulnerability to, and reduces our flexibility in planning for, adverse changes in economic, industry and competitive conditions; and |
• | increases our vulnerability to increases in interest rates because borrowings under our revolving credit facility and payments under some of our equipment leases are subject to variable interest rates. |
• | Cost overruns by our customers on their projects may cause our customers to terminate future projects or expansions that could adversely affect the amount of work we receive from those customers. |
• | Because most of our customers are Canadian energy companies, a downturn in the Canadian energy industry or a global reduction in the demand for oil and related commodities could result in a decrease in the demand for our services. |
• | Lump-sum and unit-price contracts expose us to losses when our estimates of project costs are lower than actual costs. |
• | site conditions differing from those assumed in the original bid; |
• | scope modifications during the execution of the project; |
• | the availability and cost of skilled workers; |
• | the availability and proximity of materials; |
• | unfavourable weather conditions hindering productivity; |
• | inability or failure of our customers to perform their contractual commitments; |
• | equipment availability, productivity and timing differences resulting from project construction not starting on time; and |
• | the general coordination of work inherent in all large projects we undertake. |
• | Significant labour disputes could adversely affect our business. |
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KPMG LLP | Telephone | (780) 429-7300 | ||||
Chartered Accountants | Fax | (780) 429-7379 | ||||
10125 – 102 Street | Internet | www.kpmg.ca | ||||
Edmonton AB T5J 3V8 | ||||||
Canada |
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Chartered Accountants |
Edmonton, Canada |
June 10, 2013 |
Date: June 10, 2013 |
/s/ Martin Ferron |
Name: Martin Ferron |
Title: President and Chief Executive Officer |
Date: June 10, 2013 |
/s/ David Blackley |
Name: David Blackley |
Title: Chief Financial Officer |
Date: June 10, 2013 |
/s/ Martin Ferron |
Name: Martin Ferron |
Title: President and Chief Executive Officer |
Date: June 10, 2013 |
/s/ David Blackley |
Name: David Blackley |
Title: Chief Financial Officer |