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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Divestco Inc. | TSXV:DVT | TSX Venture | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.01 | 0.01 | 0.015 | 0 | 01:00:00 |
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Divestco Inc. (TSX VENTURE:DVT) ("Divestco" or the "Company") is pleased to
announce its operating results for the three months ended March 31, 2013.
Divestco generated net income for the first quarter of 2013 of $2.1 million
($0.03 per share - basic and diluted) compared to $2.6 million ($0.04 per share
- basic and diluted) for the same period in 2012. EBITDA was $5 million in Q1
2013, a $2.5 million (33%) decrease from $7.5 million for the same period in
2012. The Company generated funds from operations of $5.2 million ($0.08 per
share - basic and diluted) for the first quarter of 2013, compared to $7.2
million ($0.11 per share - basic and diluted) for the same period in 2012.
EBITDA and funds from operations do not include capital expenditures of $0.1
million (March 31, 2012: $8.6 million), mainly comprised of the costs related to
new seismic programs.
During Q1 2013, Divestco generated revenue of $11.6 million compared to $14.5
million in Q1 2012, a decrease of $2.9 million (20%). Revenue in the Software
and Data segment increased by $0.1 million (5%) due to improved land software
and log data revenue offset by lower geological and geophysical software
revenue. Revenue in the Seismic Data segment decreased by $0.6 million (8%) due
to a drop in seismic participation revenue as the Company acquired more data in
Q1 2012 compared to Q1 2013. This was offset by two large seismic data sales and
fees associated with managing client surveys. Revenue in the Services segment
decreased by $2.4 million (43%) with geomatics, processing and land management
services all experiencing weaker demand as compared to Q1 2012. Focus shifted
from exploration to development activities through the industry in Q1 2013 and
this had an impact on demand for some of Divestco's services.
Operating expenses decreased by $0.3 million (5%) to $6.7 million in Q1 2013
from $7 million in Q1 2012. Salaries and wages were down $476,000 (10%) due to
lower headcount and profit-share accrual. G&A expenses were up $117,000 (5%) as
occupancy costs rose due to a scheduled increase in Divestco's lease rate offset
by the Company surrendering an additional floor of office space effective
January 1, 2013. Depreciation and amortization decreased by $2.6 million (49%)
mainly due to lower depreciation on seismic data as the Company acquired a
greater amount of data in Q1 2012 as compared to Q1 2013.
Liquidity and Working Capital
On May 9, 2013, the Company announced it had closed a new senior credit facility
of up to $11 million. The Company also received $1 million in new shareholder
loans just prior to the closing of the new facility. The proceeds were used to
retire bank and subordinated debt totaling approximately $6 million. The
facility has an expanded operating line ($8 million as compared to $5 million
under its previous facility) based on receivables aged less than 90 days and $3
million in term debt as well as a financial covenant that is better suited to
the Company's business.
Management ensures that Divestco's credit facilities, combined with its working
capital and funds from operations, will be sufficient in the short-term and
long-term to meet planned growth and to fund future capital expenditures.
Furthermore, the Company has implemented significant cost-cutting measures,
which included surrendering a significant portion of its office space lease
since 2011 and utilizing salary austerity measures during seasonally slow
periods. In addition, the Company evaluates all material capital expenditures,
mainly seismic participation surveys, before commencement to ensure they meet
appropriate funding levels.
Divestco ended Q1 2013 with a working capital deficit of $1.7 million (December
31, 2012: $7.5 million deficit), excluding deferred revenue of $4.2 million
(December 31, 2012 - $2.4 million). The improvement in working capital from the
end of 2012 was primarily due to a number of seismic data transactions completed
in Q1 2013 offset by an unpredictably slow quarter for the services segment. As
a result of closing these seismic deals, the Company has significantly reduced
its payables since the end of 2012. The Company's funded debt to equity ratio
was 0.56:1 at March 31, 2013 compared to 0.64:1 at December 31, 2012.
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Financial Position (Thousands) Balance as at
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Mar 31 Dec 31 Dec 31
----------------------------------------------------------------------------
2013 2012 2011
----------------------------------------------------------------------------
Total Assets $ 40,277 $ 41,945 $ 43,761
Working Capital (Deficit) (1) (1,748) (7,483) 297
Long-Term Financial Liabilities (2) 7,470 7,622 8,610
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1. Excludes the current portion of deferred revenue of $4.2 million
(December 31, 2012: $2.4 million; December 31, 2011: $4.6 million).
2. Includes long-term debt obligations, deferred rent obligations, sublease
loss provision and other long-term liabilities. The long-term debt
obligations are comprised of the Company's subordinated debt,
shareholder loans and finance leases.
Operations Update
During Q1 2013, Divestco completed a 3D seismic participation survey, covering
an area of approximately 93 square kilometers. Total cost for the survey was
approximately $3.5 million, with most of the cost incurred in Q4 2012.
Mr. Stephen Popadynetz, CEO commented: "Returning to profitability in Q1 2013
demonstrates that Divestco's efforts to control costs and focus on our assets
are starting to pay dividends. Our first quarter seismic data library sales in
2013 were excellent and we are pleased with the validation of our seismic data
inventory. As well, despite the softness in our Services group, we are seeing
increased activity levels which should result in improved results going forward.
Our efforts to expand into international markets are expected to result in
increased revenue in 2013. Additionally, our Software group is rapidly
developing new products which are about to hit the marketplace and we believe
will lead to significant growth later this year. With all of these positive
growth catalysts, we remain optimistic that Divestco can start to deliver
additional profitable quarters to our shareholders."
Non-GAAP Measures
The Company's condensed consolidated interim financial statements have been
prepared in accordance with IFRS. Certain measures in this document do not have
any standardized meaning as prescribed by IFRS and are considered additional
GAAP measures. While these measures may not be comparable to similar measures
presented by other issuers, they are described and presented in this MD&A to
provide shareholders and potential investors with additional information
regarding the Company's results, liquidity, and its ability to generate funds to
finance its operations. These measures include:
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
Divestco uses EBITDA as a key measure to evaluate the performance of its
segments and divisions as well as the Company overall, with the closest IFRS
measure being net income or loss. EBITDA is a measure commonly reported and
widely used by investors as indicators of the Company's operating performance
and ability to incur and service debt, and as a valuation metric. The Company
believes EBITDA assists investors in comparing the Company's performance on a
consistent basis without regard to financing decisions and depreciation and
amortization, which are non-cash in nature and can vary significantly depending
upon accounting methods or non-operating factors such as historical cost.
EBITDA is not a calculation based on IFRS and should not be considered an
alternative to net income or loss in measuring the Company's performance. As
well, EBITDA should not be used as an exclusive measure of cash flow, because it
does not consider the impact of working capital growth, capital expenditures,
debt principal reductions and other sources and uses of cash, which are
disclosed in the consolidated statements of cash flows. While EBITDA has been
disclosed herein to permit a more complete comparative analysis of the Company's
operating performance and debt servicing ability relative to other companies,
investors should be cautioned that EBITDA as reported by Divestco may not be
comparable in all instances to EBITDA as reported by other companies. Investors
should also carefully consider the specific items included in Divestco's
computation of EBITDA.
The following is a reconciliation of EBITDA with net income (loss):
----------------------------------------------------------------------------
Three months ended March 31
----------------------------------------------------------------------------
(Thousands) 2013 2012
----------------------------------------------------------------------------
Net Income $ 2,084 $ 2,645
Finance Costs (Income) 270 (360)
Depreciation and Amortization 2,613 5,165
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EBITDA $ 4,967 $ 7,450
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Working capital
Working Capital is calculated as current assets minus current liabilities
(excluding deferred revenue). Working capital provides a measure that can be
used to gauge Divestco's ability to meet its current obligations.
Additional GAAP Measure
Funds from operations
Divestco reports funds from operations because it is a key measure used by
management to evaluate its performance and to assess the ability of the Company
to finance operating and investing activities. Funds from operations excludes
certain working capital changes and other sources and uses of cash, which are
disclosed in the consolidated statements of cash flows.
Funds from operations is not a calculation based on IFRS and should not be
considered an alternative to the consolidated statements of cash flows. Funds
from operations is a measure that can be used to gauge Divestco's capacity to
generate discretionary cash flow. Investors should be cautioned that funds from
operations as reported by Divestco may not be comparable in all instances to
funds from operations as reported by other companies. While the closest IFRS
measure is cash from operating activities, funds from operations is considered
relevant because it provides an indication of how much cash generated by
operations is available before proceeds from divested assets and changes in
certain working capital items.
The following reconciles funds from operations with cash from operating activities:
----------------------------------------------------------------------------
Three months ended March 31
----------------------------------------------------------------------------
(Thousands) 2013 2012
----------------------------------------------------------------------------
Cash from Operating Activities $ 3,988 $ 12,761
Changes in Non-Cash Working Capital Balances
Related to Operating Activities 980 (5,147)
Interest Paid (Received) 243 (407)
----------------------------------------------------------------------------
Funds from Operations $ 5,211 $ 7,207
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Financial Highlights
----------------------------------------------------------------------------
Financial Results (Thousands, Except Per Share Amounts)
----------------------------------------------------------------------------
Three months ended March 31
----------------------------------------------------------------------------
2013 2012 $ Change % Change
----------------------------------------------------------------------------
Revenue $ 11,618 $ 14,466 $ (2,848) -20%
Operating Expenses 6,655 7,015 (360) -5%
Other Loss (Income) (4) 1 (5) N/A
----------------------------------------------------------------------------
EBITDA 4,967 7,450 (2,483) -33%
Finance Costs (Income) 270 (360) 630 N/A
Depreciation and Amortization 2,613 5,165 (2,552) -49%
----------------------------------------------------------------------------
Income before Income Taxes 2,084 2,645 (561) -21%
Income Tax Expense - - - N/A
----------------------------------------------------------------------------
Net Income $ 2,084 $ 2,645 $ (561) -21%
Per Share - Basic and Diluted 0.03 0.04 (0.01) -25%
----------------------------------------------------------------------------
Funds from Operations $ 5,211 $ 7,207 $ (1,996) -28%
Per Share - Basic and Diluted 0.08 0.11 (0.03) -27%
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Shares Outstanding 66,865 66,615 N/A N/A
Weighted Average Shares
Outstanding
Basic 66,775 66,616 N/A N/A
Diluted 66,811 66,616 N/A N/A
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Segment Review Summary
----------------------------------------------------------------------------
Three months ended March 31, 2013 (Thousands)
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Corporate
Software Services Data & Other Total
----------------------------------------------------------------------------
Revenue $ 2,232 $ 3,183 $ 6,203 $ - $ 11,618
EBITDA 617 262 5,401 (1,313) 4,967
Finance costs
(income) 84 42 144 - 270
Depreciation and
amortization 702 155 1,638 118 2,613
Income (loss) before
income taxes (169) 65 3,619 (1,431) 2,084
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended March 31, 2012 (Thousands)
----------------------------------------------------------------------------
Corporate
Software Services Data & Other Total
----------------------------------------------------------------------------
Revenue $ 2,132 $ 5,584 $ 6,750 $ - $ 14,466
EBITDA 487 1,947 5,989 (973) 7,450
Finance costs
(income) 78 54 (492) - (360)
Depreciation and
amortization 800 230 3,934 201 5,165
Income (loss) before
income taxes (391) 1,663 2,547 (1,174) 2,645
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Divestco Inc.
Condensed Consolidated Interim Statements of Financial Position
----------------------------------------------------------------------------
At Mar 31 At Dec 31
----------------------------------------------------------------------------
(Thousands - Unaudited) 2013 2012
----------------------------------------------------------------------------
Assets
Current Assets
Cash $ 952 $ 1,320
Funds held in trust 34 18
Accounts receivable 7,704 7,134
Prepaid expenses, supplies and deposits 381 357
Income taxes receivable 281 196
----------------------------------------------------------------------------
Total current assets 9,352 9,025
Investment in affiliated company 139 137
Participation surveys in progress - 3,508
Property and equipment 4,487 4,607
Intangible assets 26,299 24,668
Total assets $ 40,277 $ 41,945
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Liabilities and Shareholders' Equity
Current Liabilities
Bank indebtedness $ 4,450 $ 4,450
Accounts payable and accrued liabilities 4,188 9,624
Deferred revenue 4,218 2,420
Current loss on sublease loss provision 326 326
Current portion of long-term debt
obligations 2,014 1,986
Current portion of tenant inducement 122 122
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Total current liabilities 15,318 18,928
Deferred rent obligations 398 189
Long-term debt obligations 3,807 4,115
Sublease loss provision 925 1,006
Tenant Inducements 1,359 1,389
Total liabilities 21,807 25,627
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Shareholders' Equity
Equity instruments 7,235 7,216
Contributed surplus 7,878 7,829
Retained earnings (deficit) 3,357 1,273
----------------------------------------------------------------------------
Total shareholders' equity 18,470 16,318
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Total liabilities and shareholders' equity $ 40,277 $ 41,945
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Divestco Inc.
Condensed Consolidated Interim Statements of Income and Comprehensive Income
----------------------------------------------------------------------------
Three months ended March 31
----------------------------------------------------------------------------
(Thousands, Except Per Share Amounts -
Unaudited) 2013 2012
----------------------------------------------------------------------------
Revenue $ 11,618 $ 14,466
----------------------------------------------------------------------------
Operating expenses
Salaries and benefits 4,331 4,808
General and administrative 2,275 2,166
Depreciation and amortization 2,613 5,165
Stock compensation expense 49 41
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Total operating expenses 9,268 12,180
----------------------------------------------------------------------------
Finance costs 270 (360)
Other loss (income) (4) 1
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Income before income taxes 2,084 2,645
----------------------------------------------------------------------------
Income taxes
Current - -
----------------------------------------------------------------------------
Net income and comprehensive income for the year $ 2,084 $ 2,645
Net income per share
Basic and Diluted $ 0.03 $ 0.04
Weighted average number of shares
Basic and Diluted 66,811 66,616
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Divestco Inc.
Condensed Consolidated Interim Statements of Changes in Equity
----------------------------------------------------------------------------
Number of Number of
Shares Share Warrants
(Thousands - Unaudited) Issued Capital Issued Warrants
----------------------------------------------------------------------------
Balance as at January 1,
2012 66,610 $ 74,571 16,280 $ 1,860
Net income and
comprehensive income for
the period
Transactions with owners,
recorded in equity
contributions by and
distributions to owners:
Issuance of Class A
common shares 5 1
Share-based payment
transactions
----------------------------------------------------------------------------
Balance as at March 31,
2012 66,615 $ 74,572 16,280 $ 1,860
Balance as at January 1,
2013 66,758 $ 7,216 - $ -
Net income and
comprehensive income for
the period
Transactions with owners,
recorded in equity
contributions by and
distributions to owners:
Issuance of Class A
common shares 107 19
Share-based payment
transactions
----------------------------------------------------------------------------
Balance as at March 31,
2013 66,865 $ 7,235 - $ -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Retained
Equity Contributed Earnings Total
(Thousands - Unaudited) Instruments Surplus (Deficit) Equity
----------------------------------------------------------------------------
Balance as at January 1,
2012 $ 76,431 $ 5,663 $ (67,383) $ 14,711
Net income and
comprehensive income for
the period 2,645 2,645
Transactions with owners,
recorded in equity
contributions by and
distributions to owners:
Issuance of Class A
common shares 1 1
Share-based payment
transactions 41 41
----------------------------------------------------------------------------
Balance as at March 31,
2012 $ 76,432 $ 5,704 $ (64,738) $ 17,398
Balance as at January 1,
2013 $ 7,216 $ 7,829 $ 1,273 $ 16,318
Net income and
comprehensive income for
the period 2,084 2,084
Transactions with owners,
recorded in equity
contributions by and
distributions to owners:
Issuance of Class A
common shares 19 19
Share-based payment
transactions 49 49
----------------------------------------------------------------------------
Balance as at March 31,
2013 $ 7,235 $ 7,878 $ 3,357 $ 18,470
----------------------------------------------------------------------------
Divestco Inc.
Condensed Consolidated Interim Statements of Cash Flows
----------------------------------------------------------------------------
Three months ended March 31
----------------------------------------------------------------------------
(Thousands - Unaudited) 2013 2012
----------------------------------------------------------------------------
Cash from (used in) operating activities
Net income for the period $ 2,084 $ 2,645
Items not affecting cash:
Equity investment income (2) (1)
Depreciation and amortization 2,613 5,165
Amortization of tenant inducements (30) (28)
Deferred rent obligations 210 (258)
Unrealized foreign exchange loss (2) 2
Non-cash employment benefits 19 1
Share-based payments 49 41
Finance costs (income) 270 (360)
----------------------------------------------------------------------------
Funds from operations 5,211 7,207
Changes in non-cash working capital balances (980) 5,147
Interest received (paid) (243) 407
----------------------------------------------------------------------------
Net cash from operating activities 3,988 12,761
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Cash from (used in) financing activities
Bank indebtedness - 550
Advances to affiliated company - 14
Repayment of long-term debt obligations (299) (329)
Net cash from (used in) financing activities (299) 235
----------------------------------------------------------------------------
Cash from (used in) investing activities
Additions to intangible assets (3,563) (9,780)
Decrease in participation surveys in progress 3,508 1,299
Purchase of property and equipment (55) (151)
Payments towards sublease loss provision (89) (89)
Deferred development costs (590) (587)
Changes in non-cash working capital balances (3,268) (3,417)
----------------------------------------------------------------------------
Net cash from (used in) investing activities (4,057) (12,725)
----------------------------------------------------------------------------
Increase (decrease) in cash (368) 271
Cash, beginning of period 1,320 1,547
----------------------------------------------------------------------------
Cash, end of period $ 952 $ 1,818
----------------------------------------------------------------------------
About the Company
Divestco is an exploration services company that provides a comprehensive and
integrated portfolio of data, software, and services to the oil and gas
industry. Through continued commitment to align and bundle products and services
to generate value for customers, Divestco is creating an unparalleled set of
integrated solutions and unique benefits for the marketplace. Divestco's breadth
of data, software and services offers customers the ability to access and
analyze the information required to make business decisions and to optimize
their success in the upstream oil and gas industry. Divestco is headquartered in
Calgary, Alberta, Canada and trades on the TSX Venture Exchange under the symbol
"DVT".
This press release contains forward-looking information related to the Company's
capital expenditures, projected growth, view and outlook with respect to future
oil and gas prices and market conditions, and demand for its products and
services. Statements that contain words such as "could', "should", "can",
"anticipate", "expect", "believe", "will", "may" and similar expressions and
statements relating to matters that are not historical facts constitute
"forward-looking information" within the meaning applicable by Canadian
securities legislation. Although management of the Company believes that the
expectations reflected in such forward-looking information are reasonable, there
can be no assurance that such expectations will prove to have been correct
because, should one or more of the risks materialize, or should the assumptions
underlying forward-looking statements or forward-looking information prove
incorrect, actual results may vary materially from those described in this press
release as intended, planned, anticipated, believed, estimated or expected.
Readers should not place undue reliance on forward-looking statements or
forward-looking information. All of the forward-looking statements and
forward-looking information of the Company contained in this press release are
expressly qualified, in their entirety, by this cautionary statement. Except
where required by law, the Company does not assume any obligation to update
these forward-looking statements or forward-looking information if conditions or
opinions should change.
In particular, this press release contains forward-looking statements pertaining
to the following: Company's ability to keep debt and liquidity at acceptable
levels, improve/maintain its working capital position and maintain profitability
in the current economy; availability of external and internal funding for future
operations; relative future competitive position of the Company; nature and
timing of growth; oil and natural gas production levels; planned capital
expenditure programs; supply and demand for oil and natural gas; future demand
for products/services; commodity prices; impact of Canadian federal and
provincial governmental regulation on the Company; expected levels of operating
costs, finance costs and other costs and expenses; future ability to execute
acquisitions and dispositions of assets or businesses; expectations regarding
the Company's ability to raise capital and to add to seismic data through new
seismic shoots and acquisition of existing seismic data; treatment under tax
laws; and new accounting pronouncements.
These forward-looking statements are based upon assumptions including: future
prices for crude oil and natural gas; future interest rates and future
availability of debt and equity financing will be at levels and costs that allow
the Company to manage, operate and finance its business and develop its software
products and various oil and gas datasets including its seismic data library,
and meet its future obligations; the regulatory framework in respect of
royalties, taxes and environmental matters applicable to the Company and its
customers will not become so onerous on both the Company and its customers as to
preclude the Company and its customers from viably managing, operating and
financing its business and the development of its software and data; and that
the Company will continue to be able to identify, attract and employ qualified
staff and obtain the outside expertise as well as specialized and other
equipment it requires to manage, operate and finance its business and develop
its properties.
These forward-looking statements are subject to numerous risks and
uncertainties, certain of which are beyond the Company's control, including:
general economic, market and business conditions; volatility in market prices
for crude oil and natural gas; ability of Divestco's clients to explore for,
develop and produce oil and gas; availability of financing and capital;
fluctuations in interest rates; demand for the Company's product and services;
weather and climate conditions; competitive actions by other companies;
availability of skilled labour; failure to obtain regulatory approvals in a
timely manner; adverse conditions in the debt and equity markets; and government
actions including changes in environment and other regulation.
FOR FURTHER INFORMATION PLEASE CONTACT:
Divestco Inc.
Mr. Stephen Popadynetz
CEO, President and CFO
587-952-8152
Divestco Inc.
Mr. Danny Chiarastella
Vice President, Finance
587-952-8027
www.divestco.com
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