Northern Frontier Corp. announces agreement to Acquire Central Water; Proposed Financing; Preliminary 2014 First Quarter Results and Conference Call Details

/THIS NEWS RELEASE IS NOT FOR DISTRIBUTION IN THE UNITED STATES OR FOR DISSEMINATION ON TO UNITED STATES NEWS WIRE SERVICES/

CALGARY, May 21, 2014 /CNW/ - Northern Frontier Corp. (TSX-V: FFF) (the "Corporation") today announced that it has agreed to acquire Central Water & Equipment Services Ltd. ("Central Water"), a leading logistics service provider in the bulk water and fluids transfer sector in western Canada.  Central Water's primary business is providing services for the bulk movement of water used in the testing of large infrastructure storage tanks and pipelines as well as dewatering and other services for industrial sites.

The acquisition is being completed pursuant to the terms and conditions of a share purchase agreement dated May 20, 2014 (the "Share Purchase Agreement") between the Corporation and Darcy Tofin, Paris Tofin and certain affiliated entities (collectively, the "Vendors").  The Share Purchase Agreement provides for the acquisition by the Corporation of all of the issued and outstanding shares of Central Water (the "Acquisition") in exchange for aggregate consideration of approximately $31.0 million, subject to an adjustment for current year growth capital expenditures made by Central Water, currently estimated to be $0.3 million, which is subject to change and will be finalized on closing (before giving effect to certain post-closing adjustments).  The consideration paid at closing of the Acquisition will consist of a cash payment of approximately $27.3 million and the issuance of approximately 1,129,944 common shares in the capital of the Corporation, with an aggregate value of approximately $4.0 million.  The cash portion of the purchase price for the Acquisition will be funded through the completion of the Offering (as described below).

Central Water generated EBITDA (as defined below under the heading "Advisories - Non-GAAP Measures") of $8.5 million for the fiscal year ended January 2, 2014, resulting in an acquisition valuation multiple of approximately 3.7x trailing EBITDA.  The completion of the Acquisition is subject to certain conditions, including the completion of the Note Offering (as described below) and the approval of the TSX Venture Exchange. The Acquisition is expected to close late in the 2nd Quarter of 2014 and is expected to be accretive to the Corporation's earnings per share for the remainder of fiscal 2014.

"Northern Frontier is very pleased to have the opportunity to add Central Water to anchor our logistics services strategy. Combining the expertise of Central Water with our other water-based services in the SAGD market will provide an expanded service offering to our clients and increases the diversification of our overall business" stated Chris Yellowega, Northern Frontier's CEO.

Acquisition Highlights

Central Water is a unique industrial service provider with a leading position in its niche sector.  The Acquisition is expected to result in the addition of new clients in the pipeline, storage tanks and terminals sector, a strengthened service position for clients in the SAGD (as described below) market and an improved market and service presence from Manitoba to northeastern British Columbia.

Offering of Senior Notes

Concurrent with the completion of the Acquisition, the Corporation intends to complete a $75 million private placement offering (the "Offering") of senior secured second lien notes (the "Notes"), via underwriters GMP Securities L.P., BMO Capital Markets and Acumen Capital Finance Partners Limited (the "Underwriters"). The Notes will bear interest at a rate determined by the Corporation, potential buyers and the Underwriters.  The Corporation intends to use the net proceeds of the Offering to: (i) finance the cash consideration payable in connection with the Acquisition; (ii) repay in full all borrowings under its senior and subordinated credit facilities; (iii) finance future capital expenditures; and (iv) for general corporate purposes, including the payment of fees and expenses associated with the Corporation's completion of the Acquisition, the Offering and the amended senior credit facility.

The Offering is expected to close immediately prior to the completion of the Acquisition.  The Corporation will issue an additional news release regarding pricing of the Notes immediately prior to completion of the Offering, which will more fully describe the terms of the Notes.  "It is expected that the Note Offering will provide Northern Frontier with long-term, stable capital at a reasonable cost, which in turn will give us additional flexibility in executing our acquisition and growth strategies" said Monty Balderston, Northern Frontier's CFO.

Preliminary 2014 Q1 Financial Results

The Corporation has also announced that, based upon information currently available to management, it anticipates first quarter of 2014 ("2014 Q1") revenue to be between $17.5 million and $18 million, compared to $15.0 million for the fourth quarter of 2013 and 2014 Q1 EBITDA to be between $3.3 million and $3.5 million, compared to $2.1 million for the fourth quarter of 2013. Consistent with the expectations disclosed in the Corporation's management's discussion and analysis for the year ended December 31, 2013, activity levels were similar to what the Corporation's predecessor entity, NEC Contractors, experienced for the first quarter of 2013.

All figures reported above with respect to the 2014 Q1 are preliminary and are subject to change and adjustment as the Corporation's 2014 Q1 financial results are finalized. Accordingly, investors are cautioned not to place undue reliance on the foregoing guidance.  The Corporation is issuing preliminary results in order to enable it to disclose such information in connection with the Offering of Notes described above, and the Corporation does not intend to provide preliminary results in the future.  The preliminary results provided in this news release constitute forward-looking statements within the meaning of applicable securities laws, are based on a number of assumptions and are subject to a number of risks and uncertainties. Actual results may differ materially. Please see the section below entitled "Advisories - Cautionary Statement Regarding Forward-looking Information".

Release of 2014 Q1 Financial Results

The Corporation has scheduled to release its first quarter 2014 financial results on Friday, May 30, 2014 at 9:30 a.m. Calgary / 11:30 a.m. Toronto Time. The call will feature remarks by Chris Yellowega, President and CEO and Monty Balderston, Executive Vice President and CFO regarding the financial results.

Conference dial-in instructions are as follows:

Toronto: 416-764-8677
North America: 888-390-0549
Conference ID: 92900775

A replay of the call will be available for one week after the event until 11:59 p.m. EST on June 6, 2014. To access the archived conference call, please dial 888-390-054 and enter passcode 900775.

Advisories

Securities Law Matters

This news release does not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale of any securities in any jurisdiction in which such offering, solicitation or sale would be unlawful. The Notes have not been and will not be qualified for distribution to the public under applicable Canadian securities laws and, accordingly, any offer and sale of the Notes in Canada will be made on a basis which is exempt from the prospectus and dealer registration requirements of such securities laws. The Notes will be offered and sold in Canada on a private placement basis only to "accredited investors" pursuant to certain prospectus exemptions. The Notes may be offered and sold in the United States only to qualified institutional buyers in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") and outside the United States in reliance on Regulation S under the U.S. Securities Act. The Notes have not been and will not be registered under the U.S. Securities Act, any state securities laws or the laws of any other jurisdiction, and may not be offered or sold in the U.S. absent registration or an applicable exemption from such registration requirements.

Non-GAAP Measure

EBITDA, which is defined by the Corporation as earnings before finance costs, taxes, depreciation and amortization, gain/loss on disposal of property and equipment and share-based compensation, is a non-GAAP measure that does not have a standardized meaning prescribed by GAAP. Therefore, this financial measure may not be comparable to similar measures presented by other issuers. Investors are cautioned that this measure should not be construed as an alternative to profit or cash flow from operating activities determined in accordance with GAAP as an indicator of the Corporation's performance. The Corporation's management believes that EBITDA is a useful supplemental measure as it provides an indication of the results generated by the principal business activities prior to consideration of how these activities are financed or how the results are taxed in various jurisdictions.

The Corporation's 2014 Q1 unaudited condensed interim consolidated financial statements and notes and its 2014 Q1 management's discussion and analysis are currently expected to be available and filed under the Corporation's profile on SEDAR at www.sedar.com on about May 29, 2014.

Cautionary Statement Regarding Forward-looking Statements

This news release includes certain statements that constitute forward-looking statements under applicable securities legislation. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology.  These forward-looking statements include, among other things, statements in respect of:

  • completion of the Acquisition and the Offering;

  • use of net proceeds from the Offering;

  • terms of the Notes;

  • anticipated benefits of completing the Acquisition and the Offering; and

  • anticipated financial results for the three month period ended March 31, 2014.

These statements are only predictions and are based upon current expectations, estimates, projections and assumptions, which the Corporation believes are reasonable but which may prove to be incorrect and therefore such forward-looking statements should not be unduly relied upon. In making such forward-looking statements, assumptions have been made regarding, among other things, industry activity, the state of financial markets, business conditions, continued availability of capital and financing, future oil and natural gas prices and the ability of the Corporation to obtain necessary regulatory approvals. Although the Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements.

By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. These risks and uncertainties include: the possibility that the parties will not proceed with the Acquisition and the Offering, that the ultimate terms of the Acquisition and the Offering will differ from those that are currently contemplated, that the Acquisition and Offering will not be successfully completed for any reason (including the failure to obtain the required approvals from regulatory authorities) and regulatory changes. Investors are cautioned that forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements.  The Corporation has no obligation to update any forward-looking statements set out in this news release, except as required by applicable law.

About Northern Frontier Corp.

Northern Frontier's strategic objective is to create a large industrial and environmental services business through a buy and build growth strategy. Currently, the Corporation provides civil construction and excavation services to the industrial industry, primarily in the in situ oil sands region south of Fort McMurray, Alberta.  Through providing these services to large industrial customers in the steam assisted gravity drainage ("SAGD") region of northeastern Alberta, the Corporation focuses on the ongoing demand for services to support operating facilities, sustaining capital expenditures to maintain production levels of those facilities and the development of new production capacity.  The Acquisition of Central Water will complement and expand upon the Corporation's current service offerings.

The Corporation's common shares and common share purchase warrants are listed on the TSX Venture Exchange under the trading symbol "FFF" and "FFF.WT", respectively.  For more information on the Corporation, investors should review the Corporation's continuous disclosure filings that are available under the Corporation's profile at www.sedar.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


SOURCE Northern Frontier Corp.

For further information:

Northern Frontier Corp.
Chris Yellowega - President and Chief Executive Officer
Phone: 587.350.7232
Email: cyellowega@nfcorp.ca

- or -

Monty Balderston - Executive Vice President and Chief Financial Officer
Phone: 587.350.7231
Email: mbalderston@nfcorp.ca