/NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE
SERVICES/Highlights:
- First quarter 2008 revenues were $35.1 million exceeding the first
quarter of 2007 by $11.0 million or 45.6%.
- Average revenue per service increased 4.5% compared to the first
quarter of 2007.
- Cash available for distribution for the first quarter of 2008 was
C$9.5 million, exceeding distributions by C$2.6 million for a 72.5%
pay out ratio.
- On April 7, 2008, the Company announced its intention to convert to a
traditional common share company by way of a non-cash rights
offering.TORONTO, May 7 /CNW/ - Keystone North America Inc. (TSX:KNA.UN) today
reported the financial results for its first quarter ended March 31, 2008. All
amounts are reported in U.S. dollars, except as otherwise noted.
"Our revenues grew over the first quarter of 2007 from both new
acquisitions and on a same store basis. The first quarter is typically our
seasonally strongest period and this quarter appears to be no exception," said
Steve Tidwell, President and CEO. "The positive impact from the acquisitions
completed in 2007, demonstrates the contribution potential of our external
growth program."
"During the quarter, we also announced our plan to convert to a
traditional common share company through our non-cash offering of rights,"
added Mr. Tidwell. "We believe the benefits, as outlined in the final
prospectus filed on April 14th 2008, will create a stronger company."
"We have experienced organic case count growth with mortality returning
from the lower December levels," said Mr. Tidwell. "Our acquisition and
organic growth programs coupled with the benefits of the non-cash rights
offering provide Keystone with a platform for improved performance. We are
very optimistic about the future of Keystone."
For the first quarter, revenues totalled $35.1 million, as compared to
$24.1 million for the first quarter of 2007. The $11.0 million, or 45.6%,
increase primarily resulted from the revenue generated by new acquisitions and
a 4.5% increase in average revenues per funeral service.
Cash available for distribution for the three month period ended
March 31, 2008 was C$9.5 million (US$9.5 million) or C$0.34 per unit, which
exceeded distributions declared by C$2.6 million. Excess cash available for
distribution for the three month period ended March 31, 2007 was
C$1.3 million. The Company's payout ratio was 72.5% in the first quarter of
2008, compared to 79.8% in the first quarter of 2007. The increased cash
available for distribution in the first quarter of 2008 is attributable to
increased same store revenues and the contribution of the 2007 acquisition
class.
Non-cash Rights Offering
On April 14, 2008, the Company filed a final short form prospectus in all
of the provinces and territories of Canada in connection with its conversion
to a traditional common share company by way of a non-cash rights offering.
The Company issued to holders of its common shares, on the record date of
April 23, 2008, rights to subscribe for and purchase five additional common
shares. These rights must be exercised prior to 5:00 p.m. (Eastern Time) on
May 15, 2008. The subscription price to exercise each right will be satisfied
by delivery of the C$4.286 principal amount of subordinated notes, which is a
component of each income participating security ("IPS"). No cash payment is
required. Subscriptions for common shares will be irrevocable.
In connection with the offering, the members of management and directors
will convert all their holdings (consisting of both Class B shares and IPSs)
into common shares of the Company on the same basis as an IPS holder that
converts.
The Board has recommended that investors exercise their rights under this
offering and urges investors to contact their broker or financial advisor as
soon as possible.
Investors who fail to exercise their rights will experience material
ownership and value dilution. Rights not exercised before 5:00 p.m. (Eastern)
on the expiry date of May 15, 2008 will be void and have no value.
To exercise their rights, investors should contact their broker or
financial advisors (CDS participant) sufficiently in advance of the expiry
date. In order to obtain additional information investors should use any of
the following resources:
BMO Capital Markets
Via the Keystone non-cash rights offering enquiries line
1 (866) 539-4393
Keystone
By contacting the secretary of Keystone
1 (813) 594-4735
Investor_Relations@keystonegroup.com
www.keystonenorthamerica.ca
Georgeson Shareholder Communications Canada, Inc.
1 (866) 656-4117
In connection with this offering, the Company has made a cash offer to
purchase the C$16 million aggregate principal amount of subordinated notes
outstanding that are not represented by IPSs, which amount, if successful,
will be financed through additional borrowings under the Company's senior
credit facility. The offer to purchase these outstanding subordinated notes
will be conditional on the closing of the rights offering. However, the
closing of the rights offering will not be conditional upon the purchase of
these outstanding subordinated notes.
The Company is the fifth largest funeral service provider in North
America operating 200 funeral homes and 16 cemeteries across the United States
and the province of Ontario, primarily in suburban and rural areas. The
Company's IPSs each consist of one common share of Keystone North America Inc.
and C$4.286 principal amount of 14.5% subordinated notes of Keystone Newport
ULC, a subsidiary of the Company.
The Company's consolidated financial statements together with the notes
thereto and management's discussion and analysis will be available on May 7,
2008 at www.sedar.com (see Note 2).
Note 1 - Reconciliation of cash from operating activities to cash
available for distributionThree Months Ended
March 31,
-------------------------
2008 2007
-------------------------
Cash from operating activities $4,320 $2,907
Adjustments:
Cash interest expense 6,118 4,255
Changes in working capital 936 (24)
Current tax expense 153 75
Provision for bad debt (317) (66)
Non-cash rights offering costs 615 -
Interest expense (other than non-cash and
IPS sub-notes) (1,686) (1,291)
Capital expenditure, net (532) (183)
Payments on debt, net (8) (78)
Class B distributions declared - (143)
Cash taxes (paid) recovered (136) 5
-------------------------
-------------------------
Cash Available for Distribution US$ $9,463 $5,457
Average rate of C$ to US$ 1.006 1.172
-------------------------
Cash Available for Distribution C$ $9,520 $6,394
-------------------------
-------------------------
Per IPS unit in C$ $0.34 $0.31
-------------------------
-------------------------
Interest accrued on IPS units in C$ 4,290 3,172
Declared dividends on IPS units in C$ 2,613 1,932
-------------------------
Total IPS distributions in C$ $6,903 $5,104
-------------------------
-------------------------
Per IPS unit in C$ $0.25 $0.25
-------------------------
-------------------------
Payout ratio 72.5% 79.8%
-------------------------
-------------------------
Note 2 - Consolidated Financial Statements
Keystone North America Inc.
Unaudited Consolidated Balance Sheets
(000's of U.S. Dollars)
As at As at
March 31, December 31,
2008 2007
-------------------------
Assets
Current assets:
Cash and cash equivalents $ 4,643 $ 2,595
Restricted short-term investments 3,336 3,604
Trade receivables, less allowances for
doubtful accounts of $2,673 and $2,511
at March 31, 2008 and December 31, 2007,
respectively 11,682 11,108
Inventories and cemetery property 10,209 10,172
Income tax receivable 43 60
Prepaid and other current assets 3,533 5,233
Future income taxes 2,376 2,239
-------------------------
Total current assets 35,822 35,011
Preneed receivables and trust funds 77,137 77,583
Restricted cemetery care trust funds 6,195 6,274
Restricted long-term investments 5,341 5,987
Property and equipment, net 106,603 107,417
Goodwill 107,500 107,608
Tradenames 35,526 35,661
Covenants not to compete, less accumulated
amortization of $6,973 and $6,410 at
March 31, 2008 and December 31, 2007,
respectively 13,167 14,029
Derivative contracts 4,399 10,057
Other assets 116 139
-------------------------
Total assets $ 391,806 $ 399,766
-------------------------
-------------------------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 10,129 $ 10,040
Dividends payable 883 926
Class B shares of subsidiary 3,298 3,936
Current maturities of long-term debt 3,157 3,336
-------------------------
Total current liabilities 17,467 18,238
Deferred revenue 92,201 92,644
Long-term debt 181,366 184,656
Future income taxes 14,166 14,344
Other long-term liabilities 84 114
Non-controlling interests in preneed funds 6,195 6,274
Shareholders' equity:
Share capital 109,771 109,771
Accumulated deficit (19,971) (14,189)
Accumulated other comprehensive loss (9,473) (12,086)
-------------------------
Total shareholders' equity 80,327 83,496
-------------------------
Total liabilities and shareholders' equity $ 391,806 $ 399,766
-------------------------
-------------------------
Unaudited Consolidated Statements of Operations
(000's of U.S. Dollars - except per share amounts)
Three months Three months
ended ended
March 31, March 31,
2008 2007
-------------------------
Revenues:
Funeral services $ 33,370 $ 23,033
Other 1,687 1,109
-------------------------
Total revenues 35,057 24,142
Costs and expenses 21,784 15,232
-------------------------
Gross profit 13,273 8,910
Other operating expenses:
Corporate, general and administrative expenses 3,669 2,396
Depreciation 1,051 747
Amortization 741 678
-------------------------
Income from operations 7,812 5,089
Interest expense 6,117 4,253
Unrealized gain (loss) on derivative contracts (8,204) 173
Other income 1,676 494
-------------------------
Income (loss) from continuing operations before
income taxes and minority interest (4,833) 1,503
Income tax expense (benefit) (1,924) 665
Minority interest - 162
-------------------------
Income (loss) from continuing operations (2,909) 676
Income (loss) from discontinued operations (282) 20
-------------------------
Net Income (loss) $ (3,191) $ 696
Weighted average number of shares outstanding 27,613,017 19,811,961
-------------------------
-------------------------
Basic and diluted income (loss)
from continuing operations $ (0.11) $ 0.03
-------------------------
-------------------------
Basic and diluted income (loss)
from discontinued operations $ (0.01) $ 0.00
-------------------------
-------------------------
Basic and diluted income (loss)
Per common share $ (0.12) $ 0.04
-------------------------
-------------------------
Unaudited Consolidated Statements of Cash Flows
(000's of U.S. Dollars)
Three months Three months
ended ended
March 31, March 31,
2008 2007
-------------------------
Operating activities:
Net income (loss) $ (3,191) $ 696
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Minority interest - 163
Payments on Class B liability (122) -
Unrealized loss on change in fair value of
Class B shares of subsidiary 64 -
Provision for future income taxes (2,175) 603
Provision for bad debt 317 66
Unrealized (gain) loss on derivative
contracts 8,204 (173)
Amortization expense 746 727
Depreciation expense 1,058 760
Loss (gain) on disposal of businesses
and assets 355 41
Changes in operating assets and liabilities (936) 24
-------------------------
Net cash provided by operating activities 4,320 2,907
Investing activities:
Business acquisitions, net of cash acquired (149) (14,380)
Cash paid to repurchase Class B shares,
net of cash received from management (592) (3,387)
Purchases of property and equipment (833) (281)
Proceeds from dispositions of business 478 -
Proceeds from restricted investments 1,200 930
-------------------------
Net cash used in investing activities 104 (17,118)
Financing activities:
Public offering and over-allotment proceeds of
common shares, net of expenses - 15,011
Public offering and over-allotment proceeds of
14.5% Subordinated Notes - 17,930
Proceeds from Credit Facility 1,000 -
Payment of deferred financing cost - (1,281)
Payments on credit facility - (300)
Borrowings on long-term debt 51 98
Payments on long-term debt (1,208) (1,008)
Cash paid for Class A dividends (2,219) (1,448)
Cash paid for Class B dividends - (180)
-------------------------
Net cash provided by (used in) financing
activities (2,376) 28,822
-------------------------
Net increase in cash 2,048 14,611
Cash and cash equivalents, beginning of period 2,595 2,824
-------------------------
Cash and cash equivalents, end of the period $ 4,643 $ 17,435
-------------------------
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 5,999 $ 3,984
-------------------------
-------------------------
Cash paid (recovered) for income taxes $ 136 $ (5)
-------------------------
-------------------------
NON-GAAP MEASURESCash Available for Distribution
The Company has historically distributed a majority of its free cash
flows from operations to holders of its IPSs, with a portion of such
distributions being interest payments on the 14.5% subordinated notes of the
Company's indirect, wholly-owned subsidiary, Keystone Newport ULC ("Keystone
ULC") (the "Subordinated Notes") and a portion being dividends on the
Company's Common Shares. The Company believes that cash available for
distribution on its IPSs provides a useful measure for evaluation of the
Company's performance. In particular, the Company believes that investors
should be able to ascertain the extent to which the distributions are funded
by operations as discussed below. The major differences between cash available
for distribution, which is not a defined term under generally accepted
accounting principles in Canada ("GAAP"), and cash provided by operating
activities as reported in the Company's financial statements are:1) Capital expenditures, net of debt incurred on equipment financing
2) Payments on debt, net of proceeds from investments
3) Cash taxes
4) Current tax expense
5) Provision for bad debts
6) Non-cash rights offering costs
7) Class B distributions declared
8) Changes in working capital
9) Adjustments to interest that in effect exclude the IPS interest,
which is included in distributions, to exclude non-cash interest
expense and to present interest expense on an accrual basis for the
period.Investors should refer to the table under the heading "Cash Available for
Distribution Summary" within the Management Discussion and Analysis for a
reconciliation of cash available for distribution to cash provided by
operating activities.
Cash available for distribution is not intended to be representative of
cash flow or results of operations determined in accordance with GAAP and does
not have a standardized meaning prescribed by GAAP. Cash available for
distribution may not be comparable to similar measures used by other
companies. Readers are cautioned that this measure should not be construed as
an alternative to net income or loss or other comparable measures determined
in accordance with GAAP as an indicator of the Company's performance or as a
measure of its liquidity and cash flow. The Company's method of calculating
non-GAAP measures may differ from the methods used by other issuers and
accordingly, the company's non-GAAP measures may not be comparable to
similarly titled measures used by other issuers.
EBITDA
Reference may be made to EBITDA, which represents earnings before
interest, provision for income taxes, gain or loss on sale of fixed assets,
depreciation and amortization, impairment losses, minority interest, change in
the market value of the Class B shares of subsidiary and other non-recurring
expenses as defined. This is a non-GAAP measure and, as there is no generally
accepted method of calculating EBITDA, the measure as calculated by the
Company may not be comparable to similarly-titled measures reported by other
companies. EBITDA is presented as management believes it is a useful indicator
of a Company's operating and financial performance. EBITDA should not be
considered by an investor as an alternative to net income or cash flows as
determined in accordance with Canadian GAAP.FORWARD LOOKING INFORMATIONCertain statements in this news release are "forward-looking statements",
which reflect the expectations of management regarding the Company's future
growth, results of operations, performance and business prospects and
opportunities. These forward-looking statements reflect management's current
reasonable expectations regarding future events and operating performance and
speak only as of the date of this news release. Forward-looking statements
involve significant risks and uncertainties, should not be read as guarantees
of future performance or results, and will not necessarily be accurate
indications of whether or not or the times at or by which such performance or
results will be achieved. A number of factors could cause actual results to
differ materially from the results discussed in the forward-looking statements
including, among others, those factors set out in the "Risk Factors" sections
of the Company's Annual Information Form dated March 27, 2008 and short form
prospectus dated April 14, 2008, which factors are incorporated herein by
reference. However, the risk factors set out therein are not exhaustive of the
factors that may affect any of the Company's forward-looking statements.
Although the forward-looking statements contained in this news release are
based upon what management believes to be reasonable assumptions, investors
cannot be assured that actual results will be consistent with these
forward-looking statements, and the differences may be material. These
assumptions, which include, management's current expectations, estimates and
assumptions about the markets the Company operates in, mix of funeral
services, interest rates, exchange rates, tax considerations and the Company's
ability to attract and retain customers and to manage its assets and operating
costs, may prove to be incorrect. Further information regarding these and
other factors is included in the Company's public filings with Canadian
securities regulatory authorities. These forward-looking statements are made
as of the date of this news release and, except as otherwise required by law,
the Company assumes no obligation to update or revise them to reflect new
events or circumstances.
%SEDAR: 00021578E
For further information: Steven A. Tidwell, Chief Executive Officer,
(813) 225-4652, stidwell@keystonegroup.com; Stephen Shaffer, Chief Financial
Officer, (813) 225-4654, sshaffer@keystonegroup.com or please visit our
investor website at http://www.keystonenorthamerica.ca/
