Armtec Reports Financial Results for the Fourth Quarter and Full Year 2014

Toronto Stock Exchange: ARF; ARF.DB

CONCORD, ON, March 24, 2015 /CNW/ - Armtec Infrastructure Inc. ("Armtec" or the "Company") (TSX: ARF; ARF.DB) Armtec today reported financial results for the year and the fourth quarter ended December 31, 2014.

Summary of 2014 Year-End and Fourth-Quarter Results:

  • Revenue in 2014 was $473.9 million, an increase of $18.3 million or 4.0% from the prior year.  Revenue for the Precast Concrete Solutions business unit was $313.2 million, up $20.3 million, or 6.9%, compared to 2013 and revenue for the Drainage Solutions business unit was $160.7 million, a decrease of $2.0 million, or 1.2%, from the same period in 2013.  Precast revenue benefited from increased activity in rail and highway infrastructure projects.  Improved engineered precast volumes were primarily due to the rail infrastructure project running from Toronto Pearson International Airport to Union Station in downtown Toronto, Ontario.  While certain market areas in Drainage Solutions improved during the second half of the year, it did not make up for the softness experienced in the first half of 2014.  For the fourth quarter, overall revenue was $129.6 million, a 20.1% increase over the prior year.
  • The loss from operations for the year was $31.8 million compared to earnings from operations of $28.0 million in 2013.  As a result of the decline in the Company's market enterprise value during the fourth quarter of 2014, Armtec reviewed the carrying value of its assets as required under International Financial Reporting Standards and as a result recorded a non-cash impairment charge of approximately $46.9 million in the fourth quarter. Excluding the non-cash impairment charge, earnings from operations for 2014 would have been $15.1 million.
  • Adjusted EBITDA for 2014 was $28.7 million, below the prior year by $11.4 million.  The impact of the costs associated with the review of strategic alternatives and related adjustment was approximately $2.0 million resulting in a 2014 EBITDA of $26.7 million.
  • The audited consolidated financial statements describe matters and conditions related to the previously announced extension, waiver and sales process agreements that indicate the existence of a material uncertainty that may cast significant doubt upon Armtec's ability to continue as a going concern.

"The Company achieved solid revenue growth driven by key project wins in our Precast business unit, and improved volumes in agricultural and natural resource applications in our Drainage business," said Mark Anderson, President and Chief Executive Officer. "In the near term, Armtec faces a challenging outlook across its markets, with sharp declines in the price of oil and the Canadian dollar and the ability and timing of governments in Ontario and Quebec to adequately finance pent up infrastructure needs. However, longer-term market fundamentals and Armtec's uniqueness in terms of scale and capabilities remain favourable.  To realize this potential and maintain our leadership position, our Board of Directors has determined that the recently announced sale and investment process, back-stopped by Brookfield, represents the best course of action at this time for the Company and all of its stakeholders."

Recent Developments:

  • On February 25, 2015, the Company provided an update on its ongoing review of its strategic alternatives and the execution of an extension, waiver and sales process agreement (the "Extension Agreement") with Brookfield Capital Partners Fund III LP ("Brookfield"), in which the Company's term facility with Brookfield (the "Brookfield Facility") was amended in order to extend the maturity date of the October 2014 amendment  to May 11, 2015, and provide a new short-term facility of up to $20.0 million (the "Third Incremental Facility").  The Company drew $10.0 million on the Third Interim Facility in March 2015.
  • The Extension Agreement also includes a commitment from Brookfield for its affiliate, Trisura Guarantee Insurance Co., to provide Armtec with up to $150.0 million of bonding on a cost to complete basis.
  • As part of its ongoing review of strategic alternatives, the Company has commenced a process to solicit interest in a sale of, or investment in, Armtec (the "Sale and Investment Process"), led by BMO Capital Markets.
  • Brookfield has agreed to support the Sale and Investment Process, and has also agreed that if no transaction emerges from the Sale and Investment Process or otherwise which would result in Brookfield's indebtedness being repaid in full, together with certain other liabilities of Armtec, Brookfield will indirectly, through a new entity ("Newco") acquire all of Armtec's assets in exchange for Brookfield's indebtedness on the terms described below (the "Brookfield Transaction"). Pursuant to the terms of the Brookfield Transaction, Newco would assume Armtec's obligations to its trade creditors and employees.
  • On March 2, 2015, Armtec announced that the TSX informed the Company that it has commenced a review process with respect to the continued listing of its securities on the TSX. The Company has been granted 60 days to comply with all TSX requirements for continued listing. If Armtec cannot demonstrate that it meets all TSX requirements for continued listing on or before May 1, 2015, the Company's securities will be delisted 30 days from such date.
  • On March 6, 2015, Armtec entered into a fifth amending agreement with its revolving lenders for its asset based loan ("Revolving Credit Facility"), amending the Revolving Credit Facility to conform to the Extension Agreement.  In connection with their consent to the Extension Agreement, Armtec paid a fee of $150,000 to its revolving lenders.

Summary of Results


Three Months
Ended

Year Ended

(in thousands of Canadian dollars except per share amounts)

December
 31, 2014

December
31, 2013

December
31, 2014

December
31, 2013


(unaudited)

(unaudited)








Revenue

$

129,641

$

107,964

$

473,866

$

455,522







Gross margin

$

19,150

$

17,278

$

72,825

$

84,112

As a % of revenue


14.8%

16.0%

15.4%

18.5%

Selling, general and administrative

$

15,805

$

14,337

$

57,886

$

56,001

As a % of revenue


12.2%

13.3%

12.2%

12.3%

Impairment of assets

$

46,898

$

-

$

46,898

$

-

As a % of revenue


36.2%

-%

9.9%

-%

(Loss) earnings from operations

$

(43,558)

$

2,852

$

(31,834)

$

28,022

As a % of revenue


(33.6)%

2.6%

(6.7)%

6.2%

Finance expense

$

9,030

$

8,003

$

33,043

$

31,087

As a % of revenue


7.0%

7.4%

7.0%

6.8%

Net loss attributable to owners of the Company

$

(77,531)

$

(4,495)

$

(86,691)

$

(2,907)

As a % of revenue


(59.8)%

(4.2)%

(18.3)%

(0.6)%

Basic and diluted loss per share

$

(3.22)

$

(0.19)

$

(3.60)

$

(0.12)







EBITDA (1)

$

6,167

$

5,926

$

26,667

$

40,073

As a % of revenue


4.8%

5.5%

5.6%

8.8%

Adjusted EBITDA (1)

$

8,175

$

5,926

$

28,675

$

40,073

As a % of revenue


6.3%

5.5%

6.1%

8.8%







Breakdown of depreciation and amortization by financial statement line item:


Cost of sales

$

1,576

$

1,651

$

6,132

$

6,471


Selling, general and administrative

1,251

1,423

5,471

5,580






Total depreciation and amortization

$

2,827

$

3,074

$

11,603

$

12,051

(1) Please refer to the section entitled "Non-GAAP Measure" below for a definition of EBITDA and to the separately issued management, discussion and analysis for the year ended December 31, 2014 and December 31, 2013 for a reconciliation of this non-GAAP measure.

Full Year Results
Revenue
Armtec recorded revenue of $473.9 million in 2014 which was $18.3 million or 4.0% higher than 2013 levels at $455.5 million.  Lower activity levels in the Company's building construction, municipal infrastructure and natural resource markets offset improved activity in light rail and highway infrastructure projects.  Improved engineered precast volumes related to the rail infrastructure project running from Toronto Pearson International Airport to Union Station in downtown Toronto, Ontario ("UP Express").  Projects in oil & gas applications in the Prairie market area partially mitigated the shortfalls in the Pacific Precast Concrete Solutions ("Precast") market where the Kitimat Smelter Modernization ("Kitimat") project reached completion in 2014 compared to full production in 2013.  Armtec's portion of the Kitimat smelter modernization project was announced in December of 2011 to supply precast components to expand and upgrade Rio Tinto Alcan's aluminum smelter in Kitimat, British Columbia.  The severe winter weather conditions during the first four months of 2014 impacted the Precast business unit ("BU") through significant project schedule delays and hindered its ability to manufacture at its outdoor facilities at seasonally normal production rates in the Central Precast market area.

After a slow start to the year, the Drainage Solutions ("Drainage") BU revenue exceeded prior year levels.  The start to 2014 was heavily impacted in Central Canada by adverse weather conditions causing the postponement of many infrastructure projects and agricultural drainage installations.  During the second half of the year, the agricultural market recovered, enabling Central and Eastern Canada to recover to prior year levels.  Improvements were also noted in infrastructure applications offsetting the softness in building construction and natural resource markets.  Selling prices that were adversely impacted by competitive activity in corrugated high-density polyethylene pipe ("HDPE") products in the earlier quarters, recovered slightly in the fourth quarter of 2014.  Corrugated steel pipe volumes and pricing levels in Western Canada remained depressed with the activity of the new market entrants attempting to gain market share.  International Drainage product revenue remained below prior year levels as a result of the reduced activity and higher tariffs in the Russian market.

(Loss) Earnings from Operations
The loss from operations for 2014 was $31.8 million compared to earnings from operations of $28.0 million in 2013.  As a result of the decline in the Company's market enterprise value during 2014, Armtec reviewed the carrying value of its assets as required under International Financial Reporting Standards ("IFRS") and as a result recorded a non-cash impairment charge of approximately $46.9 million during the fourth quarter.  The non-cash impairment charge was allocated on a pro rata basis to property, plant and equipment and intangible assets in the impaired cash-generating units ("CGU or CGUs") as identified by the Company.  Please refer to the separately issued audited consolidated financial statements for more details on the non-cash impairment charge.  Excluding the non-cash impairment charge, earnings from operations for 2014 would have been $15.1 million.

Gross margin in 2014 of $72.8 million, or 15.4% of revenue, was a reduction of $11.3 million as compared to $84.1 million, or 18.5% of revenue in 2013.  Despite the improvements in the second half of 2014 and supported by the commencement of the UP Express project, performance in the Precast BU for 2014 lagged 2013 results.  Performance was impacted by lower volumes in the Pacific and Central market areas, a negative shift in product mix to lower margin products and under-absorbed operating overheads associated with the negative impacts of weather at the start of the year.  The Central market area was impacted severely by lower volumes and challenging manufacturing conditions caused primarily by the prolonged harsh winter that disrupted project schedules and significantly increased production costs through the first four months of the year.  Engineered precast revenue in 2013 also consisted of multiple parking garages which delivered higher margins than the replacement bridge and oil & gas projects in 2014.  The Pacific market area completed the Kitimat project during 2014 which was a key contributing project for 2013.

Margins were affected in the Drainage BU by lower revenue and the delayed start-up of production in many facilities due to adverse weather conditions causing the under-absorption of operating overheads.  The excess inventory and capacity primarily in the Central and Eastern market areas, caused by the delayed start to the construction season, resulted in downward pricing pressures despite rising resin and steel costs.  Competition in the Western market area continued to compress margins of corrugated steel pipe ("CSP") products as costs of galvanized steel rose.  Gains were made in improved manufacturing processes resulting in improved raw materials utilization.

Selling, general and administrative expenses for 2014 were $57.9 million, compared to $56.0 million in 2013.  Planned investment in additional resources to support the sales and Precast operational functions, severances and foreign exchange losses were offset by lower incentive costs and reduced discretionary spend.  In addition, Armtec incurred $1.2 million in costs associated with the review of strategic alternatives during 2014.

Depreciation and amortization was $11.6 million, consistent with 2013 levels of approximately $12.1 million.

EBITDA of $26.7 million was below the prior year by $13.4 million.  Removing the impact of the costs associated with the review of strategic alternatives of $1.2 million and related adjustment of $0.8 million, Adjusted EBITDA was $28.7 million.

Fourth Quarter Results
Revenue
Armtec recorded revenue of $129.6 million for the three months ended December 31, 2014, a $21.7 million or a 20.1% increase over the three months ended December 31, 2013.  Significant contributions were realized on the UP Express Soundwall project in the quarter as the project moved into full production.  Further improved engineered precast volumes in the Central market area offset the decline in the Pacific market area with the completion of the Kitimat project in the quarter.  Revenue from standard precast was consistent with prior years with improved volumes in the Prairie market area offsetting the continued softness in the Eastern market area.  During 2013, significant growth was realized in the natural resource market as a result of the Kitimat project.  Revenue from the Drainage BU improved by 7.5% over the prior year reflecting improved agricultural installations and natural resource applications.

(Loss) Earnings from Operations
The loss from operations for the fourth quarter of 2014 was $43.6 million as compared to earnings from operations of $2.9 million for the 2013 comparative period.  As a result of the decline in the Company's market enterprise value during 2014, Armtec reviewed the carrying value of its assets as required under IFRS and as a result recorded a non-cash impairment charge of approximately $46.9 million during the fourth quarter.  The non-cash impairment charge was allocated on a pro rata basis to property, plant and equipment and intangible assets in the impaired CGUs as identified by the Company.  Please refer to the separately issued financial statements for more details on the non-cash impairment charge.  Excluding the non-cash impairment charge, earnings from operations in the fourth quarter of 2014 were $3.3 million.

The gross margin for the three months ended December 31, 2014 was $19.2 million, an increase of $1.9 million, from $17.3 million in the same period of 2013.  As a percentage of revenue, the gross margin in the quarter was 14.8%, compared with 16.0% in the same period of 2013.  Excluding depreciation, gross margin in the fourth quarter of 2014 was $20.7 million or 16.0% of revenue as compared to $18.9 million or 17.5% of revenue in the comparative quarter of 2013.  Performance in the Drainage BU continued to be impacted by increased raw material costs, compounded by the impact of the weakening Canadian dollar, and ongoing competitive pricing pressures resulting in compressed margins in both HDPE and steel products.  Increased competition in the Western market area continued to impact selling prices of CSP products adding to the downward pressure on margins.  Performance in the Precast BU improved with the increase in revenue delivering a consistent gross margin as a percent of revenue.

Selling, general and administrative expenses for the three months ended December 31, 2014 were $15.8 million as compared to $14.3 million in 2013.  Armtec incurred approximately $1.2 million in fees associated with the ongoing review of its strategic alternatives in the fourth quarter.  Excluding these fees, 2014 expenses were consistent with 2013 levels.

Depreciation and amortization in the quarter of $2.8 million was consistent with 2013 levels.  EBITDA performance for the quarter of $6.2 million was favourable when compared to the prior year of $5.9 million.  The improved results in the Precast BU were offset by lower margins in the Drainage BU and the fees incurred for the review of strategic alternatives.  Excluding the cost of the strategic review, Adjusted EBITDA was $8.2 million.

Results by Segment
Drainage Solutions


Three Months Ended

Year Ended

(in thousands of Canadian dollars)

December
31, 2014

December
31, 2013

December
31, 2014

December
31, 2013


(unaudited)

(unaudited)








Revenue

$

42,038

$

39,112

$

160,650

$

162,607






(Loss) earnings from operations

$

(9,361)

$

2,608

$

(2,170)

$

16,594

As a % of revenue

(22.3)%

6.7%

(1.4)%

10.2%

Depreciation and amortization

$

742

$

535

$

2,349

$

2,130

As a % of revenue

1.8%

1.4%

1.5%

1.3%

Impairment of assets

$

9,870

$

-

$

9,870

$

-






EBITDA

$

1,251

$

3,143

$

10,049

$

18,724

As a % of revenue

3.0%

8.0%

6.3%

11.5%

Revenue
Revenue for Drainage in 2014 was $160.7 million, a decrease of $2.0 million, or 1.2%, from the same period in 2013.  While certain market areas improved during the second half of the year, this did not offset the softness experienced throughout the first half of 2014.  The decline in revenue in Western Canada and International was offset by improved sales in Central Canada.  Improvements were made in infrastructure volumes offsetting the softness in natural resources, primarily in mining applications.  New building construction activity continued to lag prior year levels.  Agricultural revenue levels recovered during the second half of 2014, exceeding prior year levels.

(Loss) Earnings from Operations
Earnings from operations in 2014, excluding the non-cash impairment charge of $9.9 million, were $7.7 million, a decrease of $8.9 million as compared to the prior year.  Manufacturing cost improvements were delivered through the focus on controllable expenses and other performance improvement plans during 2014.  Gains were made with the utilization of raw materials and production throughput particularly related to plastic products.  However, with the delayed start to the construction season, many production facilities, particularly in Central and Eastern Canada remained closed for longer periods than normal in 2014 in order to mitigate the cost of labour and overheads and increased inventory levels.  Downward pressure on pricing, at a time when steel and resin raw material costs were increasing and the Canadian dollar was weakening was predominately caused by two issues.  First, the pricing pressure in Western Canada continued due to the entry of new CSP producers in Alberta and Saskatchewan.  Second, HDPE product pricing in Central and Eastern Canada remained compressed throughout most of the year due to excess capacity that was the result of the slow start to the 2014 installation season.  Due to a reorganization in Drainage, severance costs were partially offset by tighter cost controls in selling, general and administrative spend resulting in a $0.5 million higher spend than 2013.  Depreciation and amortization were consistent with 2013.  EBITDA for the Drainage BU of $10.0 million was $8.7 million below 2013 levels.

Precast Solutions


Three Months Ended

Year Ended

(in thousands of Canadian dollars)

December
31, 2014

December
31, 2013

December
31, 2014

December
31, 2013


(unaudited)

(unaudited)








Revenue

$

87,603

$

68,852

$

313,216

$

292,915






(Loss) earnings from operations

$

(27,366)

$

5,223

$

(9,904)

$

29,882

As a % of revenue

(31.2)%

7.6%

(3.2)%

10.2%

Depreciation and amortization

$

1,672

$

2,156

$

7,655

$

8,419

As a % of revenue

1.9%

3.1%

2.4%

2.9%

Impairment of assets

$

35,943

$

-

$

35,943

$

-






EBITDA

$

10,249

$

7,379

$

33,694

$

38,301

As a % of revenue

11.7%

10.7%

10.8%

13.1%

Revenue
Precast revenue for 2014 at $313.2 million was up $20.3 million, or 6.9%, over the $292.9 million of 2013.  The growth in engineered precast revenue was mainly attributable to the commencement of the UP Express project in September of 2014.  The Central and Pacific market areas experienced lower revenue over the prior year.  In 2013, the Central market area was performing at full capacity with a number of parking garages and flexwall projects. However in 2014, bridge structures were the dominant product. Softer market conditions provided fewer opportunities for parking garages and flexwall work.  Revenue in the Pacific market area declined due to the completion of the Kitimat project in 2014.  The Prairie market area realized improved revenue with increased activity related mainly to oil & gas initiatives as well as bridge projects.

Standard precast revenue was consistent with prior year levels with growth in the Pacific and Prairie market areas offsetting weather related declines experienced in the first four months of the year in the Eastern and Central market areas.

(Loss) Earnings from Operations
Overall, earnings from operations in 2014, excluding the non-cash impairment charge of $35.9 million, were $26.0 million, a decrease of $3.8 million as comparted to the prior year.  Engineered precast gross margin declined due to the unfavourable mix of projects as compared to the previous year.  As the Kitimat project in the Pacific market area wound down, new projects in the ramp-up stage were at expected lower gross margin levels.  Despite the improved revenue in the Prairie market area, the less favourable project mix contributed lower incremental earnings.  Offsetting these declines in project mix was the commencement of the UP Express project in the fourth quarter of 2014.

The Central market area produced more bridge components which generated lower contributions than the parking garage and flexwall projects that were the main drivers of performance in 2013.  In addition, results were impacted in the first quarter of 2014 by the severe weather conditions, project schedule delays, production cost increases related to the incremental resources required to manufacture in the extreme temperatures, and additional costs to maintain the temperature of manufacturing inputs in the Company's outdoor facilities.  Cure times for concrete took longer and labour was impacted by the ability to work outdoors in the extreme winter conditions, reducing productivity to well below seasonal norms.  The combination of not achieving expected output levels and incurring higher operating costs had a significant impact on first quarter earnings as compared to 2013.  The resultant delays impacted other projects in those facilities.  Depreciation and amortization were $7.6 million or $0.8 million lower than the prior year due to the limited capital investments made in the year.

Outlook
This section contains forward-looking information.  For more information please see the section entitled "Caution Regarding Forward-Looking Statements".

On February 25, 2015, Armtec announced that as part of its ongoing review of strategic alternatives it was commencing a Sale and Investment Process.  Management will continue to work with its legal and financial advisors to complete the Sale and Investment Process in the second quarter of 2015, and if necessary, implement the Brookfield Transaction.  See "Recent Developments".

The long-term outlook for Armtec's markets remains slightly favourable; driven by a reasonably stable macro-economic climate in Canada and ongoing infrastructure investments required across the country.  The demand factors for Armtec's products appear stable to favourable with solid infrastructure prospects in the Prairie provinces and the potential for improved government spending on infrastructure in Ontario and Quebec.

In the near term, market conditions across Canada remain mixed with downward pressure.  Engineered precast backlog at December 31, 2014 was $112 million compared with $129 million at the end of 2013.  In Eastern and Central Canada, newly elected Liberal governments in the provinces of Quebec and Ontario have announced plans to increase infrastructure spending.  While these intentions are positive, significant concerns exist over the high levels of public debt and the ability of these provincial governments to deliver significantly increased spending in a timely manner.

Entering 2015, the provinces in Western Canada demonstrated the greatest opportunity with demand expected in residential, commercial and infrastructure construction driven largely from investments in highways, bridges and, to a lower extent, oil & gas initiatives.  However, recent sharp declines in the price of oil has caused future investments in oil & gas projects to be scrutinized and/or delayed, tempering the potential growth rate in the Prairies.  In addition, the lower oil price is likely to have an adverse effect on public infrastructure spending, commercial development and residential housing in Alberta.

Near term opportunities are expected from improved United States ("US") market demand with specific prospects identified for engineered precast products, primarily for the Pacific and Soundwall market areas.  It is anticipated that international shipments for drainage products will remain depressed throughout 2015 due to the unfavourable geo-political environment, especially in Russia.  Armtec continues to evaluate opportunities to increase its presence in other international markets.

Improved margins are anticipated in the Drainage BU as efforts to increase product selling prices should be assisted by lower costs for resin and steel in the first half of 2015.  As steel and resin inputs are largely affected by changes in the US dollar exchange rate, a weaker Canadian dollar will offset much of the savings related to lower commodity prices.

Despite the significantly lower Canadian dollar and more uncertain economic conditions, management believes that 2015 should generate earnings from operations that are similar to 2014. Below is a summary of management's estimates for 2015:

For the year ended December 31

2015

(in millions of Canadian dollars)




Consolidated revenue

$470 - $485

EBITDA

$28 - $33

Consolidated capital expenditures

$8 - $10

Conference Call
Management will host a conference call at 10:00 a.m. (ET) on Wednesday, March 25, 2015 to discuss the results. Investors who wish to participate can access the call using the following numbers:  1-800-319-4610 or +1-604-638-5340 outside Canada and the US.  The call will be archived on Armtec's website at armtec.com.

A taped rebroadcast will be available to listeners following the call until midnight on Friday, April 24, 2015. To access the rebroadcast, please dial 1-800-319-6413 or +1-604-638-9010 outside of Canada and the US and quote the passcode 3271#.

Armtec's full consolidated financial statements, notes to financial statements and management's discussion and analysis are available at www.sedar.com or at armtec.com.

About Armtec Infrastructure Inc.
Armtec is a manufacturer and marketer of a comprehensive range of infrastructure products and engineered construction solutions for customers in a diverse cross-section of industries that are located in every region of Canada, as well as in selected markets globally. These markets include Canada's national and regional public infrastructure markets and private sector markets in agricultural drainage, building construction and natural resources. Armtec operates through a network of offices and production facilities across the country. Armtec operates in two business units: Drainage Solutions manufactures and markets corrugated high- density polyethylene pipe, corrugated steel pipe and other drainage related products including small bridge structures. Precast Concrete Solutions manufactures and markets highly engineered precast systems such as parking garages, bridges, sport venues and building envelopes as well as standard precast products such as steps, paving stones and utility vaults.

Non-GAAP Measure
EBITDA
References to EBITDA are to earnings before finance (income) expense – net, income taxes, depreciation and amortization, certain non-recurring expenses and certain other non-cash amounts.  Management believes that in addition to net earnings, EBITDA is a useful supplemental measure of cash available prior to debt service, changes in working capital, capital expenditures and income taxes.  However, EBITDA is not a recognized measure under GAAP.  Investors are cautioned that EBITDA should not be construed as an alternative to net and comprehensive earnings determined in accordance with GAAP as an indicator of Armtec's performance or as an alternative to cash flows from operating, investing and financing activities as a measure of Armtec's liquidity and cash flows.  Armtec's method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, Armtec's EBITDA may not be comparable to similarly named measures used by other issuers.

Risks and Uncertainties
Armtec is subject to certain risks and uncertainties that could have a material -adverse effect on Armtec's results of operations, business prospects, financial condition, and the trading price of Armtec's securities.  These risks and uncertainties are largely derived from Armtec's capital structure and business environment.

For a full description of the risks and uncertainties facing the Company. Please refer to the section entitled "Risks and Uncertainties" in Armtec's separately issued management's discussion and analysis available at www.sedar.com or at armtec.com.

Capital and Liquidity Risk
Armtec faces a number of challenges with respect to its current capital structure and significant levels of debt, including restrictive covenants under the Senior Notes, the Brookfield Facility and the Revolving Credit Facility and the need to maintain significant liquidity to operate in the ordinary course.

Armtec's borrowings mature as follows: the Senior Notes mature on September 22, 2017; the Debentures mature on June 30, 2017; and each of the Brookfield Facility and the Revolving Credit Facility matures on December 21, 2016 (and the Third Interim Facility matures on May 11, 2015).

As described further above in "Recent Developments", on February 25, 2015, Armtec entered into the Extension Agreement and commenced the Sale and Investment Process.  In the event a satisfactory offer to buy or recapitalize Armtec is not obtained, Brookfield and Armtec have agreed that Brookfield will indirectly acquire all of Armtec's assets in exchange for Brookfield's indebtedness on the terms set out in the Extension Agreement.  If the Brookfield Transaction is implemented, neither Newco nor Brookfield will assume any of Armtec's obligations under its Senior Notes or its Debentures.

There can be no assurance that the Sale and Investment Process, an investment or the Brookfield Transaction will provide any recovery for the holders of Armtec's Senior Notes, Debentures or Common Shares.  Any recovery would be limited to sale or investment transaction proceeds in excess of the amount owing to Brookfield and Armtec's other senior lenders, which will be nil in the event Armtec pursues the Brookfield Transaction.

The Company agreed in the Extension Agreement not to pay the interest payment on the Senior Notes that was due on March 22, 2015 (the "March Interest Payment") nor other payments on the Senior Notes and Debentures unless Brookfield's indebtedness is paid in full.  On March 19, 2015, the Company announced that the March Interest Payment would not be made.  The indenture governing the Senior Notes provides for a 30 day cure period in the event Armtec does not pay any interest payment when due.  The Extension Agreement provides that a failure of Armtec to pay the March Interest Payment will not terminate the Extension Agreement.

If Armtec and Brookfield pursue the Brookfield Transaction, it is intended to be completed pursuant to a court-supervised process to be agreed by Armtec and Brookfield.  Implementation of the Brookfield Transaction or a Superior Transaction is subject to a number of conditions and other risks and uncertainties including the receipt of the final approval of the court and all necessary regulatory approvals, as well as other conditions.

Caution Regarding Forward-Looking Statements
This news release contains "forward-looking" statements (including, but not limited to, those set out under the headings "Recent Developments" and "Outlook") within the meaning of applicable securities legislation which involve known and unknown risks, uncertainties and other factors which may cause the actual results, events, performance or achievements of Armtec or industry results, to be materially different from any future results, events, performance or achievements expressed or implied by such forward-looking statements.  Forward-looking statements typically contain such words or phrases as "may", "outlook", "objective", "intend", "estimate", "anticipate", "should", "could", "would", "will", "expect", "believe", "plan" and other similar terminology suggesting future outcomes or events.  Forward-looking statements reflect current expectations regarding future results, events, performance and achievements and are based on information currently available to Armtec's management, anticipated operating and financial results of Armtec and current and anticipated market conditions.

Forward-looking statements involve numerous assumptions and should not be read as guarantees of future results, events, performance or achievements.  Such statements will not necessarily be accurate indications of whether or not such future results, events, performance or achievements will be achieved.  You should not unduly rely on forward-looking statements as a number of factors, many of which are beyond the control of Armtec, could cause actual results, events, performance or achievements to differ materially from the results, events, performance or achievements discussed in the forward-looking statements, including, but not limited to the factors discussed in Armtec's materials filed with the Canadian securities regulatory authorities from time to time.  These factors also include, but are not limited to, known and unknown risks with respect to: capital and liquidity risk: restrictive covenants and obligations under the Senior Notes, the Brookfield Facility and the Revolving Credit Facility; access to bonding and letters of credit; delisting of securities; competition; cost estimates vs. actual profit in respect of large projects; credit risk in respect of Armtec's receivables; fluctuations in operating results; seasonality and adverse weather; relationships with suppliers; lack of long-term agreements; the outcome of existing legal proceedings; future claims and litigation; industry cyclicality; ineffective change management; availability and price volatility of raw materials; acquisition and expansion risk; current global financial conditions; reduction in demand for Armtec's products; the ability to attract and retain key personnel; competition for labour; current and future environmental obligations pursuant to federal, provincial and municipal environmental laws and regulations; currency rate fluctuations; product liability in respect of both Armtec's products and the products incorporated from third parties; expiration of rights under license and distribution arrangements; operating hazards; potential infringement in respect of Armtec's intellectual property and any of Armtec's licensed intellectual property; collective bargaining; pension plans; interest rates; information management; uninsured and underinsured losses with respect to Armtec's insurance policies; current insurance coverage; changes to securities laws and corporate governance standards; changes in and Armtec's compliance with respect to income tax and other tax laws; geographical risk; and geopolitical risk.

Although the forward-looking statements contained in this news release are based upon what management of Armtec believes are reasonable assumptions, Armtec cannot assure investors that actual results, events, performance or achievements will be consistent with these forward-looking statements.  These cautionary statements qualify all forward-looking statements in this news release.  These forward-looking statements are made as of the date of this news release and, except as required by applicable law, Armtec assumes no obligation to update or revise them to reflect new events or circumstances.

SOURCE Armtec Infrastructure Inc.

For further information: please contact: Carrie Boutcher, Vice President & Corporate Secretary, Tel: (647) 795-9290

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http://www.armtec.com

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