Northern Frontier Corp. Announces the Release of its Third Quarter Financial Results and Corporate Milestones Accomplished

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

CALGARY, Nov. 29, 2013 /CNW/ - Northern Frontier Corp. (TSX-V: FFF) (the "Corporation" or "Northern Frontier") today announced its operating and financial results for the third quarter of fiscal 2013. The Corporation's condensed interim consolidated financial statements and management's discussion and analysis ("MD&A") can be viewed on SEDAR at www.sedar.com. All financial information is prepared in accordance with International Financial Reporting Standards ("IFRS") and all dollar amounts are expressed in Canadian dollars unless otherwise indicated.

Northern Frontier achieved several key strategic milestones during the quarter including (refer to the Corporation's news release dated September 27, 2013 for additional details):

  • the closing of an equity offering for $18.3 million;

  • the establishment of a $42.0 million senior credit facility;

  • the establishment of a $12.0 million subordinated credit facility;

  • the closing of the acquisition the NEC Group and CRC assets for $56.0 million (the "Acquisition");

  • completion of the Corporation's qualifying transaction as a capital pool company; and

  • the reclassification of the Corporation as a Tier 1 issuer on the TSX Venture Exchange.

President and CEO Chris Yellowega commented, "during the third quarter we took several significant steps towards realizing our vision of creating a diverse maintenance, logistics and civil services business for the industrial energy industry. The NEC Group Acquisition provides a solid platform for us to launch our strategy and initiate our growth plans."

The Acquisition

On a trailing twelve month basis, with assumed pro forma fully loaded public costs for the same period, the Corporation estimates that it completed the Acquisition and related financings for the equivalent of 3.75 times the adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"). EBITDA is a non-GAAP financial measure, refer to the "Non-GAAP Measures" section of the Corporation's MD&A and Final Long Form Prospectus dated September 4, 2013 for details.

The Acquisition was completed on September 27, 2013, as such the financial results of Northern Frontier only include the operating activities of the Acquisition for three days. Management estimates that if the Acquisition had occurred on January 1, 2013, on a pro forma basis including fully loaded public costs of Northern Frontier, the combined entities would have generated the following for the nine months ended September 30, 2013 as compared to the stand-alone results of the NEC Group for the year ended December 31, 2012:

         
(in 000's, except as noted)   Nine
months ended
Sep 30, 2013 (2)
  Twelve
months ended
Dec 31, 2012 (3)
    (Pro forma)    
Revenue   $ 52,646   $ 42,596
Gross Profit   $ 14,615   $ 12,871
  as a % of revenue     27.8%     30.2%
EBITDA (1)   $ 12,818   $ 11,161
  as a % of revenue     24.3%     26.2%
(1)      Refer to the "Non-GAAP Measures" disclosure.
(2)      Pro forma unaudited consolidated financial results giving effect to the Acquisition of the NEC Group and CRC assets as if it occurred on January 1, 2013. Refer to the cautionary statement regarding "Pro Forma Financial Information" included later in this news release.
(3)      NEC Group and CRC assets stand-alone financial results with no pro forma adjustment for public company costs or actual financial results of the Corporation for the same period. For additional information refer to the Final Prospectus issued by the Corporation on September 4, 2013.
   

Management negotiated the Acquisition based on the financial results of fiscal 2012. The business has continued to grow throughout 2013 and management is very pleased with the overall financial performance achieved by the NEC Group.

The preliminary value allocated to the net asset acquired was:

           
Fair value of net assets acquired (in 000's)          
           
Trade and other receivables       $ 11,456
Input tax credit receivable         341
Prepaid expenses         26
Trade payables, other payables and accrued liabilities         (8,323)
Income taxes payable         (974)
          2,526
           
Property and equipment         32,207
Land         4,000
Intangible assets         13,425
Goodwill         12,607
Obligations under finance leases         (2,910)
Deferred taxes         (5,876)
           
Total consideration       $ 55,979
           

Northern Frontier Financial Results

Financial results of the NEC Group have been included in the Corporation's results since the date of acquisition on September 27, 2013.

For the three month period ended September 30, 2013, the Corporation had revenues of $0.5 million, expenditures of $0.9 million and incurred a net loss and comprehensive loss of $0.4 million. This compares to no revenues, expenses of $0.1 million and a net loss and comprehensive loss of $0.1 million for the three month period ended August 31, 2012. For the 10 month period ended September 30, 2013, Corporation had revenues of $0.5 million, expenditures of $2.1 million and incurred a net loss and comprehensive loss of $1.6 million. This compares to no revenues, expenses of $0.1 million and a net loss and comprehensive loss of $0.1 million for the nine month period ended August 31, 2012.

Proposed Bought Deal Equity Financing

Monty Balderston, Executive Vice President and CFO added, "in addition to our third quarter accomplishments, we are very excited to have added investor support through our recently announced $10.1 million bought deal equity financing lead by Acumen Capital Financial Partners Limited (the "Bought Deal") and look forward to putting this capital to work in 2014 as we see several business opportunities that we are confident that we can capitalize on." Refer to the Corporation's news release dated November 27, 2013 for additional details.

Implementation of Dividend Policy

Contingent on closing of the Bought Deal, the Corporation also announced that as part of its long-term strategy to maximize shareholder value, it has approved the implementation of a dividend policy ("Dividend Policy") commencing in fiscal 2014, whereby Northern Frontier intends to pay an annual aggregate dividend of $0.26 per common share, quarterly in arrears which equates to a 7.4% yield for participants of the equity offering completed on September 27, 2013 and the bought deal that is anticipated to close on or about December 17, 2013. The Corporation will review the Dividend Policy on an ongoing basis and may amend the policy at any time in light of Northern Frontier's then current financial position, profitability, cash flow, debt covenant compliance, legal requirement s and other factors considered relevant. As such, no assurances can be made that any future dividends will be declared and/or paid.

Outlook

Northern Frontier operates in the steam assisted gravity drainage ("SAGD") market of northeastern Alberta. Activity levels for this market have been growing and management believes it may continue to grow in excess of 20% annually for the next few years. For the remainder of fiscal 2013, management expects that the pace of activity will lessen towards year-end as the completion of summer projects and transitioning to winter projects occur. Further, the end of year holiday period tends to limit activity volumes in the fourth quarter. Management believes that Northern Frontier's overall corporate performance will be consistent with expectations as previously disclosed. The Corporation currently services three key clients in the area and is focused on adding additional clients and services in this evolving market. Management is pleased with the strength of the NEC Group and is focused on staging the company for its next phase of growth.

About Northern Frontier

Northern Frontier provides sustaining capital services to large industrial energy customers in the SAGD region of northeastern Alberta. NEC's head office and shop is located in Lac La Biche, Alberta and its field location is in Conklin, Alberta which is central to the substantial industrial energy production developments in the vicinity. The business 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.

Non-GAAP Measures

EBITDA is defined as earnings before interest, taxes, depreciation and amortization and other specific expenses and exclusive of the charges paid to CRC for the rental of assets included in the Acquisition, net of associated costs incurred by CRC related to these assets. EBITDA is a supplemental non-GAAP financial measure that is not recognized under IFRS and does not have a standardized meaning prescribed by IFRS. EBITDA should not be considered as an alternative to, or more meaningful than net profit and comprehensive income or cash flows from operating activities as determined in accordance with IFRS or as an indicator of operating performance or liquidity. Management believes that EBITDA is a useful supplemental measure as it provides an indication of the results generated by the principal business activities of the Acquisition after considering CRC's former related party relationship with the NEC Group and prior to consideration of how these activities are financed or how the results are taxed in various jurisdictions. The computations of EBITDA may not be comparable to other similarly titled measures of other companies, and accordingly EBITDA may not be comparable to measures used by other companies. 

Pro Forma Financial Information

The pro forma financial information is not intended to be indicative of the financial results of the Corporation which would have actually resulted has the acquisition occurred as assumed. Further, the pro forma financial information is not necessarily indicative of the financial results which may be achieved in the future.

Forward Looking Information

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 statements are made as of the date of this news release and the Corporation does not undertake to publicly update these forward-looking statements except in accordance with applicable securities laws. These forward-looking statements include management's expectations with regards to the Corporation's future growth and industry activity levels and the Dividend Policy.

These statements are only predictions and are based on current expectations, estimates, projections and assumptions, which the Corporation believes are reasonable but which may prove to be incorrect.  As a result, such forward-looking statements should not be unduly relied upon. In making such forward-looking statements, assumptions have been made regarding the demand for the Corporation's services and its ability to meet such demand and the Corporation's future financial and operating results. Although the Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future outcome and actual 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 are set out in the MD&A. For more information on the Corporation, investors should review the Corporation's continuous disclosure filings that are available 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:

on Northern Frontier Corp., please contact:

Chris Yellowega
President and Chief Executive Officer
Phone: 587.350.7232 or 403.880.9511
Email: cyellowega@nfcorp.ca

- or -

Monty Balderston
Executive Vice President and Chief Financial Officer
Phone: 587.350.7231 or 403.874.7408
Email: mbalderston@nfcorp.ca

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Northern Frontier Corp.

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