HALIFAX, March 28, 2012 /CNW/ - Clarke Inc. ("Clarke" or the "Company") (TSX: CKI CKI.DB CKI.DB.A) today announced its results for the three months and year ended December 31, 2011.
Basic loss per share from continuing operations for the year ended December 31, 2011 was $0.47, compared to basic earnings per share of $1.30 for the year ended December 31, 2010, a decline of $1.77 per share. Book value per share at December 31, 2011 was $5.31, a decrease of $0.10 or 1.85% from a book value per share of $5.41 on December 31, 2010.
Net loss attributable to equity holders of the Company for the year ended December 31, 2011 was $2.6 million compared with net income of $30.7 million earned in 2010. During the year ended December 31, 2011, the Company had net realized and unrealized losses on its publicly traded securities of $18.5 million, compared to net realized and unrealized gains of $6.8 million in 2010.
Net loss for 2011 was driven by a series of factors and events. The Company's investment portfolio decreased in value mainly due to net realized and unrealized losses on its publicly traded securities. The Home Heating segment continued to deliver strong sales volumes due in part to incremental sales associated with businesses acquired in 2010 and 2011. However, profitability was negatively impacted due to several factors including a stronger Canadian dollar which compressed profit margins on U.S. dollar denominated sales, as well as reduced production efficiencies in the residential tank division (which have since been addressed). The Freight Transportation segment delivered increased revenues. The efficiencies introduced over the last two years enabled these increases to translate into solid earnings growth in this segment. Income from discontinued operations represents the results of Countdown, which includes the gain on the sale of its digital licensing business (representing the remaining business of the former Entertainment segment owned 50% in a joint venture with the founders) to a private buyer.
During the year the Company redeemed $18.3 million outstanding principal amount of its convertible debentures maturing on December 31, 2012. Additionally, the Company completed a substantial issuer bid ("SIB") pursuant to which the Company purchased for cancellation 3,000,000 of its issued and outstanding Common Shares at a purchase price of $5.00 per Common Share.
RESULTS OF OPERATIONS
Highlights of the consolidated financial statements for the three months and year ended December 31, 2011 compared to the three months and year ended December 31, 2010 are as follows:
| (in millions, except per share amounts) | For the three months ended December 31, 2011 $ |
For the three months ended December 31, 2010 $ |
For the year ended December 31, 2011 $ |
For the year ended December 31, 2010 $ |
| Revenue and other income | 72.3 | 68.0 | 206.1 | 214.3 |
| Net income (loss) attributable to equity holders of the Company | 16.4 | 22.5 | (2.6) | 30.7 |
| Other comprehensive income (loss) | (0.1) | 0.2 | - | (0.1) |
| Comprehensive income (loss) attributable to equity holders of the Company | 16.3 | 22.7 | (2.6) | 30.6 |
| Basic EPS - continuing operations | 0.78 | 1.08 | (0.47) | 1.30 |
QUARTER ENDED DECEMBER 31, 2011
Fourth quarter revenue and other income increased as a result of increased revenue generated in the Freight Transportation and Home Heating segments. Higher revenue in the Freight Transportation segment is due primarily to an increased focus on revenue growth in that segment. The improved efficiencies established by management of the Company's freight companies have enabled these increased revenues to translate into a meaningful increase in earnings. Higher revenues in the Home Heating segment are due to incremental sales associated with the PNA and Gil-Fab businesses acquired in 2011. This increase in revenue was partially offset by reduced residential tank sales volumes and the appreciation of the Canadian dollar on U.S. dollar denominated sales. The Company generated income from continuing operations of $16.1 million in the quarter compared to $20.0 million in the same period in the prior year. This result was driven largely by the accounting results of the defined benefit pension plans which generated a recovery of $2.6 million in the fourth quarter of 2011 compared to $9.3 million for the same period in 2010. Specifically, a decrease in the assumed discount rate for both years led to a larger increase in the defined benefit asset in the prior year than in the current year. Net income from discontinued operations for both years consists of the results of the former Entertainment segment, which was entirely divested during 2011.
Overall the value of our portfolio of publicly traded securities recovered in the fourth quarter of 2011 and 2010, leading to comprehensive income attributable to equity holders of the Company of $16.3 million and $22.7 million respectively.
For the three months ended December 31, 2011, Clarke's basic EPS from continuing operations was $0.78, compared to $1.08 for the same quarter in 2010. This was reflective of the results of operations for each quarter respectively, combined with the reduced number of shares outstanding in both 2011 and 2010 after SIB and NCIB activity.
Net cash provided by operating activities was $7.9 million for the fourth quarter of 2011, compared to $11.1 million during the fourth quarter of 2010. The majority of this cash flow from operations was provided by the Freight Transportation and Home Heating segments, with combined EBITDA for the two segments in the fourth quarters of 2011 and 2010 of $4.5 million and $5.0 million, respectively.
Net cash used in investment activities was $1.3 million in the fourth quarter of 2011, compared to net cash provided of $0.5 million in the same period in 2010. As liquidity improved throughout 2011, the Company made strategic investments in the Home Heating segment. Net security sales in the fourth quarter of 2011 totalled $2.7 million, with purchases of $1.5 million and sales of $4.2 million. By comparison, $2.0 million of net security sales occurred in the fourth quarter of 2010, with purchases of $5.6 million and sales of $7.6 million.
Throughout 2011 the Company incurred additional capital expenditures in our Freight Transportation segment. Our Freight Transportation segment spent $1.9 million on fixed assets in the fourth quarter of 2011 compared to $1.5 million in 2010. These purchases are expected to result in improved future efficiencies. The Company will continue to ensure that all subsidiaries have sufficient capital to meet their operating requirements, both in terms of working capital and fixed assets.
Throughout 2011 and 2010 the Company has continued to reduce debt levels, repaying short term borrowings and long-term debt that is recourse to Clarke to improve borrowing costs and better insulate Clarke from refinancing and business risk. This is somewhat offset by additional debt acquired from Home Heating segment acquisitions. In the fourth quarter of 2011, we continued to return capital to investors through the repurchase of our own securities, returning $15.1 million to shareholders in the period through a substantial issuer bid for Common Shares. In 2010, we had a cash outlay of $3.1 million on the repurchase of Common Shares and convertible debentures. Net cash used in financing activities for the fourth quarter of 2011 was $15.2 million compared to $11.0 million for the same period in 2010.
Discontinued operations returned cash of $5.1 in 2011, as a result of the disposition of the Countdown digital licensing business of the former Entertainment segment. Discontinued operations returned nominal cash in 2010, as a result of the restructuring and disposition of the CD and DVD business of the former Entertainment segment.
YEAR ENDED DECEMBER 31, 2011
Clarke's Investment segment delivered losses before income taxes of $5.7 million during the year ended December 31, 2011, compared to income of $19.3 million for the year ended December 31, 2010. The market value of the Company's investment portfolio decreased by $29.0 million to $77.3 million during 2011, mainly as a result of net realized and unrealized losses on marketable securities of $18.5 million for the year ended December 31, 2011 and $3.9 million of net securities sold. That compared unfavorably to $6.8 million net realized and unrealized gains on publicly traded investments during the year ended December 31, 2010 and $4.5 million of net securities sold.
The Company's Freight Transportation segment continues to benefit from increased efficiencies and greater revenue focus in 2011. Revenue and other income for the year ended December 31, 2011 was $177.5 million compared to $158.8 million in 2010. The segment delivered EBITDA of $15.2 million for the year ended December 31, 2011, a significant improvement over EBITDA of $12.0 million achieved a year ago.
Clarke's Home Heating segment had revenues for the year ended December 31, 2011 that were $1.6 million higher when compared to 2010 due to incremental sales associated with businesses acquired in 2010 and 2011. This increase in sales was partially offset by reduced residential tank sales volumes in the United States and Canada, as well as the impact of the appreciation of the Canadian dollar on U.S. dollar denominated sales. EBITDA for the year ended December 31, 2011 was $5.0 million, compared to $9.0 million in 2010. In addition to the factors noted above, EBITDA in 2011 was negatively impacted by reduced production efficiencies in the residential tank division, which have since been addressed. In addition, in 2010 the Home Heating segment realized a one-time gain of approximately $2.3 million associated with the acquisition of Parrsboro Metal Fabricators Inc., and in 2011 incurred an expense of approximately $0.4 million related to a long-term compensation plan for certain senior managers.
The Other segment consists of real estate used primarily in the Freight Transportation segment, together with the Company's IT services, human resource functions and private investments in associates. The results of the pension plans are also reflected in the Other segment, as well as the interest payable on the two series of convertible debentures issued by the Company.
Income from discontinued operations in 2011 represents the results of Countdown, which includes the gain on the sale of its digital licensing business (representing the remaining business of the former Entertainment segment owned 50% in a joint venture with the founders) to a private buyer. Total proceeds on closing to the Company were $5.0 million net of the repayment of certain indebtedness. This resulted in a gain to Clarke of $7.2 million. On the closing date, an additional US $1.75 million in proceeds to Clarke was available if certain earn-out targets were met in future periods. In 2011, the first earn out payment was achieved in the amount of $0.5 million. This amount was added to the gain on sale for a total of $7.7 million for the year ended December 31, 2011. At this time, due to the uncertainty surrounding the remaining US $1.25 payments achievable in future periods, no amount has been realized in respect of these earn-outs. The results of the former Entertainment segment, including this gain, are included with discontinued operations. Income from discontinued operations in 2010 includes the loss on the Madacy CD and DVD business, which was restructured and ultimately divested in the fourth quarter of 2010.
OUTLOOK
During 2011, Clarke, through its 75%-owned subsidiary Granby, acquired a Quebec-based manufacturer of commercial tanks and a Maine-based distributor of heating products. Also in 2011, the Freight Transportation segment acquired a business that provides over-the-road transport of produce and other refrigerated freight and represents the Company's entry into this line of service. These strategic acquisitions are expected to improve each segment's competitive position, and are illustrative of the manner in which Clarke intends to support and grow its core businesses. Clarke continues to provide direct support to other core businesses by aiding managers with the review of possible growth opportunities, and working with existing partners in the energy services sector in the development of a new venture in which Clarke has subsequent to December 31, 2011, taken a meaningful, non-controlling position.
Clarke will continue to seek out investment opportunities that, in management's view, will deliver attractive returns in the long-term. We will, where possible, invest alongside experienced operators and strategic partners in businesses that demonstrate growth or turnaround potential. Clarke will remain very active on its shareholders' behalf, utilizing the Company's investment experience and strategic relationships to build businesses that are expected to deliver long-term shareholder value.
Given the opportunity, we will continue to repurchase the Company's convertible debentures and Common Shares at times and prices that management feels are beneficial to the Company. We will also constantly review the Company's portfolio of investments, divesting of mature investments and increasing Clarke's position where there is an opportunity to build long-term value.
Further information about Clarke, including Clarke's Consolidated Financial Statements and Management's Discussion & Analysis for the year ended December 31, 2011, is available at www.sedar.com and www.clarkeinc.com.
About Clarke
Halifax-based Clarke Inc. invests in undervalued businesses and participates actively where necessary to enhance performance and increase return. Clarke's securities trade on the Toronto Stock Exchange (CKI, CKI.DB; CKI.DB.A); for more information about Clarke Inc., please visit our website at www.clarkeinc.com.
Note on Forward-Looking Statements and Risks
This press release may contain or refer to certain forward-looking statements relating, but not limited to, the Company's expectations, intentions, plans and beliefs with respect to the Company. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "does not expect", "is expected", "budget", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or equivalents or variations, including negative variations, of such words and phrases, or state that certain actions, events or results, "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking statements include, without limitation, those with respect to the future price of securities held by the Company, changes in these securities holdings, changes to the Company's hedging practices, currency fluctuations, requirements for additional capital, changes to government regulations and the timing and possible outcome of pending litigation. Forward-looking statements rely on certain underlying assumptions that, if not realized, can result in such forward-looking statements not being achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements.
With respect to the Company's Investment segment, such risks and uncertainties include, without limitation, the Company's investment strategy, legal and regulatory risks, general market risk, potential lack of diversification in the Company's investments, reliance on certain key executives, interest rates and foreign currency fluctuations and other factors. With respect to the Company's Freight Transportation segment, such risks and uncertainties include, without limitation, competition, expiry of certain leases, labour relations, the use of third party service providers, dependence on certain personnel, fuel costs, weather conditions, customer relationships, claims, litigation and insurance, government regulation of the transport industry and other factors. With respect to the Company's Home Heating segment (formerly the Steel Tanks segment), such risks and uncertainties include, without limitation, the costs of housing and major consumer products, energy costs, alternative energy sources, steel costs, product liability claims, foreign exchange risk, and other factors. Other general risks and uncertainties include, without limitation, environmental considerations, use of information technology and information systems, safety issues, concentration of sales among a small number of customers, the seasonality of business cycles for certain segments, commodity market risk, risks associated with investment in derivative instruments and other factors.
Although the Company has attempted to identify important factors that could cause actual actions, events or results or cause actions, events or results not to be estimated or intended, there can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Other than as required by applicable Canadian securities laws, the Company does not update or revise any such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Accordingly, readers should not place undue reliance on forward-looking statements.
Matthew Towns
Vice President Investments
Clarke Inc.
Telephone: (902) 442-3989
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