First quarter results
Three months ended March 31, 2017 vs. three months ended March 31, 2016
Macro Enterprises Inc. posted consolidated revenue of $12.7 million, a slight increase over last year's first quarter revenue results of $9.1 million. The increase over prior year was due to a general pick up in work activity carrying over from prior year, however, activity declined substantially quarter over quarter. Work levels continue to remain below historical averages as a result market uncertainty, some scheduling and permitting issues compounded by commodity price volatility. Revenue during the quarter was split fairly evenly between MSA maintenance and integrity work and smaller projects being performed. Revenue during the period ended March 31, 2016 included recurring integrity and maintenance work from its existing clients under master service agreements.
Operating expenses were 96.3 % of revenue in the quarter compared to 95.2 % in the same quarter last year.
The Company's operating margins remained higher than historical averages due to the mix of variable and necessary fixed costs being incurred. In addition, the Company incurred pre-job spending and business development costs on project work anticipated to commence in the second quarter. All aspects of the Company's operations are diligently being monitored and streamlined to continue to realize efficiencies and costs savings while ensuring the highest degree of health, safety and environmental standards are maintained.
General and administrative expenses were $1.8 million, up $220,000 from the $1.6 million recorded prior year.
The Company will continue to contain its overhead expenditures while ensuring its business development plans are achieved despite these challenging market conditions. The additional costs incurred during the quarter focused on specific project opportunities that the Company feels are highly likely to proceed.
Depreciation of property, plant and equipment was $1.4 million. The decrease over prior year was a result of reduced capital expenditures being made and the aging of the Company's existing fleet of equipment. Depreciation is calculated at various declining balance methods across the Company's multiple categories of property, plant and equipment and is used in guiding the annual capital expenditure estimates. Residual values, methods of amortization and useful lives of the assets are reviewed annually and adjusted if appropriate.
During the first quarter the Company recognized a non-cash loss of $461,000 on the mark-to-market fair value re-measurement of its preferred shares at period end.
Finance costs of $0.3 million were higher than prior year but remained in-line with its prior quarters' fees. The increase over first quarter 2016 was due to the premium fees and expenses paid to its banking syndicate for two waivers and amendments made under its senior secured credit facility. However, also included in the finance costs were $72,000 of amortized deferred transaction costs relating to the establishment of the credit facility and $42,000 of effective interest rate payments made on its preferred shares.
Income tax recovery in the quarter of $750,000 was at an effective rate of 22.3% which approaches the enacted tax rates of 26% after appropriate deductions.
Net loss in the quarter was $2.6 million (($0.08) per share) compared to a net loss of $2.9 million (($0.10) per share) recognized prior year. The recognition of the loss during the quarter was a result of reduced levels of work activity compounded by diminished margins, impacted by pre-job spending and business development costs, and non-cash adjustments booked including a loss on re-measurement of the preferred shares and stock-based compensation charges.
With a solid balance sheet, enhanced liquidity and its industry leading health, safety and environmental practices, the Company is in excellent financial shape to address the continued market and commodity price volatility.
The Company will maintain its focus on working with blue chip pipeline owners and operators to carry out their construction and maintenance programs across Canada.
The Company expects second quarter revenues to be almost double its first quarter revenues with a corresponding return to operational profitability. The Company incurred business development costs in excess of $0.6 million for the period ending March 31, 2017, in addition to the $3.0 million incurred in 2016, as accounting for in its operating expenditures, relating to large scale projects management remains optimistic will proceed and result in contracts. Recurring revenues from its existing master service agreements will continue to represent the bulk of activity for the calendar year. The Company anticipates other project work to pick up materially in the latter half of fiscal 2017.
Macro's core business is providing pipeline and facilities construction and maintenance services to major companies in the oil and gas industry. The Company is based in Fort St. John, B.C. Its shares are listed on the TSX Venture Exchange under the symbol MCR. Information on the Company's principal operating unit, Macro Industries Inc., can be found at www.macroindustries.ca.
SOURCE: Macro Enterprises Inc.
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