Company restates 1Q18 results to reflect change in accounting policy under new IFRS revenue recognition standard.
WINNIPEG, August 27, 2018 – Empire Industries Ltd. (TSX-V: EIL) today reported its unaudited consolidated financial results for the quarter ended June 30, 2018, as well as restated financial results for the quarter ended March 31, 2018. The unaudited consolidated financial statements and MD&A have been filed on SEDAR and can be viewed at sedar.com or at empind.com.
“Empire continues to stay on track with its plan to return to profitability,” said Guy Nelson, Executive Chairman and Chief Executive Officer of Empire. “The Company expects to ramp up its deliveries and processing of its record backlog during the second half of 2018 and throughout 2019,” added Nelson. “The Company strengthened its working capital by $5.7 million at the end of 2Q18 and this is expected to help improve our profitability in 3Q18 and after because it enables the Company to procure our required inputs with more favorable terms, in a more timely manner.”
Summary of second quarter 2018 consolidated results
- Contract Backlog as of June 30, 2018 was $280 million, up 31% from $214 million at the Company’s March 31, 2018 report.
- Revenues increased by $1.3 million (4%), to $33.6 million from $32.2 million in 2Q17. This increase is driven by an increase in the number of projects that the Company has secured.
- Adjusted EBITDA in 2Q 2018 was NIL compared to $3.1 million in 2Q17. This decrease is driven by reduced adjusted gross margins and higher selling, general and administrative costs in the period.
- Net Income in 2Q18 was a loss of $1.2 million compared to net income of $1.6 million in 2Q17. This decrease is largely driven by the factors described above.
Summary of Q2 2018 Segmented Financial Results
1 Adjusted earnings (loss) before interest, tax, depreciation and amortization (Adjusted EBITDA) is not defined by IFRS. The definition of Adjusted EBITDA does not take into account the Company’s share of profit of an associate investment, gains and losses on the disposal of assets, fair value changes in foreign currency forward contracts and non-cash components of stock-based compensation. Adjusted EBIT is the result of the Company’s Adjusted EBITDA less depreciation and amortization expenses. While not IFRS measures, Adjusted EBITDA and Adjusted EBIT are used by management, creditors, analysts, investors and other financial stakeholders to assess the Company’s performance and management from a financial and operational perspective.
Adoption of IFRS 15 Accounting Standard, Restatement of First Quarter 2018
Empire has implemented a change of accounting standard in respect of IFRS 15 (Revenue from Contracts with Customers) which came into effect on January 1, 2018. IFRS 15 provides guidance for circumstances when there is an inability to reliably estimate progress on performance obligations that are earned over time. Under such circumstances, revenue is recognized only to the extent that it offsets the costs incurred, resulting in any projected profit being deferred until a reliable estimate of the performance obligation can be made. This is different from the “percentage of completion” revenue recognition method that the Group has previously used, under which profits are earned progressively as the project progresses.
Applying the provisions of IFRS 15, Empire has concluded that contracts with a high degree of technical risk should be accounted for in this manner. Empire has identified three such contracts in its current backlog. For those three contracts, Empire is deferring any profit and immediately recognizing any projected losses. Empire has applied the standard retroactively, to demonstrate the effect on its financial statements as if the policy was in place for all periods presented.
This has resulted in a reduction of shareholders’ equity of $3.5 million as of December 31, 2017 ($10.9 million as of January 1, 2017.)
In compliance with this change, Empire has also filed re-stated first quarter 2018 financial statements and MD&A. These have been filed on SEDAR and can be viewed at sedar.com or at empind.com. Readers are encouraged to review the re-stated filings for the full details of the restatement. A summary of the key income statement and balance sheet changes is as follows:
| Item | Mar 31 2018 Original Filing |
Mar 31 2018 Restated Filing |
Variance |
| Revenue | $33.7 million | $33.5 million | ($0.2 million) |
| Adjusted EBITDA | $ 1.5 million | $ 1.3 million | ($0.2 million) |
| Net Income | ($ 0.8 million) | ($ 1.0 million) | ($0.2 million) |
| Total Assets | $95.5 million | $91.9 million | ($3.6 million) |
| Shareholder’s Equity | $20.1 million | $16.5 million | ($3.6 million) |
About Empire Industries Ltd.
Empire focuses on designing, supplying, and installing premium theme park, media-based attractions and ride systems for the global entertainment industry. Empire also uses these same turn-key integration services for special projects such as large optical telescopes and enclosures. Through Empire’s execution of its strategy over the years, Empire owns several non-entertainment investments, such as its equity holding in Tornado Global Hydrovacs Ltd. Empire’s common shares are listed on the TSX Venture Exchange under the symbol EIL.
For more information about the Company, visit empind.com or contact:
| Guy Nelson Chief Executive Officer Phone: (416) 366-7977 Email: gnelson@empind.com |
Allan Francis Vice President – Corporate Affairs and Administration Phone: (204) 589-9301 Email: afrancis@empind.com |
Conference Call Information
Empire’s management team will be holding an investor/analyst conference call to discuss the second quarter 2018 results and the outlook for the company. The call-in details are as follows:
| Time/Date: | Tuesday, August 28, 2018 at 10:30AM Eastern Time |
| Dial-in Number: | 1-800-319-4610 (Canada/USA toll-free) |
| 1-416-915-3239 (Toronto) |
Callers should dial in 5 – 10 minutes prior to the scheduled start time and ask to join the Empire Industries Second Quarter 2018 Results Conference Call. This call will be available for replay on our website (empind.com/document_type/presentations/) or on the conference call provider’s website for 30 days:
| International Toll (replay): | 1-604-638-9010 |
| Canada/USA Toll-free (replay): | 1-800-319-6413 |
| Replay Access Code: | 2568 |
Reader Advisory
This news release contains forward-looking statements, within the meaning of applicable securities legislation, concerning Empire’s business and affairs. In certain cases, forward-looking statements can be identified by the use of words such as ‘‘plans’’, ‘‘expects’’ or ‘‘does not expect’’, ‘‘budget’’, ‘‘scheduled’’, ‘‘estimates’’, “forecasts’’, ‘‘intends’’, ‘‘anticipates’’, “believes” or variations of such words and phrases or state that certain actions, events or results ‘‘may’’, ‘‘could’’, ‘‘would’’, ‘‘might’’ or ‘‘will be taken’’, ‘‘occur’’ or ‘‘be achieved’’. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Although Empire believes these statements to be reasonable, no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. Actual results could differ materially from those anticipated in these forward-looking statements as a result of prevailing economic conditions, and other factors, many of which are beyond the control of Empire. The forward-looking statements contained in this news release represents empire’s expectations as of the date hereof, and are subject to change after such date. Empire disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable securities regulations.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.