WINNIPEG – November 19, 2020 – Empire Industries Ltd. (TSX-V: EIL, OTC:ERILF) (“Empire”, “EIL”, “us”, “our”, “we” or the “Company”) today reported its unaudited consolidated financial results for the third quarter ended September 30, 2020. The unaudited consolidated financial statements and MD&A have been filed on SEDAR and can be viewed at sedar.com or at empind.com.
“The COVID-19 pandemic is continuing to have a significant impact on the Company,” said Guy Nelson, Executive Chairman and Chief Executive Officer. “We are implementing a three-pronged plan to adapt to these market realities. We are; accelerating our development plans for the co-venture business, restructuring and reducing the ride manufacturing business commensurate with the near term reduction in expected sales. We have also established a Product R&D and Engineering company to continue to innovate in the ride and attractions industry and utilize our world class engineering expertise to pursue new business in markets that we have historically been a global leaders in.”
Summary of Third Quarter 2020
- Revenues were $16.6 million for the 3 month period and $50.4 million for the nine month period ending September 30, 2020. They were significantly lower than the prior year largely because of COVID-19 related slowdowns.
- Adjusted EBITDA remained positive despite the revenue reductions, at 0.4 million for the 3 month period and $1.4 million for the 9 month period ending September 30, 2020.
- Contract Backlog was $135 million as of September 30, 2020, down from $218 million as of March 31. This is attributable to working off some of the backlog and reduced replenishment of the backlog due to the impact that COVID-19 is having on theme park ride procurement.
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| For the 3 and 9 month periods ended September 30, 2020 | ||||
| Q3 | Q3 | YTD | YTD | |
| ($ millions, except per-share amounts) | 2020 | 2019 | 2020 | 2019 |
| Revenue | 16.6 | 27.0 | 50.4 | 95.5 |
| EBITDA ($)1 | 0.4 | 2.1 | 1.4 | 6.0 |
| Income (loss) from continuing operations before tax | (2.7) | (2.5) | (8.2) | 0.1 |
| Net Income (loss) | (2.8) | (3.4) | (9.4) | (1.8) |
Per Share Information (Basic & Diluted) | ||||
| Loss per share – continuing operations | (0.02) | (0.02) | (0.05) | 0.00 |
| Loss per share – discontinued operations | (0.00) | (0.01) | (0.01) | (0.02) |
| Loss per share – all operations | (0.02) | (0.03) | (0.06) | (0.02) |
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1 Earnings (loss) before interest, tax, depreciation and amortization (EBITDA) is not defined by IFRS. The definition of 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. While not IFRS measures, EBITDA is used by management, creditors, analysts, investors and other financial stakeholders to assess the Company’s performance and management from a financial and operational perspective.
Co-ventures Update
The co-venture business is pursued by the Company’s wholly owned subsidiary, Dynamic Entertainment. It is focused on co-owning attractions in high traffic, tourist areas that are expected to generate steady, recurring revenue and profit, by leveraging the company’s attraction development knowhow and its proprietary, world class ride systems.
The Company’s pipeline of co-venture prospects is geographically broad and advancing, in-spite of travel restrictions. Its co-venture offices in Shanghai and Singapore have allowed it to continue to develop prospects in Asia and South Asia and its offices in Toronto and Orlando have been able to cover North America and Europe/UK effectively. It is the Company’s view that its co-venture strategy is well suited to capitalize on the post-pandemic world. Guest satisfaction and value and will be the key success factors for popular tourist locations that choose to complement their experience with our award winning, world class, media-based attractions.
The Pigeon Forge, Tennessee co-venture, is in the heart of the Smoky Mountains. Empire holds an option to acquire 50% of this project which is planning to open its flying theater attraction in the spring of 2021. Construction of the facility at the Island Theme Park is underway and manufacturing of the flying theatre and production of the movie are also on schedule. The Island is ranked the sixth most popular theme park in America by Trip Advisor.
Ride Manufacturing Update
The pandemic has focused the Company’s attention on ensuring it reduces and aligns its cost structure with the much more cautious approach to capital spending of its customers. The Company has undertaken an organization-wide, cost reduction initiative to reduce fixed and variable costs, as well as identifying and implementing design, procurement and production efficiencies and facility cost reductions. It has streamlined operational resources and implemented processes that have dramatically improved its productivity. The Company’s rigorous best practices have been effectively implemented at its primary manufacturing facilities and this has allowed it to continue to produce throughout the pandemic. The goal remains to emerge on the other side of this pandemic with its unique design, manufacture and commissioning competency intact and continue to be one of the strongest attraction suppliers in the industry.
The Company is fortunate to have a backlog of unfinished contracts to reduce the amount of pain caused by capital expenditure restraint of its main customers. The Company’s Contract Backlog at September 30, 2020 was $135 million, down from $218 million at March 31, 2020. This is attributable to reduced backlog replenishment due to the impact of COVID-19 on theme parks.
The Company’s installation teams have recently remobilized and are at various stages of commissioning award winning ride systems in Abu Dhabi, Beijing, Japan, Malaysia, Qatar and California. This massive commissioning effort has been negatively affected by site closures and travel restrictions caused by the pandemic that have delayed the Company’s ability to enter these countries to finish these jobs. The Company has incurred incremental costs because of the delays and the required quarantines on both entry and return to their home country.
In addition to its existing backlog, the Company continues its business development efforts to identify and establish future projects but given the uncertainties of capital spending in the rides business, we are planning for our ride manufacturing business to remain at a reduced level of sales and production for the near term.
New Product R&D and Engineering Subsidiary with Equity Infusion
On October 13, 2020, the Company announced that it has completed an internal reorganization and private placement in its newly formed Product R&D and Engineering Services subsidiary, Dynamic Structures Ltd. This new subsidiary will engage in the R&D and design engineering required to keep the Company as a leading innovator of new ride systems for the themed attraction industry. The subsidiary, which employs 30+ engineers formerly employed by the Dynamic Attractions Ltd. subsidiary, is 50% owned by Empire and 50% owned by third party investors, who invested $5 million into Dynamic Structures Ltd.
Senior Lender update
On October 7, 2020 the Company, completed a renegotiation of its credit facilities. The material amendments to the Credit Agreement include: (i) extending the repayment dates for each of the facilities to align with the Company’s forecasted cash availability; (ii) reducing the annual interest from a variable prime plus 9.5% to a fixed rate of 10%; (iii) accruing and deferring 3% of the interest until the maturity of each facility and paying the remaining 7% on a monthly basis; and (iv) removing certain financial covenants altogether and revising the remaining financial covenants to allow the Company to remain in compliance to the end of the term of the loan.
In addition, the Company also amended the terms of its USD $4.0 million term loan with another lender to push out the repayment of the loan in four equal, quarterly payments starting July 16, 2022 and ending on April 16, 2023.
Annual Meeting/ Investor Conference Call Information
Empire has scheduled its Annual General and Special Meeting of Shareholders on November 25, 2020 at 2:00PM Eastern Time. The meeting will be held in a virtual format. Investors and guests can listen to the meeting, and participate in a post-meeting question and answer session. The call-in details are as follows:
Time/Date: Wednesday, November 25 at 2:00PM Eastern Time
Dial-in Number: 1-800-319-4610 (Canada/USA toll-free)
1-416-915-3239 (Toronto)
Web login: http://services.choruscall.ca/links/empireagm20201125.html
(to view slides/video)
Callers should dial in 5 – 10 minutes prior to the scheduled start time and ask to join the Empire Industries 2020 AGM Call.
About Empire Industries Ltd.
Empire focuses on designing, supplying, and installing iconic media-based attractions and ride systems for the global theme park industry. Empire also uses these same turn-key integration services for special projects such as large optical telescopes and enclosures. Empire also has commenced an initiative to leverage its world class flying theater and attraction development capability on a co-venture ownership basis. Empire was selected as a 2020 TSX Venture 50 company. The 2020 TSX Venture 50 is a ranking of top performers on the TSX Venture Exchange over the past year. The ranking is comprised of 10 companies from each of 5 industry sectors, with Empire being selected in the Diversified Industry category. Selection was based on three equally weighted criteria; share price, trading and market capitalization. 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
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’’, “booked”, ‘‘scheduled’’, “positions”, ‘‘estimates’’, “forecasts’’, ‘‘intends’’, ‘‘anticipates’’, “believes” or variations of such words and phrases or state that certain actions, events or results ‘‘may’’, “may be”, ‘‘could’’, “should”, ‘‘would’’, ‘‘might’’ or ‘‘will’’, ‘‘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 represent 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.