Additions to senior management team, 2 new
loans originated during quarter, letter of intent
signed to sell commodity division of C&C Resources
All amounts in Canadian dollars unless otherwise indicated.
Highlights
- Subsequent to the end of the third quarter, Callidus Capital
Corporation announced significant additions to its senior
management to strengthen the team, support further growth of its
loan portfolio and to continue unlocking value from its portfolio
of operating companies. Patrick
Dalton has joined Callidus as Interim Chief Executive
Officer and Jim Hall has re-joined
the Company as Senior Vice President. Mr. Dalton is an accomplished
investment management executive with over 25 years of experience in
private credit markets, and previously held senior management
positions including CEO of Fifth Street Finance Corp., CEO of
Gordon Brothers Finance Company, and President and COO of Apollo
Investment Corporation. Mr. Hall is an accomplished and versatile
entrepreneur, business operator, corporate investor, and director
with expertise in finance, private equity, banking and media. From
2014 to 2017, he was Vice President at Callidus where he was the
Company's most successful Underwriter and Portfolio Manager in
terms of interest and fee profitability. These appointments are
part of ongoing recruitment efforts to position the company for
growth in addition to managing the medical leave of absence of the
Company's CEO, Newton Glassman.
- Callidus President and COO David
Reese said "On behalf of my colleagues at Callidus, I am
pleased to report that while Mr. Glassman's recent surgery was
serious, it was successful and his physicians expect a full
recovery. He will require intensive post-operative rehabilitation
and physical therapy however, and therefore the length of his leave
of absence remains uncertain. We all wish him a full and speedy
recovery."
- On September 25, 2018 Callidus
announced it had entered into a letter of intent with a strategic
acquirer pursuant to which Callidus will sell the commodity
division of C&C Resources Inc. for all-cash consideration.
Under the terms, Callidus will realize the vast majority of the
current carrying value of the assets of C&C, which it acquired
in 2017. Callidus will continue to own C&C's growth-oriented,
value-added operations. The transaction is expected to close late
in the fourth quarter of 2018 or early in the first quarter of
2019.
- The pipeline of potential borrowers at September 30, 2018 was $1.4 billion, and currently stands at
approximately $1 billion with two
signed back term sheets totaling approximately $105 million.
- During the third quarter of 2018, the Company originated two
new loans with commitments totaling $162
million and a gross loans receivable and net loans
receivable balance as of September 30,
2018 of $139 million before
derecognition. In addition, the Company received full repayment of
one loan with commitments totaling $26.3
million and gross loans receivable and net loans receivable
balance of $11.1 million before
derecognition, or $2.8 million after
derecognition.
- Total revenue of $90.3 million in
the third quarter of 2018 increased by $35.7
million from the same period in 2017, primarily due to the
consolidation of three additional businesses, partially offset by
lower interest and fees in the lending business.
- Provision for loan losses for Q3-2018 was $24.7 million primarily related to a $13.1 million provision on one specific loan
concentrated in the energy sector as a result of lower expected
recovery values and a delay in expected future cashflows. Provision
for loan losses for the current year-to-date period of $61.0 million was recorded in the statements of
income. For Q3-2018 and for the year-to-date period, the Company
recorded a $5.5 million gain and a
$7.6 million gain, respectively, in
the change in fair value of financial instruments. These gains in
the fair value of financial instruments would have been previously
included in the provision for loan losses figure prior to the
adoption of IFRS 9.
- In Q3-2018 Callidus recognized a recovery in the statements of
comprehensive income of $13.1 million
under the Catalyst guarantee due to the recognition of specific
loan loss provisions and other asset impairments. During the
current year-to-date period, the Company recognized a recovery in
the statements of comprehensive income of $50.4 million under the Catalyst guarantee due to
the recognition of specific loan loss provisions and other asset
impairments and confirmation of coverage of the Catalyst guarantee
related to a specific loan.
- During the year-to-date period, there were indications of
impairment at one of the Company's businesses that reflected
declines in forecasted performance due to market conditions and
lower than expected economic performance of certain businesses. As
a result, $15.5 million was recorded
in the statements of comprehensive income as an impairment of
goodwill for the year-to-date period.
- Net loss of $20.4 million in
Q3-2018 compared to a loss of $17.6
million in the prior year period.
- Loss of $0.36 per share (diluted)
for the third quarter of 2018 compared to a loss of $0.35 in the same period in 2017.
- Net loss of $68.2 million for the
current year-to-date period compared to a loss of $46.9 million for the first nine months of
2017.
- Loss of $1.26 per share (diluted)
for the current year-to-date period compared to a loss of
$0.93 for the first nine months of
2017.
TORONTO, Nov. 14, 2018 /CNW/ - Callidus Capital
Corporation (TSX:CBL) (the "Company" or "Callidus") today announced
its unaudited financial and operating results for the quarter ended
September 30, 2018.
|
|
|
|
For Three Months
Ended
|
For Nine Months
Ended
|
($ 000s unless
otherwise indicated)
|
Sept 30,
2018
|
Jun 30, 2018
|
Sept 30,
2017
|
Sept 30,
2018
|
Sept 30,
2017
|
Net loans receivable
(before
derecognition), end of period
|
366,581
|
244,688
|
482,896
|
366,581
|
482,896
|
Gross loans
receivable (before
derecognition), end of period (1)
|
1,163,092
|
1,131,482
|
1,038,592
|
1,163,092
|
1,038,592
|
Average loan
portfolio outstanding (1)
|
1,148,956
|
1,119,327
|
1,024,383
|
1,116,373
|
1,090,760
|
Gross yield (%)
(1)
|
8.7%
|
6.6%
|
10.7%
|
7.2%
|
14.7%
|
Total
revenues(2)
|
90,269
|
89,437
|
54,539
|
235,954
|
113,002
|
Net interest margin
(%) (1)
|
-0.2%
|
-0.5%
|
2.5%
|
-0.4%
|
4.7%
|
Net (loss)
income
|
(20,388)
|
(40,825)
|
(17,569)
|
(68,236)
|
(46,887)
|
Earnings per share
(diluted)
|
($0.36)
|
($0.75)
|
($0.35)
|
($1.26)
|
($0.93)
|
|
|
|
|
|
|
Recognized yield
enhancements(3)
|
-
|
-
|
900
|
-
|
6,700
|
Leverage ratio
(%)(1)
|
38.8%
|
40.5%
|
37.1%
|
38.8%
|
37.1%
|
2018 amounts are
under IFRS 9 and 2017 amounts are under IAS 39.
|
|
(1)
|
Refer to
"Forward-Looking and Non-IFRS Measures" in this press
release. These financial measures are not recognized measures
under
IFRS and do not have a standardized meaning prescribed by
IFRS. Therefore, they may not be comparable to similar
measures used by other issuers.
|
(2)
|
Certain comparative
figures have been reclassified to conform with current period
presentation.
|
(3)
|
Recognized yield
enhancements are recorded in the statements of income in total
revenues (YTD Q3-2018 – nil; YTD Q3-2017 - $9.8 million)
and in loss on derivative assets associated with loans (YTD Q3-2018
– nil; YTD Q3-2017 - loss of $3.1 million).
|
(4)
|
Income statement data
is after derecognition, unless otherwise indicated.
|
Business Update (As at November
14, 2018)
Loan Portfolio – The Company's pipeline at September 30, 2018 was $1.4 billion, and currently stands at
approximately $1 billion with two
signed back term sheets totaling approximately $105 million.
During the third quarter, the Company originated two new loans
with commitments totaling $162
million and a gross loans receivable balance as of
September 30, 2018 of $139 million before derecognition, or
$39 million after derecognition.
As previously disclosed, Callidus undertakes extensive due
diligence before closing on a loan transaction and there can be no
assurance that the results of the due diligence will be
satisfactory to Callidus.
As at September 30, 2018, net
loans receivable increased 48% from December
31, 2017 due to loan originations and increased funding
which was partially offset by higher provisions for loan losses and
the consolidation of Midwest Asphalt Corporation in the first
quarter of 2018 as this loan was removed from loans receivable and
the company was consolidated in the financial statements.
Acquired Subsidiary Companies – A total of six loans
which have been removed from loans receivable in order to protect
collateral and have been consolidated in the financial
statements.
Total non-interest revenues for these acquired subsidiary
companies: (i) for the third quarter of 2018 was $91.0 million, an increase of $43.0 million or 90% from the same quarter last
year and (ii) for the current year-to-date period was $239.1 million, an increase of $164.5 million or 221% from the same year-to-date
period last year, primarily due to the consolidation and
recognition, for accounting purposes, of non-interest revenues of
the injection molding, forest products, and paving businesses since
June 2017, November 2017 and January
2018 respectively.
Total gross margin for these acquired subsidiary companies for
the third quarter of 2018 was 11.2%, a decrease from 13.0% in the
same quarter last year. Gross margin for the current year-to-date
period was 12.1%, a decrease from 13.9% in the same year-to-date
period last year. The decreases in gross margin were due
primarily to: (i) the aluminum castings business experiencing more
negative gross margins in the quarter and year-to-date periods due
to a reduction in volume from a major customer and (ii) a decrease
in gross margin for the gaming business due to cost of sales in the
third quarter of 2017 being impacted by a one-time inventory
costing adjustment.
Callidus continues to work with these subsidiaries to implement
strategic decisions and execute new business plans as part of their
respective turnarounds.
Provision for Loan Losses –Provision for loan losses of
$24.7 million was recorded in the
statements of income for the third quarter of 2018. This
primarily related to a $13.1 million
provision on one specific loan concentrated in the energy
sector as a result of a delay in expected future cashflows.
Provision for loan losses of $61.0 million was recorded in the statements
of income for the current year-to-date period. Of this total
year-to-date provision, approximately $13.2
million is related to foreign exchange with the
remainder primarily attributed to a $27.4
million provision on one specific loan concentrated in
the energy sector.
During the third quarter of 2018 Callidus recognized a recovery
in the statements of comprehensive income of $13.1 million
under the Catalyst guarantee due to the recognition of specific
loan loss provisions and other asset impairments in the
current quarter. During the current year-to-date period, the
Company recognized a recovery in the statements of
comprehensive income of $50.4 million
under the Catalyst guarantee due to the recognition of
specific loan loss provisions, other asset impairments and
confirmation of coverage of the Catalyst guarantee related to
a specific loan.
Normal Course Issuer Bid – In April 2018, the Toronto Stock Exchange accepted
Callidus' notice of intention to undertake a normal course issuer
bid ("NCIB"). Under the terms of the NCIB, Callidus may acquire up
to 2,648,529 of its common shares, representing 5% of the
52,970,597 common shares comprising Callidus' total issued and
outstanding common shares as of April 2, 2018, and will be
purchased only when and if the Company considers it advisable. No
purchases have been made to date under the current Normal Course
Issuer Bid. As the Company continues to pursue a potential
privatization transaction, it is maintaining a trading blackout and
purchases under the Normal Course Issuer Bid may only be affected
when that blackout ceases.
Liquidity – The Company's primary sources of short-term
liquidity are cash and cash equivalents and undrawn credit
facilities. Assuming a participation rate for Catalyst Fund Limited
Partnership V of approximately 75%, total liquidity as at
September 30, 2018 would be able to
support in excess of $200 million of
new loans. In addition, as business acquisitions are rehabilitated,
we will pursue opportunities to monetize these investments where
and when we believe capital may be deployed in opportunities that
generate superior returns. Timing of these divestitures is
uncertain and will be assessed on a case by case basis, taking into
account performance of the investment and the macro-economic
conditions impacting the sector of the investment.
Privatization Process – The Company continues to pursue a
privatization and has no material facts or changes to report.
Strategy for restoring and building shareholder value -
Callidus reaffirmed its previously announced six strategies for
restoring and building shareholder value, the first of which is
prudently growing the loan portfolio, which management believes it
is moving forward with, as indicated in this press release. The
other strategies the Company continues to pursue and remains
committed to are: actively managing the loan portfolio to minimize
realized losses and with a goal of maximizing recovery of the loan
loss provisions recorded to date; maximizing the cash-flow and
value of businesses consolidated; prudently increasing leverage,
including seeking external sources of financing at the subsidiary
level; enhancing the management team as appropriate; and
considering other transactions that could support and / or benefit
the Corporation.
IFRS and non-IFRS Measures- Management uses both IFRS and
non-IFRS measures to monitor and assess the operating performance
of the Company's operations. Throughout this press release,
Management uses the following terms and ratios which do not have a
standardized meaning under IFRS and are unlikely to be comparable
to similar measures presented by other organizations:
Average loan portfolio outstanding is calculated before
derecognition for the annual periods using daily loan balances
outstanding. The average loan portfolio outstanding grosses
up the loans receivable for (i) businesses acquired, (ii) the
allowance for loan losses, and (iii) discounted facilities.
This information is presented to enable readers to see, at a
glance, trends in the size of the loan portfolio.
Gross yield is defined as total revenues before
derecognition divided by the average net loan portfolio outstanding
after adjusting for loans classified as businesses acquired. While
gross yield is sensitive to non-recurring fees and yield
enhancements earned (for example, as a result of early repayment),
the Company has included this information as it believes the
information to be instructive given the frequency of receipt of
non-recurring fees and enables readers to see, at a glance, trends
in the yield of the loan portfolio
Gross loans receivable is defined as the sum of (i) the
aggregate amount of loans receivable on the relevant date, (ii) the
loan loss allowance on such date, (iii) the book value of
businesses acquired as they appear on the balance sheet, and (iv)
discounts on loan acquisitions. The following is a reconciliation,
before and after derecognition, of gross loans receivable to net
loans receivable in the statements of financial position and a
summary of gross loans receivable as at September 30, 2018 and December 31, 2017.
|
|
After
Derecognition
|
Before
Derecognition
|
After
Derecognition
|
Before
Derecognition
|
($ 000s)
|
September
30, 2018
|
September
30, 2018
|
December 31,
2017
|
December 31,
2017
|
Loan
facilities
|
$
|
1,204,982
|
$
|
1,372,704
|
$
|
1,096,888
|
$
|
1,162,483
|
Gross loans
receivable
|
1,041,894
|
1,163,092
|
1,022,193
|
1,046,983
|
Less: Discounted
facilities
|
-
|
-
|
(7,575)
|
(7,575)
|
Less: Allowance for
loan losses
|
(265,698)
|
(267,347)
|
(358,217)
|
(359,079)
|
Less: Cumulative
change in fair value of financial
instruments(1)
|
(42,056)
|
(42,056)
|
-
|
-
|
Less: Impairment on
goodwill and businesses acquired(2)
|
(87,058)
|
(87,058)
|
(57,421)
|
(57,421)
|
Less: Businesses
acquired(2)
|
(400,050)
|
(400,050)
|
(375,602)
|
(375,602)
|
Net loans
receivable
|
$
|
247,032
|
$
|
366,581
|
$
|
223,378
|
$
|
247,306
|
2018 amounts are
under IFRS 9 and 2017 amounts are under IAS 39.
|
|
(1)
|
Certain loans
receivable have been reclassified from loans receivables at
amortised cost under IAS 39 to loans receivables measured at
FVTPL
under IFRS 9.
|
(2)
|
Businesses acquired
are presented in the statements of financial position by their
respective assets and liabilities.
|
Return on equity ("ROE") is defined as net income after
derecognition divided by quarterly average shareholders'
equity. Return on equity is a profitability measure that
presents the annualized net income as a percentage of the capital
deployed to earn the income.
Yield enhancement is defined as a component of a lending
arrangement that Callidus negotiates in addition to the original
loan agreement including additional fees, profit participation
arrangements and equity and equity like instruments. Should a value
be determined for the enhancement and depending on its contractual
nature, the related amount may be recognized in the statements of
comprehensive income as a part of interest income, fee income or as
a financial instrument at fair value through profit or loss
("recognized yield enhancements") or may be unrecognized, which
includes yield enhancements relating to controlling interests,
depending on the appropriate accounting treatment under IFRS. The
Company has discontinued disclosure of unrecognized yield
enhancements in light of comments expressed by the Ontario
Securities Commission.
Total gross margin is defined as total non-interest
revenues less cost of total cost of sales, divided by total
non-interest revenues, expressed as a percentage.
Leverage ratio is defined as total debt (net of
unrestricted cash and cash equivalents) divided by gross loans
receivable before derecognition. Total debt consists of the
senior debt, revolving credit facilities, collateralized loan
obligation and subordinated bridge facility.
The non-IFRS measures should not be considered as the sole
measure of the Company's performance and should not be considered
in isolation from, or as a substitute for, analysis of the
Company's financial statements.
About Callidus Capital Corporation
Established in
2003, Callidus Capital Corporation is a Canadian company
that specializes in innovative and creative financing solutions for
companies that are unable to obtain adequate financing from
conventional lending institutions. Unlike conventional lending
institutions who demand a long list of covenants and make credit
decisions based on cash flow and projections, Callidus credit
facilities have few, if any, covenants and are based on the value
of the borrower's assets, its enterprise value and borrowing needs.
Callidus employs a proprietary system of monitoring collateral and
exercising control over the cash inflows and outflows of each
borrower, enabling Callidus to very effectively manage risk of
loss. Further information is available on our
website, www.calliduscapital.ca.
Conference Call
Callidus will host a conference call
to discuss the third quarter 2018 results on Thursday,
November 15, 2018 at 10.30 a.m. Eastern Time. The dial
in number for the call is (647) 427-7450 or (888) 231-8191
(Conference ID: 4198629). A taped replay of the call will be
available until November 22, 2018 at
(416) 849-0833 or (855) 859-2056.
SOURCE Callidus Capital Corporation