VANCOUVER, BRITISH COLUMBIA--(Marketwired - Apr 1, 2014) - Matrix Asset Management Inc. (the "Company" or "Matrix") reported today its financial and operating results for the fourth quarter ended December 31, 2013.
A conference call to discuss the fourth quarter results is scheduled for April 1, 2013 at 9:00 a.m. Eastern Time. The conference may be accessed by calling 1-855-353-9183 and entering access code 58018. Alternatively a webcast of this conference is available at https://web.conf-centre.com/ by entering conference reference 1153646 and access code 58018.
President and CEO, David Levi commented, "I thank all of our investors for their support during a very challenging past year. We voluntarily delisted from the Toronto Stock Exchange and have undertaking a strategic review of the Company in order to address its present debt obligations and to provide liquidity options for its shareholders." Mr. Levi added, "The delisting of the Company's Common shares does not affect any of the funds managed by subsidiaries of Matrix."
This release should be read in conjunction with Matrix's audited financial statements and Management Discussion & Analysis ("MD&A") for the fourth quarter and year ended December 31, 2013, which are available on the SEDAR at www.sedar.com.
Corporate Overview
Matrix is a venture capital asset management company with offices across Canada. As at December 31, 2013, the Company managed approximately $0.2 billion in assets operated through GrowthWorks Capital Ltd., which manages funds in the venture capital sector.
Summary of Fourth Quarter and Year End 2013 Financial Results
The following table sets out selected consolidated financial information about Matrix for the years ended December 31, 2013, 2012 and 2011.
The summary of financial results identifies expense items which are considered non-recurring. Management believes that it is important to identify non-recurring items in order to fully understand Matrix's operating results. The intent of identifying these non-recurring items is to provide greater transparency as to what the core or run-rate capacity of the business may be. This is particularly important for Matrix given that Matrix, and GWC in particular, has during prior periods: (i) executed various initiatives and incurred various expenses to grow its business by mergers and acquisitions and (ii) implemented significant restructuring measures as a result of completed mergers and acquisitions. In specific circumstances, management considers these matters to be material, and therefore important to present as supplemental information. The following table summarizes non-recurring expenses for the three and year ended December 31, 2013 compared with the same periods in 2012. Further information regarding non-recurring expenses is contained in Table 3 of Matrix's MD&A for the year ended December 31, 2013.
| | For the twelve
months ended
December
31, 2013
(in $ thousands) | | For the twelve
months ended
December
31, 2012
(in $ thousands) | | For the twelve
months ended
December
31, 2011
(in $ thousands) | |
| Revenue | | | | | | |
| | Management and administration fees | $ | 9,935 | | $ | 14,064 | | $ | 16,916 | |
| | Additional administration fees | | 812 | | | 1,248 | | | 1,421 | |
| | Incentive participation revenues | | 853 | | | 503 | | | 1,533 | |
| | Interest income | | 412 | | | 534 | | | 38 | |
| | Other income | | 510 | | | 253 | | | 388 | |
| | | 12,522 | | | 16,602 | | | 20,296 | |
| Expenses | | | | | | | | | |
| | Selling, general and administrative | | 14,204 | | | 15,917 | | | 18,571 | |
| | Share-based compensation | | 152 | | | 507 | | | 477 | |
| | Servicing commissions | | - | | | 2 | | | 7 | |
| | Amortization and impairment - property and equipment | | 541 | | | 231 | | | 235 | |
| | Amortization - deferred sales commissions | | 591 | | | 760 | | | 942 | |
| | Amortization and impairment - asset management contracts | | 1,569 | | | 2,267 | | | 1,268 | |
| | Interest | | 737 | | | 547 | | | 190 | |
| | | 17,794 | | | 20,231 | | | 21,690 | |
| Loss before merger, acquisition and other special project costs and income taxes | | (5,272 | ) | | (3,629 | ) | | (1,395 | ) |
| Merger, acquisition and other special project costs | | 1,718 | | | 342 | | | 4,043 | |
| Loss before income taxes | | (6,990 | ) | | (3,971 | ) | | (5,438 | ) |
| Income tax recovery | | (1,319 | ) | | (473 | ) | | (2,019 | ) |
| Loss from continuing operations | | (5,671 | ) | | (3,498 | ) | | (3,419 | ) |
| Loss from discontinued operations, net of tax | | (3,663 | ) | | (1,358 | ) | | (6,762 | ) |
| Net loss | $ | (9,334 | ) | $ | (4,856 | ) | $ | (10,181 | ) |
| | | | | | | | | | |
| Basic and diluted loss per share from continuing operations (in $) | | (0.11 | ) | | (0.07 | ) | | (0.07 | ) |
| Basic and diluted loss per share from discontinued operations (in $) | | (0.07 | ) | | (0.03 | ) | | (0.15 | ) |
| | | | | | | | | | |
| | | | | | | | | | |
| | As at
December
31, 2013
(in $ thousands) | As at
December
31, 2012
(in $ thousands) | As at
December
31, 2011
(in $ thousands) |
| | | | |
| Cash, cash equivalents and investments | $ | 1,251 | $ | 2,353 | $ | 1,141 |
| Total assets | | 5,303 | | 25,439 | | 28,133 |
| Total long-term liabilities | | 6,781 | | 9,689 | | 11,799 |
| Total assets under management(1) | | 232,000 | | 1,100,000 | | 1,600,000 |
| | |
| Notes: | |
| (1) | Assets under management or "AUM" means the fair value of the net assets of the funds and accounts managed by Matrix and its subsidiaries in respect of which fees are earned. |
| | |
| | For the three
months ended
December 31, 2013
(in $ thousands) | | For the three
months ended
December 31, 2012
(in $ thousands) | |
| Revenue | | | | |
| | Management and administration fees | $ | 1,696 | | $ | 3,239 | |
| | Additional administration fees | | 98 | | | 296 | |
| | Incentive participation revenues | | 463 | | | (624 | ) |
| | Interest income | | (19 | ) | | 185 | |
| | Other income | | 375 | | | 80 | |
| | | 2,613 | | | 3,176 | |
| Expenses | | | | | | |
| | Selling, general and administrative | | 1,466 | | | 3,434 | |
| | Share-based compensation | | 22 | | | 95 | |
| | Servicing commissions | | - | | | - | |
| | Amortization and impairment - property and equipment | | 33 | | | 50 | |
| | Amortization - deferred sales commissions | | 144 | | | 191 | |
| | Amortization and impairment - asset management contracts | | - | | | 1,692 | |
| | Interest | | 215 | | | 194 | |
| | | 1,880 | | | 5,656 | |
| Income (loss) before merger, acquisition and other special project costs and income taxes | | 733 | | | (2,480 | ) |
| Merger, acquisition and other special project costs | | 704 | | | 18 | |
| Income (loss) before income taxes | | 29 | | | (2,498 | ) |
| Income tax (recovery) expense | | (15 | ) | | 577 | |
| Income (loss) from continuing operations | | 44 | | | (3,075 | ) |
| Loss from discontinued operations, net of tax | | (1,226 | ) | | (108 | ) |
| Net Loss | $ | (1,182 | ) | $ | (3,183 | ) |
| | | | | | | |
| Basic and diluted loss per share from continuing operations (in $) | | 0.00 | | | (0.06 | ) |
| Basic and diluted loss per share from discontinued operations (in $) | | (0.02 | ) | | (0.00 | ) |
| | | | | | | |
| | | | | | | |
Liquidity and Capital Resources
As at December 31, 2013, Matrix had total assets of $5.3 million, a decrease of $20.1 million from $25.4 million at December 31, 2012. During the year, current assets decreased by $5.0 million while long term assets decreased $15.1 million. Total liabilities of $13.1 million as at December 31, 2013 decreased by $11.0 million compared to $24.1 million as at December 31, 2012. Current liabilities decreased by $8.1 million while long term liabilities decreased by $2.9 million.
The Company requires capital for operating purposes, including funding current and long term liabilities and current and future operations. Subsidiaries of the Company registered under securities laws must also maintain minimum levels of working capital in order to meet regulatory requirements under securities laws. If these minimum working capital requirements are not maintained, these registrations may be revoked. As a result of the term credit facility provided on September 30, 2013 and December 30, 2013, the Company believes that it has rectified its previously announced working capital deficiency but securities regulators have not finalized their review of the matter and any confirmation of that rectification is still pending. There can be no assurance that these subsidiaries will restore and maintain compliance with working capital requirements to the satisfaction of regulatory authorities and a failure to do so would have a material adverse effect on the Company's ability to operate and its financial position and future operating results.
Matrix's liquidity position and capital resources are dependent on cash flows from operations which in turn are dependent on AUM. Matrix's AUM is subject to a number of risks and uncertainties and has declined significantly with the result of the dispositions related to the SEAMARK Sale and the Marquest Transaction. Matrix's working capital position has also deteriorated significantly over the past two years. Failing to meet payment obligations, including in respect of secured indebtedness or failing to maintain compliance with working capital requirements under securities laws, may have a material adverse effect on Matrix's financial condition, operating results and ability to carry on business. See "Risk Factors".
As at December 31, 2013, Matrix had a working capital deficiency of ($2.9) million, comprised of $3.4 million current assets and ($6.3) million in current liabilities. Matrix's retained earnings deficit as at December 31, 2013 was $(32.4) million and the net loss from continuing operations for the year was $(5.7) million. Significant items contributing to the working capital deficit are: (1) $4.8 million in trades payable and accrued liabilities; (2) $0.9 million of employment related obligations, primarily non-recurring lump sum payments due during the next 12 months; and (3) $0.6 million in operating lease related obligations.
The financial statements and MD&A were prepared on a going concern basis, which assumes that Matrix will continue to realize its assets and discharge its liabilities as they become due.
Management's cash flow forecasts indicate that the Company is expected to have resources available to continue to operate as a going concern; however the forecasts are based on a number of assumptions with respect to future cash flows and the Company's ability to discharge its current liabilities during 2014. There can be no assurance that Matrix will re-structure or re-finance these debt obligations in a manner that will allow Matrix to continue to operate. Uncertainties surrounding these assumptions may cast significant doubt on the ability of Matrix to discharge its liabilities in the normal course of business and continue to operate as a going concern. See Note 1 "Organization and Continuing Operations" in the annual audited consolidated financial statements and see Note 14 "Corporate Debt" in the annual audited consolidated financial statements for a description of terms and security on corporate debt.
There is material uncertainty surrounding Matrix's ability to generate positive cash flows to generate savings from cost reduction programs (and as to the quantum of such savings), to re-pay, re-finance and/or re-structure debt obligations, to collect fund management fees and incentive participation dividends from managed funds with poor liquidity, to collect tax refunds and as to the outcome of regulatory reviews and filings and prospects for future transactions. See "Forward-Looking Statements". If the Company is unable to re-pay or re-finance its debt obligations, the obligations and associated security may be enforced, which would have a material adverse effect on the Company's business, financial position and operating results and the Company's ability to continue to operate. The auditor's report in respect of Matrix's consolidated financial statements for the year ended December 31, 2013 was unqualified, however did contain and Emphasis of Matter notation with respect to Matrix's working capital deficit as at December 31, 2013, net loss for the year and Matrix's ability to continue to operate as a going concern.
It is not possible to predict whether strategic options pursued by Matrix will result in sufficient improvements to Matrix's financial condition to allow Matrix to continue as a going concern. If the going concern assumption ceases to be appropriate, adjustments will be necessary to the carrying amounts and/or classification of Matrix's assets and liabilities. Further, a comprehensive restructuring plan could materially change the carrying amounts and classifications reported in the consolidated financial statements.
In addition to the funds raised by the September and December 2013 financing (see "Introduction"), on August 7, 2012, the Board of Directors approved Matrix raising up to $2.0 million in debt through term loan arrangements, including with insiders of Matrix. During the third quarter of 2012, Matrix raised approximately $0.6 million under term loans advanced by the CEO of Matrix and the largest shareholder of Matrix. These two loans were evidenced by unsecured promissory notes that mature on the earlier of 30-day written notice by the lenders and the date of closing of a transaction by Matrix or any of its subsidiaries resulting in cash proceeds to Matrix of $7 million or more. The notes bear interest at a rate of 8.0% per annum, calculated and compounded monthly. These terms may be adjusted to match terms negotiated with additional third party lenders, although maturity dates may vary by lender. During to the fourth quarter of 2013, the lenders agreed, for no additional consideration, to extend the maturity date to March 31, 2015. On December 31, 2013 the Company entered into an additional $0.1 million loan with the largest shareholder of Matrix with the same terms and due date. There can be no assurance as to the amount of additional capital that will be raised through these arrangements.
Matrix's fourth quarter and year end 2013 financial statements and MD&A available on SEDAR at www.sedar.com.
About Matrix (www.matrixasset.ca)
Matrix Asset Management Inc. a venture capital asset management company with offices across Canada. As at December 31, 2013, the Company managed approximately $0.2 billion in assets operated through GrowthWorks Capital Ltd., which manages funds in the venture capital sector.
Forward-Looking Statements
Certain statements in this press release are forward-looking statements based on beliefs, assumptions and expectations of the Company and not on historical fact. Forward-looking statements are provided for the purposes of assisting the reader in understanding the Company's financial position and results of operations and to present information about management's current expectations and plans related to future periods. Readers are cautioned against placing undue reliance on forward-looking statements and that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding Matrix's ability to continue to operate as a going concern and meet minimum working capital and other regulatory requirements, future operations, business, financial condition, AUM, financial results, expense reductions, tax refunds, dividends and dividend policies, proposed financings, re-payment, re-financing and/or re-structuring Matrix's financial obligations, managed venture capital fund divestments, prospects, opportunities, goals, strategies, accounting policies and estimates and outlook of the Company for the current fiscal year and subsequent periods. Forward-looking statements include statements that are predictive in nature or depend upon or refer to future events or conditions.
Forward-looking statements are based upon beliefs and assumptions of management that were applied in drawing a conclusion or making an estimate, forecast or projection as reflected in the forward-looking statements, including the perception of historical trends and current conditions and beliefs and assumptions with respect to levels of AUM and related assumptions as to levels of portfolio returns and managed fund sales and redemptions, beliefs and assumptions concerning prevailing and future economic and market conditions and the impact of such conditions and other factors on Matrix's AUM, managed portfolio performance and the trading price of Matrix shares, the continuation of portfolio and fund management and advisory engagements, the extent and effectiveness of cost-saving measures and the impact of such measures and other factors on earnings, the outcome of pending and future tax filings, the outcome of litigation, the outcome of disputes on the allocation of expenses between Matrix and the Canadian Fund, the outcome of claims made to the Canadian Fund, the status of pending transactions and proposed transactions and the expected benefits from and impact of transactions on Matrix's future operations, the ability of Matrix to re-pay, re-finance or re-structure financial obligations, maintain compliance with related contractual covenants, minimum working capital and other regulatory requirements and other laws, tax rates, the outcomes of regulatory compliance reviews, the ability of managed venture capital funds to generate liquidity, pay management fees and IPA revenues when due and satisfy secured payment obligations under financing arrangements, performance of managed venture capital investments relative to carrying values and performance fee return thresholds, the collection of trade receivables and the absence of extraordinary or one-time expenses not currently known to management. While management considers these beliefs and assumptions to be reasonable based on information currently available, these statements are subject to numerous risks and uncertainties and no assurance can be given that such beliefs and assumptions will prove to be correct.
Accordingly, actual results may differ significantly from those expressed or implied by forward-looking statements due to many factors including, but not limited to, regulatory and other risks associated with venture capital fund management sector generally, market, economic, political and other risks affecting portfolio performance, the trading price of Matrix shares, interest and foreign exchange rates, levels of managed fund sales and redemptions and in turn Matrix's AUM, risks associated with tax filings and litigation, other risks affecting revenues and earnings, regulatory and other risks associated with fund and asset management activities, liquidity risks associated with low trading volumes for Matrix Common shares and Matrix's decision to voluntarily delist from the TSX, managed venture capital fund divestments and liquidity levels, risks associated with non-performance of financial obligations, including secured obligations, integration and continuity risks affecting completed acquisitions, changes in consumer demand for the financial products offered by the Company, Matrix's ability to respond to competition and other risks and uncertainties listed under "Risk Factors" in the MD&A for the year ended December 31, 2013 and in Matrix's Annual Information Form dated March 31, 2014, which is available on SEDAR. Many of these risks are beyond the control of Matrix.
The assumptions and risks noted in this press release are not exhaustive of the factors that may affect any of the Company's business and the forward-looking statements in this press release. Readers should consider these and other risks, uncertainties and potential events carefully and should not place undue reliance on forward-looking statements. Other than as specifically required by law, the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made, or to reflect new information, future unanticipated events or results or other factors.
Non-IFRS Financial Measures
"EBITDA", "recurring EBITDA", "Free Cash Flow", "recurring expenses", and "recurring income (loss) before taxes" are not measures recognized under International Financial Reporting Standards ("IFRS"). However, management of Matrix believes that most shareholders, creditors, other stakeholders and investment analysts prefer to have these measures included as reported measures of operating performance, a proxy for cash flow, and to facilitate valuation analysis. These non-IFRS measures do not have any standard meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Readers are cautioned that these non-IFRS measures are not alternatives to measures determined in accordance with IFRS and should not, on their own, be construed as indicators of performance, cash flows or profitability or measures of liquidity. These non-IFRS measures should only be read in conjunction with the financial statements of Matrix posted on SEDAR. "AUM", "working capital" and "non-recurring items" are also non-IFRS measures. AUM is the fair value of the net assets of the funds and accounts managed by Matrix and its subsidiaries in respect of which they earn fees. Working capital is determined by deducting current liabilities from current assets. For additional information regarding Matrix's use of non-IFRS measures, including reconciliations of these measures to the nearest IFRS measures, please refer to the "Non-IFRS Financial Measures" and "Non-Recurring Items, EBITDA & Free Cash Flow" sections of its MD&A available on the SEDAR website at www.sedar.com.
