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Clairvest Reports Fiscal 2015 First Quarter Results

TORONTO, ON--(Marketwired - August 12, 2014) - Clairvest Group Inc. (TSX: CVG) today reported results for the quarter ended June 30, 2014 and an update on subsequent events following quarter end. (All figures are in Canadian dollars unless otherwise stated)

Highlights

  • Clairvest reports under International Financial Reporting Standards ("IFRS" or "GAAP") effective quarter ended June 30, 2014. Book value at June 30, 2014 as prepared under IFRS was $405.2 million or $26.78 per share. Book value per share at March 31, 2014 as prepared under IFRS was $399.5 million or $26.39 per share, $1.47 per share higher than previously reported primarily due to the recognition of unrealized carried interest from the CEP Funds
  • Net income for the quarter ended June 30, 2014 was $9.5 million or $0.63 per share
  • At June 30, 2014, cash or near cash of $123.9 million, presented on a Non-GAAP basis, represented 30.6% of the June 30, 2014 book value, or $8.19 per share 
  • At June 30, 2014, Clairvest and the CEP Funds had $737.3 million of capital available for future acquisitions
  • Clairvest and its managed funds made a follow-on investment of $13.4 million in Discovery Air Inc. ("Discovery Air") pursuant to the standby commitment for a rights offering
  • Subsequent to quarter end, Clairvest completed the final closing of Clairvest Equity Partners V ("CEP V") at $600 million
  • Subsequent to quarter end, Clairvest and Clairvest Equity Partners III ("CEP III") received US$100.3 million in pre-tax distributions from Light Tower Rentals Inc. ("Light Tower Rentals")
  • Subsequent to quarter end, Clairvest paid an annual ordinary dividend of $1.5 million, or $0.10 per share, and a special dividend of $2.3 million, or $0.1492 per share, which in aggregate represents 1% of the March 31, 2014 published book value per share of $24.92

Clairvest's book value, as prepared under IFRS, was $405.2 million or $26.78 per share at June 30, 2014, compared with $26.39 per share, as prepared under IFRS, at March 31, 2014. The increase in book value per share for the quarter was primarily attributable to net income for the quarter of $9.5 million, or $0.63 per share, net of $0.2492 of dividend per share accrued at June 30, 2014. The book value at March 31, 2014 as prepared under the previous generally accepted accounting principles ("previous GAAP") was $24.92 per share. The increase in book value at March 31, 2014 as prepared under IFRS was primarily due to the recognition of unrealized carried interest from the CEP Funds which attributed an increase of $1.50 per share to the book value per share. Under IFRS, Clairvest has recognized these unrealized carried interests which were disclosed in the notes to the consolidated financial statements. 

At June 30, 2014, Clairvest had $737.3 million of capital available for future acquisitions through treasury funds, credit facilities and uncalled capital in the CEP Funds. With the available funds, Clairvest has ample liquidity to support its investee companies as appropriate and to continue its active pursuit of new investment opportunities to enhance shareholder value. 

As previously announced, Clairvest and its co-investors in Discovery Air, including its managed funds, made a follow-on investment of $13.4 million in Discovery Air to acquire 15,554,906 common shares of Discovery Air for a 48.8% ownership interest. Discovery Air is a specialty aviation services business operating across Canada and in selected locations internationally. Clairvest's portion of the follow-on investment was $4.3 million for 4,943,245 common shares which represent a 15.4% ownership interest in Discover Air on a fully-diluted basis.

Subsequent to quarter end, Clairvest completed the final closing of CEP V at $600 million, or the fund's hard cap, and was materially oversubscribed. Clairvest's commitment to the fund is $180 million alongside $420 million in commitments from third party investors. The newly raised third party capital is consistent with Clairvest's strategy of investing its own capital alongside that of third party investors. The new capital will provide Clairvest with greater scale and is expected to generate an annual increase in net management fees and priority distributions over the next few years.

Subsequent to quarter end, Light Tower Rentals completed a financing and made a distribution to its shareholders. Clairvest and CEP III received pre-tax distributions totaling US$100.3 million from Light Tower Rentals, which equate to 3.1 times invested capital in US dollar terms. Consistent with its beneficial ownership, Clairvest realized 25% of this amount, or US$25.1 million. 

"Growth of our portfolio continues to generate positive returns for Clairvest and its shareholders. The successful recapitalization of Light Tower Rentals is an example of Clairvest's patient and disciplined investment strategy, working with strong and aligned management teams in industries we like," said Ken Rotman, Co-Chief Executive Officer and Managing Director of Clairvest. "In addition, the successful closing of CEP V in less than 5 months lays the groundwork for further growth and is a testament to the results we have generated for our investors to date."

Subsequent to quarter ended June 30, 2014, Clairvest paid an annual ordinary dividend of $0.10 per share and a special dividend of $0.1492 per share, such that in aggregate, the dividends represent 1% of the March 31, 2014 published book value. Both dividends were paid on July 25, 2014 to common shareholders of record as of July 9, 2014 and are eligible dividends for Canadian income tax purposes.

The following tables reconcile the financial results reported in accordance with IFRS to Non-GAAP financial results. Non-GAAP financial information is provided to aid investors in better understanding the company's performance.

Summary of Financial Results - Unaudited

                                                                            
----------------------------------------------------------------------------
Financial Performance Measures                                              
                                                                            
                                                             Quarters ended 
                                                                    June 30 
                                                           -----------------
                                                             2014     2013  
----------------------------------------------------------------------------
($000's, except per share amounts)                            $        $    
                                                                            
Net realized gains on corporate investments                     19        - 
Net changes in unrealized gains (losses) on corporate                       
 investments                                                10,474    1,457 
                                                           -------  ------- 
Net Investment Gains (Non-GAAP)                             10,493    1,457 
IFRS Adjustments (1)                                         2,423    2,469 
                                                           -------  ------- 
Net Investment Gains (IFRS)                                 12,916    3,926 
                                                                            
Other realized income from treasury funds, investee                         
 companies and the CEP Funds (non-GAAP)                      6,221    6,651 
IFRS Adjustments (1)                                        (2,888)    (784)
                                                           -------  ------- 
Other realized income from treasury funds, investee                         
 companies and the CEP Funds (IFRS)                          3,333    5,867 
                                                                            
Unrealized carried interest from the CEP Funds (non-GAAP)    2,896      890 
IFRS Adjustments (1)                                         2,896      890 
                                                           -------  ------- 
Other realized income from investee companies and the CEP                   
 Funds (IFRS)                                                5,792    1,780 
                                                                            
Total Expenses, excluding income taxes (non-GAAP)            9,717    5,873 
IFRS Adjustments (1)                                         3,709      888 
                                                           -------  ------- 
Total Expenses, excluding income taxes (IFRS)               13,426    6,761 
                                                                            
Net income (Non-GAAP & IFRS)                                 9,541    4,403 
Basic net income per share (non-GAAP and IFRS)                0.63     0.29 
Fully diluted net income per share (non-GAAP and IFRS)        0.62     0.28 
                                                                            
----------------------------------------------------------------------------
Financial Condition Measures                                  June    March 
                                                              2014     2014 
----------------------------------------------------------------------------
($000's, except per share amounts)                               $        $ 
                                                                            
Total assets (Non-GAAP)                                    450,828  439,961 
IFRS Adjustments (1)                                        41,085   35,502 
                                                           -------  ------- 
Total assets (IFRS)                                        491,913  475,463 
                                                                            
Total cash, cash equivalents and temporary investments                      
 (Non-GAAP)                                                123,917  115,786 
IFRS Adjustments (1)                                        (4,369)    (994)
                                                           -------  ------- 
Total cash, cash equivalents and temporary investments                      
 (IFRS)                                                    119,548  114,792 
                                                                            
Total corporate investments (Non-GAAP)                     249,969  241,066 
IFRS Adjustments (1)                                        13,651    2,963 
                                                           -------  ------- 
Total corporate investments (IFRS)                         263,620  244,029 
                                                                            
Total liabilities (Non-GAAP)                                45,598   40,501 
IFRS Adjustments (1)                                        41,085   35,501 
                                                           -------  ------- 
Total liabilities (IFRS)                                    86,683   76,002 
                                                                            
Book value (Non-GAAP & IFRS) (2)                           405,230  399,460 
Book value per share (Non-GAAP & IFRS)                       26.78    26.39 
                                                                            

(1) IFRS adjustments: Under IFRS, the Company is required to fair value certain acquisition entities and wholly-owned holding entities instead of recording its share of the assets, liabilities, revenues and expenses of these entities. The Company is also required to recognize as revenue that portion of the carried interest from the CEP Funds which are allocated to the principals and employees of Clairvest through various limited partnerships. In addition, Clairvest is required to record a liability any entitlements of limited partners of a partnership where the limited partners are not part of the consolidated group of the Company but where the partnership is required to be consolidated by the Company. Accordingly, that portion of the carried interest from the CEP Funds that is allocated to the limited partners of these partnerships ("MIP Partnerships") and the carried interest payable to MIP Partnerships by other partnerships which are consolidated by Clairvest (collectively, the "Management Entitlements") are recorded as an expense and a liability of the Company. The Non-GAAP measures are presented such that the assets, liabilities, revenues and expenses of these acquisition entities and wholly-owned holding entities are included as part of the Company's financial position and operating performance, and the Management Entitlements are on a net basis such that only that portion of the carried interest from the CEP Funds being allocated to Clairvest is reflected in income and as a receivable and the total fair value of corporate investments exclude that portion of partnership interests where Clairvest does not have beneficial ownership. The Company believes the Non-GAAP measures provide investors more insightful information regarding the Company's financial position and operating performance and such information is consistent with Management's evaluation of the business.

(2) Book value is a Non-GAAP measure calculated as the value of total assets less the value of total liabilities. The term book value does not have any standardized meaning according to GAAP and therefore may not be comparable to similar measures presented by other companies. There is no comparable GAAP measure presented in Clairvest's consolidated financial statements and thus no applicable quantitative reconciliation for such non-GAAP financial measure. The Company has calculated book value consistently for many years and believes that book value can provide information useful to its shareholders in understanding its performance, and may assist in the evaluation of its business relative to that of its peers.

Clairvest's first quarter fiscal 2015 financial statements and MD&A are available on the SEDAR website at www.sedar.com and on the Clairvest website at www.clairvest.com.

About Clairvest

Clairvest Group Inc. is a private equity investor which invests its own capital, and that of third parties through the Clairvest Equity Partners ("CEP") limited partnerships, in businesses that have the potential to generate superior returns. In addition to providing financing, Clairvest contributes strategic expertise and execution ability to support the growth and development of its investee partners. Clairvest realizes value through investment returns and the eventual disposition of its investments.

Forward-looking Statements

This news release contains forward-looking statements with respect to Clairvest Group Inc., its subsidiaries, its CEP limited partnerships and their investments. These statements are based on current expectations and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Clairvest, its subsidiaries, its CEP limited partnerships and their investments to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include general and economic business conditions and regulatory risks. Clairvest is under no obligation to update any forward-looking statements contained herein should material facts change due to new information, future events or otherwise.

www.clairvest.com

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