Adjusted EBITDA increased to $13.3 million during the first quarter of 2013, up significantly from $5.6 million in Q1 2012. Higher revenue, combined with an increased adjusted EBITDA margin, were the key factors in the improvement. As a percentage of revenue, adjusted EBITDA margin increased to 25.7%, from 23.8% in the first quarter of 2012. ENTREC's 2012 expansion into higher-margin crane services, together with economies of scale in general and administrative expenses achieved as a result of ENTREC's recent growth, contributed to the higher adjusted EBITDA margin.
First quarter adjusted net income more than doubled to $5.5 million, from $2.7 million in Q1 2012 as a result of the increased revenue and higher adjusted EBITDA margin.
Adjusted earnings per share of $0.06 were consistent with Q1 2012 results, as higher adjusted net income was offset by a higher number of common shares outstanding as at March 31, 2013. This included the recent issuance of 18,672,000 common shares at a price of $1.75 per share, for gross proceeds of $32.7 million in February 2013. Net proceeds of the offering were temporarily utilized to reduce outstanding debt and strengthen ENTREC's balance sheet. The Company plans to utilize its additional financial capacity to complete future growth capital expenditures and accretive business acquisitions, which could in turn, grow earnings per share.
First quarter net income, reported in accordance with IFRS, grew to $5.4 million, from $2.5 million in the first quarter of last year. Net income includes the after-tax effect of acquisition-related intangible asset amortization, interest accretion on convertible debentures and gains (loss) on the revaluation of the embedded derivative component of convertible debentures; all of which are components excluded from the calculation of adjusted net income.
Impact of Rental Equipment and Non-Recurring Fees on Adjusted EBITDA
To help meet demand for its services, ENTREC continues to use short-term rental equipment to complement its owned fleet of cranes and trailers. While these rentals provide greater financial flexibility, they generate lower economic returns due to the rental costs involved. If equipment rental costs were excluded from the Company's first quarter results, adjusted EBITDA would have increased by a further $1.2 million to $14.5 million during the first quarter of 2013 (an increase of $0.4 million to $6.0 million during the same period in 2012).
Most of the equipment ENTREC rents come with purchase options, including a provision that allows the Company to apply much of its previous rental payments against the purchase price. During the first quarter of 2013, ENTREC bought-out $4.0 million of rental equipment as part of its capital expenditure program. When warranted in the future, the Company will continue to access rental equipment to meet short-term customer demand, while taking advantage of the flexibility to acquire the equipment should long-term demand justify doing so.
ENTREC's first quarter results also include $0.2 million in non-recurring professional fees and other integration and rebranding costs (three months ended March 31, 2012 - $0.1 million), which, if excluded, would have further increased adjusted EBITDA during each of the periods reported.
Outlook Strong for 2013 and 2014
"Our outlook for 2013 and 2014 continues to be very positive," said Mr. Stevens. "With the tremendous expansion in our business over the past year, we are well positioned to capture a large share of the growing industrial development occurring throughout Western Canada; most notably in Alberta's oil sands region and throughout Northern B.C. Quoting activity continues to increase on a year-over-year basis as customers become more aware of our enhanced scale and operating capabilities. During the first quarter, we were granted heavy haul transportation contracts extending into 2014 and 2015 that we would not have had the scale of operations to execute even 12 months ago. We are also being awarded integrated crane and heavy haul services projects as we cross-sell our crane and heavy haul transportation services to both existing and new customers. Several of our key customers have also expanded their existing master service agreements with us to include crane services."
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