Mr. Frank Miles reports

MACRO ENTERPRISES INC. ANNOUNCES 2015 FIRST QUARTER RESULTS

Macro Enterprises Inc. has released its first quarter 2015 results.

                       SUMMARY OF FINANCIAL RESULTS
                        (thousands of dollars except
                              per-share amounts)
                                                 Three months ended March 31,
                                                          2015          2014
                                                                            
Revenues                                            $   30,238    $   87,779
EBITDA                                                   4,069         5,104
Net earnings                                             1,430         2,153
Net earnings per share                              $     0.05    $     0.07

Highlights:

• The company is reporting its 15th consecutive profitable quarter with a net income of $1.4-million and earnings before interest, taxes, depreciation and amortization of $4.1-million despite depressed market conditions.
• The company continues to build on and maintains a strong working capital position of $47.7-million as at March 31, 2015, as a result of positive operating results and prudent capital management.
• The company is reporting shareholders' equity of $87.7-million or $2.89 per share based on common shares issued and outstanding as at March 31, 2015.
• Subsequent to quarter-end, the company entered into a commitment letter for $115-million in new senior secured credit facilities with an option to increase the revolving facility by up to $20-million, bringing the total credit facilities to a maximum of $135-million.

First quarter results

Three months ended March 31, 2015, versus three months ended March 31, 2014

Macro Enterprises posted consolidated revenue of $30.2-million, a significant decrease over last year's first quarter record revenue results of $87.8-million. The significant decline in work performed during the quarter was expected due to depressed market conditions and weak commodity prices that resulted in a slowdown in industry activity and overall reduced or deferred capital spending. Revenue during the period ended March 31, 2015, consisted primarily of recurring integrity and maintenance work from its existing clients under master service agreements. In addition, the company worked on a pipeline construction project with a former client in anticipation of entering into a new long-term services arrangement. In the prior-year first quarter, the company worked on two material big-inch pipeline projects near Fort McMurray, Alta., along with a higher than normal volume of maintenance and integrity work.

Operating expenses were 78.0 per cent of revenue in the quarter compared with 91.4 per cent in the same quarter last year. Operating expenses remained in line with historical averages and were comparable with margins achieved in the second half of fiscal 2015. The company has been successful at maintaining its operating margins through safe, timely and efficient execution of work and will continue to tightly monitor all operating costs under its control in an effort to remain competitive during this period of depressed market conditions. Margins in the prior-year first quarter were negatively impacted by unanticipated problems and higher than expected costs from a bid for a large pipeline project.

General and administrative expenses were $2.3-million, down $164,000 from the $2.5-million recorded in the prior year. The company's general and administrative expenditures reflect costs incurred in connection with the bid processes, professional fees, corporate wages, burdens and various other overheads, including rents, insurance, travel and administrative supplies that are not charged directly to projects. Despite temporarily depressed market conditions, the company will continue to invest in business development and initiatives and anticipates its general and administrative costs to remain consistent going forward.

Depreciation of property, plant and equipment was $1.9-million and comparable with the prior-year first quarter. Depreciation is calculated at various declining balance methods across the company's multiple categories of property, plant and equipment and is used in guiding the annual capital expenditure estimates. Residual values, methods of amortization and useful lives of the assets are reviewed annually and adjusted if appropriate.

During the first quarter, the company recognized non-cash stock-based compensation charges of $301,000 relating to options granted in the prior year. The company anticipates recognizing an additional $1.0-million in stock-based compensation pertaining to the 2014 option grant over the next five quarters.

Finance costs were down $76,000 from the prior-year first quarter to $141,000. The decrease in finance costs was a result of lower levels of debt and better terms and conditions being realized.

Income tax expense in the quarter of $600,000 was at an effective rate of 29.6 per cent, which is higher than the enacted tax rates of 26 per cent after appropriate deductions. The increase over the enacted tax rates relates to both permanent and timing differences being recognized during the quarter.

Net income in the quarter was $1.4-million (five cents per share) compared with $2.2-million (seven cents per share) recognized during the three months ended March 31, 2014. The decrease in net income was a result of significantly reduced levels of work activity, offset by a material improvement to operating margins over the prior-year first quarter. Results for the first quarter of 2015 were further impacted by a non-cash stock-based compensation charge recognized during the period.

Subsequent event

On May 25, 2015, the company announced that it had entered into a commitment letter with Toronto-Dominion Bank for the provision of $115-million in new senior secured credit facilities. TD Bank has committed to structure, arrange and provide a portion of new credit facilities comprising a $65-million three-year revolving credit facility, of which up to $30-million will be provided by TD Bank, and a $50-million letter of credit facility.

TD Bank has committed to use commercially reasonable efforts, but without any obligation, to arrange a syndicate of lenders to provide the balance of the credit facilities. TD Bank will act as lead arranger, bookrunner and administrative agent. Its commitment is subject to customary terms and conditions, including the condition that the balance of the facilities is provided by the other participants in the syndicate.

After closing, the company will have the right, subject to customary conditions, to increase the amount of the revolving facility by up to $20-million, bringing the total credit facilities to a maximum of $135-million, by securing increased commitments from one or more of the initial lenders or by securing one or more new lenders.

The company's obligations under the new credit facilities will be secured by a first-priority-ranking security interest in all property and assets of the company and of its material subsidiaries.

Outlook

As a result of the significant decline with commodity prices as experienced during the second half of fiscal 2014 and throughout the start of 2015, activity levels in the oil and gas industry have been materially impacted across Western Canada. Although the pricing uncertainty is affecting activity and many projects have been delayed, large oil and gas companies are continuing to request bids on significant projects, both liquefied natural gas related and not. With a solid balance sheet, strong liquidity, and its industry-leading health, safety and environmental practices, the company is in excellent financial shape to address these uncertain times.

Macro will remain geographically focused and disciplined ensuring financial resilience. The company will maintain its focus on working with blue-chip pipeline owners and operators to carry out their construction and maintenance programs. However, primarily as a result of depressed market conditions and client project scheduling delays, the company is anticipating revenues in the first half of fiscal 2015 to be significantly less than those recorded in the first half of fiscal 2014. Revenue for the second quarter should be relatively close to what was achieved during the three months ended March 31, 2015. This is less than the company's previous revenue guidance.

As part of its overall strategy, the company is seeking out pipeline and facilities construction contracts in connection with the liquefied natural gas projects being planned on the west coast of British Columbia, an industry that is anticipated to bring substantial economic activity to British Columbia over the next 30 years. Macro has completed bid processes and has entered into discussions with the LNG project owners regarding future pipeline and facilities construction.

Macro has also been approached by a number of its clients to assist with budget and constructability estimates on fee-based recovery arrangements for major pipeline and facility projects that are not LNG related. These projects are scheduled for approvals by mid- to late 2015.

Conference call

The company will host a conference call at 8 a.m. PDT on May 26, 2015, to discuss the first quarter 2015 results. The conference call can be accessed by dialling 1-888-390-0546 and referencing conference ID 41931781.

We seek Safe Harbor.