(Note: All dollar amounts in this press release
are expressed in U.S. dollars, except as otherwise noted. The
financial results are reported under International Financial
Reporting Standards, except as otherwise noted.)
TORONTO, Nov. 12, 2015 /CNW/ - The Westaim Corporation
("Westaim" or the "Company") (TSXV: WED) today announced that it
recorded net income of $7.0 million
or $0.07 per share for the three
months ended September 30, 2015,
compared to net income of $15.0
million or $0.28 per share for
the three months ended September 30,
2014. For the nine months ended September 30, 2015, Westaim recorded net income
of $13.4 million or $0.17 per share compared to net income of
$10.9 million or $0.40 per share for the nine months ended
September 30, 2014.
Book value per share was $2.31
(C$3.09) at September 30, 2015, compared to $2.34 (C$2.71) at
December 31, 2014.
On August 31, 2015, the Company
satisfied the escrow release conditions in relation to the equity
financings conducted in connection with the Arena Transactions (as
hereinafter defined) and issued an aggregate of 72,889,376 common
shares for aggregate net proceeds of $169.3
million, net of share issuance costs of $9.9 million. The Company also completed
the Arena Transactions and capitalized Arena Finance Company Inc.
("Arena Finance") and Westaim Origination Holdings, Inc. ("Arena
Origination") in the amounts of approximately $146.6 million and $34.3
million, respectively. The Company also capitalized
and started up the business of Arena Investors, LP ("Arena
Investors" and collectively with Arena Finance and Arena
Origination and related entities, the "Arena Group"). The
establishment, capitalization and organization of Arena Finance and
Arena Origination and Arena Investors are referred to as the "Arena
Transactions". The capital invested by the Company in Arena
Finance and Arena Origination, less expenses incurred during the
period ended September 30, 2015, was
held by their subsidiaries in cash and cash equivalents at
September 30, 2015, and will be
invested by Arena Finance and Arena Origination in their future
business operations.
The Company recorded a net unrealized gain on its investments of
$6.1 million and $15.9 million in the three and nine months ended
September 30, 2015,
respectively. The net unrealized gain of $6.1 million in the third quarter of 2015
consisted of an unrealized gain related to Westaim HIIG Limited
Partnership (the "HIIG Partnership") of $6.6
million, offset in part by an unrealized loss of
$0.5 million related to the Arena
Group. The net unrealized gain of $15.9 million in the nine months ended 2015
consisted of an unrealized gain related to the HIIG Partnership of
$16.4 million, partially offset by an
unrealized loss of $0.5 million
related to the Arena Group. The unrealized loss of the Arena
Group resulted from costs incurred for operational start-up and
other ongoing operating expenses. The unrealized gain on the
Company's investments for the three and nine months ended
September 30, 2014 was $11.9 million and related solely to the HIIG
Partnership.
At September 30, 2015, Westaim
owned approximately 58.5% of the limited partnership interests in
the HIIG Partnership representing an approximate 44.1% indirect
interest in Houston International Insurance Group, Ltd.
("HIIG"). HIIG's unaudited consolidated stockholders' equity
as at September 30, 2015, determined
in accordance with United States
generally accepted accounting principles, was $323.8 million, and the HIIG Partnership owned
approximately 75.4% of HIIG's common shares.
At September 30, 2015, Westaim's
unaudited consolidated shareholders' equity was $331.9 million, compared to $167.2 million at December
31, 2014. At September 30,
2015, the Company had 143,186,718 common shares outstanding,
no debt, and a cash balance of approximately $11.9 million.
"Westaim is very excited to have completed the Arena
Transactions and we are well underway in working with Dan Zwirn and his team in building the Arena
businesses. We are pleased with the continuing growth of the
Company's investment in HIIG as Stephen
Way and his management team execute the HIIG specialty
insurance business plan," said J. Cameron
MacDonald, President and Chief Executive Officer of
Westaim.
Westaim will be holding an investor day to provide an update on
its business. The investor day will be held on November 17, 2015 at 10:00
A.M. EST at St. Andrew's Club and Conference Centre, 150
King Street West, S3/S4 Inverness
Room, 27th Floor. The agenda will include
presentations and Q&A sessions with Westaim senior management,
Stephen L. Way, Chairman and Chief
Executive Officer, Houston International Insurance Group, Ltd. and
Daniel B. Zwirn, Chief Executive
Officer and Chief Investment Officer of the Arena Group of
Companies. If you are interested in attending the investor
day, please R.S.V.P. to Laurie Morra
at lmorra@westaim.com.
Westaim's unaudited consolidated financial statements and
management's discussion and analysis for the three and nine months
ended September 30, 2015 and 2014
were filed on SEDAR at www.sedar.com, and have been posted to
Westaim's website at www.westaim.com.
Change in functional and presentation currency
All currency amounts in this press release are expressed in U.S.
dollars ("USD" or "US$") unless otherwise noted. As a result
of the completion of the Arena Transactions, Westaim now expects a
significant majority of revenues and costs to be sourced and
incurred in USD. Therefore, the Company has changed its
functional currency from Canadian dollars (C$) to USD,
prospectively from the date of change of August 31, 2015, in accordance with International
Accounting Standard ("IAS") 21 "The Effects of Changes in Foreign
Exchange Rates". On August 31,
2015, the Company also changed its presentation currency
from Canadian dollars to USD. Comparative information has
been restated in USD in accordance with IAS 21. See note 2 to
the Company's unaudited consolidated financial statements for the
three and nine months ended September 30,
2015 and 2014 for the procedures used in translating the
Company's comparative financial statements and associated notes
prior to August 31, 2015.
Non-GAAP Financial Measures
Westaim uses both International Financial Reporting Standards
("IFRS") and non-generally accepted accounting principles
("non-GAAP") measures to assess performance. The Company
cautions readers about non-GAAP measures that do not have a
standardized meaning under IFRS and are unlikely to be comparable
to similar measures used by other companies. Book value per
share is a non-GAAP measure. Book value per share represents
shareholders' equity at the end of the period determined on an IFRS
basis and adjusted upwards by the Company's liability with respect
to RSUs, divided by the aggregate of the total number of common
shares outstanding at that date and the number of common shares
that would have been issued if all outstanding RSUs were exercised.
Readers are urged to review Westaim's management's discussion
and analysis in respect of its unaudited consolidated financial
statements as at and for the three and nine months ended
September 30, 2015 for additional
disclosure regarding these measures. The financial
information relating to the Arena Group and HIIG contained herein
and in Westaim's Management's Discussion and Analysis in respect of
its unaudited consolidated financial statements for the three and
nine months ended September 30, 2015
and 2014 is unaudited and has been derived from the unaudited
interim consolidated financial statements of the related
entities. Readers are cautioned that the HIIG financial
information has not been reconciled to IFRS and so may not be
comparable to the financial information of issuers that present
their financial information in accordance with IFRS.
About Westaim
Westaim is a Canadian investment company specializing in
providing long-term capital to businesses operating primarily
within the global financial services industry. The Company invests,
directly and indirectly, through acquisitions, joint ventures and
other arrangements, with the objective of providing its
shareholders with capital appreciation and real wealth
preservation. Westaim's strategy is to pursue investment
opportunities with a focus towards the financial services industry
and grow shareholder value over the long term. Westaim's common
shares are listed on the TSX Venture Exchange under the trading
symbol WED.
Certain portions of this press release as well as other public
statements by Westaim contain forward-looking statements. Such
forward-looking statements include but are not limited to
statements concerning: strategies, alternatives and objectives to
maximize value for shareholders; expectations and assumptions
relating to the Company's business plan; expectations and
assumptions relating to the business and operations of the Arena
Group and HIIG; expectations regarding the Company's assets and
liabilities; the Company's ability to retain key employees;
management's belief that its estimates for determining the
valuation of the Company's assets and liabilities are appropriate;
the Company's views regarding potential future remediation costs;
the effect of changes to interpretations of tax legislation on
income tax provisions in future periods; and the Company's
determination that the adoption of new accounting standards will
not have a material impact on its consolidated financial
statements. These statements are based on current expectations that
are subject to risks, uncertainties and assumptions and Westaim can
give no assurance that these expectations are correct. The
Company's actual results or financial position could differ
materially from those anticipated by these forward-looking
statements for various reasons generally beyond the Company's
control, including, without limitation, the following factors: the
Arena Group is effectively a start-up venture with no operating
history; operational risks; due diligence risks; valuation risks;
change(s) in the investment management industry; legal risks; lack
of investment opportunities; regulatory compliance; poor investment
performance; illiquid strategies; failure of risk management;
failure to attract and retain qualified staff; competitive
pressures; conflicts of interest; employee error or misconduct;
loan concentration; creditworthiness of borrowers; default by and
bankruptcy of a borrower; adequacy of provision for credit losses;
insufficient collateral securing loans; monitoring, enforcement and
liquidation procedures; fraud by a borrower; lack of regulation of
asset-based lenders; United States
tax law implications relating to the conduct of a U.S. trade or
business; potential treatment of the Company as a passive foreign
investment company for U.S. federal income tax purposes; the
Company's ability to implement its investment strategies or operate
its business as management currently expects; the Company's ability
to generate revenue from its investments; the Company and/or HIIG
may have undisclosed liabilities; the Company's ability to obtain
additional funding to pursue additional acquisitions or other
investments; the occurrence of catastrophic events including
terrorist attacks and weather related natural disasters; the
cyclical nature of the property and casualty insurance industry;
HIIG's ability to accurately assess the risks associated with the
insurance policies that it writes and to adequately reserve against
past and future claims; the effects of emerging claim and coverage
issues on HIIG's business; the effect of government regulations
designed to protect policyholders and creditors rather than
investors; the effect of climate change on the risks that HIIG
insures; HIIG's reliance on brokers and third parties to sell its
products to clients; the effect of intense competition and/or
industry consolidation; HIIG's ability to accurately assess
underwriting risk and to predict future claims frequency; the
effect of risk retentions on HIIG's risk exposure; HIIG's ability
to alleviate risk through reinsurance; dependence by HIIG on key
employees; the effect of litigation and regulatory actions; HIIG's
ability to successfully manage credit risk (including credit risk
related to the financial health of reinsurers); HIIG's ability to
compete against larger more well-established competitors;
unfavourable capital market developments or other factors which may
affect the investments of HIIG; HIIG's ability to maintain its
financial strength and credit ratings; HIIG's ability to obtain
additional funding; HIIG's ability to successfully pursue its
acquisition strategy; HIIG may be exposed to goodwill or intangible
asset impairment in connection with its acquisitions; the ability
of HIIG to receive dividends from its subsidiaries; HIIG's reliance
on information technology and telecommunications systems;
dependence by HIIG on certain third party service providers;
general economic, financial and political conditions; the
volatility of the stock market and other factors affecting the
Company's share price; fluctuations in the USD to Canadian dollar
exchange rate; future sales of a substantial number of the
Company's common shares; and other risk factors set forth herein or
in the Company's annual report or other public filings. Westaim
disclaims any intention or obligation to revise forward-looking
statements whether as a result of new information, future
developments or otherwise except as required by law. All
forward-looking statements are expressly qualified in their
entirety by this cautionary statement.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
The Westaim Corporation
Financial
Highlights
(millions of USD except share and per share
data)
|
|
|
Highlights
|
Three months ended
September 30
|
Nine months ended
September 30
|
|
2015
|
2014
(restated1)
|
2015
|
2014
(restated1)
|
|
|
|
|
|
Revenue
|
$
|
0.4
|
$
|
0.5
|
$
|
1.0
|
$
|
0.6
|
Net results of
investments
|
6.1
|
11.9
|
15.9
|
11.9
|
Share-based
compensation recovery (expense)
|
0.3
|
-
|
(2.5)
|
(0.1)
|
Other expense
recovery (other expenses)
|
0.2
|
2.6
|
(1.0)
|
(1.5)
|
|
|
|
|
|
|
|
|
|
Profit
|
$
|
7.0
|
$
|
15.0
|
$
|
13.4
|
$
|
10.9
|
|
|
|
|
|
Earnings per share -
basic and diluted
|
$
|
0.07
|
$
|
0.28
|
$
|
0.17
|
$
|
0.40
|
|
|
|
|
|
Profit
|
$
|
7.0
|
$
|
15.0
|
$
|
13.4
|
$
|
10.9
|
Other comprehensive
loss
|
(9.0)
|
(5.6)
|
(20.5)
|
(5.9)
|
Comprehensive (loss)
income
|
$
|
(2.0)
|
$
|
9.4
|
$
|
(7.1)
|
$
|
5.0
|
|
|
|
|
|
At September
30:
|
|
|
|
|
|
Shareholders'
equity
|
$
|
331.9
|
$
|
165.9
|
$
|
331.9
|
$
|
165.9
|
|
Number of common
shares outstanding
|
143,186,718
|
70,297,342
|
143,186,718
|
70,297,342
|
|
Book value per share
- in US$
|
$
|
2.31
2
|
$
|
2.36
|
$
|
2.31
2
|
$
|
2.36
|
|
Book value per share
- in C$
|
$
|
3.09
3
|
$
|
2.65
3
|
$
|
3.09
3
|
$
|
2.65
3
|
1
|
Comparative
information restated due to a change in presentation currency from
the Canadian dollar to USD.
|
2
|
Book value per share
at the end of the period represents shareholders' equity at the end
of the period determined on an IFRS basis and adjusted upwards by
the Company's liability with respect to RSUs (September 30, 2015 -
$4.1 million; September 30, 2014 - $nil), divided by the aggregate
of the total number of common shares outstanding at that date and
the number of common shares that would have been issued if all
outstanding RSUs (September 30, 2015 - 2,375,000 units, September
30, 2014 - nil) were exercised.
|
3
|
Book value per share
at September 30, 2015 and September 30, 2014 converted from US$ to
C$ at period end rates of 1.3394 and 1.1208,
respectively.
|
|
|
|
Financial
Position
|
September 30,
2015
|
December 31,
2014
(restated1)
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
11.9
|
$
|
80.0
|
|
Accounts receivable
and other assets
|
2.3
|
0.6
|
|
Investments in
private entities
|
324.9
|
93.7
|
|
Investments in
associates
|
1.3
|
-
|
|
$
|
340.4
|
$
|
174.3
|
|
|
|
Liabilities
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
5.2
|
$
|
3.6
|
|
Site restoration
provision
|
3.3
|
3.5
|
|
8.5
|
7.1
|
|
|
|
Shareholders'
equity
|
331.9
|
167.2
|
Total liabilities and
shareholders' equity
|
$
|
340.4
|
$
|
174.3
|
1
|
Comparative
information restated due to a change in presentation currency from
the Canadian dollar to USD.
|
SOURCE Westaim Corporation