VANCOUVER, BRITISH COLUMBIA — (Marketwired) — 04/02/13 — Matrix Asset Management Inc. (the “Company” or “Matrix”) (TSX: MTA) reported today its financial and operating results for the year ended December 31, 2012.
“The first half of 2012 was a challenging period for Matrix yet we are pleased with some of the progress we have made since the second quarter,” said David Levi, President and CEO of Matrix. “Efforts aimed at reducing expenses have resulted in a 5.1% decrease in recurring expenses in 2012. Matrix Funds have demonstrated organic growth with its Flow Through LP program. SEAMARK-s AUM increased in the fourth quarter. The return of three former principals who re-joined SEAMARK from LeeSide Capital Management Inc. in March 2012 has been a stabilizing influence. Moreover, the proposed business combination with Marquest we announced recently would offer a great opportunity for Matrix to attain greater scale and realize significant synergies. Improving the balance sheet is a priority for management and we are considering a range of potential options to increase working capital.”
Selected Fourth Quarter and Year End 2012 Highlights
Subsequent Events:
Corporate Overview
Matrix is a diversified, asset and wealth management company with offices across Canada. The Company manages approximately $1.1 billion in assets through three operating divisions:
This diversified set of operations delivers multiple sources of revenue across several asset and client groups. The Company-s mission is to provide a diverse array of investment choices and the best possible investment management service to Canadian investors and institutions. With five offices located in major and regional centres across Canada, Matrix has a national investment presence.
Summary of Year and Fourth Quarter ended 2012 Financial Results – Audited
The following table sets out selected consolidated financial information about Matrix for the years ended December 31, 2012, 2011, and 2010.
The following table sets out selected consolidated financial information about Matrix for the three months ended December 31, 2012 and 2011 (footnotes are listed above).
Liquidity and Capital Resources
As at December 31, 2012, Matrix had total assets of $25.4 million, a decrease of $2.7 million from $28.1 million at December 31, 2011. During the year, current assets decreased by $1.3 million while long term assets decreased by $1.4 million. Total liabilities of $24.1 million as of December 31, 2012 increased by $2.8 million compared to $21.3 million as at December 31, 2011. Current liabilities increased by $5.0 million while long term liabilities decreased by $2.1 million year-over-year. Significant changes in financial position during the 2012 year resulted primarily from a $4.0 million third party loan financing to Matrix, the proceeds of which were used to fund a loan in the same amount to GrowthWorks Canadian Fund Ltd. (“the Canadian Fund Loan”), repayment of term loans, the change from long-term to current liabilities of $1.2 million of subordinated debentures, additional $0.6 million and $0.8 million in new term loans advanced from related parties and third parties, respectively, and $1.8 million of employment related obligations.
As at December 31, 2012, Matrix had a working capital deficiency of $6.0 million, comprised of $8.5 million current assets and $14.4 million in current liabilities. Matrix-s retained earnings deficit as at December 31, 2012 was $23.1 million and the net loss for the period was $4.9 million. Significant items contributing to the working capital deficit are: (1) $1.8 million of employment related obligations, primarily non-recurring lump sum payments due in April 2013; (2) $1.2 million of payments on account of a subordinated debenture due in July 2013; and (3) $6.8 million in internally-financed retail mutual fund commissions, which management aims to re-finance.
Matrix has not recorded contingent current assets of $1.7 million on the balance sheet, consisting of incentive participation revenues of $776 thousand, which have been confirmed as earned in 2012 but are paid in the form of dividends which have not yet been declared, and tax refunds receivable of $953 thousand, comprised of taxes paid in a prior year by a subsidiary, which refunds are dependent upon filing and processing of tax returns in 2013. During 2012 similar refunds of $953 thousand were received in the third quarter. Matrix-s working capital deficit after deducting these contingent amounts would be $4.2 million. There can be no assurance as to whether or when contingent assets will be realized.
The financial statements and MD&A for the year ended December 31, 2012 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 into the foreseeable future.
Management-s cash flow forecasts indicate that the Company is expected to have resources available to continue to operate as a going concern into the foreseeable future, however the forecasts are based on a number of assumptions with respect to future cash flows. Uncertainties surrounding these assumptions may cast significant doubt on the ability of Matrix to discharge its liabilities in the normal course and continue as a going concern. There is material uncertainty surrounding future profitability, the realization of savings from cost reduction programs, the Company-s ability to re-pay, re-finance or re-structure debt obligations, timely collection of fund management fees and incentive participation dividends from managed funds with poor liquidity, the outcome of regulatory filings and reviews, collection of tax refunds and the timing and completion of any previously announced and future strategic transactions, including possible acquisition or disposition transactions. Further information is contained in Matrix-s MD&A and Annual Information Form for the year ended December 31, 2012. See “Forward-Looking Statements” below.
Management is evaluating several strategic options for reducing the Company-s working capital deficit and improving the Company-s operating results, including acquisitions and possible dispositions of assets or operating divisions that are not generating positive results and re-financing debt obligations.
On February 13, 2013 Matrix and Marquest announced a signed Letter of Intent to pursue a business combination. Management expects the business combination to improve Matrix-s working capital position and generate cost savings as the two businesses are integrated and operating synergies are realized. See “Introduction”. There can be no assurance that the transaction will be completed on the terms proposed or at all.
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 audited consolidated financial statements. The audited consolidated financial statements do not reflect any such adjustments and do not take into account events or conditions that arose subsequent to December 31, 2012.
Matrix-s fourth quarter and year end 2012 financial statements and MD&A available on the SEDAR website at .
About Matrix ()
Matrix Asset Management Inc. (TSX: MTA) is a diversified asset and wealth management company, with approximately $1.1 billion in assets under management and offices in four cities across Canada. Matrix-s mission is to provide a diverse array of investment choices and the best possible investment management service to Canadian investors and institutions. Matrix delivers its services through three main operating subsidiaries serving institutional, high net worth and retail investors.
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, 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, targeted acquisitions and other transactions, 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 and managed portfolio performance, 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 status of pending transactions and the impact of transactions on Matrix-s future operations, the ability of Matrix to re-pay or re-structure financial obligations and remain in compliance with related covenants, tax rates and laws, the ability of managed venture capital funds to generate liquidity, pay management fees 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, risks associated with institutional, mutual fund and venture capital fund management sectors generally, market, economic, political and other risks affecting portfolio performance, interest and foreign exchange rates, 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 completing proposed financings and targeted acquisitions, managed venture capital fund divestments and liquidity levels, risks associated with non-performance of financial obligations, including secured obligations, the risk that new products will not be successful, 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, 2012 and in Matrix-s Annual Information Form dated March 30, 2013, which are 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” 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. 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 .
Contacts:
Matrix Asset Management Inc.
David Levi
President & CEO
(604) 895-7274 and (416) 934-7700
Matrix Asset Management Inc.
Isabelle Gervasio
Vice President, Investor Relations & Business Development
(514) 227-0666, ext. 3222