ZCL Composites Reports Q4 and Fiscal 2011 Financial Results

EDMONTON, March 7, 2012 /CNW/ - ZCL Composites Inc. (TSX: ZCL) today announced financial results for the fourth quarter and year ended December 31, 2011.

Year 2011 compared with 2010

• Revenue of $127.0 million, up 5% from $121.6 million;
• Net income from continuing operations of $3.5 million or $0.12 per share (fully diluted), compared with net loss from continuing operations of $16.7 million or $0.59 per share (fully diluted).  The 2010 net loss included a loss on the impairment of assets of $14.3 million;
• Net income of $3.3 million or $0.11 per share (fully diluted), compared with net loss of $16.8 million or $0.60 per share (fully diluted); and
• Backlog of $42.2 million, up 70% from $24.9 million.

Q4 2011 compared with Q4 2010

• Revenue of $37.7 million, up 8% from $35.0 million; and
• Net income of $1.8 million or $0.06 per share (fully diluted), compared with net loss of $0.8 million or $0.03 per share (fully diluted).

"ZCL has returned to profitability and has made tremendous progress for the year ended December 31, 2011," said Rod Graham, ZCL's President and Chief Executive Officer.  "Early in the year, ZCL established our simplify to grow strategy.  This mission has rooted itself with our people, our customers and the investment community and it has made a difference in the tone and direction of our Company.  We made changes to the management team and the asset profile in order to provide a 'turn of the page'.  Our balance sheet is in excellent fiscal condition, our profitability is improving and our people are re-focused on activities that create shareholder value."

"As a result, the Board of Directors has reinstated our dividend after a two year hiatus," said Mr. Graham.  "Our one cent per quarter payment is modest, however, it will be reviewed quarterly by the Board with a philosophical balance of fiscal prudence and a sharing of improved results."

"As we disclosed earlier in the year, for family reasons I have decided to retire as President and CEO.  I am pleased that, after an extensive search process, the Board has announced Ron Bachmeier, current Chief Operating Officer of ZCL, will be assuming the role of President and CEO effective August 8, 2012.  I have had the pleasure of working with Ron for a number of years and believe that his relationships with suppliers, customers, employees and the financial community make him the obvious choice to lead our Company over the long term."

Financial Results

Revenue for the year ended December 31, 2011 was $127.0 million, up 5% from $121.6 million for the 2010 fiscal year.  The increase in revenue was attributable to both of ZCL's operating segments: Underground Fluid Containment (which consists of Petroleum Products and Water Products) and Aboveground Fluid Containment (which consists of Industrial Corrosion Products). Canadian and US operations both contributed to the improvement in revenue.

Underground Fluid Containment revenue of $101.6 million increased by 4% and included an 8% increase in Petroleum Products revenue, partially offset by a $2.7 million or 15% reduction in the Water Products market compared with the 2010 year.  Aboveground Fluid Containment (Industrial Corrosion) revenue of $25.5 million was 6% higher than 2010.

Gross profit for the year ended December 31, 2011 was $19.5 million, up $7.8 million or 67% from the 2010 gross profit of $11.7 million.  This increase was the result of an increase in revenues as well as an increase in profitability on those revenues as the gross margin as a percentage of revenues increased from 10% in the 2010 year to 15% in the 2011 year.  Both the Aboveground and Underground operating segments contributed to the increase in gross margin.  The Aboveground segment was the largest contributor to the improvement in gross profit.

General and administration ("G&A") for the year ended December 31, 2011 decreased $1.4 million or 12% over the same period in 2010.  The year over year reduction in G&A reflected a number of cost saving initiatives that were offset by approximately $1.6 million of restructuring and other costs that were incurred as a result of a conscious decision to improve the future financial state of the Company. In 2010, approximately $2.0 million in costs were incurred relating to restructuring, integration, and ERP implementation.

Disposal of Non-Core Assets and Repayment of Debt

ZCL continues to hold certain non-core real estate assets for sale.  Management expects to use any proceeds to further pay down debt.  These non-core assets are located in markets where it will take more time to realize liquidity.

During 2011, the Company successfully divested of non-core assets.  These include the sale of the steel tank division and the repatriation of the note and debt received on the sale of the Home Heating Oil Tank division that occurred in 2010.  In 2011, ZCL reduced long term debt by $4.8 million, of which $2.9 million was the result of divesting of non-core assets.

Backlog and Financial Position

ZCL's backlog at December 31, 2011 totalled $42.2, up 70% from $24.9 million a year earlier. The increase included growth across all product groups and in both the Canadian and US markets.  The growth was led by the Aboveground Fluid Containment segment with an increase in backlog of $12.0 million or 136% over the prior year.

At December 31, 2011, ZCL's balance sheet had working capital (current assets less current liabilities) of $23.4 million up $5.6 million or 31% from $17.8 million a year earlier.  Net debt (long term debt, including current portion, plus bank indebtedness, less cash and cash equivalents), totalled $4.6 million, down $13.0 million or 74% from $17.8 million a year earlier. Total long term liabilities at December 31, 2011 were $15.2 million, down $2.6 million or 16% from a year earlier.

Dividends

With three profitable quarters and a positive outlook, the Board has re-implemented a quarterly dividend payment.  The quarterly dividend declared is $0.01 per share for the shareholders of record on March 7, 2012, to be paid out on April 2, 2012.  Although a $0.01 per share dividend is modest, it will be reviewed quarterly by the board with a philosophical balance of fiscal prudence and a sharing of improved results.

Outlook and Priorities for 2012

The plan for 2012 will continue the quest for profitable growth:

• The Company has taken steps to ensure a strong group of companies within the ZCL family with a single culture and mandate;
• With the focus on marketing groups, as opposed to operating groups, management has been directed to put forth a concerted effort to create a stronger customer value proposition;
• Cost control and a continued focus on core assets; and
• Continued attention to safety and safety culture.

Management has identified approximately $3.0 million of capital expenditures for 2012 on plant and equipment to continue to improve its productivity.

	Summary Financial Results
For the three months ended		2011				2010
		Dec 31	Sep 30	Jun 30	Mar 31	Dec 31	Sep 30	Jun 30	Mar 31
(in thousands of dollars,						(restated)	(restated)	(restated)	(restated)
except per share amounts)		$	$	$	$	$	$	$	$
Revenue		37,716	36,352	29,820	23,158	35,028	32,340	30,521	23,685
Net income (loss)
	Continuing operations	1,840	1,892	969	(1,247)	(1,102)	(12,485)	(437)	(2,676)
	Discontinued operations	-	-	(181)	17	287	(233)	4	(207)
	Total	1,840	1,892	788	(1,230)	(815)	(12,718)	(433)	(2,883)
Basic and diluted earnings (loss) per share
	Continuing operations	0.06	0.07	0.03	(0.04)	(0.04)	(0.44)	(0.02)	(0.09)
	Total	0.06	0.07	0.02	(0.04)	(0.03)	(0.45)	(0.02)	(0.10)

(1)	The comparative information has been adjusted for IFRS requirements from the amounts reported under previous GAAP.
(2)	The discontinued operations are the steel tank division which was sold May 31, 2011 and the Home Heating Oil Tank division, which ZCL sold June 14, 2010 because they were not part of ZCL's core business.

MD&A and Financial Statements

The Company's management's discussion and analysis ("MD&A") and audited consolidated financial statements for the year ended December 31, 2011 are available on Sedar at www.sedar.com and the ZCL website at this link:  www.zcl.com/investors/corpdisclosure.html.

Conference Call

ZCL Composites Inc. has scheduled an investor conference call for 9:30 a.m. Mountain Time (11:30 a.m. Eastern Time) on Thursday, March 8, 2012, to discuss its financial and operating results for 2011.

To access the conference call by telephone, please call 647-427-7450 from the Greater Toronto area, or dial toll free 888-231-8191 from anywhere in North America. An audio webcast may be accessed through the investor events tab on the ZCL Composites website. Audio replays will be available on the ZCL Composites website shortly after the conclusion of the conference call.

The conference call will include prepared remarks by ZCL's President and Chief Executive Officer, Rod Graham, by ZCL's Chief Operating Officer, Ron Bachmeier and by ZCL's Chief Financial Officer, Kathy Demuth. After the prepared remarks, ZCL will accept questions from analysts and institutional investors. The public is invited to listen to the conference call in real time or by replay.

Note on Backlog

Backlog is defined as the total value of orders that management has assessed as having a high certainty of being performed because of the existence of a contract or purchase order specifying the scope, value and timing of an order.

Advisory Regarding Forward-Looking Statements

This document contains forward-looking statements under the heading "Outlook" and elsewhere concerning future events or the Company's future performance, including the Company's objectives or expectations for revenue and earnings growth, income taxes as a percentage of pre-tax income, business opportunities in the Underground and Aboveground Fluid Containment operating segments, efforts to reduce administrative and production costs, manage production levels, anticipated capital expenditure trends, activity in the petroleum and other industries and markets served by the Company and the sufficiency of cash flows and credit facilities available to cover normal operating and capital expenditures. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions.

Actual events or results may differ materially from those reflected in the Company's forward-looking statements due to a number of known and unknown risks, uncertainties and other factors affecting the Company's business and the industries the Company serves generally.

These factors include, but are not limited to, fluctuations in the level of capital expenditures in the Petroleum Products, Water Products and Industrial Corrosion markets, drilling activity and oil and natural gas prices, and other factors that affect demand for the Company's products and services, industry competition, the need to effectively integrate acquired businesses, uncertainties as to the Company's ability to implement its business strategy effectively, political and economic conditions, the Company's ability to attract and retain key personnel, raw material and labour costs, fluctuations in the US and Canadian dollar exchange rates, and other risks and uncertainties described under the heading "Risk Factors" in the Company's most recent Annual Information Form, and elsewhere in this document and other documents filed with Canadian provincial securities authorities. These documents are available to the public at www.sedar.com.

In addition to the factors noted above, management cautions readers that the current economic environment could have a negative impact on the markets in which the Company operates and on the Company's ability to achieve its financial targets. Factors such as continuing economic weakness in the US and Canada, tighter lending standards, volatile capital markets, lower commodity prices, the severity of the US housing crisis and other factors could negatively impact the demand for the Company's products and the Company's ability to grow or sustain revenues and earnings. Fluctuations in the US to Canadian dollar conversion rate also have the potential to impact the Company's revenues and earnings.

The Company believes that the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon.

The forward-looking statements in this report speak only as of the date of this report. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by the Company or on the Company's behalf, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

 

 

Rod Graham
President & CEO
ZCL Composites Inc.
[phone]
[email protected]

Kathy Demuth
Chief Financial Officer
ZCL Composites Inc.
[phone]
[email protected]