ZCL Composites Reports Third Quarter 2014 Financial Results

EDMONTON, Nov. 3, 2014 /CNW/ - ZCL Composites Inc. (TSX: ZCL) today announced financial results for the third quarter and nine months ended September 30, 2014.

Q3 2014 compared with Q3 2013

• Revenue of $49.4 million, up $5.4 million or 12% from $43.9 million;
• Record net income of $5.6 million or $0.19 per share ($0.18 fully diluted), up $0.6 million or 11% from $5.0 million or $0.17 per share (basic and fully diluted);
• Adjusted EBITDA of $8.8 million (18% of revenue), up $0.3 million or 4% from $8.5 million (19% of revenue); and
• Backlog of $45.8 million, up $8.5 million or 23% from $37.3 million.

First Nine Months 2014 compared with First Nine Months 2013

• Revenue of $122.6 million, down $1.4 million or 1% from $124.0 million; and
• Net income of $11.4 million or $0.38 per fully diluted share, down $1.2 million or 9% from $12.6 million or $0.43 per fully diluted share.

"Results for the third quarter of 2014 were mixed," said Ron Bachmeier, President and Chief Executive Officer.  "We secured quarterly records for several key metrics, including net income, earnings per share and Underground revenue, however Aboveground revenue remained soft, with continuing variability in timing of projects.  Moreover, gross profit was lower than a year earlier, as the low margin on our Aboveground projects more than offset a gross profit improvement in the Underground segment."

"With regard to the full year 2014, we expect a continuation of the trend of the first nine months of this year, with moderate growth in the Underground segment. Aboveground segment revenue will not achieve revenue earned in 2013."

Financial Results

Revenue for the third quarter ended September 30, 2014 was $49.4 million compared to $43.9 million earned for the third quarter of 2013.  The Underground operating segment was up $8.3 million, but this increase was partially offset by a $2.8 million decrease in the Aboveground operating segment as compared to the third quarter of 2013.

Gross profit for the third quarter ended September 30, 2014 was $10.5 million, consistent with a year earlier.  Gross profit increased by $1.9 million for the Underground operations, but was offset by a $2.0 million decrease in the Aboveground operations.  Gross margin of 21% was down three percentage points from a year earlier.

Net income for the third quarter ended September 30, 2014 was $5.6 million, up $0.6 million or 11% from $5.0 million a year earlier.  Basic earnings per share for the third quarter of 2014 was $0.19, up $0.02 or 12% from $0.17 per share a year earlier.

Backlog

As of September 30, 2014, backlog was $45.8 million, up $8.5 million or 23% from $37.3 million a year earlier.  The increase resulted from an improvement in both the Underground and Aboveground backlog.  The increase in Underground backlog was driven by the US operations which more than offset a decrease in the Canadian operations.  The Aboveground backlog was up 88% or $6.5 million relative to the third quarter of 2013, stemming mostly from an increase in the industrial chemical and power generation markets.  However, as at September 30, 2013 we had significant Aboveground time and material based field service projects which were not recorded as backlog and have not been replicated to the same degree in 2014.

Financial Position

At September 30, 2014, ZCL's balance sheet had working capital (current assets less current liabilities) of $57.2 million, up $9.4 million from $47.8 million at December 31, 2013 and up $12.5 million from $44.7 million at September 30, 2013.  Net cash decreased to $12.5 million, down $2.6 million from $15.1 million at December 31, 2013 and up $8.8 million from $3.7 million at September 30, 2013. 

Dividends

The Board has declared a quarterly dividend of $0.04 per share.  The dividend will be paid on January 15, 2015, to the shareholders of record as of December 31, 2014. 

Summary Financial Results

For the three months ended	2014			2013				2012
(in thousands of dollars,	Sep 30	Jun 30	Mar 31	Dec 31	Sep 30	Jun 30	Mar 31	Dec 31
except per share amounts)	$	$	$	$	$	$	$	$
Revenue	49,361	41,687	31,592	37,715	43,931	47,250	32,809	44,866
Net income	5,557	4,492	1,372	1,769	4,993	5,087	2,536	2,876
Adjusted EBITDA	8,834	7,382	3,159	3,975	8,512	8,316	4,797	5,386
Basic earnings per share	0.19	0.15	0.05	0.06	0.17	0.17	0.09	0.10
Diluted earnings per share	0.18	0.15	0.05	0.06	0.17	0.17	0.09	0.10
Adjusted EBITDA per diluted share	0.29	0.24	0.10	0.13	0.28	0.28	0.16	0.18
Dividends declared per share	0.04	0.035	0.035	0.03	0.03	0.025	0.025	0.02

MD&A and Financial Statements

The Company's management's discussion and analysis ("MD&A") and unaudited interim condensed consolidated financial statements for the third quarter ended September 30, 2014 and 2013, are available on Sedar at www.sedar.com and the ZCL website at this link: http://www.zcl.com/investor-relations/financials.html.

Conference Call

ZCL Composites Inc. has scheduled an investor conference call for 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Tuesday, November 4, 2014, to discuss its financial and operating results for the third quarter ended September 30, 2014.

The conference call will include prepared remarks by ZCL's President and Chief Executive 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.

To access the conference call by telephone, please call [phone] from the greater Toronto area, or dial toll free [phone] from elsewhere in North America.  An audio webcast may be accessed through the Investor Events tab on the ZCL website at http://www.zcl.com/investor-relations/investor-events.html. Audio replays will be available on the ZCL website shortly after the conclusion of the conference call.

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.  Backlog is a non-IFRS measure and does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures used by other companies.

Note on Adjusted EBITDA

Adjusted EBITDA is defined as income from operations before finance expense, income taxes, share-based compensation, depreciation of property, plant and equipment, amortization of intangible assets, gains or losses on sale of assets, and impairment of assets.

Note on Adjusted EBITDA per Diluted Share

Adjusted EBITDA per diluted share is defined as adjusted EBITDA divided by weighted average diluted shares outstanding.

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 Petroleum Products, Water Products, Corrosion Products markets, 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," "forecast," "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 Corrosion Products 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 dollar, euro 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 global economic uncertainty, tighter lending standards, volatile capital markets, fluctuating commodity prices, 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 conversion rates of the US dollar to Canadian dollar and euro to Canadian dollar 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.  For further information, please contact:

SOURCE: ZCL Composites Inc.

Ron Bachmeier, President & CEO, ZCL Composites Inc., [phone], [email protected]; Kathy Demuth, Chief Financial Officer, ZCL Composites Inc., [phone], [email protected]

Related Links

http://www.zcl.com