CECO ENVIRONMENTAL CORP. DALLAS, May 10, 2018 /PRNewswire/ -- CECO Environmental Corp. (Nasdaq: CECE), a leading global air quality and fluid handling company serving the energy, industrial and other niche markets, today reported its financial results for the first quarter of 2018.
Highlights of the First Quarter 2018*
- Revenue of $74.1 million, compared with $92.7 million
- Gross profit of $25.6 million (34.5% margin), compared with $32.0 million (34.5% margin)
- Operating income of $12.2 million, compared with $1.4 million
- Non-GAAP operating income of $4.0 million, compared with $10.2 million
- Net income was $5.8 million, compared with break even
- Non-GAAP net income of $1.7 million, compared with $7.0 million
- Net income per diluted share was $0.17, compared with break even
- Non-GAAP net income per diluted share of $0.05, compared with $0.20
- Adjusted EBITDA of $5.6 million, compared with $11.7 million
- Bookings of $95.0 million, compared with $84.0 million
- Backlog of $182.1 million, compared with $168.9 as of December 31, 2017
- Repaid $30.5 million in bank debt
* All comparisons are versus the comparable prior-year period unless otherwise stated.
CECO's Chief Executive Officer Dennis Sadlowski commented, "In the first quarter of 2018, we took several positive steps in executing our strategy, including the successful sale of two non-core assets and the repayment of approximately 25% of our outstanding debt which will provide significant financial flexibility to invest in our future growth. We are also very pleased to have delivered a second successive quarter of increasing bookings along with a strong book to bill ratio on solid new orders coming from our growth platforms. Revenue was down reflecting the reduced activity and backlog from soft end markets in 2017. Aided by the benefit of our Q4 restructuring and solid gross margins, operating income and EBITDA margins expanded modestly from Q4."
Mr. Sadlowski added, "Our 4-3-3 operating strategy is helping build positive momentum across the business. In 2018, we are investing in targeted growth opportunities and major account relationships with key industrials around the world. We will continue to focus on driving preference for our leading brands by strengthening sales and marketing tools, providing essential resources and training, and optimizing operations to ensure the company is best-positioned to maximize our market opportunities in all segments. Our management team is energized and determined to drive organic growth."
Revenue in the first quarter of 2018 was $74.1 million, down 20.0% from $92.7 million in the prior-year period.
Operating income was $12.2 million for the first quarter of 2018 (16.5% margin), compared with $1.4 million in the prior-year period (1.5% margin). Operating income on a non-GAAP basis was $4.0 million for the first quarter of 2018 (5.4% margin), compared with $10.2 million in the prior-year period (11.0% margin).
Net income was $5.8 million for the first quarter of 2018, compared with break even in the prior-year period. Net income on a non-GAAP basis was $1.7 million for the first quarter of 2018, compared with $7.0 million in the prior-year period.
Net income per diluted share was $0.17 for the first quarter of 2018, compared with net income per diluted share of break even in the prior-year period. Non-GAAP net income per diluted share was $0.05 for the first quarter of 2018, compared with $0.20 for the prior-year period.
Cash and cash equivalents were $33.1 million and bank debt was $87.2 million, as of March 31, 2018, compared with $29.9 million and $117.7 million, respectively, as of December 31, 2017.
BACKLOG AND BOOKINGS
Total backlog at March 31, 2018 was $182.1 million as compared with $168.9 million on December 31, 2017, and $184.2 million on March 31, 2017.
Bookings were $95.0 million for the first quarter of 2018, compared with $84.0 million in the prior-year period and $91.4 million in the fourth quarter of 2017.
CONFERENCE CALL
A conference call is scheduled for today at 7:30 a.m. CT to discuss the first quarter 2018 financial results. The conference call may be accessed by dialing (877) 870-4263 (Toll Free) within North America, Canada (855) 669-9657 (Toll Free) or Toll/International (412) 317-0790. A replay of the conference call will be available on the Company's website for 14 days. The replay may be accessed by dialing (877) 344-7529 (Toll-Free) within North America or Toll/International (412) 317-0088 and entering passcode 10119907.
The live webcast and slides can also be accessed at https://investors.cecoenviro.com/events-webcasts-and-presentations.
ABOUT CECO ENVIRONMENTAL
CECO Environmental is a global leader in air quality and fluid handling serving the energy, industrial and other niche markets. Providing innovative technology and application expertise, CECO helps companies grow their business with safe, clean and more efficient solutions that help protect our shared environment. In regions around the world, CECO works to improve air quality, optimize the energy value chain and provide custom engineered solutions for applications including oil and gas, power generation, water and wastewater, battery production, poly silicon fabrication, chemical and petrochemical processing along with a range of others. CECO is listed on Nasdaq under the ticker symbol "CECE". For more information, please visit www.cecoenviro.com.
Contact:
Matthew Eckl, Chief Financial Officer
(888) 990-6670
investor.relations@onececo.com
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(unaudited) | ||||||||
(dollars in thousands, except per share data) | MARCH 31, 2018 | DECEMBER 31, | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 33,089 | $ | 29,902 | ||||
Restricted cash | 933 | 591 | ||||||
Accounts receivable, net | 63,796 | 67,990 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 36,214 | 33,947 | ||||||
Inventories, net | 22,083 | 20,969 | ||||||
Prepaid expenses and other current assets | 13,748 | 10,760 | ||||||
Prepaid income taxes | 243 | 1,930 | ||||||
Assets held for sale | 7,736 | 7,853 | ||||||
Total current assets | 177,842 | 173,942 | ||||||
Property, plant and equipment, net | 23,042 | 23,400 | ||||||
Goodwill | 152,780 | 166,951 | ||||||
Intangible assets – finite life, net | 45,288 | 49,956 | ||||||
Intangible assets – indefinite life | 18,412 | 19,691 | ||||||
Deferred charges and other assets | 4,755 | 4,609 | ||||||
Total assets | $ | 422,119 | $ | 438,549 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of debt | $ | — | $ | 11,296 | ||||
Accounts payable and accrued expenses | 77,367 | 70,786 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 18,215 | 20,469 | ||||||
Note payable | 5,300 | 5,300 | ||||||
Income taxes payable | 3,073 | — | ||||||
Total current liabilities | 103,955 | 107,851 | ||||||
Other liabilities | 30,103 | 30,382 | ||||||
Debt, less current portion | 84,704 | 103,537 | ||||||
Deferred income tax liability, net | 8,784 | 10,210 | ||||||
Total liabilities | 227,546 | 251,980 | ||||||
Commitments and contingencies | ||||||||
Shareholders' equity: | ||||||||
Preferred stock, $.01 par value; 10,000 shares authorized, none issued | — | — | ||||||
Common stock, $.01 par value; 100,000,000 shares authorized, 34,740,933 and | 347 | 347 | ||||||
Capital in excess of par value | 248,860 | 248,170 | ||||||
Accumulated loss | (46,495) | (52,673) | ||||||
Accumulated other comprehensive loss | (7,783) | (8,919) | ||||||
194,929 | 186,925 | |||||||
Less treasury stock, at cost, 137,920 shares at March 31, 2018 and December 31, 2017 | (356) | (356) | ||||||
Total shareholders' equity | 194,573 | 186,569 | ||||||
Total liabilities and shareholders' equity | $ | 422,119 | $ | 438,549 | ||||
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(unaudited) | ||||||||
THREE MONTHS ENDED MARCH 31, | ||||||||
(dollars in thousands, except per share data) | 2018 | 2017 | ||||||
Net sales | $ | 74,139 | $ | 92,651 | ||||
Cost of sales | 48,578 | 60,722 | ||||||
Gross profit | 25,561 | 31,929 | ||||||
Selling and administrative expenses | 21,573 | 23,256 | ||||||
Amortization and earnout expenses | 2,903 | 7,323 | ||||||
Gain on divestitures, net of selling costs | (11,177) | — | ||||||
Restructuring expenses | 112 | — | ||||||
Income from operations | 12,150 | 1,350 | ||||||
Other expense, net | (356) | (109) | ||||||
Interest expense | (1,920) | (1,711) | ||||||
Income (loss) before income taxes | 9,874 | (470) | ||||||
Income tax expense (benefit) | 4,111 | (508) | ||||||
Net income | $ | 5,763 | $ | 38 | ||||
Earnings per share: | ||||||||
Basic | $ | 0.17 | $ | 0.00 | ||||
Diluted | $ | 0.17 | $ | 0.00 | ||||
Weighted average number of common shares outstanding: | ||||||||
Basic | 34,592,803 | 34,215,519 | ||||||
Diluted | 34,641,390 | 34,563,139 | ||||||
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES | ||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES | ||||||||
Three Months Ended March 31, | ||||||||
(dollars in millions) | 2018 | 2017 | ||||||
Operating income as reported in accordance with GAAP | $ | 12.2 | $ | 1.4 | ||||
Operating margin in accordance with GAAP | 16.5 | % | 1.5 | % | ||||
Legacy design repairs | — | 0.2 | ||||||
Plant, property and equipment valuation adjustment | — | 0.2 | ||||||
Amortization and earnout expenses | 2.9 | 7.3 | ||||||
Gain on divestitures, net of selling costs | (11.2) | — | ||||||
Restructuring expenses | 0.1 | — | ||||||
Executive transition expenses | — | 0.9 | ||||||
Facility exit expenses | — | 0.2 | ||||||
Non-GAAP operating income | $ | 4.0 | $ | 10.2 | ||||
Non-GAAP operating margin | 5.4 | % | 11.0 | % | ||||
Three Months Ended March 31, | ||||||||
(dollars in millions) | 2018 | 2017 | ||||||
Net income as reported in accordance with GAAP | $ | 5.8 | $ | — | ||||
Legacy design repairs | — | 0.2 | ||||||
Plant, property and equipment valuation adjustment | — | 0.2 | ||||||
Amortization and earnout expenses, net | 2.9 | 7.3 | ||||||
Gain on divestiture, net of selling costs | (11.2) | — | ||||||
Restructuring expense | 0.1 | — | ||||||
Executive transition expenses | — | 0.9 | ||||||
Facility exit expenses | — | 0.2 | ||||||
Foreign currency remeasurement | (0.2) | (0.3) | ||||||
Tax expense (benefit) of adjustments | 4.3 | (1.5) | ||||||
Non-GAAP net income | $ | 1.7 | $ | 7.0 | ||||
Depreciation | 1.0 | 1.1 | ||||||
Non-cash stock compensation (excluding executive transition costs) | 0.6 | 0.5 | ||||||
Other expense | 0.6 | 0.4 | ||||||
Interest expense | 1.9 | 1.7 | ||||||
Income tax (benefit) expense | (0.2) | 1.0 | ||||||
Adjusted EBITDA | $ | 5.6 | $ | 11.7 | ||||
Earnings per share: | ||||||||
Basic | $ | 0.17 | $ | 0.00 | ||||
Diluted | $ | 0.17 | $ | 0.00 | ||||
Non-GAAP net income per share: | ||||||||
Basic | $ | 0.05 | $ | 0.20 | ||||
Diluted | $ | 0.05 | $ | 0.20 | ||||
NOTE REGARDING NON-GAAP FINANCIAL MEASURES
CECO is providing certain non-GAAP historical financial measures as presented above as the Company believes that these figures are helpful in allowing individuals to better assess the ongoing nature of CECO's core operations. A "non-GAAP financial measure" is a numerical measure of a company's historical financial performance that excludes amounts that are included in the most directly comparable measure calculated and presented in the GAAP statement of operations.
Non-GAAP operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and adjusted EBITDA, as we present them in the financial data included in this press release, have been adjusted to exclude the effects of transactions related to gain on divestitures, net of selling costs, legacy design repairs, property, plant and equipment valuation adjustments, acquisition and integration expense activities including retention, legal, accounting, banking, amortization and contingent earn-out expenses, foreign currency re-measurement, executive transition expenses, facility exit expenses, restructuring expense, other nonrecurring or infrequent items and the associated tax benefit of these items. Management believes that these items are not necessarily indicative of the Company's ongoing operations and their exclusion provides individuals with additional information to compare the Company's results over multiple periods. Management utilizes this information to evaluate its ongoing financial performance. Our financial statements may continue to be affected by items similar to those excluded in the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that all such costs are unusual or infrequent.
Non-GAAP operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and adjusted EBITDA are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of CECO's results as reported under GAAP. Additionally, CECO cautions investors that non-GAAP financial measures used by the Company may not be comparable to similarly titled measures of other companies.
In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, non-GAAP operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and adjusted EBITDA stated in the tables above present the most directly comparable GAAP financial measure and reconcile to the most directly comparable GAAP financial measures.
SAFE HARBOR
Any statements contained in this Press Release, other than statements of historical fact, including statements about management's beliefs and expectations, are forward-looking statements and should be evaluated as such. These statements are made on the basis of management's views and assumptions regarding future events and business performance. We use words such as "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," "will," "plan," "should" and similar expressions to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Potential risks, among others, that could cause actual results to differ materially are discussed under "Part I – Item 1A. Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and include, but are not limited to: our ability to successfully realize the expected benefits of our restructuring program; our ability to successfully integrate acquired businesses and realize the synergies from acquisitions, as well as a number of factors related to our business, including economic and financial market conditions generally and economic conditions in CECO's service areas; dependence on fixed price contracts and the risks associated therewith, including actual costs exceeding estimates; fluctuations in operating results from period to period due to cyclicality or seasonality of the business; the effect of growth on CECO's infrastructure, resources, and existing sales; the ability to expand operations in both new and existing markets; the potential for contract delay or cancellation; liabilities arising from faulty services or products that could result in significant professional or product liability, warranty, or other claims; changes in or developments with respect to any litigation or investigation; failure to meet timely completion or performance standards that could result in higher cost and reduced profits or, in some cases, losses on projects; the potential for fluctuations in prices for manufactured components and raw materials; the substantial amount of debt incurred in connection with our acquisitions and our ability to repay or refinance it or incur additional debt in the future; the impact of federal, state or local government regulations; economic and political conditions generally; and the effect of competition in the Industrial Solutions segment, Energy Solutions segment and Fluid Handling Solutions segment industries. Many of these risks are beyond management's ability to control or predict. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated. Investors are cautioned not to place undue reliance on such forward-looking statements as they speak only to our views as of the date the statement is made. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we undertake no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.
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SOURCE CECO Environmental Corp.
