ZCL COMPOSITES INC. ZCL Composites Reports Q4 and Fiscal 2014 Financial Results
Edmonton, Alberta, March 5, 2015 - ZCL Composites Inc. (TSX: ZCL) today announced financial results for the fourth quarter and year ended December 31, 2014.
Year 2014 compared with 2013
• Record revenue of $170.8 million, up $9.1 million or 6% from $161.7 million;
• Record net income of $16.3 million or $0.54 per share (basic and fully diluted), up $1.9 million or $0.05 per share from $14.4 million or $0.49 per share (basic and fully diluted);
• Record adjusted EBITDA of $27.1 million, up $1.5 million or 6% from $25.6 million;
• Backlog of $31.0 million, down $7.9 million or 20% from $38.9 million; and
• Quarterly dividend of $0.045 per share, up 13% from $0.04 per share in the third quarter of 2014.
Q4 2014 compared with Q4 2013
• Revenue of $48.2 million, up $10.5 million or 28% from $37.7 million;
• Net income of $4.9 million or $0.16 per share (basic and fully diluted), up $3.1 million or $0.10 per share from $1.8 million or $0.06 per share (basic and fully diluted); and
• Adjusted EBITDA of $7.7 million, up $3.7 million or 94% from $4.0 million.
"I view 2014 as a year of achievement for ZCL," said Ron Bachmeier, President and Chief Executive Officer. "We set annual records for several financial performance metrics and delivered a return on capital employed of 29%. Our balance sheet continues to be strong with working capital of $62.6 million and a net cash position of $25.8 million. As there is uncertainty in certain markets that we serve due to the decline in oil and gas prices, we will continue exercising prudence on our capital allocation decisions, leaving us with flexibility to take advantage of any growth opportunities that may arise."
"Looking ahead, we remain encouraged about our prospects. As we enter 2015, we expect that we may initially see lower levels of activity at ZCL due to the uncertainty in the energy markets. However, we feel that the diversity of our product offerings in the retail petroleum, water, and industrial corrosion markets, which should benefit from lower commodity energy prices, will allow us to grow our business in 2015 and capitalize on the opportunities that will present themselves in the current environment."
Financial Results
Revenue for the year ended December 31, 2014 was a record $170.8 million, up $9.1 million or 6% from
$161.7 million for the year ended December 31, 2013. The Underground operating segment grew 14% and both Petroleum Products and Water Products achieved record annual revenues. The Aboveground operating segment revenue was down 21% from 2013.
Gross profit for the year ended December 31, 2014 was $34.5 million, up $1.0 million or 3% from $33.5 million a year earlier. Gross margin was 20% of revenue for 2014, down slightly from 21% a year earlier, with the decrease attributable to the Aboveground operating segment.
Net income for the year ended December 31, 2014 was $16.3 million, up $1.9 million or 13% from $14.4 million a year earlier. Net income per diluted share for 2014 was $0.54, up $0.05 or 10% from $0.49 per
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diluted share a year earlier. Net income included a foreign exchange gain of $1.0 million that arose on the translation of US dollar assets and liabilities held in the Canadian legal entities.
Backlog
As of December 31, 2014, backlog was $31.0 million, down $7.9 million or 20% from $38.9 million a year earlier. The overall decrease primarily resulted from a reduction in the Underground backlog of $8.0 million, which was partially offset by a small increase in Aboveground backlog. The Underground backlog decline reflects the significant amount of pre-orders that the Canadian sales group received at the end of 2013 relative to 2014, an acceleration of product sales to certain customers in the fourth quarter of 2014 that otherwise would have been recorded as backlog at year end, and temporary customer indecision due to the oil price drop. Our Canadian sales team is currently focused on obtaining pre-orders for the first quarter of
2015.
Financial Position
At December 31, 2014, ZCL's balance sheet had working capital (current assets less current liabilities) of $62.6 million, up $14.7 million or 31% from $47.8 million at December 31, 2013. Net cash increased $10.6 million throughout the 2014 fiscal year to $25.8 million, primarily due to increases in cash flows from operations throughout the year of $20.8 million. Return on capital employed remains strong at 29% for the year ended December 31, 2014.
Dividends
Given our financial strength and ability to generate cash from operations, the Board declared a 13% increase in our quarterly dividend to $0.045 per share for the fourth quarter of 2014, up from $0.04 per share previously. The dividend will be paid on April 15, 2015, to the shareholders of record as of March 31, 2015.
2015 Outlook
In 2015, our operations group plans to incur capital investment at a level similar to 2014, in order to further progress lean initiatives within our facilities. ZCL's maintenance capital requirements are historically between
$3 million to $5 million annually. For 2015, similar to 2014, ZCL's capital budget is planned to be at the upper
end of that range in order to continue to upgrade certain of our existing facilities and equipment with the intent to further improve lead times and process flow.
Summary Financial Results
For the three months ended 2014 | 2013 |
(in thousands of dollars, Dec 31 Sep 30 Jun 30 Mar 31 except per share amounts) $ $ $ $ | Dec 31 Sep 30 Jun 30 Mar 31 $ $ $ $ |
Revenue 48,195 49,361 41,687 31,592 Net income 4,895 5,557 4,492 1,372 Adjusted EBITDA 7,702 8,834 7,382 3,159 Basic earnings per share 0.16 0.19 0.15 0.05 Diluted earnings per share 0.16 0.18 0.15 0.05 Adjusted EBITDA per diluted share 0.25 0.29 0.24 0.10 Dividends declared per share 0.04 0.04 0.035 0.035 | 37,715 43,931 47,250 32,809 1,769 4,993 5,087 2,536 3,975 8,512 8,316 4,797 0.06 0.17 0.17 0.09 0.06 0.17 0.17 0.09 0.13 0.28 0.28 0.16 0.03 0.03 0.025 0.025 |
MD&A and Financial Statements
The Company's management's discussion and analysis ("MD&A") and consolidated financial statements for the years ended December 31, 2014 and 2013, are available on SEDAR at www.sedar.comand the ZCL website at this link: http://www.zcl.com/investor-relations/financials.html.
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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 Friday, March 6, 2015, to discuss its financial and operating results for the year and fourth quarter ended December 31, 2014.
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 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.
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.
Note on Non-IFRS Measures:
ZCL uses both IFRS and non-IFRS measures to make strategic decisions and to set targets. Backlog, adjusted EBITDA, return on capital employed, and net cash are non-IFRS measures that are used by ZCL and may not be comparable to similar measures used by other companies.
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.
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 deferred development costs and intangible assets, gains or losses on sale of assets, and impairment of assets.
Return on Capital Employed
Return on capital employed is defined as adjusted EBITDA divided by average capital employed, being average shareholders' equity, plus average long term debt, including current portion, less average cash and cash equivalents.
Net cash
Net cash is defined as cash and cash equivalents less long term debt, current portion of long term debt and bank indebtedness.
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," "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.
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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. Unless otherwise indicated, the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and the reporting currency is in Canadian dollars.
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 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. For further information, please contact:
Ron Bachmeier Kathy Demuth President & CEO Chief Financial Officer ZCL Composites Inc. ZCL Composites Inc. (780) 466-6648 (780) 466-6648
Ron.Bachmeier@zcl.com Kathy.Demuth@zcl.com
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