CECO Environmental Corp. Reports Fourth Quarter and Full Year 2015 Results

Achieves Record Annual Revenue, Gross Profit and Adjusted EBITDA

Mar 10, 2016, 07:00 ET from CECO Environmental Corp.

CINCINNATI, March 10, 2016 /PRNewswire/ --  

Fourth Quarter 2015*

  • Revenue of $103.9 million, up 37%; Organic revenue flat on a constant currency basis
  • Gross profit of $33.2 million, up 47%; Gross margin of 31.9%, up 220 basis points
  • Adjusted EBITDA of $12.7 million, up 43%
  • Net loss per diluted share of $0.09, compared with net income per diluted share of $0.07
  • Non-GAAP net income per diluted share of $0.18, compared with non-GAAP net income per diluted share of $0.22
  • Debt repayment of $20 million

Full-Year 2015*

  • Record revenue of $370.1 million, up 41%; Organic revenue up 3.4% on a constant currency basis
  • Record gross profit of $111.6 million, up 32%; Gross margin of 30.2%, down 200 basis points
  • Record adjusted EBITDA of $48.9 million, up 26%
  • Net loss per diluted share of $0.19, compared with net income per diluted share of $0.50
  • Non-GAAP net income per diluted share of $0.97, compared with net income per diluted share of $0.94
  • Debt repayment of $37 million

* All results compared to prior-year period

CECO Environmental Corp. (Nasdaq: CECE), a leading global environmental, energy and fluid handling technology company, today reported its financial results for the fourth quarter and full year of 2015.

"Despite macroeconomic challenges, which caused top line results to come in below expectations for the fourth quarter, we delivered margin expansion and outperformed on the Peerless acquisition integration," said CEO Jeff Lang. "In addition, we achieved several annual milestones, including record revenue, bookings, gross profit, adjusted EBITDA and non-GAAP earnings per diluted share. Our continued focus on our Sales Excellence and OneCECO initiatives helped drive full-year organic and recurring aftermarket revenue growth.

"We completed our first full quarter with Peerless and I am very pleased with the integration and execution thus far.  We have exceeded the previously communicated level of operational efficiencies and cost savings within six months of completing the acquisition, and today, we have realized the committed synergies of $15 million, more than one year ahead of schedule.

"While we anticipate ongoing headwinds in the coming year, we are confident that the actions we have taken in 2015 and our diversity of end markets, geographies and revenue streams provide us with a solid foundation to drive profitable growth through various cycles. The direction and core of our business is fundamentally strong, and we have the right team in place to deliver growth in our solid end markets," concluded Jeff Lang.

Revenue in the fourth quarter of 2015 was $103.9 million, up 37% from $76.1 million in the prior-year period. Recent acquisitions(1) contributed $29.6 million of incremental revenue in the fourth quarter of 2015. Organic revenue was flat on a constant currency basis compared with the prior-year period.

Revenue for the full year 2015 was $370.1 million, up 41% from $263.2 million in the prior-year period. Recent acquisitions(1) contributed $104.5 million of incremental revenue for the full year 2015. Organic revenue was up 3.4% on a constant currency basis compared with the prior-year period.

Operating income was $0.1 million for the fourth quarter of 2015, compared with $3.7 million operating income in the prior-year period.  Operating income on a non-GAAP basis was $10.5 million for the fourth quarter of 2015, compared with $7.5 million in the prior-year period.

Operating income for the full year 2015 was $5.4 million compared with $21.7 million in the prior-year period.  Non-GAAP operating income for the full year was $43.3 million compared with $34.0 million in the prior-year period.

Net loss per diluted share was $0.09 for the fourth quarter of 2015, compared with net income per diluted share of $0.07 in the prior-year period. Non-GAAP net income per diluted share was $0.18 for the fourth quarter of 2015, compared with $0.22 for the prior-year period.

Net loss per diluted share was $0.19 for full year 2015, compared with net income per diluted share of $0.50 in the prior year. Non-GAAP net income per diluted share was $0.97 for full year 2015, compared with $0.94 for the prior year period.

Cash and cash equivalents were $34.2 million and bank debt was $177.3 million as of December 31, 2015 compared with $18.2 million and $111.8 million, respectively, as of December 31, 2014.

BACKLOG AND BOOKINGS Total backlog at December 31, 2015 was $208.5 million as compared with $140.1 million on December 31, 2014, and $212.3 million on September 30, 2015.

Bookings were $358.0 million for full year 2015, compared with $254.9 million in the prior year, an increase of 40%.  Bookings were $100.3 million in the fourth quarter of 2015, compared with $63.7 million in the prior-year period.

QUARTERLY DIVIDEND On March 9, 2016, CECO's Board of Directors approved a quarterly dividend of $0.066 per share.  The dividend will be paid on March 30, 2016 to all stockholders of record on close of business on March 18, 2016.  CECO initiated a Dividend Reinvestment Plan ("DRIP") in 2012 that provides for the voluntary reinvestment of dividends by its stockholders.

CONFERENCE CALL A conference call is scheduled for today at 9:30AM ET to discuss the fourth quarter and full-year 2015 results.

Access to the conference call and the accompanying slides, as well as the replay, can be accessed at http://www.cecoenviro.com/investor-relations. Additionally, the live call can be accessed by dialing 855.327.6837 (Toll-Free) in the U.S. and Canada or 631.891.4304 for international calls. A replay will be available from 12:30 p.m. ET on the day of the call until March 24, 2016 at 11:59 p.m. ET. The replay may be accessed by dialing 877.870.5176  (Toll-Free) in the U.S. and Canada or  858.384.5517 for international calls and entering passcode 118343. -------------------------

(1) Acquisitions completed within the past twelve months

ABOUT CECO ENVIRONMENTAL

CECO is a diversified global provider of leading engineered technologies to the environmental, energy, and fluid handling and filtration industrial segments, targeting specific niche-focused end markets through an attractive asset-light business model, strategically balanced across the world. CECO targets its over $5 billion+ of installed-base, specifically to expand and grow a higher recurring revenue of aftermarket products and services. CECO's brands, technologies and solutions have been evolving for well over 50 years to become leading-class technologies in specific niche global end markets, including natural gas turbine power, refinery & petrochemical engineered cyclones and mid-stream energy pipeline gas transmission. CECO is listed on NASDAQ under the ticker symbol "CECE". For more information, please visit http://www.cecoenviro.com/.

Contacts:

Ed Prajzner, Chief Financial Officer & Secretary 800.333.5475 eprajzer@cecoenviro.com  

Tracy Krumme, Vice President of Investor Relations 513.458.2610 tkrumme@cecoenviro.com

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

December 31,

($ in thousands, except per share data)

2015

2014

ASSETS

Current assets:

Cash and cash equivalents

$

34,194

$

18,162

Restricted cash

5,319

1,200

Accounts receivable, net

97,028

58,394

Costs and estimated earnings in excess of billings on uncompleted contracts

41,641

24,371

Inventories, net

29,397

23,416

Prepaid expenses and other current assets

9,736

9,046

Prepaid income taxes

4,724

4,190

Assets held for sale

1,699

4,188

Total current assets

223,738

142,967

Property, plant and equipment, net

44,981

18,961

Goodwill

219,112

165,861

Intangible assets – finite life, net

74,957

58,398

Intangible assets – indefinite life

26,337

19,766

Deferred income tax asset, net

3,003

Deferred charges and other assets

3,925

3,151

$

593,050

$

412,107

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of debt

$

19,494

$

8,887

Accounts payable and accrued expenses

98,046

53,819

Billings in excess of costs and estimated earnings on uncompleted contracts

22,848

14,728

Income taxes payable

2,015

405

Total current liabilities

142,403

77,839

Other liabilities

30,073

27,884

Debt, less current portion

157,834

102,969

Deferred income tax liability, net

17,719

22,191

Total liabilities

348,029

230,883

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, 34,055,749 and       26,404,869 shares issued in 2015 and 2014, respectively

340

264

Capital in excess of par value

243,274

168,886

Accumulated earnings

5,472

19,051

Accumulated other comprehensive loss

(9,577)

(6,621)

239,509

181,580

Less treasury stock, at cost, 137,920 shares in 2015 and 2014

(356)

(356)

Total CECO shareholders' equity

239,153

181,224

Noncontrolling interest

5,868

Total shareholders' equity

245,021

181,224

$

593,050

$

412,107

 

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(unaudited)

THREE MONTHS ENDED DECEMBER 31,

TWELVE MONTHS ENDED DECEMBER 31,

($ in thousands, except per share data)

2015

2014

2015

2014

Net sales

$     103,900

$       76,106

$     370,076

$     263,217

Cost of sales

70,736

53,519

258,514

178,394

Gross profit

33,164

22,587

111,562

84,823

Selling and administrative expenses

23,128

15,038

69,286

51,440

Acquisition and integration expenses

962

948

7,940

1,269

Amortization and earn out expenses

5,624

2,863

25,613

10,151

Intangible asset impairment

3,340

3,340

Legal reserves

300

Income from operations

110

3,738

5,383

21,663

Other expense, net

(625)

(625)

(2,081)

(2,311)

Interest expense

(2,119)

(883)

(5,964)

(3,138)

(Loss) income before income taxes

(2,634)

2,230

(2,662)

16,214

Income tax expense

577

370

3,072

3,137

Net (loss) income

$       (3,211)

$         1,860

$       (5,734)

$       13,077

Less net loss attributable to noncontrolling interest

$          (132)

$              —

$          (132)

$              —

Net (loss) income attributable to CECO Environmental Corp.

$       (3,079)

$         1,860

$       (5,602)

$       13,077

(Loss) earnings per share:

Basic

$         (0.09)

$           0.07

$         (0.19)

$           0.51

Diluted

$         (0.09)

$           0.07

$         (0.19)

$           0.50

Weighted average number of common shares outstanding:

Basic

33,912,163

26,057,831

28,791,662

25,750,972

Diluted

33,912,163

26,467,984

28,791,662

26,196,901

 

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES

Three Months Ended December 31,

Twelve Months Ended December 31,

(dollars in millions)

2015

2014

2015

2014

Gross profit as reported in accordance with GAAP

$           33.2

$           22.6

$       111.6

$          84.8

Gross profit margin in accordance with GAAP

31.9%

29.7%

30.2%

32.2%

Inventory valuation adjustment

0.5

--

0.5

--

Plant, property and equipment valuation       adjustment

0.1

0.1

0.6

0.6

Non-GAAP gross margin

$           33.8

$           22.7

$       112.7

$          85.4

Non-GAAP gross profit margin

32.5%

29.8%

30.5%

32.4%

Three Months Ended December 31,

Twelve Months Ended December 31,

(dollars in millions)

2015

2014

2015

2014

Operating income as reported in accordance with       GAAP

$              0.1

$              3.7

$            5.4

$          21.7

Operating margin in accordance with GAAP

0.1%

4.9%

1.5%

8.2%

Inventory valuation adjustment

0.5

--

0.5

--

Plant, property and equipment valuation       adjustment

0.1

0.1

0.6

0.6

Acquisition and integration expenses

0.9

0.9

7.9

1.3

Amortization and earn-out expenses

5.6

2.8

25.6

10.1

Intangible asset impairment

3.3

--

3.3

--

Legal reserves

--

--

--

0.3

Non-GAAP operating income

$           10.5

$              7.5

$          43.3

$          34.0

Non-GAAP operating margin

10.1%

9.9%

11.7%

12.9%

Three Months Ended December 31,

Twelve Months Ended December 31,

(dollars in millions)

2015

2014

2015

2014

Net (loss) income as reported in accordance with       GAAP

$           (3.1)

$              1.9

$         (5.6)

$          13.1

Inventory valuation adjustment

0.5

--

0.5

--

Plant, property and equipment valuation       adjustment

0.1

0.1

0.6

0.6

Acquisition and integration expenses

0.9

0.9

7.9

1.3

Amortization and earn-out expenses

5.6

2.8

25.6

10.1

Intangible asset impairment

3.3

--

3.3

--

Legal reserves

--

--

--

0.3

Deferred financing fee adjustment

--

--

0.3

--

Foreign currency remeasurement

0.7

1.2

2.5

2.9

Tax benefit of expenses

(2.0)

(1.0)

(7.1)

(3.7)

Non-GAAP net income

$              6.0

$              5.9

$          28.0

$          24.6

                    Depreciation

1.5

0.8

3.5

3.1

                    Non-cash stock compensation

0.6

0.5

1.9

1.7

                    Other (income) expense

(0.1)

(0.6)

(0.4)

(0.6)

                    Interest expense

2.1

0.9

5.7

3.1

                    Income tax expense

2.6

1.4

10.2

6.8

Adjusted EBITDA

$           12.7

$              8.9

$          48.9

$          38.7

Earnings (loss) per share:

Basic

$         (0.09)

$           0.07

$       (0.19)

$          0.51

Diluted

$         (0.09)

$           0.07

$       (0.19)

$          0.50

 

Non-GAAP net income per share:

Basic

$           0.18

$           0.22

$          0.97

$          0.95

Diluted

$           0.18

$           0.22

$          0.97

$          0.94

NOTE REGARDING NON-GAAP FINANCIAL MEASURES

CECO is providing the non-GAAP historical financial measures 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 gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP gross profit margin, 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 expenses related to property, plant equipment valuation adjustments, acquisition and integration expense activities including retention, legal, accounting, banking, amortization and contingent earnout expenses, foreign currency re-measurement, intangible asset impairment, legal reserves and the associated tax benefit of these charges. 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 gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic and diluted shares 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.

In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP gross profit margin, 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. Words such as "estimate," "believe," "anticipate," "expect," "intend," "plan," "target," "project," "should," "may," "will" and similar expressions are intended to identify forward-looking statements. Forward-looking statements (including oral representations) 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. These risks and uncertainties include, but are not limited to: our ability to successfully integrate acquired businesses and realize the synergies from acquisitions, including PMFG, 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 and method of accounting for contract revenue; fluctuations in operating results from period to period due to 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; changes in or developments with respect to any litigation or investigation; the potential for fluctuations in prices for manufactured components and raw materials; the substantial amount of debt incurred in connection with our recent 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 environmental, energy and fluid handling and filtration industries. These and other risks and uncertainties are discussed in more detail in CECO's filings with the Securities and Exchange Commission, including our reports on Form 10-K and Form 10-Q. 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. All forward-looking statements attributable to CECO or persons acting on behalf of CECO are expressly qualified in their entirety by the cautionary statements and risk factors contained in this press release and CECO's respective filings with the Securities and Exchange Commission. 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 Securities and Exchange Commission, CECO undertakes no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.

 

SOURCE CECO Environmental Corp.



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