CINCINNATI, Nov. 8, 2016 /PRNewswire/ -- CECO
Environmental Corp. (Nasdaq: CECE), a leading global energy,
environmental, and industrial technology company, today reported
its financial results for the third quarter and first nine months
of 2016.
Third Quarter 2016 Highlights*
- Revenue of $101.6 million, up
3.4%
- Gross profit of $33.7 million, up
9.4%
- Gross margin of 33.2%, up 180 basis points
- Operating income of $10.5
million, non-GAAP operating income of $14.4 million
- Net income of $5.8 million;
non-GAAP net income of $8.2
million
- Net income per diluted share of $0.17; non-GAAP net income per diluted share of
$0.24
- Adjusted EBITDA of $16.2 million,
up 14.9%
- Bookings of $96.2 million, up
8.3%
- Backlog of $219.3 million, up
3.3%
- Term debt repayment of $15.4
million
* All changes are versus the comparable prior-year period.
CECO's Chief Executive Officer Jeff
Lang stated, "I am pleased with our operational progress,
especially our gross and operating margin expansion as well as our
working capital improvements, both year-over-year and sequentially.
This allowed us to significantly pay down debt ahead of schedule.
Our continued focus on sales, aftermarket recurring revenue growth,
and working capital initiatives have enabled reduction in our
overall leverage ratios. We were expecting better revenues
and bookings in the quarter, but were affected by the softer
markets globally. However, despite these headwinds, we
delivered strong earnings and significant cash flow generation in
the quarter and year-to-date".
"While we anticipate some continuing macroeconomic headwinds in
a few markets and regions for the remainder of the year and going
into 2017, we are confident that the actions taken in 2016, coupled
with our diversity of end markets, geographies and revenue streams,
will provide a 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 earnings growth, margin expansion and sales improvement
into the future," concluded Jeff
Lang.
Revenue in the third quarter of 2016 was $101.6 million, up 3.4% from $98.2 million in the prior-year period. Recent
acquisitions (1) contributed $11.3 million of incremental revenue in the third
quarter of 2016.
Operating income was $10.5 million
for the third quarter of 2016 (10.3% margin), compared with
operating loss of $2.2 million in the
prior-year period (negative 2.2% margin). Operating income on
a non-GAAP basis was $14.4 million
for the third quarter of 2016 (14.2% margin), compared with
$13.0 million in the prior-year
period (13.2% margin).
Net income was $5.8 million for
the third quarter of 2016, compared with net loss of $4.8 million in the prior-year period. Net
income on a non-GAAP basis was $8.2
million for the third quarter of 2016, compared with
$7.8 million in the prior-year
period.
Net income per diluted share was $0.17 for the third quarter of 2016, compared
with net loss per diluted share of $0.17 in the prior-year period. Non-GAAP net
income per diluted share was $0.24
for the third quarter of 2016, compared with $0.27 for the prior-year period.
Cash and cash equivalents were $41.8
million and bank debt was $133.4
million as of September 30,
2016, compared with $34.2
million and $177.3 million,
respectively, as of December 31,
2015. We repaid $15.4 million
of term debt in the third quarter of 2016 and $39.6 million in the nine months ended
September 30, 2016.
BACKLOG AND BOOKINGS
Total backlog at September 30, 2016 was $219.3 million compared with $211.2 million on December
31, 2015 and $212.3 million on
September 30, 2015.
Bookings were $96.2 million for
the third quarter of 2016, compared with $88.8 million in the prior year, an increase of
8.3%. Bookings were $325.1 for
the first nine months of 2016 as compared with $257.2 for the prior-year period.
YEAR-TO-DATE RESULTS
Revenue in the first nine months
of 2016 was $317.0 million, up 19.1%
from $266.2 million in the prior-year
period. Recent acquisitions(1) contributed $61.2 million of incremental revenue in the first
nine months of 2016.
Operating income was $24.9 million
for the first nine months of 2016 (7.9% margin), compared with
$5.3 million in the prior-year period
(2.0% margin). Operating income on a non-GAAP basis was
$38.2 million for the first nine
months of 2016 (12.1% margin), compared with $32.8 million in the prior-year period (12.3%
margin).
Net income was $12.9 million for
the first nine months of 2016, compared with net loss of
$2.5 million in the prior-year
period. Net income on a non-GAAP basis was $21.5 million for the first nine months of 2016,
compared with $22.0 million in the
prior-year period.
Net income per diluted share was $0.38 for the first nine months of 2016, compared
with net loss of $0.09 in the
prior-year period. Non-GAAP net income per diluted share was
$0.63 for the first nine months of
2016, compared with $0.80 in the
prior-year period.
QUARTERLY DIVIDENDS
On November
7, 2016, CECO's Board of Directors approved a quarterly
dividend of $0.066 per share.
The dividend will be paid on December 30,
2016 to all stockholders of record on close of business on
December 16, 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 10:30 a.m. ET to discuss the
third quarter 2016 results. The conference call may be accessed by
dialing +1.877.407.3982 (Toll-Free) in the U.S. and Canada or by dialing +1.201.493.6780 for
international calls. A replay will be available from
1:30 p.m. ET on November 8, 2016 until November 22, 2016 at 11:59
p.m. ET. The replay may be accessed by dialing
+1.844.512.2921 (Toll-Free) in the U.S. and Canada or by dialing +1.412.317.6671 for
international calls and entering passcode 13648786.
The live webcast and slides can also be accessed
at https://www.cecoenviro.com/events-calendar.
-------------------------
(1) Acquisitions completed within the past twelve months
(PMFG).
ABOUT CECO ENVIRONMENTAL
CECO is a diversified global provider of leading
engineered technologies to the energy, environmental, and
industrial segments, targeting specific niche-focused end markets
through an attractive asset-light business model, strategically
balanced across the world. CECO targets its $5 billion+ of
installed base, specifically to expand and grow a higher recurring
revenue of aftermarket products and services. CECO's well respected
brands, technologies and solutions have been evolving for well over
50 years to become leading-edge 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/.
Contact:
Ed Prajzner, Chief Financial
Officer & Secretary
800.333.5475
investor.relations@cecoenviro.com
CECO ENVIRONMENTAL
CORP. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(dollars in
thousands, except per share data)
|
|
(unaudited)
SEPTEMBER 30,
2016
|
|
|
DECEMBER 31,
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
41,814
|
|
|
$
|
34,194
|
|
Restricted
cash
|
|
|
1,427
|
|
|
|
5,319
|
|
Accounts receivable,
net
|
|
|
83,359
|
|
|
|
97,778
|
|
Costs and estimated
earnings in excess of billings on uncompleted contracts
|
|
|
38,370
|
|
|
|
43,175
|
|
Inventories,
net
|
|
|
23,945
|
|
|
|
32,509
|
|
Prepaid expenses and
other current assets
|
|
|
14,759
|
|
|
|
9,058
|
|
Prepaid income
taxes
|
|
|
1,595
|
|
|
|
4,724
|
|
Assets held for
sale
|
|
|
8,086
|
|
|
|
1,699
|
|
Total current
assets
|
|
|
213,355
|
|
|
|
228,456
|
|
Property, plant and
equipment, net
|
|
|
28,773
|
|
|
|
44,981
|
|
Goodwill
|
|
|
224,531
|
|
|
|
220,163
|
|
Intangible
assets-finite life, net
|
|
|
63,976
|
|
|
|
74,957
|
|
Intangible
assets-indefinite life
|
|
|
26,393
|
|
|
|
26,337
|
|
Deferred charges and
other assets
|
|
|
4,930
|
|
|
|
3,925
|
|
|
|
$
|
561,958
|
|
|
$
|
598,819
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current portion of
debt
|
|
$
|
10,216
|
|
|
$
|
19,494
|
|
Accounts payable and
accrued expenses
|
|
|
90,076
|
|
|
|
99,097
|
|
Billings in excess of
costs and estimated earnings on uncompleted contracts
|
|
|
34,854
|
|
|
|
28,000
|
|
Note
payable
|
|
|
5,300
|
|
|
|
—
|
|
Income taxes
payable
|
|
|
4,236
|
|
|
|
1,582
|
|
Total current
liabilities
|
|
|
144,682
|
|
|
|
148,173
|
|
Other
liabilities
|
|
|
34,165
|
|
|
|
30,072
|
|
Debt, less current
portion
|
|
|
123,231
|
|
|
|
157,834
|
|
Deferred income tax
liability, net
|
|
|
15,416
|
|
|
|
17,719
|
|
Total
liabilities
|
|
|
317,494
|
|
|
|
353,798
|
|
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, 34,148,585
and
34,055,749 shares issued 2016 and 2015, respectively
|
|
|
341
|
|
|
|
340
|
|
Capital in excess of
par value
|
|
|
244,316
|
|
|
|
243,274
|
|
Accumulated
earnings
|
|
|
11,688
|
|
|
|
5,472
|
|
Accumulated other
comprehensive loss
|
|
|
(11,525)
|
|
|
|
(9,577)
|
|
|
|
|
244,820
|
|
|
|
239,509
|
|
Less treasury stock,
at cost, 137,920 shares in 2016 and 2015
|
|
|
(356)
|
|
|
|
(356)
|
|
Total CECO
shareholders' equity
|
|
|
244,464
|
|
|
|
239,153
|
|
Noncontrolling
interest
|
|
|
-
|
|
|
|
5,868
|
|
Total shareholders'
equity
|
|
|
244,464
|
|
|
|
245,021
|
|
|
|
$
|
561,958
|
|
|
$
|
598,819
|
|
CECO ENVIRONMENTAL
CORP. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited)
|
|
|
|
|
THREE MONTHS
ENDED
SEPTEMBER 30,
|
|
|
NINE MONTHS
ENDED
SEPTEMBER 30,
|
|
(dollars in
thousands, except per share data)
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net sales
|
|
$
|
101,596
|
|
|
$
|
98,230
|
|
|
$
|
317,029
|
|
|
$
|
266,176
|
|
Cost of
sales
|
|
|
67,920
|
|
|
|
67,435
|
|
|
|
217,837
|
|
|
|
187,778
|
|
Gross
profit
|
|
|
33,676
|
|
|
|
30,795
|
|
|
|
99,192
|
|
|
|
78,398
|
|
Selling and
administrative expenses
|
|
|
19,549
|
|
|
|
18,054
|
|
|
|
60,625
|
|
|
|
46,158
|
|
Acquisition and
integration expenses
|
|
|
163
|
|
|
|
5,685
|
|
|
|
524
|
|
|
|
6,978
|
|
Amortization and
earn-out expenses
|
|
|
3,465
|
|
|
|
9,250
|
|
|
|
13,176
|
|
|
|
19,989
|
|
Income (loss) from
operations
|
|
|
10,499
|
|
|
|
(2,194)
|
|
|
|
24,867
|
|
|
|
5,273
|
|
Other income
(expense), net
|
|
|
14
|
|
|
|
(282)
|
|
|
|
395
|
|
|
|
(1,456)
|
|
Interest
expense
|
|
|
(1,913)
|
|
|
|
(1,711)
|
|
|
|
(5,995)
|
|
|
|
(3,845)
|
|
Income (loss) before
income taxes
|
|
|
8,600
|
|
|
|
(4,187)
|
|
|
|
19,267
|
|
|
|
(28)
|
|
Income tax
expense
|
|
|
2,774
|
|
|
|
638
|
|
|
|
6,349
|
|
|
|
2,495
|
|
Net income
(loss)
|
|
$
|
5,826
|
|
|
$
|
(4,825)
|
|
|
$
|
12,918
|
|
|
$
|
(2,523)
|
|
Plus (less) net
income (loss) attributable to noncontrolling interest
|
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
(36)
|
|
|
$
|
—
|
|
Net income (loss)
attributable to CECO Environmental Corp.
|
|
$
|
5,804
|
|
|
$
|
(4,825)
|
|
|
$
|
12,954
|
|
|
$
|
(2,523)
|
|
Earnings (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.17
|
|
|
$
|
(0.17)
|
|
|
$
|
0.38
|
|
|
$
|
(0.09)
|
|
Diluted
|
|
$
|
0.17
|
|
|
$
|
(0.17)
|
|
|
$
|
0.38
|
|
|
$
|
(0.09)
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
33,983,708
|
|
|
|
28,617,589
|
|
|
|
33,952,768
|
|
|
|
27,066,072
|
|
Diluted
|
|
|
34,354,687
|
|
|
|
28,617,589
|
|
|
|
34,211,067
|
|
|
|
27,066,072
|
|
CECO ENVIRONMENTAL
CORP. AND SUBSIDIARIES
|
RECONCILIATION OF
GAAP TO NON-GAAP MEASURES
|
|
|
Three Months Ended September
30,
|
Nine Months Ended September
30,
|
(dollars in
millions)
|
2016
|
2015
|
2016
|
2015
|
Gross profit as
reported in accordance with GAAP
|
$
33.7
|
$
30.8
|
$
99.2
|
$
78.4
|
Gross profit margin
in accordance with GAAP
|
33.2%
|
31.4%
|
31.3%
|
29.5%
|
Inventory valuation
adjustment
|
--
|
--
|
0.1
|
--
|
Plant, property and
equipment valuation adjustment
|
0.2
|
0.2
|
0.5
|
0.5
|
|
|
|
|
|
Non-GAAP gross
profit
|
$
33.9
|
$
31.0
|
$
99.8
|
$
78.9
|
Non-GAAP gross
profit margin
|
33.4%
|
31.6%
|
31.5%
|
29.7%
|
|
|
|
|
Three Months Ended September
30,
|
Nine Months Ended September
30,
|
(dollars in
millions)
|
2016
|
2015
|
2016
|
2015
|
Operating income
(loss) as reported in accordance
with GAAP
|
$
10.5
|
$
(2.2)
|
$
24.9
|
$
5.3
|
Operating margin in
accordance with GAAP
|
10.3%
|
(2.2%)
|
7.9%
|
2.0%
|
Inventory valuation
adjustment
|
--
|
--
|
0.1
|
--
|
Plant, property and
equipment valuation adjustment
|
0.2
|
0.2
|
0.5
|
0.5
|
Gain on insurance
settlement
|
--
|
--
|
(1.0)
|
--
|
Acquisition and
integration expenses
|
0.2
|
5.7
|
0.5
|
7.0
|
Amortization and
earn-out expenses
|
3.5
|
9.3
|
13.2
|
20.0
|
|
|
|
|
|
Non-GAAP operating
income
|
$
14.4
|
$
13.0
|
$
38.2
|
$
32.8
|
Non-GAAP operating
margin
|
14.2%
|
13.2%
|
12.1%
|
12.3%
|
|
|
|
|
Three Months Ended September
30,
|
Nine Months Ended September
30,
|
(dollars in
millions)
|
2016
|
2015
|
2016
|
2015
|
Net income (loss) as
reported in accordance with GAAP
|
$
5.8
|
$
(4.8)
|
$
12.9
|
$
(2.5)
|
Inventory valuation
adjustment
|
--
|
--
|
0.1
|
--
|
Plant, property and
equipment valuation adjustment
|
0.2
|
0.2
|
0.5
|
0.5
|
Acquisition and
integration expenses
|
0.2
|
5.7
|
0.5
|
7.0
|
Amortization and
earn-out expenses
|
3.5
|
9.3
|
13.2
|
20.0
|
Gain on insurance
settlement
|
--
|
--
|
(1.0)
|
--
|
Deferred financing fee
adjustment
|
--
|
0.3
|
--
|
0.3
|
Foreign currency
remeasurement
|
(0.2)
|
(0.3)
|
(0.6)
|
1.8
|
Tax benefit of
adjustments
|
(1.3)
|
(2.6 )
|
(4.1)
|
(5.1 )
|
|
|
|
|
|
Non-GAAP net
income
|
$
8.2
|
$
7.8
|
$
21.5
|
$
22.0
|
Depreciation
|
1.2
|
0.7
|
3.4
|
2.0
|
Non-cash stock compensation
|
0.6
|
0.4
|
1.7
|
1.3
|
Other (income)/expense
|
0.2
|
0.6
|
0.2
|
(0.3)
|
Gain on insurance settlement
|
--
|
--
|
1.0
|
--
|
Interest
expense
|
1.9
|
1.4
|
6.0
|
3.6
|
Income tax expense
|
4.1
|
3.2
|
10.5
|
7.6
|
|
|
|
|
|
Non-GAAP Adjusted
EBITDA
|
$
16.2
|
$
14.1
|
$
44.3
|
$
36.2
|
|
|
|
|
|
Net income per share
in accordance with GAAP:
|
|
|
|
|
Basic
|
$
0.17
|
$
(0.17)
|
$
0.38
|
$
(0.09)
|
|
|
|
|
|
Diluted
|
$
0.17
|
$
(0.17)
|
$
0.38
|
$
(0.09)
|
Non-GAAP net income
per share:
|
|
|
|
|
Basic
|
$
0.24
|
$
0.27
|
$
0.63
|
$
0.82
|
|
|
|
|
|
Diluted
|
$
0.24
|
$
0.27
|
$
0.63
|
$
0.80
|
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 profit, 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, 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 gross profit, 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.
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SOURCE CECO Environmental Corp.