PMFG, Inc. (the "Company") (Nasdaq:PMFG) today reported financial
results for the quarter ended March 28, 2015.
Third Quarter Fiscal Year 2015 Compared to
2014
Revenue in the third quarter of fiscal 2015 increased $2.5
million or 7.7 percent to $34.8 million. The year-over-year growth
in revenue is largely attributed to increased revenue from our
Environmental Systems segment. Higher demand for environmental
solutions, combined with the benefit of the acquisition of the
assets of CCA Combustion Systems ("CCA") completed in March 2014
drove the increase in revenue in the period.
Gross profit increased in the quarter by $0.5 million or 6.7
percent to $8.6 million on higher revenue, which was offset by cost
overruns and customer back-charges on two projects completed during
the quarter. These overruns and back-charges reduced gross margin
by approximately $1.9 million in the quarter. Gross profit as a
percent of revenue declined slightly to 24.7 percent in the quarter
from 24.9 percent in the prior year.
Operating expenses decreased $0.4 million or 3.2 percent in the
quarter. Operating expenses in the third quarter of fiscal 2014
included some costs which were not repeated in fiscal 2015,
including due diligence and transaction costs associated with the
acquisition of CCA and implementation of the ERP system in our
European locations. The benefit from these costs not repeating in
fiscal 2015 were partially offset by normal operating expenses
associated with CCA. Net loss attributable to PMFG, Inc. common
stockholders was $2.4 million or $0.11 per diluted share in the
quarter compared to a net loss of $3.8 million or $0.18 per diluted
share in the prior year.
During the third quarter of fiscal 2015, the Company sold its
heat exchanger product line, including the Alco, Alco-Twin, and
Bos-Hatten brand names. The product line and related trade names
were acquired in 2008 with the purchase of Nitram Energy, Inc. The
sale resulted in a gain of $1.2 million in the quarter.
Excluding the gain from the sale of the heat exchanger brands in
fiscal 2015 and the transaction costs associated with the
acquisition of the assets of CCA in fiscal 2014, net loss
attributable to PMFG, Inc. common stockholders was $3.6 million or
$0.17 per diluted share in the third quarter of fiscal 2015
compared to a net loss of $3.1 million or $0.15 per share in fiscal
2014. A reconciliation between GAAP and non-GAAP financial
results is shown in the tables accompanying this release.
Reporting Segments
Process Products segment revenue decreased $1.1 million or 4.4
percent in the quarter to $23.1 million. The decrease is
attributable to lower relative revenue from separation and
filtration projects in the United States and Germany. Cost overruns
and back-charges from a single contract reduced gross margin in the
quarter by $1.4 million or 6.1% of revenue. Our economics on this
project were negatively impacted by customer-imposed fabrication
requirements, which exceeded those stated in the contractual
agreement. Due to the fixed-priced nature of the contract, we were
unable to recover the incremental costs incurred. Segment operating
income remained relatively flat, as the impact of lower revenue and
lower margin was offset with reductions in operating expenses when
compared to the same quarter in fiscal 2014.
Environmental Systems segment revenue increased $3.6 million or
44.0 percent in the quarter to $11.7 million. Increased demand for
air pollution control solutions in the United States combined with
the benefit of the acquisition of CCA drove the higher revenue.
Customer back-charges on a project completed in the quarter
negatively impacted gross profit by $0.5 million in the quarter.
Despite the impact of the back-charges, the Environmental Systems
segment realized gross profit of $4.4 in the quarter or 37.8% of
segment revenue. Segment operating income increased $0.8 million to
$2.6 million compared to $1.8 million in the prior year on higher
revenue and relative gross profit.
Fiscal Year-To-Date 2015 Compared to 2014
Revenue for the nine month period ended March 28, 2015 increased
$30.0 million or 33.0 percent to $120.9 million. The year-over-year
growth in revenue is largely attributed to increased revenue in the
United States with positive contributions from the EMEA and APAC
regions.
Gross profit increased by $10.3 million or 40.0 percent to $36.2
million compared to $25.9 million in fiscal 2014. Included in cost
of goods sold for fiscal 2015 is $399,000 benefit from the
reimbursement of previously incurred warranty costs. Included in
cost of goods sold for fiscal 2014 is $485,000 of restructuring
costs related to the closure of a manufacturing plant in Texas and
the relocation of the fabrication activities to the remaining
plants in Texas. During the nine months ended fiscal 2015,
gross profit as a percentage of revenue benefitted from operational
initiatives designed to improve project execution, but much of that
benefit was offset by cost overruns and customer back-charges on
two projects completed in the third quarter.
Operating expenses increased $4.6 million or 14.2 percent in the
nine month period largely attributed to the acquisition of CCA,
global information technology system expenditures and
process-improvement initiatives. The net loss attributable to PMFG,
Inc. common stockholders was $1.8 million or $0.09 per diluted
share for the nine months compared to a net loss of $8.4 million
and $0.40 per diluted share in the prior year.
Reporting Segments
Process Products segment revenue increased $5.0 million or 6.8
percent to $77.9 million. The increase in revenue is attributed to
higher demand for pressure vessels and oily water separation
applications destined for the EMEA region. Year-to-date gross
profit is generally flat compared to the prior year as the benefit
of higher revenue was offset by cost overruns and back-charges.
Segment operating income increased $1.6 million or 38.3 percent to
$5.6 million.
Environmental Systems segment revenue increased $25.0 million or
138.7 percent to $43.0 million. The higher revenue reflects the
acquisition of CCA, combined with higher demand for environmental
solutions. Segment operating income increased $6.1 million to $10.1
million.
Net Bookings and Backlog
Net bookings totaled $27.6 million and $104.8 million during the
three and nine month periods ended March 28, 2015, respectively.
This compares to net bookings of $38.8 million and $111.0 million
for the three and nine month periods ended March 29,
2014. Bookings in the quarter were negatively impacted by the
well-publicized decline in global oil and natural gas prices. We
experienced delays in the award of a number of large projects in
the quarter as the customers became more conservative in allocating
capital to new projects as well as those in process.
The backlog at March 28, 2015 was $99.8 million compared to
$107.1 million at the end of December. Approximately $6 million of
the backlog value is currently subject to customer-driven delays,
attributed largely to uncertainties surrounding the decline in
energy prices. Based on discussions with these customers, we expect
the customer-driven delays to be temporary rather than result in
the cancelation of the projects. Excluding these projects, for
which the timeline for completion is uncertain, we expect 85
percent of the backlog value at March 28, 2015 to be recognized as
revenue over the next 12 months.
Financial Condition and Cash Flows
At March 28, 2015, the Company reported $35.4 million of cash
and cash equivalents (including $16.1 million of cash and cash
equivalents restricted as collateral for outstanding letters of
credit), total assets of $167.0 million, net working capital
of $51.2 million and a current ratio of 1.9 to 1.0.
Unrestricted cash and cash equivalents decreased $8.0 million
during the nine month period ended March 28, 2015, compared to a
decrease of $10.5 million in the prior period. Cash flows in
year-to-date fiscal 2015 include $4.6 million used in operating
activities, $0.6 million used in investing activities, $1.6 million
used in financing activities and $1.1 million effect of exchange
rate changes on cash.
Industry Conditions and Forward Outlook
Peter J. Burlage, President and Chief Executive Officer, stated,
"Earlier this week, we announced the pending merger with CECO
Environmental Corp. Our team is extremely excited about the
opportunities for both top line growth and improvement in operating
leverage that we anticipate from the merger. Initial feedback from
our customers, employees and business partners has been very
positive."
"As announced at the end of March, we were successful in
disposing of our heat exchanger product line. While the heat
exchanger product line was highly aligned with our focus on energy
efficiency, the competitive landscape combined with the margin
profile did not fit our strategic focus."
Mr. Burlage continued, "On the operational side, I was pleased
with the progress underway to improve the efficiency of product
through our manufacturing facilities, as well as the initiatives to
reduce ongoing operating costs. Unfortunately, that progress was
somewhat offset by cost overruns on two of the Company's larger
projects. Despite these short-term issues, I remain enthusiastic
about our prospects both for revenue growth and improved operating
efficiencies."
Conference Call
Peter Burlage, President and Chief Executive Officer, and Ron
McCrummen, Chief Financial Officer, will discuss the Company's
results for the third quarter ended March 28, 2015, during a
conference call scheduled for Thursday, May 7, 2015, at 9:30 a.m.
EDT.
Stockholders and other interested parties may participate in the
conference call by dialing +1 866 271 6130 (domestic) or +1 617 213
8894 (international) and entering access code 98520364, a few
minutes before 9:30 a.m. EDT on May 7, 2015. Those who wish to
listen to the live conference call and view the accompanying
presentation slides should visit "Event Calendar" in
the "Investor Relations" portion of the PMFG, Inc.
website at www.peerlessmfg.com.
A replay of the conference call will be accessible two hours
after its completion through May 14, 2015 by dialing +1 888 286
8010 (domestic) or +1 617 801 6888 (international) and entering
access code 65880059. The call also will be archived for 30 days at
www.peerlessmfg.com.
About PMFG
We are a leading provider of custom engineered systems and
products designed to help ensure that the delivery of energy is
safe, efficient and clean. We primarily serve the markets for
natural gas infrastructure, power generation and petrochemical
processing. Headquartered in Dallas, Texas, we market our systems
and products worldwide.
Safe Harbor Under The Private Securities Litigation
Reform Act of 1995
Certain statements contained in this press release that are not
historical facts are forward-looking statements that involve a
number of known and unknown risks, uncertainties and other factors
that could cause the actual results to be materially different from
those expressed or implied by such forward-looking statements. The
words "anticipate," "preliminary," "expect," "believe," "intend"
and similar expressions identify forward-looking statements. The
Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for these forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety
of factors could cause actual results to differ materially from the
anticipated results expressed in these forward-looking statements.
The risks and uncertainties that may affect the Company's results
include the ability to complete the pending merger with CECO
Environmental; the Company's ability to increase revenue and market
share; the receipt of new, and the non-cancellation of existing,
contracts; the Company's ability to effectively manage its business
functions while growing its business in a rapidly changing
environment; the Company's ability to identify growth
opportunities, including through acquisitions and strategic
partnerships; the Company's ability to satisfy financial and
nonfinancial covenants and requirements of our debt agreements; the
Company's ability to adapt and expand its services in such an
environment; the quality of the Company's plans and strategies; and
the Company's ability to execute such plans and strategies. Other
important information regarding factors that may affect the
Company's future performance is included in the public reports that
the Company files with the Securities and Exchange Commission,
including the information under Item 1A. "Risk Factors" in our
Annual Report on Form 10-K for the fiscal year ended June 28, 2014.
The Company undertakes no obligation to update any forward-looking
statements to reflect events or circumstances occurring after the
date of this release, or to reflect the occurrence of other events.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
release. The inclusion of any statement in this release does not
constitute an admission by the Company or any other person that the
events or circumstances described in such statement are
material.
Important Information for Investors and
Stockholders
The information in this press release is not a substitute for
the prospectus/proxy statement that CECO Environmental Corp.
("CECO") and PMFG, Inc. ("PMFG") will file with the SEC, which will
include a prospectus with respect to shares of CECO common stock to
be issued in the merger and a proxy statement of each of CECO and
PMFG in connection with the merger between CECO and PMFG (the
"Prospectus/Proxy Statement"). The Prospectus/Proxy Statement will
be sent or given to the stockholders of CECO and PMFG when it
becomes available and will contain important information about the
merger and related matters, including detailed risk factors. CECO's
AND PMFG's SECURITY HOLDERS ARE ADVISED TO READ THE
PROSPECTUS/PROXY STATEMENT CAREFULLY WHEN IT BECOMES AVAILABLE
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
MERGER. The Prospectus/Proxy Statement and other documents that
will be filed with the SEC by CECO and PMFG will be available
without charge at the SEC's website, www.sec.gov, or by directing a
request when such a filing is made to (1) CECO Environmental
Corp. by mail at 4625 Red Bank Road Suite 200, Cincinnati, Ohio
45227, Attention: Investor Relations, by telephone at 800-333-5475
or by going to CECO's Investor page on its corporate website at
www.cecoenviro.com; or (2) PMFG, Inc. by mail at 14651 North
Dallas Parkway Suite 500, Dallas, Texas 75254, Attention: Investor
Relations, by telephone at 877-879-7634, or by going to PMFG,
Inc.'s Investors page on its corporate website at www.pmfginc.com.
A final proxy statement or proxy/prospectus statement will be
mailed to stockholders of CECO and PMFG as of their respective
record dates.
The information in this press release is neither an offer to
sell nor the solicitation of an offer to sell, subscribe for or buy
any securities, nor shall there be any sale, issuance or transfer
of securities in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of such jurisdiction. This press release
is also not a solicitation of any vote in any jurisdiction pursuant
to the proposed transactions or otherwise. No offer of securities
or solicitation will be made except by means of a prospectus
meeting the requirements of Section 10 of the Securities Act
of 1933, as amended.
Proxy Solicitation
CECO and PMFG, and certain of their respective directors,
executive officers and other members of management and employees
may be deemed participants in the solicitation of proxies in
connection with the proposed transactions. Information about the
directors and executive officers of CECO is set forth in the proxy
statement for CECO's 2015 annual meeting of stockholders and CECO's
10-K for the year ended December 31, 2014. Information about
the directors and executive officers of PMFG is set forth in the
proxy statement for PMFG's 2014 annual meeting of shareholders and
PMFG's Form 10-K for the year ended June 28, 2014. Investors
may obtain additional information regarding the interests of such
participants in the proposed transactions by reading the
prospectus/proxy statement for such proposed transactions when it
becomes available.
PMFG,
Inc. |
Condensed Financial
Information |
(In thousands, except
per share amounts) |
|
|
|
|
|
|
|
|
Three Months
Ended March 28, |
Three Months
Ended March 29, |
|
2015 |
2014 |
Operating Results |
GAAP |
Adjustments |
Non-GAAP |
GAAP |
Adjustments |
Non-GAAP |
|
|
|
|
|
|
|
Revenue |
$ 34,766 |
$ -- |
$ 34,766 |
$ 32,273 |
$ -- |
$ 32,273 |
Cost of goods sold |
26,185 |
-- |
26,185 |
24,231 |
(64) |
24,167 |
Gross profit |
8,581 |
-- |
8,581 |
8,042 |
64 |
8,106 |
Operating expenses |
11,288 |
-- |
11,288 |
11,659 |
(576) |
11,083 |
Operating income |
(2,707) |
-- |
(2,707) |
(3,617) |
640 |
(2,977) |
Other income (expense): |
|
|
|
|
|
|
Interest income |
25 |
-- |
25 |
31 |
-- |
31 |
Interest expense |
(674) |
-- |
(674) |
(436) |
-- |
(436) |
Foreign exchange gain
(loss) |
(197) |
-- |
(197) |
(194) |
-- |
(194) |
Other income (expense),
net |
1,280 |
(1,238) |
42 |
13 |
-- |
13 |
Income (loss) before income
taxes |
(2,273) |
(1,238) |
(3,511) |
(4,203) |
640 |
(3,563) |
Income tax benefit
(expense) |
(38) |
-- |
(38) |
439 |
-- |
439 |
Net earnings (loss) |
(2,311) |
(1,238) |
(3,549) |
(3,764) |
640 |
(3,124) |
Less net income (loss)
attributable to noncontrolling interest |
62 |
-- |
62 |
17 |
-- |
17 |
Net earnings (loss)
attributable to PMFG |
$ (2,373) |
$ (1,238) |
$ (3,611) |
$ (3,781) |
$ 640 |
$ (3,141) |
|
|
|
|
|
|
|
Basic earnings per share |
$ (0.11) |
|
$ (0.17) |
$ (0.18) |
|
$ (0.15) |
Diluted earnings per share |
$ (0.11) |
|
$ (0.17) |
$ (0.18) |
|
$ (0.15) |
|
|
|
|
|
|
|
Weighted-average shares outstanding |
|
|
|
|
|
|
Basic |
21,301 |
|
21,301 |
21,097 |
|
21,097 |
Diluted |
21,301 |
|
21,301 |
21,097 |
|
21,097 |
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
Net earnings (loss) |
|
|
$ (3,549) |
|
|
$ (3,124) |
Depreciation and
amortization |
|
|
603 |
|
|
626 |
Interest expense, net |
|
|
649 |
|
|
405 |
Income tax expense
(benefit) |
|
|
38 |
|
|
(439) |
Adjusted EBITDA |
|
|
$ (2,259) |
|
|
$ (2,532) |
|
|
|
|
|
|
|
PMFG,
Inc. |
Condensed Financial
Information |
(In thousands, except
per share amounts) |
|
|
|
|
|
|
|
|
Nine Months Ended
March 28, |
Nine Months Ended
March 29, |
|
2015 |
2014 |
Operating Results |
GAAP |
Adjustments(a) |
Non-GAAP |
GAAP |
Adjustments(c) |
Non-GAAP |
|
|
|
|
|
|
|
Revenue |
$ 120,945 |
$ -- |
$ 120,945 |
$ 90,958 |
$ -- |
$ 90,958 |
Cost of goods sold |
84,733 |
399 |
85,132 |
65,080 |
(485) |
64,595 |
Gross profit |
36,212 |
(399) |
35,813 |
25,878 |
485 |
26,363 |
Operating expenses |
37,366 |
399 |
37,765 |
32,730 |
(576) |
32,154 |
Operating income |
(1,154) |
(798) |
(1,952) |
(6,852) |
1,061 |
(5,791) |
Other income (expense): |
|
|
|
|
|
|
Interest income |
59 |
-- |
59 |
63 |
-- |
63 |
Interest expense |
(1,491) |
-- |
(1,491) |
(1,142) |
-- |
(1,142) |
Foreign exchange gain
(loss) |
(97) |
-- |
(97) |
(666) |
-- |
(666) |
Other income (expense),
net |
1,585 |
(1,238) |
347 |
84 |
-- |
84 |
Income (loss) before income
taxes |
(1,098) |
(2,036) |
(3,134) |
(8,513) |
1,061 |
(7,452) |
Income tax benefit
(expense) |
(447) |
-- |
(447) |
254 |
(143) |
111 |
Net earnings (loss) |
(1,545) |
(2,036) |
(3,581) |
(8,259) |
918 |
(7,341) |
Less net earnings (loss)
attributable to noncontrolling interest |
263 |
-- |
263 |
117 |
-- |
117 |
Net earnings (loss)
attributable to PMFG |
$ (1,808) |
$ (2,036) |
$ (3,844) |
$ (8,376) |
$ 918 |
$ (7,458) |
|
|
|
|
|
|
|
Basic earnings per share |
$ (0.09) |
|
$ (0.18) |
$ (0.40) |
|
$ (0.35) |
Diluted earnings per share |
$ (0.09) |
|
$ (0.18) |
$ (0.40) |
|
$ (0.35) |
|
|
|
|
|
|
|
Weighted-average shares outstanding |
|
|
|
|
|
|
Basic |
21,266 |
|
21,266 |
21,092 |
|
21,092 |
Diluted |
21,266 |
|
21,266 |
21,092 |
|
21,092 |
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
Net earnings (loss) |
|
|
$ (3,581) |
|
|
$ (7,341) |
Depreciation and
amortization |
|
|
1,960 |
|
|
1,851 |
Interest expense, net |
|
|
1,432 |
|
|
1,079 |
Income tax expense
(benefit) |
|
|
447 |
|
|
(111) |
Adjusted EBITDA |
|
|
$ 258 |
|
|
$ (4,522) |
|
|
|
|
|
|
|
|
March 28, |
|
June 28, |
|
|
|
Condensed Balance Sheet
Information |
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
Current assets |
$ 105,886 |
|
$ 104,834 |
|
|
|
Non-current assets |
61,075 |
|
62,389 |
|
|
|
Total assets |
$ 166,961 |
|
$ 167,223 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
$ 54,697 |
|
$ 49,725 |
|
|
|
Long term debt |
12,748 |
|
14,149 |
|
|
|
Other non current
liabilities |
5,799 |
|
5,877 |
|
|
|
Total equity |
93,717 |
|
97,472 |
|
|
|
Total liabilities and
equity |
$ 166,961 |
|
$ 167,223 |
|
|
|
STATEMENT REGARDING NON-GAAP RESULTS
PMFG, Inc. has provided a reconciliation of non-GAAP measures in
order to provide the users of this financial information with a
better understanding of the impact on our financial results
resulting from certain events. A gain resulting from the sale
of brands of the Company's heat exchangers are excluded in the
non-GAAP results for the three and nine months ended March 28,
2015. A one-time settlement with the Nitram selling
shareholders to reimburse the Company for previously incurred
warranty and environmental remediation and monitoring costs are
excluded in the non-GAAP results for the nine months ended March
28, 2015. One-time costs associated with the purchase of
Combustion Components Associates, Inc. and transitioning to our new
manufacturing facilities offset by the gain on the sale of the
former manufacturing facility in Denton, Texas, are excluded in the
non-GAAP results for the three and nine months ended March 29,
2014. Management believes that excluding these items from the
Company's financial results provides investors with a clearer
perspective of the current underlying operating performance of the
Company, a clearer comparison between results in different periods
and greater transparency regarding supplemental information used by
management in its financial and operational decision making. These
non-GAAP measures are not measurements under accounting principles
generally accepted in the United States. These measures should be
considered in addition to, but not as a substitute for, the
information contained in our financial statements prepared in
accordance with GAAP.
CONTACT: For Further Information Contact:
Mr. Peter J. Burlage, President and Chief Executive Officer
Mr. Ronald L. McCrummen, Chief Financial Officer
PMFG, Inc.
14651 North Dallas Parkway, Suite 500
Dallas, Texas 75254
Phone: (214) 353-5545
Fax: (214) 351-4172
www.peerlessmfg.com
or
Mr. Shawn Severson
The Blueshirt Group
Phone: (415) 489-2198
Email: shawn@blueshirtgroup.com
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