Mr. Michael West reports
CE FRANKLIN LTD. ANNOUNCES 2012 FIRST QUARTER RESULTS
CE Franklin Ltd. had net earnings of $7.9-million or 46 cents per share (basic) for the
first quarter ended March 31, 2012, a significant increase from net
earnings of $3.4-million or 19 cents per share (basic) generated in the
first quarter ended March 31, 2011.
FINANCIAL HIGHLIGHTS
(millions of Canadian dollars except per share data)
Three months ended
March 31,
2012 2011
Revenues $160.3 $137.7
Gross profit $29.4 $22.3
Gross profit -- per cent of sales 18.3% 16.2%
EBITDA(1) $11.3 $5.3
EBITDA -- per cent of sales(1) 7.0% 3.8%
Net earnings $7.9 $3.4
Per share
Basic $0.46 $0.19
Diluted $0.44 $0.19
Net working capital(2) $137.8 $120.1
Long-term debt $- $0.3
"Solid revenue growth, improved product margins and disciplined cost
management lead to increased profitability. Activity levels are
expected to remain at prior year levels as strong oil and oil sands
activity offsets softer gas activity," said Michael West, president and
chief executive officer.
Net earnings for the first quarter of 2012 were $7.9-million, an
increase of $4.5-million (132 per cent) from the first quarter of 2011.
Revenues were $160.3-million, an increase of $22.6-million (16 per cent) from
the first quarter of 2011. Despite well completions decreasing by 26 per cent
compared with the first quarter of 2011, both the capital project
business and maintenance repair and operating (MRO) revenues grew by
$7.3-million and $15.1-million respectively year over year. The
increase in capital projects revenue was driven by higher sales to oil
and oil sands projects. Increased MRO activity came from all areas of
the business. Spring breakup arrived earlier than normal and dampened
activity levels late in the quarter. Gross profits increased by $7.1-million (32 per cent) due to the increase in revenues and improved gross profit
margins year over year. Average gross profit margins improved
sequentially compared with the fourth quarter of 2011 and improved over
the first quarter 2011 due to improved supply chain costs and increased
volume rebate income arising from increased purchasing levels. Selling,
general and administrative expenses increased by $800,000 (5 per cent) to
$17.8-million for the quarter as compensation and operating costs have
increased in response to higher revenue levels. The weighted average
number of shares outstanding during the first quarter was consistent
with the prior year period as the rise in share price during the last
year has limited the activity occurring under the normal course issuer
bid program. Net earnings per share (basic) were 46 cents in the first
quarter of 2012, compared with net earnings of 19 cents per share in the
first quarter of 2011.
Business outlook
Oil and gas industry activity in 2012 is expected to remain at 2011
levels for the remainder of the year. Natural gas prices remain
depressed as North American production capacity and inventory levels
continue to exceed demand. Natural gas capital expenditure activity is
focused on liquid-rich gas plays and the company is well positioned to
service customers pursuing these gas plays. Conventional and heavy oil
economics are attractive at current price levels leading to continuing
activity in on these plays. Activity is especially strong in southeast
Saskatchewan. Oil sands project announcements are expected to continue
with current oil price levels. Approximately 50 per cent to 60 per cent of the
company's total revenues are driven by its customers' capital
expenditure requirements. CE Franklin's revenues are expected to
increase modestly in 2012 through organic growth as the oil and gas
industry activity levels remain relatively consistent with 2011 levels.
Gross profit margins are expected to remain under pressure as customers
that produce natural gas focus on reducing their costs to maintain
acceptable project economics and due to continued aggressive oil field
supply industry competition as industry activity levels remain below
the five-year average. The company will continue to manage its cost
structure to protect profitability while maintaining service capacity
and advancing strategic initiatives.
Over the medium to longer term, the company's strong financial and
competitive positions should enable profitable growth of its
distribution network through the expansion of its product lines,
supplier relationships and capability to service additional oil and gas
and other industrial end-use markets.
(1) EBITDA represents net earnings before interest, taxes, depreciation and amortization. EBITDA is supplemental non-GAAP (generally accepted accounting principles) financial measure used by management, as well as industry analysts, to evaluate operations. Management believes that EBITDA, as presented, represents a useful means of assessing the performance of the company's continuing operating activities, as it reflects the company's earnings trends without showing the impact of certain charges. The company is also presenting EBITDA and EBITDA as a percentage of revenues because it is used by management as supplemental measures of profitability. The use of EBITDA by the company has certain material limitations because it excludes the recurring expenditures of interest, income tax and depreciation expenses. Interest expense is a necessary component of the company's expenses because the company borrows money to finance its working capital and capital expenditures. Income tax expense is a necessary component of the company's expenses because the company is required to pay cash income taxes. Depreciation expense is a necessary component of the company's expenses because the company uses property and equipment to generate revenues. Management compensates for these limitations to the use of EBITDA by using EBITDA as only a supplementary measure of profitability. EBITDA is not used by management as an alternative to net earnings, as an indicator of the company's operating performance, as an alternative to any other measure of performance in conformity with generally accepted accounting principles or as an alternative to cash flow from operating activities as a measure of liquidity. A reconciliation of EBITDA to net earnings is provided within the company's management discussion and analysis. Not all companies calculate EBITDA in the same manner and EBITDA does not have a standardized meaning prescribed by IFRS (international financial reporting standards). Accordingly, EBITDA, as the term is used herein, is unlikely to be comparable with EBITDA as reported by other entities.
(2) Net working capital is defined as current assets less cash and cash equivalents, accounts payable and accrued liabilities, current taxes payable and other current liabilities. Net working capital and long-term debt/bank operating loan amounts are as at quarter-end.
Additional information
Additional information relating to CE Franklin, including its first
quarter 2012 management discussion and analysis and interim
consolidated financial statements and its Form 20-F/annual
information form, is available under the company's profile on the SEDAR
website and at its website.
Conference call and webcast information
A conference call to review the 2012 first quarter results, which is
open to the public, will be held on Friday, April 27, 2012, at 11
a.m. Eastern Time (9 a.m. Mountain Time).
Participants may join the call by dialling 1-647-427-7450 in Toronto or
dialling 1-888-231-8191 at the scheduled time of 11 a.m. Eastern
Time. For those unable to listen to the live conference call, a replay will
be available at approximately 2 p.m. Eastern Time on the same day by
calling 1-416-849-0833 in Toronto or dialling 1-855-859-2056 and entering the passcode of 63408715 and may be accessed until midnight May 3, 2012.
The call will be available on the company's website.
Michael West, president and chief executive officer, will lead the
discussion and will be accompanied by Derren Newell, vice-president
and chief financial officer. The discussion will be followed by a
question and answer period.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(in thousands of Canadian dollars)
Three months ended
March 31, March 31,
2012 2011
Revenue $160,253 $137,701
Cost of sales 130,901 115,424
-------- --------
Gross profit 29,352 22,277
Other expenses
Selling, general and administrative expenses 17,771 16,980
Depreciation 579 602
-------- --------
18,350 17,582
-------- --------
Operating profit 11,002 4,695
Foreign exchange loss and other 320 10
Interest expense 34 94
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Earnings before tax 10,648 4,591
Income tax expense (recovery)
Current 2,480 1,360
Deferred 228 (144)
-------- --------
2,708 1,216
-------- --------
Net earnings and comprehensive income $7,940 $3,375
======== ========
Net earnings per share
Basic $0.46 $0.19
Diluted $0.44 $0.19
We seek Safe Harbor.
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