CECO Environmental Corp (CECO) 2023 Q4 法說會逐字稿

Good morning my name is broke and I will be your compass operator today. Conference operator today that. At this time, I would like to welcome everyone to the Met-Pro fourth quarter and year-end results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (OPERATOR INSTRUCTIONS). Thank you Mr. Kevin Bittle, you may begin your conference.

Good morning and welcome to Met-Pro Corporation's earnings conference call for the fourth quarter and fiscal year ended January 31, 2008. My name is Kevin Bittle and I am with the Company's creative services department. With me on our call this morning is Ray De Hont, our Chairman and Chief Executive Officer; and Gary Morgan, our Senior Vice President of finance and Chief Financial Officer. Shortly you will hear comments from both of these individuals. But before we begin, I would like to make a few comments.

First during today's call we will be referring to adjusted earnings. This is considered to be a non-GAAP financial measure since it excludes from earnings effects of certain nonrecurring items. In this morning's release we've provided a reconciliation of adjusted earnings to our GAAP-based results together with a discussion of why we use adjusted earnings. The earnings release along with a reconciliation is available on investor relations page of our corporate website www.met-pro.com.

I'd also like to remind you that any statements made today with regard to our future expectations may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to our annual report for the fiscal year ended January 31, 2007 that was filed with the SEC for important factors that among others could cause our actual results to differ from any results which might be projected, forecasted or estimated in any of our forward-looking statements. And with that I will now like to turn the call over to Ray.

Thank you, Kevin. Good morning everyone and welcome again from Harleysville, Pennsylvania. Earlier this morning we released our financial results for the fourth quarter and the fiscal year ended January 31, 2008. In a moment, Gary Morgan will provide more specific comments on the quarter and fiscal year's financial results but prior to that I would like to offer these general comments on our performance.

Your Company had another great quarter, a fitting conclusion to the best year in our history as we reported record revenues in earnings for both the quarter and the year. Results were driven by strong international growth, widening gross margins and further improvements in our operating efficiency.

Our programs that deliver value for our customers through enhanced sales and marketing initiatives together with our efforts to improve the leverage in our model through global sourcing, consolidation and integration of our various businesses have combined to not only produce these great results but more importantly to position your Company to capitalize on the growth opportunities we see before us around the world.

I would now like to ask Gary Morgan to review our fourth quarter and fiscal year financial performance after which I will provide some concluding remarks before we take your questions. Gary?

Thank you, Ray. Earlier today the Company reported record sales and earnings for the fiscal year ended January 31, 2008. Sales for the fiscal year were $106.9 million up 14% from the $93.5 million for the fiscal 2007. Sales growth for the year was led by a 19% increase in our largest business segment product recovery and pollution control technologies followed by a 14% increase in our filtration and purification technologies segment and a 6% increase in our fluid handling technologies segment.

Met-Pro continues to post strong international growth. In 2008, international sales increased 34% to a record $30.2 million from $22.6 million in 2007. For 2008 international sales represented 28% of total sales. The gross margin for the fiscal year was 24% compared with 32.1% in 2007, an increase of 190 basis points.

Gross margins were up across all business segments primarily due to strategic decisions to implement selective product price increases and undertake a global sourcing initiative. Income from segment operations rose 44.3% to $14.1 million or 13.2% of sales in 2008, a significant improvement over 10.4% of sales in fiscal 2007, evidence of the operating leverage in our business model.

By individual segment, product recovery and pollution control technologies operating income was up 51% as both sales and operating income rose in all the business units in this segment. Operating income was up 35% in the fluid handling technologies segment and 53% in the filtration and purification technologies segment.

Operating income on our international sales nearly doubled in 2008 to a record $4.1 million compared with $2.1 million in 2007. For the fiscal year we reported a 40% increase in net income to a record $9.7 million and a comparable 37% increase in earnings to $0.63 per fully to the share. Both 2008 net income and fully diluted earnings per share exclude the fiscal 2008 first-quarter gain on the sale of the New York property.

The Company ended 2008 with a $16.8 million backlog compared to $29.5 million at the same time last year. Ray will provide some insight on the diminishing significance of backlog when he talks about trends towards more quick-turning book and ship business.

Met-Pro's balance sheet remains strong. At the end of the fiscal year our cash on hand totaled $21.9 million or $1.43 per share and our current ratio was 4.1. Total debt was only $6.1 million reducing our total debt to equity to just 7.3%. In addition the Company reported strong 2008 cash flows from operating activities amounting to $9.9 million up 153% from the $3.9 million for fiscal 2007.

During the fiscal year the Company also rewarded its shareholders by effecting a 4 for 3 stock split and by increasing the quarterly dividend by 9%. The next quarterly dividend will be paid on March 11, 2008.

Before concluding, a quick housekeeping matter. (inaudible) and represented in the distributor commission which had previously been a deduction for gross sales has now been reclassified to the cost of goods sold and selling expense categories respectively for both current and all prior periods. This reclassification had no effect on the earnings of the Company.

In summary, during the fiscal year, the Company reported record net sales and net income. Also the Company posted record international sales and international income from operations and improved the Company's total business segment operating margins by 280 basis points over the prior year. Thank you and I will now turn the call back to Ray. Ray?

Thank you, Gary. As you just heard 2008 was a terrific year with record performance along virtually every key metric. More importantly the progress achieved in 2008 has provided us with tremendous momentum entering the new year despite what appears to be a somewhat more modest backlog. Overall, we've not sensed any appreciable change in the levels of activity experienced throughout 2008.

International demand should remain firm as countries around the globe build their industrial infrastructure while the need for parts and consumables on our installed base of equipment continues to generate a healthy stream of fairly predictable recurring revenues. While customers may be taking a little longer to place orders, projects are now frequently completed within the same quarter in the process reducing the reliability of backlog as a gauge of future activity.

A good example of this was a $2.7 million order which was booked in November 2007 and shipped in January 2008. In addition, backlog can be skewed by the timing of a large order such as $7.0 million order which was booked on the last day of fiscal 2007.

At the same time that our broadening product line, global reach and strategic sales and marketing initiatives are driving revenue growth, our increasing size and scale is enabling us to improve the operating leverage in our business model. In the past year we have been able to reduce cost and improve efficiency through facility consolidation, global sourcing and better logistics.

We believe the various initiatives underway have the potential to further reduce cost and improve productivity. And we have an extremely strong balance sheet to support initiatives that can improve both our productivity as well as our growth opportunities. We're excited about our accomplishments but even more so about our opportunities not only for the new fiscal year but for years to come.

Before opening the call the questions, I would like to thank the many loyal, dedicated and talented employees who have contributed to our success as well as thank our shareholders for their continued support. I would like to thank all of you for your participation in today's call. I will now turn the call back to Kevin Bittle. Kevin?

Thank you, Ray. At this time we would welcome any questions you may have. I would like to ask our operator to provide instructions for this portion of the call. Thank you.

(OPERATOR INSTRUCTIONS) [Jeff Lebrott], Boenning & Scattergood Inc.

First of all, a few questions for you. First off on the margin lines it looks like you definitely beat our estimates for both the topline and margin line. Does this mean that going forward we should step up our timeline in achieving that 35% gross margin by the 2010/2011 timeframe?

We reclassed the commission and freight out which raised our gross margin for the (inaudible) you looked at the financial statements from 32.7% to 34% for the quarter. Under the new methodology looking at the financial statements we see our gross margins stepping up in the 35% mark to the 36, 37% gross margin. Our goal is to get that to go higher by another two or three percentage points.

We're not changing what we said previously. It's just that the numbers have changed. We're saying that over the next three to four years we will continue to improve our gross margins and reach those improvements that we have been basically preaching for the last four or five conference calls.

Secondly on the backlog, can you just talk about this a little bit (inaudible) specifically was there any noise at all that resulted in the refiling as far as the year-over-year decrease or was that really all just the tightening up of that delivery cycle in the large projects?

There was some backlog with the restating that moved from quarter to quarter last year or this fiscal year as you know and some of it actually has moved into the new fiscal year, the first quarter -- I think the latest, the second quarter where it would ship. So there has been some movement of the backlog.

As I stated earlier in the conference call, what we're finding though is on the larger projects when we get a large project many of them are projects which we can book and ship in a given quarter and therefore you don't even see it at the end of a quarter. And we're seeing more of that.

We've not had this past year the big $7 million or $5 million type projects which we had at the end of last fiscal year. If you recall on January 31, basically last year we booked a $7 million order and that kind of skewed some of the backlog numbers. We did not have it this year. We had a lot of smaller ones. We're seeing similar activity this year where a lot of small type projects that are in the queue right now.

Finally on the backlog, of that $16.8 million to give us an indication of the breakdown between the different business segments, just an indication? I known you can't get into specifics but --.

The majority of it, I would say two-thirds of it is coming from the product recovery group and the balance is coming from the other two operating segments.

As you know the other two operating segments are not really engineered products. They are leadtimes as far book ship are very short compared to the engineered products group. So they really don't work off of backlog. Typically when you look at a Keystone or if you look at a Pristine Water Solutions or a [mifiac]. Now a Fybroc and Dean, they'll work out a little bit more of the backlog than say those other divisions I just mentioned but not nearly at the level that the product recovery solution control engineered products would.

Last question for me -- on the acquisition side can you -- again here I know you can't get into specifics -- but can you address what areas you're looking to expand and then whether in those areas the macroenvironment is currently helping to bring down the prices in those areas?

I have said before if you look at our different segments, the one segment when you look at the fluid handling we would like to improve our foothold in the desalination market and we would look to add capabilities to allow us to expand our presence in that market. When you look at the filtration and purification group, I would like to see us get involved with maybe some equipment -- purification type equipment for water which we really do not have a lot of. And then if you go over the product recovery pollution control group, we're working hard on the bio side, the biofiltration side.

So those are three of the key areas we would like to improve on going forward. And we do think that the prices have come down somewhat on acquisitions from what we have seen and we're looking -- we have a number of them that we're working on and we've been working on for quite a while. I can't really tell you one way or the other where we are at on those but the bottom line is we're working on some.

(OPERATOR INSTRUCTIONS) Alvin Hoffman, Boenning & Scattergood Inc.

What is your current stock buyback program?

Currently we have a total of --

Alvin as in chipmunk.

I'm sorry?

Alvin as in chipmunk.

Okay, Alvin. Currently we have 310,000 shares outstanding on our buyback plan and we haven't been buying any shares in the last several months but we're looking at it.

We have discussed this. We thoroughly discuss it each year and even during the quarters just make sure that we have a plan in place should areas various things occur.

All right -- your inventory at the end of the year was up about a million and a half. Is this an indicator of your expected revenues in the first quarter and second quarter?

Not really. What it is is there's some hedging we have done where for instance for chemicals -- we know the chemical pricing, we knew the chemical pricing was going to go up. We hedged a little bit there. We hedged a little bit on the plastic as far as bringing some of the inventory in so we weren't hit with the high price increases that were anticipated but there is (multiple speakers)

This is not an inventory build against orders -- of perspective orders?

Some of it is. There's a few projects that did not make it out in the fiscal year-end. Several large projects in the product recovery group they just did not make it out and they're going to make it out the first quarter. And they're almost near completion, those projects. So that helped increase the inventory by I would say over $1 million.

Okay, do you care to discuss the renegade employee?

There's really not much we can discuss as far as we put out the Form 8-K before previously and we really due to various agreements that we have and things that are going on we can't discuss anything in more detail at this time.

(OPERATOR INSTRUCTIONS) [Jeff Lebrott], Benning Scattergood.

One final question for you guys. The gain on sale, I missed the first few minutes of the call. Did you talk about that at all or if you haven't could you? What was that specifically and --?

The gain on sale of the building before tax was $3.5 million. After tax it was $2.2 million and in the numbers I presented I excluded that gain in the numbers we did a 40% increase on the bottom line without the gain on the sale of the property.

What that was is that was the consolidation of our two plastic pump companies and we bought them both here -- we have both our plastic pump companies here in Telford PA and that is where I spoke about the leveraging of our resources.

At this time there no further questions. Mr. Bittle, do you have any closing remarks?

Yes, thank you, Brooke. That includes our conference call today. We thank you all for your participation.

Thank you. This concludes the conference. You may now disconnect.