CCZ Earnings releasedCriticalControl Announces Financial Results for 2010
08:30 EDT Monday, March 14, 2011
CALGARY, ALBERTA--(Marketwire - March 14, 2011) -CriticalControl Solutions Corp., (TSX:CCZ) today reported its financial resultsfor the year ended December 31, 2010.
Fiscal 2010 Highlights – 3rdconsecutive year of growth
Revenue increased by 71%
- Revenue increased by 71% to $50.7 million for the year ended December 31, 2010 compared to $29.6 million in 2009.
- Revenue from the Corporation's Service Bureau Operations increased by 28% for the year ended December 31, 2010 driven by full year results from the Corporation's acquisitions in Manitoba and Ontario in Q3 and Q4 of 2009.
- Revenue associated with the Corporation's Energy Services business increased 115% for the years ended December 31, 2010 as a result of the Corporation's expansion into the shale gas US Appalachian Basin through acquisition of GAS Analytical Service, Inc. ("GAS") in Q4 2009 and TSM Ltd ("TSM") in Q4 2010.
Income before tax increased by 48%, Income after tax increased by38%
- Income before tax increased 48% to $4.2 million for the year ended December 31, 2010 compared to $2.9 million in 2009.
- Net income increased 38% to $4.1 million for the year ended December 31, 2010 compared to $3.0 million in 2009.
- Given the Corporation's profitability and implementation of tax planning initiatives to ensure remaining losses available for carry forward are utilized, management reversed the valuation allowance that was set up in prior years. This tax benefit was offset by other changes in estimates related to the tax provision, resulting in a net benefit of $1.4 million being recognized in 2010 unrelated to the Corporation's current taxable earnings.
- Interest, depreciation and amortization totaled $3.3 million compared to $2.0 million the previous year. Of this amount, $1.4 million was related to amortization of intangibles associated with acquisitions compared to
.8 million the previous year.
- In addition, the Corporation incurred one time charges of
.6 million resulting from lease termination costs, legal expenses and employee severance. The integration of acquisitions had a one time charge of
.2 million towards the Corporation's accounts receivable associated with a contractual relationship entered into by BPOMS prior to the Corporation's acquisition of BPOMS.
Gross Margin increased by 51%
- Gross margin increased to $22.1 million from $14.7 million in the previous year.
- Gross margin as a percentage of revenue was 44% in 2010 compared to 49% in 2009.
- Gross margin in the Corporation's Service Bureau Operations fell 5% due to a recessionary decrease in the Corporation's Alberta based business and certain lines of business added with the acquisition of BPO Management Services.
- Gross margin as a percentage of revenue in the Corporation's Canadian Energy Services business remained strong at 68% for the year ended December 30, 2010.
- Gross margins in the United States Energy Services business gained due to increased economies of scale from organic growth, reaching 41% for the year ended December 31, 2010 compared to 31% for the year ended December 31, 2009 inclusive of the 10 months prior to the acquisition of GAS by the Corporation.
Selling and Administrative Expenses
- Selling and administrative expenses attributed to the Corporation's Service Bureau Operations increased by 58% for the year ended December 31, 2010 compared to the same period in 2009 due to the one time,
.6 million in cost reduction from recognition of the Corporation's investment tax credits in 2009 and the full year cost related to addition of offices in Winnipeg and Toronto in 2010.
- Selling and administrative expenses attributed to the Corporation's Canadian energy business declined by
.55 million (21%) for the year ended December 31, 2010 compared to the same period last year, due to general streamlining of expenses, offset by additional selling and administrative costs of $1.5 million for the twelve months, incurred by the addition of offices in Stonewood, West Virginia, Indiana, Pennsylvania and Girard, Ohio associated with the acquisitions of shale gas areas of GAS and TSM.
- Selling and administrative expenses attributed to Corporate overhead increased by $1.7 million for the twelve months ended December 31, 2010 compared to the same period last year. The increase is attributed to general administrative expenses related to the acquired companies and costs related to the changeover to International Financial Reporting Standard ("IFRS") from GAAP.
- Included in the above costs are onetime costs of
.6 million pertaining to legal expenses, severances incurred in the administrative integration of acquisitions and lease termination costs and an allowance of
.2 million towards the Corporation's accounts receivable.
Outlook
Management intends on continuing the integration of its Service BureauOperations in order to improve gross margins and reduce operating costs during2011. Management expects to reduce its exposure to lines of business within itsService Bureau Operations with lower margins in order to focus its efforts inthe more profitable business process outsourcing solutions. Accordingly,management expects to generate stronger cash flow as lower margin revenue isreplaced with higher margin revenue and operating costs are reduced throughtighter integration.
Management expects revenue from its Canadian Energy Services to remain stableas growth from cross selling within its client base is offset with continuedweakness in exploration activity in the Western Canadian Sedimentary Basin in2011. Management expects to continue its US shale gas growth strategy during2011, consolidating within its current operating areas and expanding into newgeographic regions to better leverage its technologies to a wider client base.
"Strong progress during 2010 was defined through diversified growth in arapidly changing industry." said Alykhan Mamdani, President and CEO ofCriticalControl. "By applying the same vigor to our operations and strategicgrowth objectives during 2011, management is optimistic about continuing thedelivery of growing cash flow and profit."