41 centsWenzel Downhole Tools earns $12.42-million in 2008
2009-03-09 07:30 EST - News Release
Mr. Harvie Andre reports
WENZEL DOWNHOLE TOOLS LTD. ANNOUNCES 2008 RESULTS
Wenzel Downhole Tools Ltd. has released financial results for the year ended Dec. 31, 2008.
The company's revenues for the full year 2008 were a record $71.77-million, a 32-per-cent increase over the $54.23-million in revenue in 2007. This increase in revenues resulted from expanded rentals and sales in both Canada and the United States, as well as sales internationally where revenues grew by 70 per cent. These revenues produced consolidated net earnings for 2008 of $12.42-million or 41 cents per share compared with $2.39-million or eight cents per share in 2007. Earnings before interest, taxes, depreciation and amortization, and stock-based compensation (EBITDA) were $25.7-million in 2008, compared with $12.2-million in 2007.
Drilling activity in Canada in 2008 was up by 7 per cent compared with 2007, while Canadian revenues increased by 25 per cent, in part due to increased market share but also due to the fact more horizontal and directional wells were drilled. Similarly, rig counts in the United States increased by 6 per cent and U.S. revenues increased by 25 per cent. International sales of $14.99-million reflect a growth in the number of international customers but also some captured slippage from 2007. International sales tend to be fewer in number but larger in size than domestic or United States sales. A shipment just before or just after year-end, which occurred in January, 2008, means that the percentage-growth comparison can give a distorted picture of the true situation. The rapid changes in the value of the Canadian dollar during the last two years, also has the effect of distorting the year-to-year comparison of revenue and profit figures. Foreign exchange adjustment increased 2008 earnings before tax by $1.9-million while in 2007 foreign exchange adjustments decreased earnings by $1.4-million. Removing the direct effects of currency fluctuations yields an increase in earnings before income tax of $10.5-million, a 200-per-cent increase over 2007.
The cost of goods and services, as well as general and administrative expenses, both increased by 19 per cent, significantly less than the 32-per-cent revenue increase. The gross margin increased to 44 per cent from 38 per cent in 2007.
"Speaking about the prospects for 2009," Mr. Andre said, "the global recession and related decrease in the price of both oil and natural gas is producing industry estimates of a significant reduction in wells to be drilled during 2009, particularly in North America. In response, the company is taking steps to reduce costs while focusing on new market opportunities internationally and on new products. The company has a strong balance sheet and should have no difficulty during the current downcycle in the industry. The company maintains its reputation for producing the highest-quality downhole tools and providing excellent service.
"All things considered, we expect 2009 to be challenging but believe the company is well positioned to meet these challenges."
SELECTED ANNUAL INFORMATION (in thousands, except for per-share values) For the year ended Dec. 31, 2008 2007 2006Revenue 71,767 54,228 55,552Gross profit 31,527 20,358 27,220Gross profit percentage 44% 38% 49%EBITDA note 25,692 12,173 16,377Earnings before income taxes 18,053 3,869 9,197Net earnings 12,425 2,387 4,817Net earnings per share 0.41 0.08 0.16Income taxes 5,628 1,483 4,380Depreciation 6,726 6,578 5,152Interest 775 1,559 926Stock-based compensation 138 166 1,102 ----------- -------------- --------------EBITDA $ 25,692 $ 12,173 $ 16,377
Management uses EBITDA as a measurement to determine the ability of the company to generate cash from normal operations. EBITDA does not have a standardized meaning for Canadian generally accepted accounting principles (GAAP) and therefore may not be comparable with calculations of similar measures presented by other issuers. EBITDA is not intended to represent net income for the period nor should it be viewed as an alternative to operating or net income or cash flow from operating activities or other measures of financial performance calculated in accordance with GAAP.
We seek Safe Harbor.