ZCL Composites Inc. Reports Third Fiscal Quarter and Year End Results and Declares Annual Dividend



    EDMONTON, March 9 /CNW/ - ZCL Composites Inc. (TSX: ZCL) is pleased to
report record results for the third fiscal quarter and year ended December 31,
2006.
    The Company changed its fiscal year end from March 31 to December 31 to
coincide with companies involved in the oil and gas industry. This fiscal year
end is for the nine months ended December 31, 2006 with comparative
information for the twelve months ended March 31, 2006. References to the
third quarter results represent the three month period ended December 31, 2006
for this fiscal year end and the three month period ended December 31, 2005
for the previous fiscal year.
    Revenue for the nine months ended December 31, 2006 was $41.4 million,
which was 90% of the revenue for the twelve months ended March 31, 2006. Net
income from continuing operations of $4.1 million for the nine months ended
December 31, 2006, increased by $0.6 million over the twelve months ended
March 31, 2006. Basic and diluted earnings per share from continuing
operations are $0.19 and $0.18 respectively for the nine months ended
December 31, 2006.
    In the third quarter, revenue was a record $14.9 million this year, up by
15% from $13.0 million last year. Net income from continuing operations for
the third quarter increased to $1.5 million from $1.1 million for the same
quarter last year. Basic earnings per share from continuing operations for the
third quarter of $0.07 were slightly higher than the $0.06 for the third
quarter of the previous fiscal year. Diluted earnings per share from
continuing operations for the third quarter of $0.07 were $0.02 higher than
the $0.05 of the third quarter of the previous fiscal year.
    The overall increase in revenue was primarily due to the increased demand
for our products sold to the upstream sector of the oil and gas industry. The
outlook for this market sector, as well as other traditional markets of the
Company, remains very positive. The order backlog is strong and the new year
is very promising.
    The home heating oil tanks operation did not generate the sales response
we had anticipated. As a result, the home heating oil tank segment incurred a
pre tax loss of $0.7 million for the current fiscal year compared to a pre tax
loss of $1.0 million for the previous fiscal year. The entire home heating oil
tank market has been slow but is showing signs of improvement. We remain
encouraged about the potential for this significant market opportunity and
hope to report positive contribution from this operation in next year's
report.
    Cash flows from operating activities before changes in working capital
for the nine months ended December 31, 2006 of $5.3 million was $0.5 million
lower than the $5.8 million for the same category for the twelve months ended
March 31, 2006.
    Dividends of $2.1 million were paid this fiscal year compared to
$1.4 million in the previous fiscal year. Common shares were issued for cash
of $1.6 million upon the exercise of share options and warrants this fiscal
year compared to $2.1 million in the previous fiscal year.
    Cash used in investing activities for the nine months ended December 31,
2006 was $1.6 million, primarily for the purchase of property, plant and
equipment. During the previous fiscal year, the Company purchased 100% of the
shares of Triple M Fiberglass Mfg. Ltd., property, plant and equipment,
certain patents and deferred development costs for total cash of $4.8 million.
    As expected, we are now beginning to see the growth for lining projects
in North America and Hong Kong. Our unique internal fibreglass tank lining
systems allow "in-situ" upgrades of a single wall tank to a secondary
contained lining system using Parabeam, ZCL's patented three dimensional glass
fabric, and a proprietary state-of-the-art curing system. There is a very
large and growing need for upgrading both underground and aboveground liquid
storage, driven by environmental legislation and industry standards requiring
secondary containment for storage of hazardous liquids. There are significant
opportunities to establish ZCL's tank lining technologies as the preferred
method of upgrading single wall tanks to a secondary contained tank.
    With the considerable demand placed on the Company's Edmonton underground
fibreglass tank manufacturing facilities, the Company is expanding one of its
current manufacturing plants. It is anticipated that larger manufacturing
facilities will not only alleviate the current demand for product, but will
also improve the manufacturing throughput by as much as 50%.
    Going into this new fiscal period, our vision is now expanded: to be the
leading global provider of environmentally friendly liquid storage solutions,
while providing superior returns to our shareholders. We will do so by
maintaining our position in our traditional markets within the Canadian
marketplace, and by pursuing growth opportunities in related products and
markets. Our organization is well positioned to take advantage of our
strengthened core business, not to mention numerous opportunities with the
acquisition of Xerxes in February, 2007. We are looking to the future with
confidence and by remaining focused we will meet our commitments and continue
to create value for our shareholders.
    Xerxes' addition to the ZCL group means that we are entering the US
market two years ahead of schedule via the acquisition of a formidable
competitor. Xerxes is the leader in its own market and has new products that
will also help benefit ZCL on both sides of the border. Xerxes is a well
managed company and together we are poised to grow both revenues and earnings,
a priority for existing and new shareholders alike. We are also now poised to
expand our international presence and to make our vision a reality.
    The Board reviewed the year end results, assessed the overall financial
position of the Company and the growth opportunities now available in the US
with the Xerxes acquisition. The Board decided to declare an annual dividend
of $0.10 per share. This annual dividend is for all shareholders of record as
of March 28, 2007 and will be paid on April 4, 2007.
    Mr. Ven Côté, President and CEO of ZCL said, "I am sincerely grateful for
the continued support from our customers, suppliers and all of our alliance
partners and shareholders. I am also most appreciative of the continuous
efforts of our employees and the support of our Board of Directors for the
confidence they have given us in growing the Company and allowing us to take
the Company to new heights in our North American pursuits, en route to the
implementation of our global vision." Mr. Côté went on to say, "This new year
will be one full of excitement, with the launching of our lining system and
the alignment of priorities with our new partners south of the border and all
of the opportunities for synergies and market growth."

    ZCL Composites Inc. trades on the Toronto Stock Exchange under the symbol
"ZCL" and is Canada's largest manufacturer of fibreglass underground storage
tanks. ZCL's complete fuel storage system is marketed under the "Prezerver"
trademark.

    The consolidated financial statements of the Company are prepared in
accordance with Canadian generally accepted accounting principles. Certain
information in this news release may constitute forward-looking statements
that are based on current expectations and are subject to risks and
uncertainties. Many internal and external factors may cause actual results to
differ materially from those expressed or implied. The Company disclaims any
intention or obligation to update or revise any such forward-looking
statements, whether as a result of new information, future events, or
otherwise.



    
    ZCL Composites Inc.
    (Incorporated under the Canada Business Corporations Act)

                         CONSOLIDATED BALANCE SHEETS

    As at
                                                       December 31, March 31,
                                                              2006      2006
    (in thousands of dollars)                                    $         $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash                                                     7,802         -
    Accounts receivable                                      6,587    11,855
    Inventories                                             10,807     9,422
    Prepaid expenses                                           142       310
    Future tax assets                                           11        48
    -------------------------------------------------------------------------
                                                            25,349    21,635
    Property, plant and equipment                           10,588     9,901
    Deferred costs                                           1,050     1,165
    Intangible assets                                          687     1,066
    Goodwill                                                 1,991     1,991
    Other assets                                               854       799
    -------------------------------------------------------------------------
                                                            40,519    36,557
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                                            -       114
    Accounts payable and accrued liabilities                 5,329     5,699
    Income taxes payable                                     1,398       447
    Future tax liabilities                                     180       256
    -------------------------------------------------------------------------
                                                             6,907     6,516
    Government grants                                          136       143
    Future tax liabilities                                   1,228     1,467
    -------------------------------------------------------------------------
                                                             8,271     8,126
    -------------------------------------------------------------------------

    Commitments and contingencies

    Shareholders' equity
    Share capital                                           23,135    21,397
    Contributed surplus                                        452       348
    Retained earnings                                        8,661     6,686
    -------------------------------------------------------------------------
                                                            32,248    28,431
    -------------------------------------------------------------------------
                                                            40,519    36,557
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    ZCL Composites Inc.

                      CONSOLIDATED STATEMENTS OF INCOME

    Period ended
                                                              Nine    Twelve
                                                            Months    Months
                                                       December 31, March 31,
                                                              2006      2006
    (in thousands of dollars)                                    $         $
    -------------------------------------------------------------------------

    Revenue                                                 41,399    46,166
    Manufacturing and selling costs                         31,676    36,876
    -------------------------------------------------------------------------
                                                             9,723     9,290
    Amortization                                             1,269     1,497
    General and administration                               2,499     2,255
    Financing charges                                            -       266
    -------------------------------------------------------------------------
    Income before income taxes                               5,955     5,272
    -------------------------------------------------------------------------

    Income taxes
    Current                                                  2,177     1,504
    Future                                                    (278)      344
    -------------------------------------------------------------------------
                                                             1,899     1,848
    -------------------------------------------------------------------------

    Net income from continuing operations                    4,056     3,424
    Net income from discontinued operations                      -       319
    -------------------------------------------------------------------------
    Net income                                               4,056     3,743
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings per share
    Net income from continuing operations                    $0.19     $0.19
    Net income from discontinued operations                      -     $0.01
    -------------------------------------------------------------------------
    Net income                                               $0.19     $0.20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted earnings per share
    Net income from continuing operations                    $0.18     $0.17
    Net income from discontinued operations                      -     $0.01
    -------------------------------------------------------------------------
    Net income                                               $0.18     $0.18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    ZCL Composites Inc.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

    Period ended
                                                              Nine    Twelve
                                                            Months    Months
                                                       December 31, March 31,
                                                              2006      2006
    (in thousands of dollars)                                    $         $
    -------------------------------------------------------------------------

    CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                               4,056     3,743
    Add items not affecting cash:
      Amortization expense                                   1,269     1,497
      Future tax (recovery) expense                           (278)      344
      Stock based compensation expense                         252       195
    -------------------------------------------------------------------------
                                                             5,299     5,779
    Changes in non-cash working capital:
      Decrease (increase) in accounts receivable             5,268      (158)
      Increase in inventories                               (1,385)   (1,193)
      Decrease in prepaid expenses                             168       246
      Decrease in accounts payable and accrued
       liabilities                                            (370)   (1,494)
      (Decrease) increase in income tax payable                977      (565)
    -------------------------------------------------------------------------
    Cash flows from operating activities                     9,957     2,615
    -------------------------------------------------------------------------

    CASH FLOWS FROM FINANCING ACTIVITIES
    Issue of common shares                                   1,590     2,102
    Dividends                                               (2,081)   (1,438)
    Net (repayment) advances of bank indebtedness             (114)      114
    -------------------------------------------------------------------------
    Cash flows (used in) from financing activities            (605)      778
    -------------------------------------------------------------------------

    CASH FLOWS FROM INVESTING ACTIVITIES
    Business acquisition, including bank indebtedness
     assumed                                                     -    (2,597)
    Purchase of property, plant and equipment               (1,495)     (921)
    Purchase of intangible assets                                -      (369)
    Deferred development costs                                   -      (835)
    Increase in other assets                                   (55)      (54)
    -------------------------------------------------------------------------
    Cash flows used in investing activities                 (1,550)   (4,776)
    -------------------------------------------------------------------------

    Increase (decrease) in cash                              7,802    (1,383)
    Cash, beginning of the year                                  -     1,383
    -------------------------------------------------------------------------
    Cash, end of the year                                    7,802         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Venence G. Côté, President & CEO, ZCL
Composites Inc., (780) 466-6648, ven.cote@zcl.com; Bernie Lafferty, VP Finance
& CFO, ZCL Composites Inc., (780) 466-6648, bernie.lafferty@zcl.com


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