Investors: 2008 Press Releases
HSE to Release September 30, 2008 Financial Results on November 12, 2008, and Host Conference Call on November 13, 2008
NEWS RELEASE - November 12, 2008
HSE Integrated Ltd. (“HSE”, “Our”, “We”, or the “Company”) today announced its financial results for the third quarter and year to date ended September 30, 2008.
Total revenue for the third quarter was $28.2 million, up 19.6% from $23.6 million in 2007 and 4.4% from the previous highest Q3 revenue of $27.0 million in 2006. For the nine months ended September 30, 2008 revenue was $83.9 million, an 18.3% increase from $70.9 million in 2007 and 12.9% higher than the previous highest nine month revenue of $74.3 million in 2006.
The main source of revenue growth was the continued expansion of HSE’s Industrial safety services in all markets across Canada. In the three month period, Industrial safety revenues were $16.2 million, 57.3% of total revenue and a 36.3% increase from $11.9 million in the third quarter of 2007. For the nine month period Industrial safety revenues were $47.2 million, a 43.6% increase from $32.9 million in 2007 and 56.3% of total Company revenues. Industrial safety services revenues are now larger than Oilfield safety services revenues, a trend the Company expects will continue in the future.
For the quarter, Oilfield safety services revenues increased by 2.7% to $12.0 million from $11.7 million in 2007. This reflects the improvement in conventional oil and gas well drilling and completion activity during this period. However, for the nine month period Oilfield safety services experienced its second year of decline. Year-over-year, Oilfield safety services revenue fell by 3.5% to $36.7 million from $38.0 million in 2007. This reflects the overall downward trend of the drilling of new wells in the Western Canadian Sedimentary Basin.
The operating margin and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) continued to improve in the third quarter of the 2008 fiscal year. For Q3, the operating margin rose to 20.5% from 14.7% in 2007. The increase in SG&A for the nine month period compared to last year included approximately $0.4 million in non-recurring costs. EBITDA for this period increased by 107.7% to $2.9 million from $1.4 million in 2007. A similar trend for the nine-month period showed the operating margin rising to 18.4% from 16.4% in 2007, while year-to-date EBITDA to September 30 increased by 74.9% to $7.7 million from $4.4 million last year.
All the foregoing had a positive effect on the bottom line. HSE reported a profit for the period of $0.4 million ($0.01 per share), a significant improvement from a loss of $15.9 million (a loss of $0.42 per share) in 2007. For the nine months ended September 30, the Company reports a small loss of $0.2 million ($0.00 per share) compared to a loss of $18.1 million (a loss of $0.48 per share). The large losses in 2007 were largely caused by a one-time write-down of goodwill carried on the balance sheet, a regulatory requirement created by a significant decline in HSE’s share price and market capitalization in 2007.
The Company’s balance sheet continues to strengthen. Working capital at September 30, 2008 was $20.3 million while the non-current portion of all long term bank debt and capital lease obligations was $14.3 million. HSE exited the reporting period with $2 million in cash and cash equivalent on the balance sheet. HSE continues to be fully compliant with all senior lending covenants and believes it will continue to do so for the foreseeable future.
David Yager, Chairman and CEO, offered the following comments for HSE’s third quarter 2008 results:
“HSE is pleased with the continued growth of Industrial safety service across the country and the improving profit margins resulting from ongoing efforts to control costs and improve operating margins. It is clear from the significant year-over-year growth that HSE has developed a product mix and business model that is attractive to our clients. The Company has no reason to believe that this growth will not continue, however due to global financial conditions the rate of future expansion may be tempered.
On the Oilfield side, higher commodity prices in the second and most of the third quarters did invigorate drilling and investment and a slight increase in HSE’s business during the third quarter. However, the sharp drop in commodity prices through the end of September and into October quickly re-introduced caution into this segment of our business. Business should be steady for the remainder of 2008 and the first quarter of 2009. Seeing beyond that in current market conditions is very difficult.
Expansion into the United States continued with delivery of the first field service equipment. A field service location was opened in Midland, Texas. HSE does not expect this investment to make a positive contribution to overall financial results until 2009.
We’re pleased with our Company’s financial performance this year, particularly in the second and third quarters. Due to volatile and unusual global capital markets, HSE plans to exploit low-risk growth opportunities while continuing to conservatively manage our balance sheet.
On behalf of Board of Directors, we’re extremely proud of the outstanding work and commitment of our managers and staff. We’re providing quality services at fair prices for our clients across the country every day. This is an essential foundation for the long-term success of our Company”.
For further information and analysis please see the attached Management Discussion and Analysis and Financial Statements.
CONFERENCE CALL
HSE will be hosting a conference to discuss their results at 11 AM (Eastern Standard Time), 9 AM (Mountain Standard Time) on Thursday November 13, 2008.
Dial-In Number: 1-800-591-7539 or 1- 416-644-3414
Conference Replay November 27, 2008: 1-416-640-1917 or 1-877-289-8525 (Passcode: 21288378 followed by the pound sign)
Webcast: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID= 2471040
HSE is an integrated, national supplier of industrial Health, Safety and Environmental services. From its head office in Calgary, Alberta, it serves its clients from field service locations in Alberta, British Columbia, Saskatchewan, Ontario, Nova Scotia, New Brunswick and Michigan. HSE also operates in Midland, Texas, under through a jointly owned company called Boots & Coots HSE Services LLP. HSE trades on the TSX under the symbol “HSL”.
Forward Looking Statements
This news release may contain forward-looking statements concerning, among other things, the Company’s prospects, expected revenues, expenses, profits, financial position, strategic direction, and growth initiatives, all of which are subject to risks, uncertainties and assumptions. These forward-looking statements are identified by their use of terms and phrases such as expect, anticipate, estimate, believe, may, will, intend, plan, continue, project, objective and other similar terms and phrases. These statements are based on certain assumptions and analyses made by the Company based on its experience and assessment of current conditions, known trends, expected future developments and other factors it believes are appropriate under the circumstances. Such statements are subject to numerous external variables, both known and unknown, such as changes in commodity prices for natural gas and oil, changes in drilling activity, weather conditions, industry-specific and general economic conditions and exchange rate fluctuations. If any of these risks and uncertainties materializes or if assumptions are incorrect, actual results may differ materially from those expressed or implied in the forwardlooking statements. The forward-looking statements included in this news release are not guarantees of future performance and should not be unduly relied upon.
Non GAAP Measures
This report makes reference to EBITDA, a measure that is not recognized under generally accepted accounting principles (GAAP). Management believes that, in addition to net earnings, EBITDA is a useful supplementary measure. EBITDA provides investors with an indication of earnings before provisions for interest, taxes, amortization, gains or losses on the disposal of property and equipment, foreign exchange gains or losses, and the non-cash effect of stock-based compensation expense. Investors should be cautioned that EBITDA should not be construed as an alternative to net earnings determined by GAAP as an indication of the Company’s performance. This method of calculating EBITDA may differ from that of other companies and accordingly may not be comparable to measures used by other companies.
For more information please contact:
HSE Integrated Ltd.
David Yager, Chairman & CEO
Telephone: (403) 266-1833
E-Mail:
Lori McLeod-Hill, CFO
Telephone: (403) 266-1833
E-Mail: lmcleod-hill@hseintegrated.com