Kelso Technologies Inc. (“Kelso” or the “Company”), (TSX: KLS),
(NYSE American: KIQ) reports that it has released its unaudited
interim consolidated financial statements and Management Discussion
and Analysis for the three and six months ended June 30, 2019.
The unaudited interim consolidated financial
statements were prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”). All amounts herein are
expressed in United States dollars (the Company’s functional
currency) unless otherwise indicated.
SUMMARY OF FINANCIAL PERFORMANCE
|
Three months ended June 30, |
Six months ended June 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
2018 |
|
Revenues |
$ |
3,977,170 |
|
$ |
2,535,235 |
|
$ |
9,651,459 |
$ |
5,047,113 |
|
Gross profit |
$ |
1,708,129 |
|
$ |
1,038,455 |
|
$ |
4,453,064 |
$ |
1,927,684 |
|
Income tax expense (recovery) |
$ |
(26,421 |
) |
$ |
- |
|
$ |
375,633 |
$ |
(3,213 |
) |
Net income (Loss) |
$ |
240,887 |
|
$ |
(162,911 |
) |
$ |
1,331,791 |
$ |
(442,054 |
) |
EBITDA (Loss) |
$ |
367,282 |
|
$ |
(88,334 |
) |
$ |
1,904,986 |
$ |
(321,386 |
) |
EPS (loss)- basic and diluted |
$ |
0.01 |
|
$ |
(0.00 |
) |
$ |
0.03 |
$ |
(0.01 |
) |
LIQUIDITY AND CAPITAL
RESOURCES
At June 30, 2019 the Company had cash on deposit
in the amount of $931,204, accounts receivable of $1,430,769,
prepaid expenses of $174,615 and inventory of $5,404,788 compared
to cash on deposit in the amount of $1,246,244, accounts receivable
of $1,224,235, prepaid expenses of $110,258 and inventory of
$3,668,401 at December 31, 2018. Reported inventory was
higher due to customer orders that were produced for second quarter
delivery but were rescheduled by customers for delivery later in
the year.
The working capital position of the Company at
June 30, 2019 was $6,005,765 compared to $4,469,882 at December 31,
2018. The majority of accounts receivable are collected within 30
days from invoicing shipments giving Kelso $1,430,769 of additional
cash flow plus $931,204 of available cash to discharge accounts
payable and accrued liabilities of $1,543,624 on a timely basis
subsequent to June 30, 2019. Income taxes for 2019 will be
filed and paid in 2020.
Net assets of the Company improved to $9,497,525
at June 30, 2019 compared to $8,165,734 at December 31, 2018.
The Company had no interest-bearing long-term liabilities or debt
at June 30, 2019.
OUTLOOK
Kelso continues to take positive measures to
improve cash flows from operations. In late 2018 we began to
see the correction from several years of diminished rail tank car
activity and improvements in our weakened financial position.
The impact of our improved sales momentum was apparent in the first
quarter of 2019 although sales slowed in the second quarter as
customer orders were rescheduled to later dates in 2019. The
uptrend in our revenue growth is expected to continue for the
balance of the year.
The overall pause in the second quarter
according to industry stakeholders relates to customers being
cautious as they try to assess the potential longer term affects of
trade conflicts, the threat of additional tariffs, economic
challenges and political uncertainties. Despite the
uncertainty the future tank car backlog remained at a healthy level
and grew slightly from 34,512 at the end of 2018 to 35,452 units at
the end of the first quarter 2019. Rail tank car production
schedule estimates have been adjusted to approximately 18,000 rail
tank cars in 2019 and is expected to remain at the same level in
each of the following two years. This bodes well for the
future for Kelso. Based on these new-build predictions and
our historic retrofit/repair business relationships with over 60
customers Kelso anticipates equipping over 10,000 tank cars in 2019
and 2020.
We have been able to stabilize our business
environment, manage costs and eliminate an inefficient marketing
workforce. Under these initiatives we have experienced 91%
sales growth for the first half of 2019 with above average
contribution margins providing a steady growth of profits and
replenishment of our internal capital reserves. With working
capital over $6,000,000 the Company currently operates without the
need for immediate access to new equity capital or new credit
facilities. The Company’s goal is to avoid dilutive equity
funding activities and to remain free of interest-bearing long-term
debt.
A key dynamic for our growth is getting a wider
variety of our rail tank car equipment adopted by hazmat shippers
through a combination of OEM, retrofit and repair market
activities. Once combination equipment orders can be established
our performance goal is to improve aggregate rail tank car revenues
to a target in excess of $10,000 per tank car.
In addition, we continue to invest in promising
product development initiatives to build future value propositions
for our stakeholders even though R&D projects are often
complex, time consuming and expensive. Timing of new revenue
streams remains unpredictable and certainly not guaranteed. Our
R&D model has delivered an array of promising new products that
include new rail tank car valves, specialized truck tanker
equipment, rail wheel cleaning systems, fuel loading systems,
military applications, first responder emergency response kits and
a world class specialized vehicle suspension system for use in
rugged wilderness terrain applications. It is important that Kelso
continues to develop new products that can eventually add a diverse
array of sales opportunities to provide a more predictable
financial growth model year-over-year.
Despite the many negative challenges of the past
few years we have been able to stabilize Kelso’s business
affairs. Business momentum appears to be improving and we
maintain a steady growth outlook for next three years. Our
key objectives are to pursue a balanced growth of profitability
from revenue streams from a more diverse portfolio of products.
Our strategic plan is designed to deliver better financial
performance and to improve the value of our business activities for
all stakeholders.
About Kelso Technologies
Kelso is an engineering product development
company that specializes in the development, production and
distribution of proprietary service equipment used in
transportation applications. Our reputation has been earned
as a developer and reliable supplier of unique high performance
rail tank car equipment for the handling and containment of
hazardous and non-hazardous commodities during transport. All
Kelso products are developed with emphasis on economic and
operational advantages to customers while mitigating the impact of
human error and environmental release. The Company offers
specialized truck tanker equipment, rail wheel cleaning systems,
fuel loading systems, military applications, first responder
emergency response kits and suspension systems for motor vehicles
being used in rugged outback terrains.
For a more complete business and financial
profile of the Company, please view the Company's website at
www.kelsotech.com and public documents posted under the Company’s
profile on www.sedar.com in Canada and on EDGAR at www.sec.gov in
the United States.
On behalf of the Board of
Directors,
James R. Bond, CEO and President
Notice to Reader: References to
EBITDA refer to net earnings from continuing operations before
interest, taxes, amortization, unrealized foreign exchange and non
cash share-based expenses (Black Sholes option pricing
model). EBITDA is not an earnings measure recognized by IFRS
and does not have a standardized meaning prescribed by IFRS.
Management believes that EBITDA is an alternative measure in
evaluating the Company's business performance. Readers are
cautioned that EBITDA should not be construed as an alternative to
net income as determined under IFRS; nor as an indicator of
financial performance as determined by IFRS; nor a calculation of
cash flow from operating activities as determined under IFRS; nor
as a measure of liquidity and cash flow under IFRS. The
Company's method of calculating EBITDA may differ from methods used
by other issuers and, accordingly, the Company's EBITDA may not be
comparable to similar measures used by any other issuer.
Legal Notice Regarding Forward-Looking
Statements: This news release contains “forward-looking
statements” within the meaning of applicable securities
legislation. Forward-looking statements are indicated expectations
or intentions. Forward-looking statements in this news release
include that Kelso that in late 2018 we began to see the correction
from several years of diminished rail tank car activity and
improvements in our weakened financial position; that the impact of
our improved sales momentum was apparent in the first quarter of
2019 although sales slowed in the second quarter as customer orders
were rescheduled to later dates in 2019; that the uptrend in our
revenue growth is expected to continue for the balance of the year;
that rail tank car production schedule estimates have been adjusted
to approximately 18,000 rail tank cars in 2019 and is expected to
remain at the same level in each of the following two years; that
this bodes well for the future for Kelso; that based on these
new-build predictions and our historic retrofit/repair business
relationships with over 60 customers Kelso anticipates equipping
over 10,000 tank cars in 2019 and 2020; that the Company currently
operates without the need for immediate access to new equity
capital or new credit facilities; that the Company’s goal is avoid
dilutive equity funding activities and to remain free of
interest-bearing long-term debt; that once combination rail tank
car equipment orders can be established our performance goal is to
improve aggregate rail tank car revenues to a target in excess of
$10,000 per tank car; that it is important that Kelso continues to
develop new products that can eventually add a diverse array of
sales opportunities to provide a more predictable financial growth
model year-over-year; that business momentum appears to be
improving and we maintain a steady growth outlook for next three
years; and that our strategic business plan is designed to deliver
better financial performance in the future and to improve the value
of our business activities for all stakeholders. Although
Kelso believes its anticipated future results, performance or
achievements expressed or implied by the forward-looking statements
and information are based upon reasonable assumptions and
expectations, they can give no assurance that such expectations
will prove to be correct. The reader should not place undue
reliance on forward-looking statements and information as such
statements and information involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Kelso to differ materially from
anticipated future results, performance or achievement expressed or
implied by such forward-looking statements and information,
including without limitation the risk that regulatory deadlines for
compliance may be delayed or cancelled; the Company’s products may
not provide the intended economic or operational advantages; or
reduce the potential effects of human error and environmental harm
during the transport of hazardous materials; or grow and sustain
anticipated revenue streams; AAR approvals may not be finalized,
orders may be cancelled and competitors may enter the market with
new product offerings which could capture some of our market share;
and our new equipment offerings may not capture market share as
well as expected. Except as required by law, the Company does
not intend to update the forward-looking information and
forward-looking statements contained in this news release.
For further information, please contact:
James R. Bond, CEO and President |
Richard Lee, Chief Financial Officer |
Corporate Address: |
Email:
bond@kelsotech.com |
Email:
lee@kelsotech.com |
13966 -
18B Avenue |
|
|
South
Surrey, BC V4A 8J1 |
|
|
www.kelsotech.com |
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