Kelso Technologies Inc. (“Kelso” or the “Company”), (TSX: KLS),
(NYSE American: KIQ) reports that the Company has released its
unaudited interim financial statements and Management Discussion
and Analysis for the three months ended March 31, 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 |
|
|
2019 |
|
|
2018 |
|
Revenues |
$ |
5,674,288 |
|
$ |
2,511,878 |
|
Gross profit |
$ |
2,929,353 |
|
$ |
889,229 |
|
Gross profit margin (after write down of inventories) |
|
48 |
% |
|
35 |
% |
Income tax (recovery) |
$ |
402,054 |
|
$ |
(3,213 |
) |
Net income (loss) for the quarter |
$ |
1,090,904 |
|
$ |
(279,143 |
) |
EBITDA (loss) |
$ |
1,537,704 |
|
$ |
(233,024 |
) |
Net income (loss) per share (basic and diluted) |
$ |
0.02 |
|
$ |
(0.01 |
) |
LIQUIDITY AND CAPITAL
RESOURCES
At March 31, 2019 the Company had cash on
deposit in the amount of $802,172, accounts receivable of
$2,845,716, prepaid expenses of $154,617 and inventory of
$4,473,610 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.
The Company has accrued income tax payable of
$451,708 for the three months ended March 31, 2019 compared to an
income tax recovery of $3,213 for the three months ended March 31,
2018.
The working capital position of the Company at
March 31, 2019 was $5,612,064 compared to $4,469,882 at December
31, 2018. The majority of accounts receivable are collected within
30 days from invoicing shipments giving Kelso $2,845,716 of
additional cash flow plus $802,172 of available cash to discharge
liabilities of $2,212,343 on a timely basis subsequent to March 31,
2019.
Net assets of the Company were $9,256,640 at
March 31, 2019 compared to $8,165,734 at December 31, 2018. The
Company had no interest-bearing long-term liabilities or debt at
March 31, 2019.
OUTLOOK
Throughout early 2019 Kelso continues to take
successful measures to improve positive cash flows from operations.
We began to see the correction of several years of weak financial
performance in late 2018 and the turnaround of sales momentum was
very apparent in the first quarter of 2019. The uptrend in capital
spending in the rail and truck hazmat marketplace fuels our
positive outlook for 2019 and 2020.
Over the past several years our strategic plan
has been focused on re-branding Kelso as a reliable American made
supplier of high-quality performance equipment for the rail tank
car industry. This was an imperative strategic goal as management
believed that it was essential to achieve a healthy turnaround of
our future financial performance.
We have been able to stabilize our business
environment, cut costs and eliminate an inefficient marketing
workforce. Under these initiatives we have experienced improved
sales growth with better contribution margins providing a steady
improvement of our available capital reserves. This turn of events
has allowed us to continue to pursue our ambitions to develop new
business opportunities, sales growth and new products requiring
regulatory certifications.
Management has been encouraged by the sales
growth commencing in 2018 and early 2019. Crude oil, ethanol and
chemicals are the key commodities that are leading the way in the
resurgence of rail tank car market activity. This stimulus has led
industrial rail tank car analysts to expect average new-build
production rates to grow from approximately 10,000 tank cars in
2018 to an expected production of 22,000 tank cars in both 2019 and
2020. Based on this independent analysis new-build predictions and
our historic retrofit/repair business relationships with over 60
customers, Kelso supplied its specialized tank car PRV equipment to
over 8,000 tank cars in 2018 and anticipates equipping over 10,000
tank cars in both 2019 and 2020.
Sales growth involves the successful achievement
of American Association of Railroads (AAR) regulatory
certifications that are required for full commercial marketing and
eventual adoption by customers. In February 2019 our vacuum relief
valve (VRV) received AAR certification and sales have commenced.
The VRV can add another $1,000 to $1,500 per tank car to our
aggregate sales and is expected to help boost overall revenues in
future periods.
A key dynamic for our financial growth is
getting a wider variety of our tank car equipment adopted by hazmat
shippers through a combination of OEM, retrofit and repair market
activities. Once this adoption trend can be firmly established we
expect customers to begin to specify combinations of our
proprietary One-Bolt Manway, VRV, our proven pressure relief valve
(PRV) products and limited runs of our ceramic ball bottom outlet
valve. Our financial performance goal is to improve tank car
revenues from a PRV only based revenue stream of approximately
$1,400 per tank car to a target in excess of $10,000 per tank
car.
We continue to pursue promising product
development initiatives to build future value propositions for
Kelso’s stakeholders even though R&D projects are often complex
and expensive. Timing of new revenue streams from these projects
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
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 new
sales opportunities.
Although many operational and human resource
expenses have been reduced, our capital management remains
challenging. However, recent improvements in cash flows from sales
growth that started in 2018 and continued in 2019 have been more
than adequate to fund our ongoing business activities. The Company
currently operates without the need for immediate access to new
equity capital or new credit facilities. The Company’s goal is
avoid dilutive equity funding activities and to remain free of
interest-bearing long-term debt.
Throughout the sector slowdown of the last three
years, we have been able to stabilize Kelso with new business
processes, new personnel, dramatic changes to our corporate culture
and the successful introduction of a more effective and economic
approach to customer service, marketing and sales. In 2019,
business momentum appears to be growing and we maintain a steady
growth outlook for 2019 and 2020. Our key objectives are to achieve
balanced growth of profitability through revenue streams from a
more diverse portfolio of products. This business model is expected
to generate the necessary internal capital resources and financial
performance results that will eventually lead to an improved
valuation of our business activities for all stakeholders.
ANNUAL GENERAL MEETING
The annual general meeting of the shareholders
of the Company will be held at the Fairmont Hotel Vancouver,
900 West Georgia Street, Vancouver, BC, Canada V6C 2W6 on
Thursday, June 6, 2019 at 10:00 a.m. (PDT).
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 also offers specialized truck
tanker equipment, rail wheel cleaning systems, fuel loading
systems, military technology, first responder emergency response
kits and suspension systems for motor vehicles being used in rugged
wilderness 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 throughout early 2019 Kelso continues to take
successful measures to improve positive cash flows from operations;
that the uptrend in capital spending in the rail and truck hazmat
marketplace fuels our positive outlook for 2019 and 2020; that
expected production in the U.S. is 22,000 tank cars in both 2019
and 2020 and that each year we can equip over 10,000 of them; that
sales growth involves the successful achievement of AAR regulatory
certifications that are required for full commercial marketing and
eventual adoption by customers; that the VRV can add another $1,000
to $1,500 per tank car to our aggregate sales and is expected to
help boost overall revenues in future periods; that we might
improve tank car revenues from a PRV only based revenue stream of
approximately $1,400 per tank car to a target in excess of $10,000
per tank car; that we can pursue other business opportunities that
complement our products; that the Company can continue to operate
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 our key objectives are to achieve a balanced growth of
profitability through revenue streams from a more diverse portfolio
of products; that our business model is expected to generate the
necessary internal capital resources and financial performance
results that will eventually lead to an improved valuation 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 rail industry
compliance with upgrade measures 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; 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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