Tecnoglass Announces 2014 Second Quarter Financial Results

Tecnoglass, Inc. (NASDAQ:TGLS)(OTCBB:TGLSW) (“Tecnoglass” or the “Company”), a leading manufacturer of architectural glass, windows, and associated aluminum products for the global residential and commercial construction industries, today announced financial results for the second quarter (Q2) and six months ended June 30, 2014.

José M. Daes, Chief Executive Officer of Tecnoglass, commented, “Our Q2 results reflect our continuing expansion in the U.S. market, and the substantial manufacturing and delivery cost advantages afforded by our location in Barranquilla, Colombia. Sales to the U.S. rose to $26 million in Q2 2014 and comprised 50% of our total quarterly revenues, both records. Sales in our traditional U.S. base of south Florida were strong, and we are now selling in U.S. regions including Baltimore-Washington, California, New York, New Jersey and Texas.”

Mr. Daes concluded, “Demand for our products remains strong, driven by a healthy commercial construction outlook in the U.S. and Latin America. Although not included in our results for Q2 2014, we expect that the July 2014 acquisition of RC Aluminum Industries will positively impact our operations in the second half of 2014 and beyond. We also continue to invest in the growth of our business, with a focus on expanding our manufacturing capabilities in order to deliver the highest quality products and benchmark client service. Our bonding capacity has increased to more than $500 million on combined projects. We believe that 2014 will be a year of growth and progress for Tecnoglass.”

Second Quarter 2014 Results

Revenues for Q2 2014 rose 17% to $51.9 million from $44.3 million in Q2 2013. Q2 2014 sales to the U.S. increased by $10.5 million to $26.0 million and sales to Panama rose by $1.2 million to $3.4 million. These increases more than offset lower sales to Colombia, which declined by $3.6 million to $21.8 million.

Gross profit rose 24% to $16.6 million, or 32.1% of revenues, from $13.4 million, or 30.1% of revenues, in Q2 2013.

Selling and administrative expenses in Q2 2014 increased to $8.2 million, or 15.8% of revenues, from $7.5 million, or 16.9% of revenues, in Q1 2013, reflecting a decline in sales commissions resulting from new arrangements in key markets, partially offset by modest increases in personnel costs driven by growth, significant public company expenses, and favorable exchange rates used in translating expenses to U.S. dollars.

Operating income improved to $8.4 million from $5.9 million in the same period last year. As a percentage of revenues, operating income increased to 16.2% from 13.3% in Q2 2013, reflecting the operating leverage inherent in the Company’s business.

Net income for Q2 2014 was $0.4 million, or $0.02 per diluted share, compared to net income of $3.2 million, or $0.16 per diluted share, in Q2 2013. Net income in Q2 2014 included an extraordinary, non-cash, non-operating loss of $4.6 million as a result of the increase in the fair value of the warrant liability in Q2 2014 relative to its fair value at December 31, 2013. There was no comparable warrant liability in Q2 2013 since the Company only accrued the derivative obligation as a result of the merger which closed on December 20, 2013. The fair value of the warrants liability changes in response to market factors not directly controlled by the Company such as the market price of the Company’s shares and the volatility index of comparable companies.

Excluding the $4.6 million extraordinary loss for the warrant liability, net income for Q2 2014 was $5.1 million, or $0.18 per diluted share.

Adjusted EBITDA was $12.6 million, a 38 % increase from $ 9.1 million in Q2 2013.

Backlog

Consolidated backlog at June 30, 2014 was $132 million, a 5.7% decline from $140 million at March 31, 2014 in part as a result of a shift in the mix in company production to export, non-contract sales. Backlog consists primarily of contract sales for projects that can last up to several years until completion. Backlog should not be considered a comprehensive indicator of future revenues or prospects, as a significant portion of Tecnoglass’s revenues are derived from non-contract, standard sales.

2014 Forecast

Based on its year-to-date performance, current market conditions, and other factors, Tecnoglass reaffirms its 2014 guidance of approximately $206 million in revenue and Adjusted EBITDA of approximately $46.0 million. This guidance represents revenue growth of approximately 12.4% and growth in Adjusted EBITDA of approximately 19.5% from 2013.

Conference Call

Management will host a conference call on Tuesday, August 19, 2014 at 10:00 am ET to discuss these results and other matters. Interested parties may participate in the call by dialing:
  • (877) 423-9820 (Domestic)
  • (201) 493-6749 (International)

The conference call will also be broadcast live via the Investor Information sector of Tecnoglass’s website at www.tecnoglass.com. To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software. If you are unable to listen live, the conference call will be archived on the website for approximately 90 days.

About Tecnoglass

Tecnoglass is a leading manufacturer of hi-spec, architectural glass and windows for the global residential and commercial construction industries. Headquartered in Barranquilla, Colombia, Tecnoglass operates out of a 2.3 million square foot vertically-integrated, state-of-the-art manufacturing complex that provides easy access to the Americas, the Caribbean, and the Pacific. Tecnoglass sells to more than 800 customers in North, Central and South America, with the United States accounting for approximately 36% of Company revenues in 2013. Tecnoglass’s tailored, high-end products are found on some of the world’s most distinctive properties, including the El Dorado Airport (Bogota), Imbanaco Medical Center (Cali), Trump Plaza (Panama), Trump Tower (Miami), and The Woodlands (Houston). For more information, please visit www.tecnoglass.com

Forward Looking Statements

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth and future acquisitions. These statements are based on Tecnoglass’s current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive and/or regulatory factors, and other risks and uncertainties affecting the operation of Tecnoglass’ business. These risks, uncertainties and contingencies are indicated from time to time in Tecnoglass’s filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Further, investors should keep in mind that Tecnoglass’ financial results in any particular period may not be indicative of future results. Tecnoglass is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.
   
Tecnoglass Inc. and Subsidiaries
Condensed Statements of Operations and Comprehensive Income
(in thousands, except share and per share amounts)
 
Three months ended June 30, Six months ended June 30,
2014   2013 2014   2013
 
 
Operating revenues $ 51,936 $ 44,330 $ 99,777 $ 83,961
Cost of sales 35,287   30,971   68,532   58,689
Gross Profit 16,649 13,359 31,245 25,272
 
Operating expenses, net 8,230 7,480 14,969 14,471
 
Operating income 8,419 5,879 16,276 10,801
 
Loss on change in fair value of warrant liability (4,645 ) - (13,525 ) -
Non-operating revenues 1,191 862 2,477 1,741
 
Interest expense 2,294 1,818 4,267 3,487
 
Income before taxes 2,671   4,923   961   9,055
 
Income tax provision 2,263 1,719 5,234 3,350
 
Net (loss) income $ 408   $ 3,204   $ (4,273 ) $ 5,705
 
Comprehensive income
Net (loss) income 408 3,204 (4,273 ) 5,705
 
Foreign currency translation adjustments 2,885 (342 ) 2,709 1,636
 
Total comprehensive (loss) income $ 3,293   $ 2,862   $ (1,564 ) $ 7,341
 
Basic (loss) income per share $ 0.02   $ 0.16   $ (0.18 ) $ 0.28
 
Diluted (loss) income per share $ 0.02   $ 0.16   $ (0.18 ) $ 0.28
 
Basic weighted average common shares outstanding 24,311,199   20,567,141   24,276,947   20,567,141
 
Diluted weighted average common shares outstanding 27,986,839   20,567,141   24,276,947   20,567,141
 
 
Tecnoglass Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
   
June 30, December 31,
2014 2013
ASSETS
Current assets:
Cash and cash equivalents $ 17,444 $ 2,866
Restricted cash - 3,633
Due from transfer agent - 15,908
Subscription receivable - 6,611
Trade accounts receivable, net 80,090 59,010
Due from related parties 20,005 19,058
Inventories 25,319 24,181
Other current assets 53,706 29,303
Total current assets 196,564 160,570
 
Long term assets:
Property, plant and equipment, net 92,391 87,382
Other long term assets 269 262
Total long term assets 92,660 87,644
Total assets $ 289,224 $ 248,214
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 39,316 $ 37,682
Current portion of customer advances on uncompleted contracts 27,835 28,470
Short-term debt and current portion of long term debt 54,973 29,720
Note payable to shareholder 80 80
Other current liabilities 14,370 12,545
Total current liabilities 136,574 108,497
 
Long term liabilities:
Warrant liability 31,745 18,280
Customer advances on uncompleted contracts 10,685 8,220
Long term debt 45,504 48,097
Total liabilities 224,508 183,094
 
COMMITMENTS AND CONTINGENCIES
 
Shareholders' equity
Preferred shares, $0.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively - -
Ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 24,330,408 and 24,214,670 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively 2 2
Legal reserves 1,367 1,367
Additional paid-in capital 41,853 40,693
Retained earnings 14,215 18,488
Cumulative translation Adjustment 7,279 4,570
Total shareholders’ equity 64,716 65,120
Total liabilities and shareholders’ equity $ 289,224 $ 248,214
 

Adjusted EBITDA Reconciliation

Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles (“GAAP”). Management believes Adjusted EBITDA, in addition to operating profit, net income and other GAAP measures, is useful to investors to evaluate the Company’s results because it excludes certain items that are not directly related to the Company’s core operating performance. Investors should recognize that Adjusted EBITDA might not be comparable to similarly-titled measures of other companies. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP. A reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure in accordance with SEC Regulation G follows:
               

Adjusted

Depreciation

Adjusted

Warrants

Interest

Tax

Net

Net

EBITDA

EBIT

Liability

Expense

Provision

Income

Income

w/o
                               

Warrants
Q2 2013   9,101   2,360   6,741   -   1,818   1,719   3,204   3,204
Q2 2014   12,630   3,020   9,610   4,645   2,294   2,263   408   5,053
1H 2013   16,537   3,995   12,542   -   3,487   3,350   5,705   5,705
1H 2014   23,725   4,972   18,753   13,525   4,267   5,234   (4,273)   9,252
2014 F   46,000   9,300   36,700   13500   9,000   10,800   3,400   16,900
 

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