ProSep Reports 2009 Financial Results

March 11, 2010, 7:01 a.m. EST
ProSep Reports 2009 Financial Results
MONTREAL, QUEBEC, Mar 11, 2010 (MARKETWIRE via COMTEX) –ProSep Inc., dedicated to providing process solutions tothe oil and gas industry, today announced its financial results forthe three and twelve-month periods ended December 31, 2009. Allamounts are reported in Canadian dollars unless otherwise stated.
Selected highlights of the year and subsequent events:
– Reported revenues of $41.4 million for the year ended December 31, 2009compared to $51.6 million recorded for the same period ending December31, 2008.– Reported second consecutive annual positive EBITDA, at $0.140 millionfor the year ended December 31, 2009 compared to $3 million in 2008.– Affected by non-cash items, Company reported net loss of $13.9 millioncompared to a net loss of $1.6 million in 2008. Excluding non-cashgoodwill impairment, debt conversion and settlement, the 2009 loss wouldhave stood at $5.3 million. The difference is principally explained bylower revenues in 2009.– Strengthened financial position and provided additional liquidities byconverting $8 million of principal amount of indebtedness into equityand subsequently completed a $5 million rights offering to shareholders.– Ended the year with a sales backlog of $12.5 million, rebuilt to $ 16.6million at the end of January 2010.
– Successful commissioning a new 55,000 square foot assembly shop inHouston, doubling the Company’s production capacity.– Strengthened South East Asian operations and gained an impressive shareof the Malaysian offshore gas treatment processing market and introducedthe Company’s produced water offering, achieving 225% revenue growth in2009.– Expanded presence in the South American gas processing market byconcluding the sale of the Company’s largest gas processing system soldto date.
– Launched a new complementary line of produced water treatment products.– Received important industry recognition for the ProSalt, a compact andhighly efficient crude desalting technology.– Received $1.4 million from industry partners Total, Statoil andConocoPhillips for the final phase of development of a new gasdehydration technology with potential future subsea applications.– Achieved promising results from field trials of the Sorbloc, arevolutionary biodegradable flocculant to treat produced water andcapable of removing a full spectrum of harmful components includingheavy metals.– Continued qualification process of several new technologies in theMiddle-East with potentially interesting near term commercialopportunities.– Ranked Deloitte’s fastest growing technology company in Canada, twelfthin North America and received the coveted Leadership and GreenTechnology awards.
“Through a challenging recessionary business environment in 2009,ProSep successfully achieved several milestones. We completed athorough balance sheet restructuring, providing the Company withnecessary working capital in preparation for growth. After adifficult start in 2009, we saw our backlog return to growth duringthe second half of the year. Finally, we made significant progresswith several of our proprietary technologies, setting the stage formarket introduction in 2010 of two promising solutions for producedwater treatment and gas dehydration,” said Jacques L. Drouin,President CEO of ProSep Inc.”
“We are starting the year in a stronger position. Our industry’s longterm fundamentals remain solid and capital spending programs arebeing revived,” added Mr. Drouin. “The level of quoting activity ispicking up significantly, our clients are investing more in upstreamproduction equipment, and ProSep is increasingly invited to bid onmuch larger projects, reflecting a growing recognition for ourability to deliver quality and efficient solutions. As we areentering a new economic cycle, ProSep must face and manage robustcompetition and increased pressure on gross margins. Our challengethis year will be to keep ProSep on a solid profitability track as wecontinue investing in resources to profit from increasing marketopportunities.”
———————————————————————-000s Quarter ended December 31 Twelve-months endedDecember 31———————————————————————-2009 2008 2009 2008———————————————————————-Revenue $ 9,730 $ 14,799 $ 41,419 $ 51,604———————————————————————-Gross margin $ 3,726 $ 5,452 $ 13,321 $ 15,870———————————————————————-Gross margin 38% 37% 32% 31%percentageof sales———————————————————————-EBITDA(i) $ 447 $ 770 $ 140 $ 3,020———————————————————————-EBITDA 4.6% 5.2% 0.3% 5.9%percentageof sales———————————————————————-Non-GAAP $ (1,306)$ 27 $ (5,306)$ (1,625)adjustednet profit(loss)excludinggoodwillimpairmentand loss ondebtsettlement———————————————————————-Net profit $ (1,306)$ 27 $ (13,878)$ (1,625)(loss)———————————————————————-Basic and (0.01) 0.00 (0.13) (0.03)dilutedprofit(loss) pershare———————————————————————-Weighted 163,255 63,828 106,085 62,877averagenumber ofshares(basic anddiluted)———————————————————————-As at: December 31, 2009 December 31, 2008———————————————————————-Working $ 2,338 $ (6,256)capital(ii)———————————————————————-Total Assets $ 53,395 $ 69,496———————————————————————-Long-term $ 13,846 $ 13,495liabilities———————————————————————-Shareholder $ 19,962 $ 19,531equity———————————————————————-
(i)EBITDA is a non-GAAP measure and the Company defines it as earningsor loss from operations excluding depreciation and amortization,financial charges and income taxes. Please refer to section callednon GAAP measurement in the MDA.
(ii) Working Capital is defined as short term assets less short termliabilities
For the year ended December 31, 2009 ProSep reported revenues of$41,418,738 a 20% decrease from revenues of $51,604,379 reported in2008. The global recession did not affect exploration and productioncapital expenditure programs (“CAPEX”) equally across all regions.Strong growth at the Company’s South East Asian operations was offsetby weaker markets for the US and Europe Middle-East operations.ProSep’s US operations generated revenues of $26,798,060 during thisperiod, down 38% from $43,171,145 reported in 2008. A favourable UScurrency exchange rate helped mitigate lower sales by improvingrevenues by $2.8 million. Europe Middle-East operations reportedrevenues of $3,872,797 down 36% from revenues of $6,056,158 in 2008.Asia Pacific operations grew at a record pace in 2009, with revenuesincreasing by 225% to $10,002,756 up from $3,078,442 during theprevious year. CAPEX programs remained stronger in the region and theCompany’s local operation continued to build on its reputation forproject execution, resulting in invitations to tender on largerprojects. Created in 2007, the Asia Pacific operations now represent24% of the Company’s consolidated revenues. Finally, Productdevelopment activities generated revenues of $1,160,041 a 105%increase from $565,653 in 2008. This increase reflects the Company’sdesire to pursue additional commercial applications for itsproprietary technology portfolio by joining forces with industrypartners such as Total, Statoil and Conoco Phillips.
For the three-month period ended December 31, 2009 ProSep reportedrevenues of $9,729,635 down 34% from $14,798,665 in 2008. Affected byresidual weakness in upstream capital expenditure programs, theCompany’s US and Europe Middle-East operations reported negativerevenue growth during the quarter, offsetting positive performance atthe Asia Pacific operations. Q4-2009 revenues at the US operationswere down 50% to $5,739,919 from $11,449,540 in Q4-2008. UnfavourableUS currency exchange rates resulted in a $0.8 million negative effectto Q4-2009 revenues. Europe Middle-East operations reported 61%revenue decrease to $781,008 in Q4-09, from $1,988,453 in Q4-08.South Asian operations reported significant revenue growth, reporting$2,771,869 in the fourth quarter, a 93% increase over revenues of$1,437,288 during Q4-2008. Product Development activities generatedrevenues of $436,839, an increase of almost 240% from $129,413 inQ4-2008. Revenue increase from this segment is mainly attributable toongoing development and testing activities of the ProDry, a compactin-line gas processing system.
Gross margin for the year ended December 31, 2009 stood at$13,321,072 or 32% of revenues compared to $15,870,143 or 31% ofrevenues in 2008. Gross margin in 2008 was positively affected by thereversal of a warranty provision of $2.5 million related to thesuccessful delivery of a large produced water system to Kuwait OilCompany. Excluding this reversal, 2008 margin would have stood at$13,308,302 or 26% of revenues. Gross margin improvements achieved in2009 reflect non-recurring savings in project commissioning andcompletion in the second half of the year and higher labourcomponents in the contract mix during the period.
For the three-month period ended December 31, 2009 gross margin stoodat $3,725,548 or 38% of revenues compared to $5,452,058 or 37% ofrevenues for the quarter ended December 31, 2008. Excluding thepositive effect of a $1.3 million provision reversal that occurred inQ4-2008, gross margins would have stood at around 27% (half of the$2.5 million warranty provision mentioned in the above paragraph wasreversed during the fourth quarter of 2008).
Close attention to project execution and procurement resulted insignificant savings in costs of goods sold. Combined with profitableproduct development activities and close monitoring of expenses, theCompany was able to report positive EBITDA in the context ofdifficult market conditions. EBITDA for 2009stood at $140,379compared with $3,019,902 in 2008. The $2,879,523 variance is largelyattributable to the warranty provision reversal of $2,561,841 thatoccurred in 2008 and mentioned above.
Total expenses remained fairly stable in 2009, reaching $13,180,693compared to $12,850,241 during the previous year. Sales and marketingexpenses were $2,170,875 or 5% of revenues compared to $1,854,230 or4% of revenues a year before, reflecting the commercialisation a newconventional produced water treatment line and additional resourcesdedicated to support the increased level of quotations. General andadministrative expenses were $10,879,418 in 2009 compared to$9,840,399 during the previous year. The $1,039,019 increase is theresults of additional expenses relating to the new 55,000 square feetfabrication and assembly facility, additional resources needed tosupport growing operations in Asia and lower human resources costallocation to contracts at the European operations. Research anddevelopment expenses decreased to $130,400 for the year endedDecember 31, 2009, down from $1,155,612 in 2008. Higher allocation ofRD resources to direct costs of projects conducted with and paid forby industry partners explain half of this variance. The balance isexplained by the capitalisation of expenses incurred during the yearin relation to development activities of the ProDry, as recent testshave shown strong conclusive results.
For the year ended December 31, 2009, the Company reported a net lossof $13,878,383 or $0.13 per share compared to a net loss of$1,625,057 or $0.03 for the same period in 2008. The increase in netloss is largely attributable to non-cash items related to the balancesheet restructuring transaction taken during the second and thirdquarters of 2009 (respectively, $6.5 million goodwill impairment and$2.1 million debt settlement loss) and from the currency conversioneffect of the US and European Middle-East operations’ balancesheets conversion accounting for approximately $3.7 million of thevariance.
Basic and diluted loss per share were calculated using theweighted-average number of Common Shares outstanding during theperiod of 106,085,384 shares and by using 62,877,078 in 2008. AtDecember 31, 2009, ProSep held cash and cash equivalents of$7,689,695 compared with $7,615,119 as at December 31, 2008.
Effect of balance sheet restructuring on financial results
In light of the balance sheet restructuring initiative, a goodwillimpairment charge of $6.5 million was recorded in the second quarterof 2009. During the third quarter of 2009, a non-cash loss of $2.1million was recognized to account for the loss on debt settlement. Nofurther write-down was required.
ProSep filed its annual audited consolidated financial statements forthe twelve-month period ending December 31, 2009 and relatedmanagement discussion and analysis with securities regulatoryauthorities. The material will be available through SEDAR at www.sedar.com and on the Company’s website, www.prosepinc.com .
Conference Call and Webcast Details
ProSep will host a conference call and webcast on Thursday, March 11,2009 at 8:30 a.m. (ET) to discuss its 2009 fourth quarter and annualfinancial results. To access the conference call by telephone, dial1-416-981-9000 or 1-800-941-1366. A live audio webcast of theconference call will also be available through www.prosepinc.com under the calendar of events in the news and investor center and on www.marketwire.com . For audio replay, dial 1-416-626-4100 or 1-800558-5253 with the reservation code #21442532.
ProSep Inc. is dedicated to providing process solutions to the oiland gas industry. ProSep designs, develops, manufactures andcommercializes technologies to separate oil, water and gas generatedby oil and gas production. For more information, please visit www.prosepinc.com .
This press release may contain forward-looking statements, includingstatements regarding the business and anticipated financialperformance of ProSep Inc. These statements are based, among others,on the Company’s current assumptions, expectations, estimates,objectives, plans and intentions regarding projected revenues andexpenses, the economic and industry environments in which the Companyoperates or which could affect its activities, the Company’s abilityto attract new clients and consumers as well as its operating costs,raw materials and energy supplies which are subject to a number ofrisks and uncertainties. Forward-looking statements can generally beidentified by the use of the conditional tense, the words “may”,”should”, “would”, “believe”, “plan”, “expect”, “intend”,”anticipate”, “estimate”, “foresee”, “objective” or “continue” or thenegative of these terms or variations of them or words andexpressions of similar nature. Actual results could differ materiallyfrom the conclusion, forecast or projection stated in suchforward-looking information. These statements are subject to a numberof risks and uncertainties that may cause actual results to differmaterially from those contemplated by the forward-looking statements.Some of the factors that could cause such differences include but arenot limited to the Company’s ability to develop, manufacture, andsuccessfully commercialize value added equipments and services, theavailability of funds and resources to continue its operations andpursue its projects, legislative or regulatory developments,competition, technological change, changes in government and economicpolicy, inflation and general economic conditions in geographic areaswhere ProSep Inc. operates. These and other factors should beconsidered carefully and undue reliance should not be placed on theforward-looking statements.
Contacts:ProSep Inc.Patrice DaignaultCFO Corporate Secretary514-522-5550 ext. 235pdaignault@prosepinc.comInvestor and media contact:ProSep Inc.Danielle Ste-MarieDirector Marketing and Communications514-522-5550 ext. 238dste-marie@prosepinc.com
Copyright 2010 Marketwire, Inc., All rights reserved.
New Chinese data show faster-than-expected inflation, still-torrid loan growth and heavy capital investment…
U.S. stock futures slip Thursday on worries the engine of the world economy, China, may have to slam the…
A former information-technology staffer at HSBC Holdings stole data on around 15,000 clients of the groupâ??s…
The â??Volcker ruleâ?? and other proposed regulation looming over Wall Street may not hit shares of Goldman…

Source