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EcoSynthetix Reports 2011 Fourth Quarter and Year-End Results
March 8, 2012
BURLINGTON, ON, March 8, 2012 /CNW/ – EcoSynthetix Inc. (TSX: ECO), a renewable chemicals company that produces a family of commercially proven bio-based products, today announced its financial results for the three months and twelve months ended December 31, 2011. Financial references are in U.S. dollars unless otherwise indicated.
Fiscal 2011 Highlights
- Revenue grew 30.8% to $20.8 million from $15.9 million in 2010
- Gross profit grew 25.8% to $5.0 million from $4.0 million in 2010
- Pro-forma (before fair value charges) net loss per share of ($0.25) compared to ($2.43) in 2010
- Increased production capacity to 155 million pounds from 35 million pounds
- Commissioned a pilot production line at the Burlington Centre of Innovation to drive development and sales activities
- Won eight net new mill customers during the year
- Four of the top 20 global manufacturers are commercial with the Company's binders with an additional 10 of the top 20 manufacturers at the mill trial stage
- Received first commercial order for a new insulation-specific grade of EcoSphere biolatex binders from a top 5 U.S. insulation manufacturer, subsequent to year-end
"Mill trial activity remained strong during the quarter, in spite of the global paper industry downturn. Our offer of substantial cost savings and price stability on a mill's number two input is resonating with potential customers as they rationalize operations and look for ongoing production efficiencies," said John van Leeuwen, Chairman and Chief Executive Officer. "This year, we have built-out our capacity and operations to handle higher levels of demand from this $5.6 billion market. We have recruited experienced individuals from the paper chemicals field to our sales team and they are focused on converting the 20 companies that control 70% of industry volumes into ongoing customers."
Financial Summary
Revenue
Total revenue for the quarter was $3.7 million, compared to $5.9 million in Q4 2010. For fiscal 2011, total revenue was $20.8 million, compared to $15.9 million in the prior period. Approximately 25% of fiscal 2011 revenue growth is attributable to new customer additions as eight net new mills were commercialized during the year.
Gross Profit
Gross profit for the quarter was $0.8 million, or 21.4% of revenue, compared to $1.4 million, or 23.8% of revenue, in Q4 2010. For fiscal 2011, gross profit was $5.0 million, or 23.9% of revenue, compared to $4.0 million, or 24.9% of revenue in the prior period. The increase in gross profit during the year was primarily due to sales price increases and higher volumes during the year partially offset by an increase in raw material input costs, mainly related to cornstarch and higher depreciation related to manufacturing equipment. Gross profit adjusted for depreciation related to manufacturing equipment was 25.5% of revenue in fiscal 2011 compared to 26.3% of revenue in 2010.
Selling, General and Administrative
Selling, general and administrative (SG&A) costs for the quarter were $2.1 million, compared to $1.5 million in Q4 2010. For fiscal 2011, SG&A costs were $8.5 million, compared to $4.8 million in the prior period. The increased costs incurred during fiscal 2011 are primarily due to higher salaries & benefits and office administration costs associated with increasing staffing levels and additional professional fees related to the requirements applicable to public companies.
Research and Development
Research and development (R&D) expenses for the quarter were $1.1 million, compared to $0.3 million in Q4 2010. For fiscal 2011, R&D costs were $2.5 million, compared to $1.1 million in the prior period. The increased R&D expenses incurred during fiscal 2011 are primarily related to the continued development of ECOSPHERE® BIOLATEX® binders. A new pilot production line was installed and commissioned in the Burlington facility (Centre of Innovation) during Q4 2011, which will allow the Company to accelerate its efforts in product and market development.
Adjusted EBITDA1
Adjusted EBITDA for the quarter was ($1.9) million, compared to nil in Q4 2010. For fiscal 2011, adjusted EBITDA was ($4.5) million, compared to ($0.5) million in the prior period. The change in adjusted EBITDA is primarily due to higher operating expenses partially offset by increased gross profit.
Net Loss
The net loss in Q4 2011 was $2.3 million, or $0.04 per common share (basic and fully diluted), compared to a net loss of $10.9 million, or $13.69 per share (basic and fully diluted), for the fourth quarter ended December 31, 2010. For fiscal 2011, the net loss was $252.7 million, or $10.93 per common share (basic and fully diluted) compared to $49.2 million or $61.78 per common share (basic and fully diluted) in the prior period.
The pro-forma (before fair value charges) net lossin Q4 2011 was $2.3 million or $0.04 per common share (basic and fully diluted) compared with a pro-forma net loss of $0.4 million or $0.47 per common share (basic and fully diluted) in Q4 2010. For fiscal 2011, the pro-forma net loss was $5.9 million, or $0.25 per common share (basic and fully diluted) compared to $1.9 million or $2.43 per common share (basic and fully diluted) in the prior period.
Liquidity
Working capital was $113.8 million at December 30, 2011 compared to working capital of $35.9 million at December 31, 2010. The increase was attributable to higher cash of $70.5 million due to the initial public offering that closed August 4, 2011 net of cash utilized for operating and investing activities.
Notice of Conference Call
EcoSynthetix will host a conference call on Friday, March 9, 2012 at 8:30AM ET to discuss its financial results. John van Leeuwen, Chairman and CEO, and Robert Haire, CFO, will co-chair the call. All interested parties can join the call by dialling (647) 427-7450 or (888) 231-8191. Please dial in 15 minutes prior to the call to secure a line. A live audio webcast of the conference call will also be available at www.ecosynthetix.com. The presentation will be accompanied by slides, which will be available via the webcast link. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.
1Non-IFRS Financial Measures
This press release makes reference to certain non-IFRS measures. These non-IFRS measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of results of operations of EcoSynthetix from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the financial information of EcoSynthetix reported under IFRS. We use non-IFRS measures such as Adjusted EBITDA to provide investors with a supplemental measure of operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also use non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess its ability to meet its capital expenditure and working capital requirements.
Adjusted EBITDA is not a measure recognized under IFRS and does not have a standardized meaning prescribed by IFRS. The Company presents Adjusted EBITDA because the Company believes it facilitates investors' use of operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structures (affecting relative interest expense), the book amortization of intangibles (affecting relative amortization expense) and the age and book value of property and equipment (affecting relative depreciation expense). The Company also presents Adjusted EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. Adjusted EBITDA as presented herein is not a recognized measure under IFRS and should not be considered as an alternative to operating income or net income as a measure of operating results or an alternative to cash flows as a measure of liquidity. Adjusted EBITDA is defined as consolidated net income (loss) before interest, income taxes, depreciation, amortization, other non-cash expenses and charges which include the movement in the unrealized gains and losses on the Company's redeemable preferred shares and warrants classified as financial liabilities prior to the initial public offering and share based compensation expense. The following table reconciles net loss to Adjusted EBITDA for Q4 2011 and Q4 2010:
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December 31, |
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December 31, |
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Net loss & comprehensive loss |
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(2,345,937) |
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(10,899,394) |
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Depreciation and amortization |
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258,341 |
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79,894 |
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Share-based compensation |
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276,217 |
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320,426 |
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Change in value of warrants and preferred shares |
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– |
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10,523,868 |
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Interest expense (income) |
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(75,275) |
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2,656 |
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Adjusted EBITDA (1) |
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(1,886,654) |
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27,450 |
Forward Looking Statements
Certain statements in this Press Release constitute "forward looking" statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, objectives or achievements of the Company, or industry results, to be materially different from any future results, performance, objectives or achievements expressed or implied by such forward looking statements. These statements reflect our current views regarding future events and operating performance and are based on information currently available to us, and speak only as of the date of this Press Release. These forward looking statements involve a number of risks, uncertainties and assumptions and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such performance or results will be achieved. Those assumptions and risks include, but are not limited to, the fact that our results of operations and business outlook are subject to significant risk, volatility and uncertainty. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward looking statements, including the factors identified in the "Risk Factors" section of the Company's supplemented prospectus dated July 27, 2011. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward looking statements prove incorrect, actual results may vary materially from those described in this Press Release as intended, planned, anticipated, believed, estimated or expected. Unless required by applicable securities law, we do not intend and do not assume any obligation to update these forward looking statements.
About EcoSynthetix Inc. (www.ecosynthetix.com)
EcoSynthetix Inc. is a renewable chemicals company specializing in bio-based products that can be used as inputs in industrial manufacturing for a wide range of consumer products. The Company's products offer a reduced carbon footprint and are marketed primarily on the basis of lower cost, stable pricing and equal or superior performance. EcoSynthetix's lead product, ECOSPHERE® BIOLATEX® binders, is used commercially by a number of the global top 20 manufacturers in the coated paper and paperboard industry.
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EcoSynthetix Inc. |
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Consolidated Balance Sheets |
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(Expressed in U.S. dollars), unaudited |
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As at |
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As at |
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Assets |
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Current assets |
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Cash |
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105,713,705 |
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35,193,037 |
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Accounts receivable |
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3,116,445 |
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2,739,570 |
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Inventories |
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10,243,410 |
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1,990,383 |
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Government assistance receivable |
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639,685 |
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973,751 |
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Prepaid expenses |
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182,842 |
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81,089 |
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Total current assets |
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119,896,087 |
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40,977,830 |
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Intangible assets |
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– |
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44,315 |
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Property, plant and equipment |
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10,766,124 |
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1,690,069 |
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Total assets |
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130,662,211 |
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42,712,214 |
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Liabilities and shareholders' equity |
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Current liabilities |
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Accounts payable and accrued liabilities |
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6,142,668 |
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3,603,796 |
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Deferred government grant |
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– |
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486,961 |
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Accrued compensation |
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– |
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1,005,371 |
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Total current liabilities |
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6,142,668 |
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5,096,128 |
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Redeemable preferred shares |
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– |
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135,196,431 |
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Warrants |
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– |
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1,501,295 |
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Total Liabilities |
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6,142,668 |
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141,793,854 |
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Shareholder's equity |
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Common shares |
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492,353,321 |
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143,213 |
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Equity component of redeemable preferred shares |
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– |
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19,793,287 |
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Contributed surplus |
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6,073,080 |
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2,180,570 |
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Accumulated deficit |
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(373,906,858) |
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(121,198,710) |
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Total shareholder's equity (deficit) |
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124,519,543 |
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(99,081,640) |
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Total liabilities and shareholders' equity |
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130,662,211 |
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42,712,214 |
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EcoSynthetix Inc. |
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Consolidated Statements of Operations and Loss |
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(Expressed in U.S. dollars), unaudited |
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Years ended December 31 |
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Three months ended December 31 |
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2011 |
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2010 |
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2011 |
2010 |
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Net sales |
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20,769,851 |
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15,879,080 |
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3,719,129 |
5,861,880 |
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Cost of sales |
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15,796,830 |
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11,927,085 |
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2,922,655 |
4,465,689 |
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Gross profit |
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4,973,021 |
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3,951,995 |
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796,474 |
1,396,191 |
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Operating expenses |
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Selling, general and administrative |
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8,518,299 |
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4,841,518 |
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2,128,841 |
1,455,304 |
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Research and development |
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2,516,360 |
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1,051,810 |
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1,088,845 |
313,757 |
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Total operating expenses |
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11,034,659 |
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5,893,328 |
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3,217,686 |
1,769,061 |
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Loss from operations |
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(6,061,638) |
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(1,941,333) |
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(2,421,212) |
(372,870) |
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Interest income |
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183,027 |
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6,901 |
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75,275 |
(2,656) |
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Loss related to warrants and redeemable preferred shares |
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(246,829,537) |
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(47,259,599) |
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– |
(10,523,868) |
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Net loss |
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(252,708,148) |
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(49,194,031) |
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(2,345,937) |
(10,899,394) |
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Basic and diluted loss per common share |
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(10.93) |
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(61.78) |
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(0.04) |
(13.69) |
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Weighted average number of common shares outstanding |
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23,125,647 |
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796,278 |
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55,239,412 |
796,278 |
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EcoSynthetix Inc. |
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Consolidated Statements of Cash Flows |
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(Expressed in U.S. dollars), unaudited |
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Years ended December 31 |
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Three Months ended December 31 |
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2011 |
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2010 |
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2011 |
2010 |
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Operating activities |
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Net loss |
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(252,708,148) |
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(49,194,031) |
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(2,345,937) |
(10,899,394) |
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Items not affecting cash |
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Changes in fair value of warrants and redeemable preferred shares |
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246,829,537 |
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47,259,599 |
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– |
10,523,868 |
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Share based compensation expense |
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984,325 |
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1,095,911 |
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276,217 |
320,426 |
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Depreciation and amortization |
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583,380 |
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351,470 |
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258,341 |
79,894 |
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Changes in non-cash working capital |
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Accounts receivable |
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(376,875) |
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(1,722,598) |
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1,379,202 |
(289,597) |
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Inventories |
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(8,055,027) |
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(1,075,867) |
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(1,947,970) |
(529,912) |
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Government assistance receivable |
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334,066 |
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(973,751) |
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262,468 |
(973,751) |
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Prepaid expenses |
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(101,753) |
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(43,311) |
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(7,374) |
142,662 |
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Accounts payable and accrued liabilities |
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226,620 |
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2,126,420 |
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(657,082) |
1,411,757 |
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Deferred government assistance |
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(486,961) |
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|
486,961 |
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– |
486,961 |
|
Accrued compensation |
|
|
|
|
|
(1,005,371) |
|
|
|
|
|
54,043 |
|
|
|
|
|
– |
8,192 |
|
Cash provided by (used in) operating activities |
|
|
|
|
|
(13,776,207) |
|
|
|
|
|
(1,635,154) |
|
|
|
|
|
(2,782,135) |
281,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant, equipment and intangibles |
|
|
|
|
|
(10,012,325) |
|
|
|
|
|
(2,535,582) |
|
|
|
|
|
(3,766,427) |
(866,608) |
|
Cash used in investing activities |
|
|
|
|
|
(10,012,325) |
|
|
|
|
|
(2,535,582) |
|
|
|
|
|
(3,766,427) |
(866,608) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common share issuance costs |
|
|
|
|
|
(10,792,531) |
|
|
|
|
|
– |
|
|
|
|
|
10,249 |
– |
|
Issuance of common shares |
|
|
|
|
|
102,451,082 |
|
|
|
|
|
– |
|
|
|
|
|
– |
– |
|
Increase in government grant |
|
|
|
|
|
2,511,459 |
|
|
|
|
|
1,175,932 |
|
|
|
|
|
– |
760,932 |
|
Proceeds from issuance of preferred shares, net of costs |
|
|
|
|
|
– |
|
|
|
|
|
28,405,251 |
|
|
|
|
|
– |
28,405,251 |
|
Preferred share warrants exercised |
|
|
|
|
|
29,494 |
|
|
|
|
|
232,456 |
|
|
|
|
|
– |
– |
|
Common share options exercised |
|
|
|
|
|
109,696 |
|
|
|
|
|
– |
|
|
|
|
|
5,205 |
– |
|
Cash provided by financing activities |
|
|
|
|
|
94,309,200 |
|
|
|
|
|
29,813,639 |
|
|
|
|
|
15,454 |
29,166,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
|
|
|
70,520,668 |
|
|
|
|
|
25,642,903 |
|
|
|
|
|
(6,533,108) |
28,580,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash – beginning of period |
|
|
|
|
|
35,193,037 |
|
|
|
|
|
9,550,134 |
|
|
|
|
|
112,246,813 |
6,612,356 |
|
Cash – end of period |
|
|
|
|
|
105,713,705 |
|
|
|
|
|
35,193,037 |
|
|
|
|
|
105,713,705 |
35,193,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EcoSynthetix Inc.
John van Leeuwen
Chairman & Chief Executive Officer
Phone: (289) 288-5010
E-mail: jvanleeuwen@ecosynthetix.com
Investor Relations
Ross Marshall
TMX Equicom
Phone: (416) 815-0700 (Ext.238)
E-mail: rmarshall@equicomgroup.com
Source: Canada Newswire (March 8, 2012 – 5:00 PM EST)
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