ProSep Reports 2010 Financial Results
ProSep Reports 2010 Financial Results
MONTREAL, QUEBEC - March 10, 2011 - ProSep Inc. (TSX: PRP) ("ProSep" or "the Company"), dedicated to providing process solutions to the oil and gas industry, today announced its financial results for the three and twelve-month periods ended December 31, 2010. All amounts are reported in Canadian dollars unless otherwise stated.
Selected highlights of the year and subsequent events:
"With the global recovery and growth in energy demand, ProSep's backlog is back to growth. Since the start of the year, we've announced $17 million in new contracts, compared to $23 million during the entire previous twelve months", said Jacques L. Drouin, President & CEO. "With strong industry fundamentals and growing production challenges, we expect order intake to continue increasing into the year and generate strong revenue growth."
"We believe that this year ProSep will benefit from strong market conditions and a favourable competitive landscape. In order to achieve above industry performance, deliver strong profitability and shareholder value, we have set forth a very aggressive growth plan. We've hired industry experts to join our sales and engineering teams to leverage our customer base, improve our global reach, expand our expertise and ensure the highest level of execution across all business units. We believe we can become the next leading independent technology-focused process solutions provider," added Mr. Drouin.
Selected Financial Highlights (in $ millions except for loss per share)
This announcement reports only consolidated results. For detailed segmented financial results please see Management Discussion and Analysis and Audited Financial Statements for the year ended December 31, 2010.
ProSep reported consolidated revenues of $34.7 million during the year ended December 31, 2010, a decrease of 16% from $41.4 million generated during 2009. Growth of close to 18% at the European and Middle-East operations was offset by decreased revenue at the US and Asia Pacific operations. Overall, lower order intake related to residual weakness in upstream capital expenditure spending, increased competition, delays in contract completion at the Asian operations and unfavourable USD/CAD exchange rates explain most of the variance.
During the fourth quarter of 2010, ProSep reported consolidated revenues of $8.5 million, representing a decrease of 12% from $9.7 million reported during the corresponding period of 2009. Revenues at all business units continued to be affected by lower order intake, however contract announcements during the first quarter of 2011 are showing a significant recovery at the US and South East Asian operations.
Gross margins for 2010 stood at $10.3 million, or 30% of revenues, compared to $13.3 million, or 32% of revenues in 2009. Weaker margins at the US and South East Asian operations were offset by stable and higher gross margins at the Company's European operations, where most of the proprietary expertise resides. Residual market weakness and a strong competitive environment explain these lower margins. Local currency appreciation and execution challenges at the South East Asian operations also contributed to lower margins.
To improve gross margin levels across the organization, ProSep set forth two important initiatives as part of its global integration plan (see new strategic direction in MD&A). By implementing a matrix organizational structure and grouping employees around their business functions such as sales, operations and marketing, the Company can leverage its best resources, develop synergies and ensure even execution across all business units. The second initiative is to decentralize knowledge of its proprietary solutions which will improve the ability of all business units to promote these new solutions in their respective markets and achieve higher gross margin levels.
Fourth quarter consolidated gross margin stood at $3.2 million or 38% of revenues compared to $3.7 million or 38% of revenues for the same period in 2009. Unusually higher levels of gross margins in both fourth quarters are the results of cost savings in project completion, contract mix as well as capitalization of certain development costs that were accounted as cost of good sold in the previous quarters.
EBITDA and Net Loss
Fourth quarter EBITDA was negative $0.2 million in 2010 compared to positive $0.4 million the previous year. Despite the Company's ability to reduce operating expenses, residual weakness in the industry and unfavourable currency exchange rates led to a negative annual EBITDA of $1.9 million compared with $0.1 million generated during the previous twelve month period of 2009.
Fourth quarter net loss was of $1.2 million ($0.01) per share, compared to a net loss of $1.3 million ($0.01 per share) during the previous year. At year-end, net loss stands at $4.4 million ($0.02 per share) compared to $13.9 million ($0.13 per share) in 2009. The previous year's net loss was affected by a $6.5 million goodwill impairment charge as well as debt conversion and settlement costs amounting to $2.1 million resulting from the balance sheet restructuring initiative concluded in the third quarter of 2009.
Basic and diluted loss per share was determined using the weighted-average number of 180,912,158 Common Shares outstanding during 2010. At December 31, 2010, 191,798,008 Common Shares were issued and outstanding compared to 163,255,910 at the corresponding date of 2009. At December 31, 2010, ProSep held cash and cash equivalents of $3.7 million compared with $7.7 million as at December 31, 2009.
Exercise of Put Option Related to ABCP Credit Facility
In accordance with the Credit Agreement entered into with National Bank of Canada with respect to the Class 2 Restructured Notes, the Company exercised its right to transfer to National Bank of Canada, on March 10, 2011 the ownership of the Class 2 Restructured Notes and any proceeds in payment of the principal amount owing under the Asset Backed Commercial Paper (ABCP) Credit Facility of $ 2.5 million.
Conference Call and Webcast Details
ProSep will host a conference call and webcast on Thursday, March 10, 2011 at 8:00 a.m. (EST) to review the financial results and highlights of the quarter and year ended December 31, 2010. To access the conference call by telephone, dial 1-416-981-9000 or 1-800-772-3714. A live audio webcast of the conference call will also be available through ProSep's website under Calendar of Events in the News & Investor section and on marketwire.com. For audio replay, dial 1-416-626-4100 or 1-800-558-5253 with the reservation code # 21513834.
ProSep filed its audited consolidated financial statements for the four and twelve-month period ending December 31, 2010 and related management discussion and analysis with securities regulatory authorities. The material will be available through SEDAR at sedar.com and on the Company's website, prosep.com.
ProSep is a technology-focused process solutions provider to the upstream oil and gas industry. ProSep designs, develops, manufactures and commercializes technologies to separate oil, water and gas generated by oil and gas production. For more information, please visit prosep.com.
Caution concerning forward-looking statements