Press release from CNW Group
Pure Technologies Ltd. Announces Second Quarter 2011 Results
Tuesday, August 09, 2011
Pure Technologies Ltd. Announces Second Quarter 2011 Results18:00 EDT Tuesday, August 09, 2011CALGARY, Aug. 9, 2011 /CNW/ - Pure Technologies Ltd. ("Pure") (TSX: PUR) today announced its financial results for the three months ended June 30, 2011.Financial highlights for the quarter include:Revenue of $12.2 million, a slight 4% decrease over $12.8 million for the second quarter of 2010. Revenue from inspection services increased by 930% over the second quarter of 2010.A decrease in net income from $3.0 million in the second quarter of 2010 to a loss of $0.8 million. A significant equipment shipment to the Great Man-Made River Project resulted in a direct increase to net income in 2010.EBITDA of $1.3 million for the quarter compared to $3.6 million during the second quarter of 2010 as a result of lower than expected revenues and higher operating expenses. The temporary discontinuance of operations in Libya during the first quarter is a major factor here.An increase in gross margin from 62.5% in 2010 to 77.8% reflecting higher inspection service revenue. This, of course, requires additional engineering and operations expense.Earnings per share of $(0.02), on a fully diluted basis, compared to $0.07 for the second quarter of 2010.Other notable developments during the period include:The acquisition of Electromechanical Technologies Inc. ("EMTEK"), a Salt-Lake City-based developer of advanced pipeline inspection technologies. While the Company is currently focused on prestressed concrete cylinder pipelines (PCCP), this acquisition positions Pure in the larger market for condition assessment of metallic water and wastewater pipelines.Graduation from the TSX Venture Exchange to the Toronto Stock Exchange. This marked an important milestone for Pure, creating improved liquidity and visibility for the Company and its shareholders.The completion of a number of significant projects worldwide including: the first phase of a large scale project in Ecuador consisting of both robotic and SmartBall inspections; the first AFO installation for the City of Ottawa; an inspection of a critical cooling water pipeline for a power plant in Arizona, demonstrating the applicability of our services to the power industry; PipeDiver and SmartBall inspections as part of the multi-million dollar contract with Miami-Dade Water and Sewer Department.Increased work in Asia including the first P-Wave project in China; a SmartBall inspection in Macau; and the signing of an MOU with Maynilad Water Services Inc. to form a Joint Venture to deliver pipeline inspection services to the water sector in the Philippines and to other selected markets."While our second quarter results were impacted as a result of the Libyan situation and costs associated with employee terminations, acquisitions, and IFRS adjustments, we continue to rapidly grow our business in North America and internationally", said Jamie Paulson, Chairman. "We are pleased with our progress in growing our technical services business, which resulted in a quarterly gross margin of 78% compared to 63% for the corresponding period last year."Looking ahead to the remainder of 2011, our current confirmed backlog is in excess of $35 million, $10.7 million of which is attributable to the Libyan contract. We have also received verbal confirmation of projects in excess of $1 million which are subject to the normal contract review process and final documentation. Regarding 2011 earnings, we are expecting a weaker third quarter and a strong fourth quarter."We continue to follow developments in Libya, particularly as they relate to our work there with the Great Man-Made River Authority (GMRA). We have been granted exemptions from the economic sanctions imposed by the Canadian Government and the United Nations and have applied to the US Treasury's Office of Foreign Asset Control for similar exemptions since the letter of credit from GMRA is routed through a US bank."The impact of the turmoil in Libya on our business this year cannot be overstated. In 2010, Libya accounted for approximately 50% of our revenue; for 2011, we had budgeted a 30% contribution from Libya to our 2011 revenue expectation of $75 - $80 million. Furthermore, we have assumed additional engineering and operations expenses as a result of the EMTEK acquisition which is expected to be accretive to earnings next year. As a consequence of these factors and IFRS-related items, we expect to incur a loss in 2011. This will be mitigated should the final equipment shipment be made to the Great Man-Made River Project this year."Notwithstanding the Libyan setback, we have made significant strides in growing the business this year. Non-Libya revenue is expected to reach approximately $50 million, up from $29 million last year. Regionally, the bulk of the growth is coming from the Americas, with 2011 revenue expected to reach approximately $33 million, up from $24 million last year."As agencies worldwide look for cost-effective solutions to address excessive water loss, deteriorating infrastructure and shrinking budgets, we are well-positioned to take advantage of these opportunities through our dominant technology platform and geographic diversity. We remain committed to growing shareholder value in the long-term through investments such as the EMTEK and STS acquisitions, which will expand our services and geographic reach. Nevertheless, we are heavily focused on consolidating the acquisitions we have made over the past year, and optimizing operational efficiency. We expect that this will result in enhanced gross and net margins as our revenues increase," Mr. Paulson said.Subsequent events included the award of a $2.7 million contract to supply pipeline leak detection and condition assessment technology to a major Asian water agency. The Company also announced a significant contract with the San Diego County Water Authority to supply monitoring and technical support, building on the work that was initially started in 2005. The Company has recently experienced a significant increase in high-value opportunities in the United Arab Emirates which is expected to result in strong revenue growth in the future.2011 Q2 Financial Highlights Condensed Consolidated Statement of Comprehensive Income(unaudited) Three months endedSix months ended June 30,2011June 30,2010June 30,2011June 30,2010Revenue Equipment sales2,405,0009,490,0003,141,000 11,210,000 Inspection services7,800,000757,000 12,394,0001,670,000 Consulting services907,0001,649,0002,592,0003,335,000 Monitoring and technical support 1,137,000901,0001,888,0002,307,000Total Revenue12,249,00012,797,000 20,015,000 18,522,000 Cost of sales2,722,0004,799,0005,899,0007,119,000 Marketing 1,722,0001,345,0003,294,0002,646,000 Engineering and operations3,767,0001,554,0007,052,0002,953,000 General and administration4,105,0001,436,0009,530,0003,434,000 Research and development624,000647,0001,462,0001,272,000Results from operating activities(691,000)3,016,000 (7,222,000)1,098,000 Interest income53,00025,00079,00041,000 Loss before income taxes(638,000)3,041,000 (7,143,000)1,139,000 Income taxes181,00070,000 (1,327,000)78,000 Net loss for the period(819,000)2,971,000 (5,816,000)1,061,000 Other comprehensive income (loss) Foreign currency translation difference- foreign operations3,0007,000108,000(154,000)Other comprehensive income (loss) for the period3,0007,000108,000(154,000) Net loss and comprehensive income(loss) for the period(816,000)2,978,000 (5,708,000)907,000 Net loss per share - basic $ (0.02) $ 0.07 $ (0.12) $ 0.03 - diluted $ (0.02) $ 0.07 $ (0.12) $ 0.03 Condensed Consolidated Statement of Financial Position (unaudited) June 302011December 312010Assets Current assets: Cash and cash equivalents 21,892,00014,173,000Accounts receivable 40,880,00041,394,000Inventory 7,067,0004,313,000Prepaid expenses 826,0001,203,000Net investment in lease -36,000 70,665,00061,119,000Property and equipment 7,806,0005,675,000Goodwill 23,379,00022,125,000Intangible assets 13,925,00011,466,000Deferred tax asset 3,271,0001,251,000 119,046,000101,636,000Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities 4,321,0006,180,000Acquisition holdback payable 4,250,0004,250,000Contingent consideration 2,146,000146,000Deposits on sales contracts 3,399,0003,546,000 14,116,00014,122,000Contingent consideration 3,300,000-Total liabilities 17,416,00014,122,000Shareholders' equity: Share capital 110,683,00091,360,000Contributed surplus 3,253,0002,752,000Share Purchase Warrants 993,000993,000Accumulated other comprehensive loss 811,000703,000Deficit (14,110,000)(8,294,000) 101,630,00087,514,000 119,046,000101,636,000 2011 Q2 Financial Highlights Condensed Consolidated Statement of Cash Flows (unaudited) June 30, 2011 June 30, 2010Cash provided by (used for): Operating activities Loss for the period(5,816,000) 1,061,000Items not affecting cash: Depreciation and amortization3,731,000 897,000 Share-based payments569,000 462,000 Loss on disposal of assets87,000 - Unrealized foreign exchange (gain) loss201,000 (62,000) Deferred income taxes (recovery)(1,957,000) (40,000) (3,185,000) 2,318,000Change in non-cash working capital Accounts receivable459,000 (5,071,000) Inventory(2,754,000) (1,607,000) Prepaid expenses374,000 56,000 Accounts payable, accrued liabilities(1,253,000) (1,404,000) Deposits on sales contracts(149,000) (50,000)Net cash used in operating activities(6,508,000) (5,758,000) Financing activities Issuance of share capital, net of costs18,947,000 28,154,000Net cash from financing activities18,947,000 28,154,000 Cash flows from investing activities Additions to property and equipment(863,000) (670,000)Acquisition of STS(1,135,000) -Acquisition of Aqua20,000 -Acquisition of EMTEK(2,930,000) -Patent and trade expenditure(59,000) (15,000)Change in net investment in lease36,000 37,000Other non-cash expenses262,000 -Net cash used in investing activities(4,669,000) (648,000) Net increase (decrease) in cash and cash equivalents7,770,000 21,748,000 Cash and cash equivalents at December 3114,173,000 15,565,000 Effects of exchange rate fluctuations oncash and cash equivalents(51,000) (53,000) Cash and cash equivalents at June 3021,892,000 37,260,000 About Pure Technologies Ltd.Pure Technologies Ltd. is an international asset management technology and services company which has developed patented technologies for inspection, monitoring and management of critical infrastructure around the world. Pure's business model incorporates four distinct but complementary business streams:Sales of proprietary monitoring technologies for pipelines, bridges and structures (SoundPrint®, SoundPrint® AFO);Recurring revenuefrom data analysis and site maintenance for these technologies, and from technology licensing;Premium technical servicesincluding inspection, leak detection and condition assessment (P-Wave®, SmartBall®, Sahara®, PipeDiver™, PureRobotics™);Specialized engineering servicesin areas related to asset management, primarily in the area of pipeline condition assessment for water and wastewater infrastructure (Openaka Corp., Price Brothers (UK) Ltd, and Jason Consultants). Forward-Looking StatementsThis release contains forward-looking statements. Forward-looking statements, without limitation, may contain the words "believes", "expects", "anticipates", "estimates", "intends", "plans", or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and the Company's actual results could differ materially from those anticipated. Forward-looking statements are based on the opinions and estimates of Management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. In the context of any forward-looking information please refer to risk factors detailed in, as well as other information contained in, the Company's filings with Securities Regulators (www.sedar.com). ® Registered Trademarks, property of Pure Technologies Ltd."The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release" For further information: To find out more about Pure Technologies Ltd. (TSX: PUR), visit our website at www.puretechltd.com. Or contact James E. Paulson, Chairman or Karen Keebler, Chief Financial Officer at (403) 266-6794 or e-mail to firstname.lastname@example.org.