The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from CNW Group

Pure Technologies Ltd. Announces Third Quarter 2011 Results

Thursday, November 10, 2011

Pure Technologies Ltd. Announces Third Quarter 2011 Results17:17 EST Thursday, November 10, 2011CALGARY, Nov. 10, 2011 /CNW/ - Pure Technologies Ltd. ("Pure") (TSX: PUR) today announced its financial results for the three months ended September 30, 2011.Financial highlights for the quarter include:The situation in Libya has improved significantly: our regional Vice President has relocated to Libya and is working directly with authorities regarding the payment of our outstanding receivables and future work.Revenue of $8.5 million.  Third quarter 2010 revenue was $13.3 million which included a large equipment shipment as part of the contract with the Great Man-Made River Authority (GMRA) in Libya; excluding this shipment, revenues are down 4.5% over last year.EBITDA loss of $2.4 million for the quarter compared to a loss of $0.2 million during the third quarter of 2010.  The loss for the quarter is primarily due to the temporary discontinuance of operations in Libya, in addition to a one-time compensation expense of $1.4 million resulting from a decision to not extend an employment arrangement.Net loss of $2.4 million compared to a net loss of $1.2 million in the third quarter of 2010.  The equipment shipment to Libya in 2010 provided a direct increase to net income in the comparable period as relatively minor operating expenses were incurred for the shipment; in 2011, there has been a shift to greater inspection services requiring a larger workforce expense under engineering and operations.Loss per share of $0.05, on a fully diluted basis, compared to $0.03 for the third quarter of 2010.Other notable developments during the period include:Significant business developments in Asia including: a major contract to supply pipeline leak detection and condition assessment technology to a major water agency; and a signed Memorandum of Understanding with Maynilad Water Services of the Philippines to form a Joint Venture to deliver pipeline inspection services to the water sector in the Philippines and other selected markets.Operational milestones expected to expand our addressable markets include: the first successful inspections of fully operational, large diameter water and wastewater force mains utilizing PipeDiverTM; a successful robotics wastewater force main inspection despite significant debris buildup; and the first successful inspection on bar-wrapped pipe.The completion of significant projects worldwide including: leak detection projects for a large multinational mining company and a government-owned defense force organization in Australia; the cleaning, inspection, assessment and rehabilitation of a major wastewater network in the United Arab Emirates; and the first P-Wave project in NingDong, Northern China.Increased work in the Americas with a contract extension to supply monitoring and technical support to the San Diego County Water Authority, building on work that commenced in 2005; a significant contract with the City of Austin for leak detection and condition assessment services; and the first contract in Alaska."As expected, our third quarter results were weaker as the period is normally slow because of an inability to access pipelines in the U.S. due to seasonally high water demand combined with utilities' vacation schedules.  This year, the situation was exacerbated by severe drought in the southwestern U.S., resulting in the deferral of some projects to the fourth quarter and to 2012.  Project activity has since increased and we expect a strong rebound in revenue and earnings in the fourth quarter", said Jamie Paulson, Chairman.  "We are pleased with our growing technical services business, which resulted in a quarterly gross margin of 79.4% compared to 62.0% in 2010 for the corresponding period last year."Regarding the situation in Libya, we are encouraged with the progress that is being made towards the payment of our outstanding receivables.  Sanction-related barriers have been removed and we no longer require the approval from the U.S. Treasury's Office of Foreign Asset Control for payment through a U.S. bank.  Several steps in the right direction have recently taken place, including a visit by Pure management to Tripoli with Canada's Minister of Foreign Affairs to further advance our return to the project as soon as conditions allow.  Our Vice President for Europe and Africa has re-located to Benghazi to work with GMRA management on the payment issue and on planning for the resumption of operations and equipment shipments once payment is received."Despite the Libya setback, our international business development efforts are bearing fruit and business in the Americas continues to strengthen as the need for proactive, cost-effective infrastructure management grows. We successfully completed a contract to supply our industry-leading pipeline leak detection and condition assessment technology to a major Asia water agency, and we achieved several operational milestones during the quarter, including the first PipeDiver inspections of fully operational, large diameter water and wastewater force mains.  We have also expanded our market reach with the introduction of extra-high resolution magnetic flux leakage tools; whereas previously our inspection technologies focused primarily on prestressed concrete cylinder pipe (PCCP), we are now able to meet the demand for condition assessment of the larger ferrous pipeline market, representing a significant growth opportunity.  We firmly believe these business and operational successes have provided Pure with an exceptional, solid platform for future growth."Looking ahead to the remainder of 2011, our current confirmed backlog is in excess of $36 million, mostly representing new technical services and inspection related work. $10.7 million of current backlog is attributable to the Libyan contract.  We have also received verbal confirmation of projects in excess of $2 million which are subject to the normal contract review process and final documentation.  Annualized licenses, monitoring and technical support revenue under contract is in excess of $5 million, with Libya accounting for $2.1 million of this. Regarding 2011 earnings, year-end revenues are expected to be slightly less than the $50 million indicated in earlier guidance due to some project delays", Mr. Paulson said.Subsequent events included the award of a $4.2 million contract to supply electromagnetic inspection and acoustic fibre optic monitoring to a major southern California water agency which owns and operates approximately 163 miles of PCCP.    As well, an aggregate of 1,000,000 stock options have been granted to officers, employees and directors as part of the normal course compensation program which provides stock option grants on an annual basis and aligns variable pay with shareholder interests. The options have an exercise price of $3.28 per share, expire on November 9, 2016, and vest over 3 years.  Total options outstanding, subsequent to the current grant, are approximately 7.9% of total shares outstanding.Condensed Consolidated Statement of Financial Position (unaudited) September 30December 31  20112010Assets   Current assets:   Cash and cash equivalents 20,717,00014,173,000Accounts receivable 39,217,00041,394,000Inventory 8,341,0004,313,000Prepaid expenses 1,018,0001,203,000Net investment in lease -36,000  69,293,00061,119,000Property and equipment 7,794,0005,675,000Goodwill 23,504,00022,125,000Intangible assets 13,070,00011,466,000Deferred tax asset 3,678,0001,251,000  117,339,000101,636,000Liabilities and Shareholders' Equity   Current liabilities:   Accounts payable and accrued liabilities 3,715,0006,179,000Acquisition holdback payable 4,250,0004,250,000Contingent consideration 1,898,000147,000Deposits on sales contracts 3,428,0003,546,000  13,291,00014,122,000Contingent consideration 4,037,000-Total liabilities 17,328,00014,122,000Shareholders' equity:   Share capital 111,854,00091,360,000Equity reserve 3,979,0002,752,000Share Purchase Warrants -993,000Accumulated other comprehensive loss 719,000703,000Deficit (16,541,000)(8,294,000)  100,011,00087,514,000  117,339,000101,636,000 2011 Q3 Financial Highlights Condensed Consolidated Statement of Comprehensive Income(unaudited) Three months endedNine months ended  September 30, 2011 September 30, 2010 September 30, 2011 September 30, 2010Revenue      Equipment sales2,576,0005,697,0005,717,00016,907,000  Inspection services4,739,0004,920,00017,132,0006,590,000  Consulting services449,0001,512,0003,041,0004,848,000  Monitoring and technical support 748,0001,179,0002,636,0003,486,000Total Revenue8,512,00013,308,00028,526,000  31,831,000     Cost of sales1,751,0005,062,0007,649,00012,181,000       Marketing 1,589,0001,622,0004,883,0004,267,000  Engineering and operations3,345,0002,084,00010,397,0005,037,000  General and administration3,798,0004,891,00013,329,0008,326,000  Research and development1,093,000793,0002,555,0002,065,000Results from operating activities(3,064,000)(1,144,000) (10,287,000)(45,000)       Finance income44,00036,000123,00077,000  Finance costs(84,000)-(84,000)-Loss before income taxes(3,104,000)(1,108,000) (10,248,000)32,000     Income taxes(674,000)76,000(2,001,000)154,000     Net loss for the period(2,430,000)(1,184,000)(8,247,000)(122,000)     Other comprehensive income (loss)      Foreign currency translation difference    - foreign operations(92,000)139,00016,000(15,000)Other comprehensive income (loss) for the period(92,000)139,00016,000(15,000)     Net loss and comprehensive income (loss) for the period(2,522,000)(1,045,000)(8,231,000)(137,000)     Net loss per share      - basic $ (0.05) $ (0.03) $ (0.17) $ (0.003)  - diluted $ (0.05) $ (0.03) $ (0.17) $ (0.003) 2011 Q3 Financial Highlights   Condensed Consolidated Statement of Cash Flows  (unaudited)   September 30, 2011  September 30, 2010Cash provided by (used for):  Operating activities  Loss for the period(8,247,000)(122,000)Items not affecting cash:    Depreciation and amortization5,505,0001,742,000  Share-based payments668,000626,000  Loss on disposal of assets87,000-  Finance costs84,000   Unrealized foreign exchange (gain) loss(781,000)65,000  Deferred income taxes (recovery)(2,087,000)(60,000) (4,771,000)2,251,000Change in non-cash working capital    Accounts receivable2,206,000(9,220,000)  Inventory(4,011,000)(2,623,000)  Prepaid expenses187,000342,000  Accounts payable, accrued liabilities(1,619,000)(4,129,000)  Deposits on sales contracts(115,000)211,000Net cash used in operating activities(8,123,000)(13,168,000)   Financing activities  Issuance of share capital, net of costs19,723,00028,154,000Net cash from financing activities19,723,00028,154,000   Cash flows from investing activities  Additions to property and equipment(1,359,000)(826,000)Acquisition of STS(1,135,000)-Acquisition of Aqua20,000-Acquisitino of EMTEK(2,930,000)-Acquisition of PPIC, net of acquisition costs-(8,801,000)Patent and trade expenditure(75,000)(25,000)Change in net investment in lease36,00057,000Other non-cash expenses262,000-Net cash used in investing activities(5,181,000)(9,595,000)   Net increase (decrease) in cash and cash equivalents6,419,0005,391,000   Cash and cash equivalents at December 3114,173,00015,565,000   Effects of exchange rate fluctuations on cash and cash equivalents125,000(71,000)   Cash and cash equivalents at September 3020,717,00020,885,000 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 ( ® Registered Trademarks, property of Pure Technologies Ltd. For further information: To find out more about Pure Technologies Ltd. (TSX: PUR), visit our website at  Or contact James E. Paulson, Chairman or Karen Keebler, Chief Financial Officer at (403) 266-6794 or e-mail to