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Press release from Marketwire

ProSep Reports 2012 First Quarter Financial Results

Wednesday, May 09, 2012

ProSep Reports 2012 First Quarter Financial Results07:00 EDT Wednesday, May 09, 2012MONTREAL, QUEBEC--(Marketwire - May 9, 2012) - 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-month period ended March 31, 2012. All amounts are reported in Canadian dollars unless otherwise stated.Selected highlights of the quarter and subsequent events:FinancialRevenues for the three-month period ended March 31, 2012 were $8.3 million, down 16% from $9.9 million recognized in the corresponding period of 2011. Since revenues are recognized as a percentage of completion of projects and most of the initial work consists of engineering, the bulk of revenues are recognized further in the execution cycle. With $50 million of contracts awarded since October 2011, of which $8.3 million have been recognized during the quarter, the Company expects that revenues will increase in the coming months. Gross margin for the first quarter of 2012 stood at $2.6 million, or 32% of revenues, compared to $2.2 million or 22% of revenues achieved during the corresponding period of 2011. Recently signed contracts, including proprietary technologies, provided better margins. EBITDA for the first quarter of 2012 was negative $2.2 million compared to negative $2.3 million for the corresponding period of 2011. The investments made to implement the new strategy in 2011 are expected to be absorbed as backlog increases and completion of projects continues as planned. Loss for the first quarter of 2012 was $1.4 million ($0.0 per share), compared to a loss of $3.0 million ($0.02 per share) in the corresponding period of 2011. At quarter end, backlog stood at $37.2 million, compared to $19.4 million at the end of the same quarter of 2011.CommercialConcluded $25 million in new contract awards, including $4 million awarded to ProSep Kolon during the first quarter of 2012, compared to $23 million during the same quarter of 2011. Signed a large contract valued at $13 million for the Company's new line of seawater treatment and water injection systems, for installation on an offshore platform in the Gulf of Mexico. OperationsMaintained exceptional Health, Safety and Environment ("HS&E") track record and zero Total Recordable Incident Rate ("TRIR") for over two years. Obtained Achilles registration, a leading industry network of buyers and suppliers focused on risk management and facilitating the procurement process. Advanced product development activities for three new offerings and the integration of proprietary technologies in ProSep's conventional offering. "Backlog growth experienced since implementing our new strategic direction in the second half of 2011, continued into the first quarter of 2012. With the added contribution of our Korean-based joint venture, an increased number of opportunities for our proprietary technologies and good industry fundamentals, year 2012 should be a year of record growth," said Jacques L. Drouin, President and CEO."Since we recognize revenues on a percentage of completion basis, revenues should increase in the second and third quarters as work progresses towards the delivery of many significant contracts in our backlog. We also expect gross margins to remain strong with improved contributions from proprietary equipment and good market fundamentals." Selected Financial Highlights (in $ millions except for loss per share)Quarters ended March 3120122011Revenue$8.3$9.9Gross margin*$2.6$2.2Gross margin as a percentage of revenues32%22%EBITDA**($2.2)($2.3)Loss for the period($1.4)($3.0)Basic and diluted loss per share($0.0)($0.02)Weighted average number of shares (basic and diluted)418.3 million191.8 millionAs at:March 31, 2012December 31, 2011Net Invested Working Capital***$6.2$2.8Total Assets$42.7$41.4Borrowings$9.1$9.1Equity$18.8$20.4* Gross margin is a non-IFRS financial measure and the Company defines it as margin excluding amortization expense. ** EBITDA is a non-IFRS financial measure and the Company defines it as earnings or loss from operations excluding amortization, financial charges and income taxes. *** Net Invested Working Capital is a non-IFRS financial measure and the Company defines it as follows: (Restricted cash + Trade and other receivables + Inventories + Prepaid expenses) - (Trade and other liabilities + Deferred revenue). Financial ResultsThis announcement reports on consolidated results. For detailed segmented financial results please see Management Discussion and Analysis and Unaudited Interim Condensed Consolidated Financial Statements for the quarter ended March 31, 2012.RevenuesProSep reported consolidated revenues of $8.3 million during the first quarter ended March 31, 2012, a decrease of 16% from $9.9 million generated in the same quarter of 2011. ProSep's bidding activity reached record levels in 2011 and continued into the first quarter of 2012. Total new bookings in 2011 amounted to $49.4 million, more than double the previous year's bookings. During the first quarter of 2012, ProSep concluded over $25 million in new purchase orders including $4 million awarded to ProSep Kolon. Revenues are recognized on a percentage of completion basis, but the bulk of revenues are recognized in the latter part of the execution cycle as initial work mostly comprises engineering. With $50 million of contracts awarded since October 2011, and of which only $8.3 million was recognized during the first quarter, the Company expects that revenues will increase in the coming months. Revenues at the American Operation were significantly lower while the Asia Pacific and European & Middle Eastern business units reported higher revenues over last year's corresponding period. Work on the $13 million seawater treatment and water injection system awarded to ProSep in January 2012 is expected to begin during the second quarter, explaining the lag in revenue recognition at the American Operation. Gross MarginOverall gross margin for the three-month period amounted to $2.6 million, or 32% of revenues, compared to $2.2 million or 22% of revenues achieved during the same period of 2011. Margins improved at the US and European & Middle East Operations on excellent execution and proprietary technologies.EBITDA and Loss for the Year For the three-month period ended March 31, 2012, EBITDA was negative $2.2 million compared to negative $2.3 million for the equivalent period of 2011. Negative EBITDA is mainly due to higher cost structures implemented in 2011 based upon the new strategic direction.The current cost structure reflects the significant investments made to hire additional human resources. This initiative was put in place during the first and second quarters of 2011. During the first quarter of 2012 there were no significant variations from the same quarter of last year. The Company has no current plans to further invest to develop its infrastructure and its objective is to leverage this structure and achieve significant top line growth. In order to quickly reach its profitability targets, ProSep will continue to pay close attention to operating expenses. ProSep has put in place the necessary resources to grow its backlog. Now its focus has shifted on operations to achieve exceptional performance and deliver on time and within budget.For the three-month period ended March 31, 2012, the Company reported a loss of $1.4 million ($0.00 per share), an improvement compared to a loss of $3.0 million ($0.02 per share) for the same period of 2011 even in the context of 16% lower revenue. Improved gross margins, gain on foreign exchange and appreciation of the Company's investments explain the positive variance. Basic and diluted loss per share was determined using the weighted average number of 418,314,388 Common Shares outstanding during the first quarter of 2012. During the period ended March 31, 2011, the weighted average number of Common Shares issued and outstanding was 191,798,008. At the end of the first quarter of 2012, ProSep held $1.0 million in cash compared to $4.1 million at December 31, 2011.At March 31, 2012, one of the Company's wholly-owned subsidiaries was in breach of a covenant to maintain one of the financial ratios stipulated in the Senior Acquisition Term Loan Facility dated October 23, 2007 between DnB Bank as lender, and said subsidiary, as Borrower. A covenant waiver wherein the lender confirmed that the breached covenant is not deemed to constitute an event of default was obtained by the Company's subsidiary.Conference Call and Webcast DetailsProSep will host a conference call and webcast on Wednesday, May 9, 2012 at 8:00 a.m. (EST) to review the financial results and highlights of the quarter ended March 31, 2012. To access the conference call by telephone, dial 1-416-981-9000 or 1-800-738-1032. A live audio webcast of the conference call will also be available through ProSep's website under "Calendar of Events" in the "News and Investor Center" and on www.marketwire.com. For audio replay, dial 1-416-626-4100 or 1-800-558-5253 with the reservation code # 21590577.Regulatory FilingsProSep filed its Unaudited Interim Condensed Consolidated Financial Statements for the first quarter ended March 31, 2012 and related Management Discussion and Analysis with securities regulatory authorities. The material will be available through SEDAR at www.sedar.com and on the Company's website at www.prosep.com. About ProSep 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 www.prosep.com.Caution concerning forward-looking statementsThis press release may contain forward-looking statements, including statements regarding the business and anticipated financial performance of ProSep Inc. These statements are based, among others, on the Company's current assumptions, expectations, estimates, objectives, plans and intentions regarding projected revenues and expenses, the economic and industry environments in which the Company operates or which could affect its activities, the Company's ability to attract new clients and consumers as well as its operating costs, raw materials and energy supplies which are subject to a number of risks and uncertainties. Forward-looking statements can generally be identified by the use of the conditional tense, the words "may", "should", "would", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective" or "continue" or the negative of these terms or variations of them or words and expressions of similar nature. Actual results could differ materially from the conclusion, forecast or projection stated in such forward-looking information. These statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements. Some of the factors that could cause such differences include but are not limited to the Company's ability to develop, manufacture, and successfully commercialize value added equipments and services, the availability of funds and resources to continue its operations and pursue its projects, legislative or regulatory developments, competition, technological change, changes in government and economic policy, inflation and general political and economic conditions in geographic areas where ProSep Inc. operates. These and other factors should be considered carefully and undue reliance should not be placed on the forward-looking statements. FOR FURTHER INFORMATION PLEASE CONTACT: Investor relations and media:ProSep Inc.Danielle Ste-MarieVP Marketing and Communications(514) 522-5550 ext. 238dste-marie@prosep.com