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Press release from Marketwire

ProSep Reports 2012 Third Quarter Financial Results

Tuesday, November 06, 2012

ProSep Reports 2012 Third Quarter Financial Results07:00 EST Tuesday, November 06, 2012MONTREAL, QUEBEC--(Marketwire - Nov. 6, 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 and nine-month periods ended September 30, 2012. All amounts are reported in Canadian dollars unless otherwise stated.Selected highlights of the quarter and subsequent events:FinancialRevenues were up 51% during the third quarter of 2012, reaching $10.3 million, compared to $6.9 million during the corresponding period of last year. Gross margin stood at $1.6 million (or 15% of revenues) during the third quarter of 2012, compared to $2.2 million (or 32% of revenues) for the corresponding period of 2011. EBITDA* improved to negative $1.1 million compared to negative $2.3 million recorded during the corresponding quarter of 2011. Net loss was $1.6 million during the third quarter of 2012, an improvement compared to a net loss of $2.5 million during the corresponding quarter of last year. At quarter end, ProSep's backlog** stood at $17.8 million and ProSep Kolon's backlog stood at $4.3 million. Including contracts awarded subsequent to quarter end, the entire group's** backlog stands at approximately $38.4 million on November 5, 2012, up more than 60% since the start of the year. Concluded a twenty-for-one share consolidation of ProSep's Common Shares. CommercialSubsequent to quarter end, ProSep announced $8 million in contract awards, all of which are for proprietary oil treatment solutions. During the same period, ProSep Kolon concluded $12 million in contract awards. Proprietary mixing technologies represent a third of the Company's current backlog, a record for this technology and the result of the recent push to accelerate the commercialization of this higher margin offering. Pursuant to the successful results obtained in field demonstrations in Saudi Arabia and in Latin America, initiated discussions with new potential customers to demonstrate the efficiency and resulting cost savings of ProSep's proprietary mixing technology. OperationsNominated Yee Phak Chuin as General Manager of the Asia Pacific Operations, replacing Matthew Rummer who is becoming ProSep Kolon's CEO. Mr. Chuin has been with ProSep since 2009 as Projects Manager. Maintained exceptional Health, Safety and Environment ("HS&E") track record and zero Lost Time Incidents ("LTI") for over two years. Experienced cost overruns and project delays at the Asia Pacific Operation, explaining lower gross margins. *EBITDA is a non-IFRS measure. EBITDA includes the share of loss in the ProSep Kolon joint venture equivalent to $43,370 for Q3-2012.**Unless specified, backlog does not include ProSep Kolon backlog. The "entire group" refers to ProSep and ProSep Kolon combined."For the second consecutive quarter, our revenues are up 50% year-over-year and proprietary technologies now make up over a third of our current backlog. Our strategy to accelerate commercialization of our proprietary technologies is starting to show promising results and profitability should improve accordingly as we deliver these higher margin projects," said Jacques L. Drouin, President and C.E.O. Selected Financial Highlights (in $ millions except for amounts per share) Quarter ended September 30Nine-months ended September 302012201120122011Revenue$10.36.9$32.5$26.4Gross margin*$1.6$2.2$7.2$6.6Gross margin as a percentage of revenues15%32%22%25%EBITDA** (loss)($1.1)($2.3)($4.0)($6.4)Loss for the period($1.6)($2.5)($4.6)($7.9)Post-consolidation basic and diluted loss per share($0.08)($0.26)($0.22)($0.82)Weighted average number of shares (basic and diluted)20,980,7859,641,83020,958,4089,619,037As at:September 30, 2012December 31, 2011Net Invested Working Capital***$3.5$2.8Total Assets$43.6$41.4Borrowings$9.2$9.1Equity$15.8$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 three and nine-month periods ended September 30, 2012.RevenuesSince the start of 2012 and up to the date of this press release, ProSep announced $49 million in new contracts including $18 million awarded to ProSep Kolon. At quarter end, ProSep's backlog stood at $17.8 million, up 87% year-over-year. Including the contracts announced subsequent to quarter end, the entire group's backlog stands at $38.4 million on November 5, 2012. During the third quarter of 2012, ProSep reported consolidated revenues of $10.3 million, an increase of 51% over $6.9 million reported during the equivalent quarter of 2011. Strong revenue growth at the Asia Pacific Operations (up 168%) is responsible for most of this growth. Revenues increased on the advancement of a large number of projects, mostly for gas and water treatment, awarded since the second half of 2012. Year-to-date, ProSep reported consolidated revenues of $32.5 million, up 23% from $26.4 million generated during the equivalent period of 2011.Gross MarginOverall gross margin for the third quarter of 2012 stood at $1.6 million (or 15% or revenues) compared to $2.2 million (or 32% of revenues) during the corresponding period of 2011. Third quarter margin levels are lower than targeted and reflect execution issues at the Asia Pacific Operations where two large projects experienced cost overruns and delays, as well as lower nominal contribution from proprietary technologies. Year-to-date, consolidated gross margin stood at $7.2 million (or 22% of revenues) compared to $6.6 million (or 25% of revenues) for the equivalent period of last year.EBITDA and Loss for the YearDuring the third quarter of 2012, EBITDA was negative $1.1 million, an improvement over the negative EBITDA of $2.3 million reported during last year's equivalent quarter. Year-to-date, EBITDA also improved to negative $4.0 million compared to negative $6.4 for the comparable period of 2011. Higher revenues from the Asia Pacific Operations and close control of expenses throughout the Company contributed to reduce negative EBITDA. The Company's objective is to continue controlling its cost structure and accelerate the commercialization of its proprietary technologies to improve overall profitability. Recent contract announcements indicate that this strategy has started demonstrating results.For the three-month period ended September 30, 2012, the Company reported a loss of $1.6 million ($0.08 per share on a post consolidation basis), an improvement from a loss of $2.5 million ($0.26 per post-consolidated share) for the second quarter of 2011. Year-to-date, the Company recorded a loss of $4.6 million ($0.22 per post-consolidated share) compared to a loss of $7.9 million ($0.82 per post-consolidated share) in the corresponding period of 2011. Loss for both periods improved on higher revenue and lower total expense levels compared to last year.Basic and diluted loss per share was determined using the weighted average number of 20,980,785 Common Shares outstanding during the second quarter of 2012 compared to 9,641,830 during the equivalent period of 2011. At September 30, 2012, the Company had $1.6 million in cash compared to $4.1 million at December 31, 2011.Covenant WaiverAt September 30, 2012, one of the Company's wholly-owned subsidiaries was in breach of a covenant under borrowing facilities 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 DetailsExceptionally, ProSep will host its conference call and webcast tomorrow, Wednesday November 7, 2012 at 8:00 a.m. (EST) to review the financial results and highlights of the period ended September 30, 2012. To access the conference call by telephone, dial 1-416-981-9035 or 1-800-732-8470. 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 # 21607033.Regulatory FilingsProSep filed its Unaudited Interim Condensed Consolidated Financial Statements for the third quarter ended September 30, 2012 and related Management Discussion and Analysis with securities regulatory authorities. After a review of the Company's recent translated continuous disclosure material, non-material translation errors were found. Subsequently, the Company corrected the French versions of its March 8, 2012 Annual Information Form and Proxy Circular and filed amended versions. 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: Contact Information: ProSep Inc.Investor relations and mediaDanielle Ste-MarieVP Marketing and Corporate Development(514) 522-5550 ext. 238dste-marie@prosep.com