- Outlines disciplined growth plan for 2015 -
BURLINGTON, ON, March 10, 2015 /CNW/ - EcoSynthetix Inc. (TSX: ECO) ("EcoSynthetix" or the "Company"), a renewable chemicals company that produces a portfolio of commercially
proven bio-based products, today announced its financial results for
the three and 12 months ended December 31, 2014. Financial references
are in U.S. dollars unless otherwise indicated.
Fiscal 2014 Highlights
-
Net sales of $4.5 million and $18.8 million for the fourth quarter and
fiscal 2014, respectively, compared to $5.2 million and $22.2 million
for the same periods last year;
-
In April 2014, appointed Jeff MacDonald as Chief Operating Officer to
lead business development, sales, operations and product development
activities;
-
Introduced expanded product range of EcoSphere® biolatex paper coatings
formulated for paperboard, lightweight coated paper and high-speed
inkjet printing;
-
Announced $2 million grant from the Bioproducts cluster program,
developed by Bioindustrial Innovation Canada, to accelerate the
commercialization of new bio-based technology platforms;
-
Retired 406,840 common shares ($0.8 million) in fiscal 2014 through its
normal course issuer bid; and,
-
Reported cash on hand of $67.2 million as at the end of December 31,
2014.
Events Subsequent to Year-End
-
Jeff MacDonald appointed Interim CEO following the announcement that
John van Leeuwen, Co-founder and CEO, would be taking a leave of
absence for personal reasons; and,
-
Total workforce reduced by 15 employees resulting in approximately $0.4
million of related severance costs. This change allows the Company to
align and strengthen its focus on high-priority projects that can
create meaningful revenue over the next year. The Company expects to
realize approximately $2.0 million in savings on an annualized basis as
a result of this change.
"Despite the headwinds we faced in 2014, we remain excited about the
opportunities ahead of us in paper and wood composites," stated Jeff
MacDonald, Interim CEO of EcoSynthetix. "In 2015, we will continue to
focus on building our foundation in paper, where we have demonstrated
that we can yield a positive return for our customers in spite of the
current challenging and volatile market dynamics. We also intend to
diversify our portfolio, in a targeted, disciplined manner, into
additional verticals that can benefit from our commercially proven,
bio-based products."
Outlook and Growth Plan for 2015
In 2015, EcoSynthetix will focus on three key areas of the business in
order to return to a growth trajectory:
1. Defined product pipeline
Over the next 12 months, the Company expects to commercialize new
products in paper and wood composites. To achieve this, the Company is
allocating capital and prioritizing resources on select projects that
can demonstrate both technical feasibility and commercial value in the
short- and long-term.
Today, key wood composite accounts are running advanced-stage,
industrial-scale trials, a strong indication that the Company remains
on track for commercial success in the near term.
The Company will also continue to invest in a smaller number of
longer-term development opportunities, including those in conjunction
with their university partners.
2. Diversified business verticals
EcoSynthetix will focus on expanding its foundation in paper and
commercializing products in new markets, including building products.
The Company has prioritized two specific opportunities that could drive
sales over the next 12 months, namely the commercialization of: (1)
bio-based paper solutions with improved performance for latex coatings
and beyond; and (2) formaldehyde-free solutions to meet regulatory
reform in the building products space.
3. Disciplined organizational growth
Achieving greater organizational efficiency remains a top priority in
2015 and beyond. This means redeploying human and financial resources
and in some cases even scaling back infrastructure.
EcoSynthetix recently reduced its workforce by 15 positions across the
business. These changes will allow the Company to focus on
high-priority projects that can create meaningful revenue over the next
year and into the future.
Going forward, prudent resource allocation will be closely tied to the
Company's innovation engine and sales cycle; this approach will ensure
that EcoSynthetix remains product and bottom-line driven.
The Company's renewed focus on diversification, product innovation, and
disciplined organizational growth provides it with a strong foundation
to return to its growth trajectory.
The Company remains highly confident about the opportunities ahead.
Financial Summary
Net Sales
Net sales for the three months ended December 31, 2014 were $4.5 million
compared to $5.2 million for the fourth quarter 2013, a decrease of
$0.7 million or 13%. The decrease was primarily due to lower sales
volume as a result of the announced closure of the FutureMark Paper
mill last quarter.
Net sales for fiscal 2014 were $18.8 million compared to $22.2 million
in fiscal 2013, a decrease of $3.4 million or 15%. The reduction in
volume was primarily due to lower sales volume as a result of the
closure of the FutureMark Paper mill last quarter, in addition to the
closure of a customer's coated paper production line in EMEA, which was
announced in 2013.
Gross Profit
Gross profit was $0.7 million or 16.6% of sales in Q4 2014 compared to
$0.9 million or 17.4% in the same period last year. The decrease was
primarily due to lower sales volume.
Gross profit as a percentage of sales adjusted for manufacturing
depreciation decreased from 22.9% to 21.6% primarily due to lower
average selling prices partly offset by lower product costs.
For fiscal 2014, gross profit was $3.2 million or 16.8% of sales
compared to $3.6 million or 16.2% in fiscal 2013. The decrease was
primarily due to lower sales volume, a $0.3 million charge to cost of
sales related to FutureMark Paper and lower average selling prices
partially offset by lower product costs.
Gross profit as a percentage of sales adjusted for manufacturing
depreciation and the $0.3 million charge, increased from 21.3% to 24.1%
during the same period primarily due to lower product costs partially
offset by lower average selling price.
Selling, General and Administrative
(Excludes share-based compensation, depreciation and amortization and
foreign exchange loss or gain)
Selling, general and administrative (SG&A) costs were $2.4 million and
$11.4 million for the fourth quarter and fiscal 2014, respectively.
This is compared to $2.7 million and $11.6 million in the corresponding
periods last year.
For the quarter, the decrease was principally due to lower variable
incentive costs and the favourable impact of a weaker Canadian dollar
relative to the US dollar. On a year-to-date basis, the decrease was
principally due to lower variable incentive costs and the favourable
impact of a weaker Canadian dollar relative to the US dollar partly
offset by bad debt expense, severance costs and a tax charge related to
a payroll audit.
Research and Development
(Excludes share-based compensation, depreciation and amortization and
foreign exchange loss or gain)
Research and development (R&D) costs were $1.3 million in the fourth
quarter of 2014, compared to $1.8 million in the same period last year.
For fiscal 2014, R&D costs were $5.3 million compared to $5.5 million
in fiscal 2013.
The decrease in R&D was primarily the result of the favourable impact of
a weaker Canadian dollar relative to the US dollar and lower
discretionary expenses.
Adjusted EBITDA1
Adjusted EBITDA for the three months ended December 31, 2014 was $(2.9)
million compared to $(3.3) million for the same period last year, a
decrease of $0.4 million or 11%. The decrease was due to lower
operating expenses partly offset by lower gross profit.
For fiscal 2014, adjusted EBITDA was $(12.6) million compared to $(12.4)
million during the fiscal year ended December 31, 2013. The increase
was due to lower gross profit partly offset by lower operating
expenses.
Net Loss
Net loss in Q4 2014 was $3.5 million, or $0.06 per common share compared
to a net loss of $3.6 million or $0.07 per common share for the same
period in the previous year.
In fiscal 2014, net loss was $14.5 million, or $0.26 per share compared
to $14.8 million or $0.26 per share in fiscal 2013.
Liquidity
Cash on hand was $67.2 million at December 31, 2014, compared to $80.5
million at December 31, 2013. The decrease was principally due to cash
utilized in operating and investing activities.
Notice of Conference Call
EcoSynthetix will host a conference call on Wednesday, March 11, 2015,
at 8:30 AM ET to discuss its financial results. Jeff MacDonald,
Interim CEO, and Robert Haire, CFO, will co-chair the call. All
interested parties can join the call by dialling (647) 427-7450 or
(888) 231-8191. Please dial in 15 minutes prior to the call to secure a
line. A live audio webcast of the conference call will also be
available at www.ecosynthetix.com. The presentation will be accompanied by slides, which will be
available via the webcast link and the Company's website. Please
connect at least 15 minutes prior to the conference call to ensure
adequate time for any software download that may be required to join
the webcast.
Non-IFRS Financial Measures1
This press release makes reference to certain non-IFRS measures. These
non-IFRS measures are not recognized measures under IFRS, do not have a
standardized meaning prescribed by IFRS and are therefore unlikely to
be comparable to similar measures presented by other companies. Rather,
these measures are provided as additional information to complement
those IFRS measures by providing a further understanding of results of
operations of EcoSynthetix from management's perspective. Accordingly,
they should not be considered in isolation nor as a substitute for
analysis of the financial information of EcoSynthetix reported under
IFRS. The Company uses non-IFRS measures such as Adjusted EBITDA to
provide investors with a supplemental measure of operating performance
and thus highlight trends in its core business that may not otherwise
be apparent when relying solely on IFRS financial measures. Management
also believes that securities analysts, investors and other interested
parties frequently use non-IFRS measures in the evaluation of issuers.
Management also uses non-IFRS measures in order to facilitate operating
performance comparisons from period to period, prepare annual operating
budgets and assess the Company's ability to meet its capital
expenditure and working capital requirements.
Adjusted EBITDA is not a measure recognized under IFRS and does not have
a standardized meaning prescribed by IFRS. See "IFRS and Non-IFRS
Measures." The Company presents Adjusted EBITDA because the Company
believes it facilitates investors' use of operating performance
comparisons from period to period and company to company by backing out
potential differences caused by variations in capital structures
(affecting relative interest expense), the book amortization of
intangibles (affecting relative amortization expense) and the age and
book value of property and equipment (affecting relative depreciation
expense). The Company also presents Adjusted EBITDA because it believes
it is frequently used by securities analysts, investors and other
interested parties as a measure of financial performance. Adjusted
EBITDA as presented herein are not recognized measures under IFRS and
should not be considered as an alternative to operating income or net
income as measures of operating results or an alternative to cash flows
as measures of liquidity. Adjusted EBITDA is defined as consolidated
net income (loss) before net interest expense, income taxes,
depreciation, amortization, other non-cash expenses and charges
deducted in determining consolidated net income (loss).
The following table reconciles net loss to Adjusted EBITDA for the three
months ended December 31, 2014 and December 31, 2013:
|
|
December 31, 2014
|
|
December 31, 2013
|
Net loss
|
-
|
3,450,295
|
-
|
3,636,080
|
Depreciation and amortization
|
|
523,855
|
|
596,824
|
Share-based compensation
|
|
90,000
|
-
|
137,754
|
Interest income
|
-
|
77,806
|
-
|
87,611
|
Adjusted EBITDA1
|
-
|
2,914,246
|
-
|
3,264,621
|
About EcoSynthetix Inc. (www.ecosynthetix.com)
EcoSynthetix Inc. is a renewable chemicals company specializing in
bio-based products that can be used as inputs in industrial
manufacturing for a wide range of consumer products. The Company's
products offer a reduced carbon footprint and are marketed primarily on
the basis of lower cost, stable pricing and equal or superior
performance. EcoSynthetix's lead product, EcoSphere® biolatex® binders,
is used commercially by a number of the global top 20 manufacturers in
the coated paper and paperboard industry.
Forward Looking Statements
Certain statements in this Press Release constitute "forward looking"
statements that involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance,
objectives or achievements of the Company, or industry results, to be
materially different from any future results, performance, objectives
or achievements expressed or implied by such forward looking
statements. The forward-looking statements in this Press Release
include, but are not limited to, statements regarding the Company's
expected product pipeline, plans to expand the Company's business into
new markets, the Company's ability to achieve organizational
efficiencies, and other statements regarding the Company's plans and
expectations in 2015. These statements reflect our current views
regarding future events and operating performance and are based on
information currently available to us, and speak only as of the date of
this Press Release. These forward looking statements involve a number
of risks, uncertainties and assumptions and should not be read as
guarantees of future performance or results, and will not necessarily
be accurate indications of whether or not such performance or results
will be achieved. Those assumptions and risks include, but are not
limited to, the Company's ability to successfully allocate capital as
needed and to develop new products, as well as the fact that our
results of operations and business outlook are subject to significant
risk, volatility and uncertainty. Many factors could cause our actual
results, performance or achievements to be materially different from
any future results, performance or achievements that may be expressed
or implied by such forward looking statements, including the factors
identified in the "Risk Factors" section of the Company's Annual
Information Form dated March 31, 2014. Should one or more of these
risks or uncertainties materialize, or should assumptions underlying
the forward looking statements prove incorrect, actual results may vary
materially from those described in this Press Release as intended,
planned, anticipated, believed, estimated or expected. Unless required
by applicable securities law, we do not intend and do not assume any
obligation to update these forward-looking statements.
EcoSynthetix Inc.
|
|
|
Interim Consolidated Balance Sheets
|
|
|
(Unaudited)
|
|
|
(expressed in US dollars)
|
|
|
|
|
|
|
December 31,
2014
|
December 31,
2013
|
Assets
|
|
|
|
|
|
Current assets
|
|
|
Cash
|
67,245,970
|
80,506,957
|
Accounts receivable
|
2,258,151
|
3,691,791
|
Inventory
|
5,497,944
|
6,470,410
|
Government grants receivable
|
66,957
|
261,648
|
Prepaid expenses
|
286,288
|
276,856
|
|
75,355,310
|
91,207,662
|
|
|
|
Non-current assets
|
|
|
Intangible assets
|
52,683
|
124,009
|
Property, plant and equipment
|
11,690,072
|
12,775,188
|
Total assets
|
87,098,065
|
104,106,859
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current liabilities
|
|
|
Accounts payable and accrued liabilities
|
1,571,976
|
3,947,385
|
|
|
|
Total liabilities
|
1,571,976
|
3,947,385
|
|
|
|
Shareholders' Equity
|
|
|
Common shares
|
492,041,244
|
492,600,022
|
Contributed surplus
|
8,101,831
|
7,661,849
|
Accumulated deficit
|
(414,616,986)
|
(400,102,397)
|
Total shareholders' equity
|
85,526,089
|
100,159,474
|
|
|
|
Total liabilities and shareholders' equity
|
87,098,065
|
104,106,859
|
EcoSynthetix Inc.
|
|
|
|
|
|
Interim Consolidated Statements of Operations and Comprehensive Loss
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
For the three and twelve months ended December 31, 2014 and 2013
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31,
|
|
Twelve months ended December 31,
|
|
2014
|
2013
|
|
2014
|
2013
|
|
|
|
|
|
|
Net sales
|
4,464,141
|
5,159,069
|
|
18,841,745
|
22,229,846
|
|
|
|
|
|
|
Cost of sales
|
3,723,639
|
4,263,475
|
|
15,671,096
|
18,620,771
|
|
|
|
|
|
|
Gross profit on sales
|
740,502
|
895,594
|
|
3,170,649
|
3,609,075
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Selling, general and administrative
|
2,853,825
|
2,741,474
|
|
12,446,687
|
12,916,606
|
Research and development
|
1,414,778
|
1,877,811
|
|
5,569,632
|
5,814,787
|
|
4,268,603
|
4,619,285
|
|
18,016,319
|
18,731,393
|
Loss from operations
|
(3,528,101)
|
(3,723,691)
|
|
(14,845,670)
|
(15,122,318)
|
|
|
|
|
|
|
Interest income
|
77,806
|
87,611
|
|
331,081
|
357,514
|
|
|
|
|
|
|
Net loss and comprehensive loss
|
(3,450,295)
|
(3,636,080)
|
|
(14,514,589)
|
(14,764,804)
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
(0.06)
|
(0.07)
|
|
(0.26)
|
(0.26)
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
56,580,168
|
55,802,382
|
|
56,656,036
|
56,113,610
|
EcoSynthetix Inc.
|
|
|
|
|
|
Interim Consolidated Statements of Cash Flows
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
For the three and twelve months ended December 31, 2014 and 2013
|
|
|
|
|
|
(expressed in US dollars)
|
Three months ended December 31,
|
|
Twelve months ended December 31,
|
|
2014
|
2013
|
|
2014
|
2013
|
Cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
Net loss and comprehensive loss
|
(3,450,295)
|
(3,636,080)
|
|
(14,514,589)
|
(14,764,804)
|
Items not affecting cash
|
|
|
|
|
|
|
Depreciation and amortization
|
523,855
|
596,824
|
|
1,767,366
|
1,731,765
|
|
Share-based compensation
|
90,000
|
(137,754)
|
|
456,000
|
956,225
|
Changes in non-cash working capital
|
|
|
|
|
|
|
Accounts receivable
|
507,939
|
149,210
|
|
1,433,640
|
617,564
|
|
Inventory
|
808,680
|
819,974
|
|
787,338
|
490,539
|
|
Government grants receivable
|
356,798
|
(80,699)
|
|
194,691
|
(77,530)
|
|
Prepaid expenses
|
7,910
|
77,185
|
|
(9,432)
|
(122,364)
|
|
Accounts payable and accrued liabilities
|
(1,627,672)
|
(1,066,391)
|
|
(2,375,409)
|
123,088
|
|
Deferred government assistance
|
-
|
-
|
|
-
|
(226,920)
|
|
(2,782,785)
|
(3,277,731)
|
|
(12,260,395)
|
(11,272,437)
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
Purchase of intangible assets and
property, plant and equipment
|
(145,803)
|
(161,302)
|
|
(425,796)
|
(1,889,374)
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
Exercise of common share options
|
-
|
7,887
|
|
27,930
|
283,844
|
Exercise of warrants
|
-
|
29,329
|
|
160,058
|
124,628
|
Repurchase of common shares
|
(68,013)
|
-
|
|
(762,784)
|
-
|
Cash provided by financing activities
|
(68,013)
|
37,216
|
|
(574,796)
|
408,472
|
|
|
|
|
|
|
Change in cash during the period
|
(2,996,601)
|
(3,401,817)
|
|
(13,260,987)
|
(12,753,339)
|
|
|
|
|
|
|
Cash - Beginning of period
|
70,242,571
|
83,908,774
|
|
80,506,957
|
93,260,296
|
|
|
|
|
|
|
Cash - End of period
|
67,245,970
|
80,506,957
|
|
67,245,970
|
80,506,957
|
SOURCE EcoSynthetix Inc.