MONTREAL, May 15, 2012 /CNW Telbec/ - Noveko International Inc. (TSX: EKO) (the "Company") today announces the results for its third quarter ended March 31, 2012.
"In recent quarters, we have carried on the measures initiated last year to improve our operating efficiency and profitability. These efforts have paid off as our operating loss (EBITDA) has been reduced by half, specifically by $3.1 million, since the beginning of the current fiscal year, although our consolidated revenue grew by only $0.4 million or 4% during the same period. Our filtration segment posted a 24% growth and our medical devices continued to bring a positive contribution to our net earnings. We are particularly proud of the advances achieved in filtration during the quarter. We completed our first deliveries in the aeronautics industry, Noveko® filters are now available in the residential market and we successfully bid on a major call for tenders to equip the STM's buildings and subway stations," indicated Mr. André Leroux, Chairman of the Board and Chief Executive Officer of the Company.
"However, despite the positive impact of the cost-tightening measures and the advances achieved by our strongest growth segments, the results are still well below our expectations. In this context, we have undertaken a strategic evaluation of each of our business segments. We are looking into different avenues to focus our efforts and resources in order to capitalize on our most promising technologies and activities. These various avenues could include some business restructuring, the monetization of assets and even divestments. We are first assessing our involvement and options as to our manufacturing and commercialization activities in the sanitizers and masks segments. Talks are already under way with potential partners who might assume responsibility for our commercialization activities and enable us to leverage the value of our inventories. Although we cannot guarantee the outcome of these procedures, optimizing the value of our Group remains our priority. In this regard, we thank our lender for its renewed support during the quarter. Concurrently with this strategic evaluation process, we are taking further steps to obtain the necessary financing to reinforce our working capital," added Mr. Leroux.
Operating Highlights
- Filtration segment: sales up by 24% since the beginning of the current fiscal year.
- Noveko and its partners finalized the prerequisite regulatory steps to commercialize the Noveko-IDP™ filters for the Airbus A330s and Noveko completed its first deliveries to Air Transat.
- April 4, 2012: subsequent to a public call for tenders, Noveko was awarded a contract to supply the STM with Noveko® filters worth up $352,000 over a three-year period. The deliveries have started and most of the filters are expected to be delivered by the end of the fiscal year.
- Noveko® filters officially marked their breakthrough in the residential market and are now sold by Groupe BMR dealers.
- Medical equipment segment: ECM was authorized to affix CE Marking on the Exagyne™ ultrasound scanner and started to commercialize the device in the human medicine market; positive contribution of $1.0 million to EBITDA(1) for the first nine months of the year.
- The head office and Noveko's activities moved from downtown Montreal to new offices located at 1190 Place Nobel, Boucherville, Quebec, near Noveko Filtration's premises. The resulting annual savings for the Group amount to over $300,000.
- Closing of the sale of BLI effective March 1st, 2012 as part of a two-fold transaction, consisting first of the sale by BLI to a private company of some of its assets, including its building, and then secondly of the sale by the Company of the shares it held in BLI, as well as its advances, to another private company for a consideration of $2. The Company has now been released from the surety bonds and guarantees it had granted to BLI's secured creditors for a total of $2.7 million.
| 1) | EBITDA is not a measure established in accordance with IFRS. This measure is used because it enables management to assess the Company's operational performance. This measure is a widely accepted financial indicator of a company's ability to repay and assume its debt. Investors should not regard it as an alternative to revenues from continuing operations or net earnings, an indicator of operating results or cash flows, or a measure of liquidity. As this measure is not established in accordance with IFRS, it might not be comparable to those of other companies. |
Selected Consolidated Information
| Statement of Earnings Data (in thousands of $, except per-share amounts) | |||||||||
| Three Months | Nine Months | ||||||||
| Periods Ended March 31 | 2012(1) | 2011 | 2012(1) | 2011 | |||||
| Revenue | 3,329 | 3,415 | 11,598 | 11,187 | |||||
| Gross profit | 1,073 | 1,384 | 4,606 | 4,555 | |||||
| Operating profit before amortization, net financial expenses and income taxes(2) (3) | (1,522) | (2,044) | (3,217) | (6,346) | |||||
| Net earnings from continuing operations | (2,320) | (2,679) | (5,463) | (8,333) | |||||
| Net earnings from discontinued operations(4) | (499) | (88) | (467) | (276) | |||||
| Net earnings | (2,819) | (2,767) | (5,930) | (8,609) | |||||
| Earnings per Class A share (basic and diluted) | |||||||||
| From continuing operations | $ | (0.03) | $ | (0.03) | $ | (0.06) | $ | (0.10) | |
| From discontinued operations(4) | $ | (0.00) | $ | (0.00) | $ | (0.00) | $ | (0.00) | |
| Total | $ | (0.03) | $ | (0.03) | $ | (0.06) | $ | (0.10) | |
| Weighted average number of outstanding Class A shares, basic and diluted (in thousands) | 91,946 | 85,940 | 91,946 | 82,077 | |||||
| Statement of Financial Position Data (in thousands of $) | |||||||||
| March 31 2012 |
June 30 2011 |
||||||||
| Total assets | 30,958 | 35,744 | |||||||
| Equity | 20,785 | 26,392 | |||||||
| Total interest-bearing debt(5) | 4,884 | 714 | |||||||
| Cash, cash equivalents, cash in trust and short-term investments(6) | 1,832 | 1,830 | |||||||
| (1) | The consolidated financial statements include the accounts of the Company and its subsidiaries. |
| (2) | Operating profit (loss) before amortization, net financial expenses and income taxes (EBITDA) is not a measure established in accordance with IFRS. This measure is used because it enables management to assess the Company's operational performance. This measure is a widely accepted financial indicator of a company's ability to repay and assume its debt. Investors should not regard it as an alternative to revenues from continuing operations or net earnings, an indicator of operating results or cash flows, or a measure of liquidity. As this measure is not established in accordance with IFRS, it might not be comparable to those of other companies. Unless otherwise indicated, the financial information presented in this press release, including tabular amounts, is prepared in accordance with IFRS. |
| (3) | Including stock-based compensation of $88,882, $156,828, $105,120 and $604,027 for the respective periods of fiscal 2012 and fiscal 2011, which have no impact on the cash balance. |
| (4) | Related to BLI's operations March 1st 2012, the date on which the subsidiary was sold. |
| (5) | Including long-term debt and its current portion, bank loans, the term note and secured convertible debentures; excluding the data related to BLI. |
| (6) | As at March 31, 2012, a total of $1.2 million in cash and cash equivalents was at the level of our foreign subsidiaries and included letters of credit issued by financial institutions to secure the payment of suppliers for a total consideration of $527,707. |
In this press release, unless otherwise indicated or required by the context, "Noveko International", "the Company", "we", "us", "our", "our Company", "the Group" and "our Group" designate, as the case may be, Noveko International Inc. or Noveko International Inc. and its subsidiaries, and "Noveko" designates Noveko Inc., a subsidiary of the Company. The Company's other subsidiaries are designated as follows: "ECM" for S.A.S. E.C.M., "Epurair" for Epurair Inc., "Noveko Algérie" for SARL Noveko Algérie, "Noveko Beijing" for Noveko (Beijing) Hi-Tech Development Limited, "Noveko Taiwan" for Noveko Taiwan Co., Ltd., "Noveko Trading" for Noveko Trading 2008 LLC, "Purer Life" for Purer Life Technology Co., Ltd. and "BLI" for Bolduc Leroux Inc. Also, the third quarter and the nine-month period ended March 31, 2012, as well as the corresponding periods ended March 31, 2011, are sometimes designated by the terms "third quarter of 2012" and "first nine-month of fiscal 2012", as well as "third quarter of 2011" and "first nine-month of fiscal 2011", whereas the fiscal year ending June 30, 2012 and those ended June 30 of prior years are sometimes designated by the terms "fiscal 2012", "fiscal 2011" and so on.
The changeover to International Financial Reporting Standards ("IFRS") was implemented for the periods beginning July 1st, 2011. The Company's consolidated financial statements for the year ended June 30, 2012 will be the first annual IFRS consolidated financial statements, whereas previously the financial statements and accompanying notes were prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). Comparative data for the quarterly and annual financial statements for fiscal 2011, as well as for the opening statement of financial position as at July 1st, 2010, have been restated to reflect the retrospective adoption of IFRS effective July 1st, 2010.
| Analysis of Operating Results |
Third Quarter of 2012 Compared with the Third Quarter of 2011 (Unaudited)
Our segmented information is reported based on the following business segments: medical equipment ("medical equipment"), sanitizers ("sanitizers"), antimicrobial surgical masks and respirators ("masks") and filtration products ("filtration"). The item "other" has been added to make a reconciliation between the information relating to the various business segments and the information appearing in our consolidated financial statements. This item consists primarily of the activities of the parent company, Noveko International, and of Noveko Trading ("other"). Furthermore, the results of operations of BLI are treated as discontinued operations in the Company's financial statements up to March 1st, 2012, the date on which the subsidiary was sold. The assets and liabilities related to BLI formerly reclassified as assets and liabilities held for sale no longer appear in our financial statements since that date.
| Consolidated and Segmented Revenue | ||||||||
| Three Months | Nine Months | |||||||
| Periods Ended March 31 | 2012 | 2011 | 2012 | 2011 | ||||
| Medical equipment | $ | 2,501,088 | $ | 2,503,431 | $ | 8,256,508 | $ | 8,436,684 |
| Sanitizers | 104,983 | 68,758 | 459,089 | 657,578 | ||||
| Masks | 3,631 | 12,097 | 323,761 | 26,773 | ||||
| Filtration | 718,864 | 830,545 | 2,558,950 | 2,066,275 | ||||
| Total | $ | 3,328,566 | $ | 3,414,831 | $ | 11,598,308 | $ | 11,187,310 |
Consolidated revenue for the third quarter of 2012 was down by approximately $86,265 (3%) from the third quarter of 2011. This slight decline primarily reflects:
- A $0.1 million (13%) reduction in the revenue attributable to the filtration segment. The advances in the institutional and commercial markets, for which the revenue recognition generally extends over the term of the lease agreements, as well as the first deliveries of Noveko-IDP™ filters to Air Transat, did not compensate for the decline in the swine industry, whereas significant sales had been recorded in this market in the third quarter of 2011, notably to the Villa Vista farms. It should be pointed out that pursuant to the contract recently awarded by the STM, most of the filters designed for its transportation centres and subway stations will be delivered by the end of fiscal 2012.
- Sales in the medical equipment segment remained relatively stable at $2.5 million, whereas the 24% growth in ECM sales did not compensate for the decrease in Noveko Algérie's sales. Although this subsidiary has completed the delivery of the orders won from the NOEAHP last September, it sustained the impact of the delays in the delivery of raw materials used in the manufacture of its medical equipment as well as the inclement weather conditions that hit the country and adversely affected its economy. The increase in ECM's revenue, despite a decline of orders of Imagyne™ ultrasound scanners from its Chinese distributor, would have been greater - a 28% increase in Euros - were it not for the devaluation of the Euro against the Canadian dollar.
- For its part, the sanitizers segment posted a $36,225 (53%) in its sales, attesting to the gains achieved by our distributors in the healthcare market.
Revenue for the first nine months grew by $0.4 million (4%). This growth reflects the $0.5 million (24%) increase in the filtration segment's revenue stemming mainly from the advances in the institutional and commercial markets, as well as the swine market contracts worth up $380,000 announced and largely delivered during the second quarter of 2012, combined with a $0.3 million increase from the masks segment's sales during the previous quarter. Conversely, the sanitizers segment's revenue was down by $0.2 million (30%) from the corresponding period of the previous year, when Noveko had won a major one-time order worth more than $0.6 million from a large grocery store chain. The medical equipment segment's revenue was also down by $0.2 million (2%), the record sales for the second quarter of 2012 having been insufficient to compensate for a weaker first quarter of 2012.
The gross margin for the third quarter of 2012 stood at 32.2%, compared with 40.5% for the third quarter of 2011. This decline mainly reflects an adjustment of approximately $0.3 million to the filtration segment's inventories. Despite this decline, the gross margin for the first nine months remained relatively stable at 39.7%, reflecting an improvement in the other segments' margins.
Selling and administrative expenses (excluding amortization) for the third quarter and first nine months decreased by $0.7 million (22%) and $2.2 million (23%), respectively, to $2.5 million and $7.5 million. This reduction reflects the cumulative cost-control measures taken since the beginning of fiscal 2011, which notably involved the restructuring of certain teams.
| Operating Profit (Loss) before Amortization, Net Financial Expenses and Income Taxes | ||||||||
| Three Months | Nine Months | |||||||
| Periods Ended March 31 | 2012 | 2011 | 2012 | 2011 | ||||
| Medical equipment | $ | 378,832 | $ | 303,101 | $ | 1,047,421 | $ | 1,250,071 |
| Sanitizers | (190,731) | (371,588) | (349,707) | (1,586,252) | ||||
| Masks | (50,392) | (38,669) | (52 143) | (475,930) | ||||
| Filtration | (668,143) | (494,090) | (1,012,129) | (1,741,724) | ||||
| Other | (991,096) | (1,442,951) | (2,850,860) | (3,791,860) | ||||
| Total | $ | (1,521,530) | $ | (2,044,197) | $ | (3,217,418) | $ | (6,345,695) |
In light mainly of the aforementioned factors, the loss before amortization, net financial expenses and income taxes was reduced significantly. It amounted to $1.5 million for the third quarter of 2012, down by $0.5 million (26%) from the corresponding quarter of the previous year. For the first nine months, it amounted to $3.2 million, a decrease of $3.1 million (49%). This significant improvement is due mainly to the following factors:
- overall, it reflects the positive impact of cost-tightening measures, including the decrease in total payroll resulting from the aforementioned restructuring of teams, as well as, in particular for the nine-month period, the reduction in the stock-based compensation charge of the parent company Noveko International. The loss under "Other" was reduced by $0.5 million and $0.9 million, respectively, for the third quarter of 2012 and first nine months;
- the medical equipment segment recorded earnings before amortization, net financial expenses and income taxes of $0.4 million in the third quarter of 2012, an improvement of $0.1 million. For the first nine months, its EBITDA totalled $1.0 million, down by $0.2 million from the corresponding period of the previous year as a result of the more difficult market conditions in the first quarter of 2012;
- for the third quarter of 2012 and first nine months, improvements totalling $0.2 million and $1.2 million, respectively, in the sanitizers segment, whereas the masks segment's loss remained stable for the quarter but was reduced by $0.3 million for the first nine months, due notably to a decrease in research and development expenses; and
- the filtration segment's loss increased by $0.2 million in the third quarter of 2012 as a result of the aforementioned adjustment to inventories, whereas it improved by $0.7 million for the first nine months.
Financial expenses less financial income and foreign exchange gain (loss) increased by $0.5 million to approximately $0.4 million in the third quarter of 2012. This higher amount is primarily attributable to the financial expenses associated with the financing closed in September 2011, consisting of a credit facility and convertible debentures, and, to a lesser extent, a lower foreign exchange gain than in the third quarter of 2011. For the same reasons, such expenses increased by $1.2 million for the first nine months. Also, whereas a foreign exchange loss of $0.2 million was recognized for the first nine months of fiscal 2012, a foreign exchange gain of $0.3 million had been recognized for the corresponding period of the previous year.
| Net Earnings (Loss) from Continuing Operations | |||||||||
| Periods Ended March 31 | Three Months | Nine Months | |||||||
| 2012 | 2011 | 2012 | 2011 | ||||||
| Medical equipment | $ | 221,568 | $ | 50,612 | $ | 248,246 | $ | 474,546 | |
| Sanitizers | (206,610) | (517,195) | (400,952) | (2,038,007) | |||||
| Masks | (73,833) | (54,209) | (125,941) | (488,702) | |||||
| Filtration | (675,507) | (591,828) | (1,081,296) | (1,834,910) | |||||
| Other | (1,585,655) | (1,566,210) | (4,102,560) | (4,445,525) | |||||
| Total | $ | (2,320,037) | $ | (2,678,830) | $ | (5,462,503) | $ | (8,332,598) | |
In light mainly of the aforementioned factors, the net loss from continuing operations for the third quarter of 2012 and first nine months was down from the corresponding periods of the previous year, by $0.4 million (13%) and $2.9 million (34%), respectively, to stand at $2.3 million and $5.5 million.
A loss of $498,921 from discontinued operations (BLI) was recognized, which includes a loss on disposal of the subsidiary of $462,812 (a non-recurring charge), compared with a loss of $88,142 for the corresponding period of the previous year. For the first nine months, a loss of $467,129 from discontinued operations (BLI) was recognized, compared with a loss of $276,499 for the corresponding period of the previous year.
The Company's net loss remained stable at $2.8 million for the third quarter of 2012. For the first nine months, the net loss totalled $5.9 million, compared with $8.6 million for the corresponding period of the previous year, a major reduction of $2.7 million (31%).
| Statement of Financial Position |
As at March 31, 2012, total assets amounted to $31.0 million, down by $4.8 million from June 30, 2011. Working capital stood at $11.3 million for a current ratio of 3.5:1, compared with $11.4 million for a 2.4:1 current ratio as at June 30, 2011. Shareholders' equity totalled $20.8 million as at March 31, 2012, compared with $26.4 million as at June 30, 2011. Total interest-bearing debt amounted to $4.9 million as at March 31, 2012, an increase of $4.2 million over June 30, 2011. This increase is due primarily to the financing consisting of a credit facility and convertible debentures closed on September 28, 2011.
As at March 31, 2012, $3.3 million was used under the Credit Facility. According to the covenants of the credit facility and the debentures, the Company must notably maintain a minimum EBITDA. As indicated in the Management's Report for the second quarter of 2012, the Company did not meet the EBITDA requirement for the three-month period ended December 31, 2012; however, the lenders and their agent, Third Eye Capital Corporation ("TEC"), had signed waivers in this regard. The conditions of a financial nature for the six-month period ended March 31, 2012 were not met by the Company, primarily the maintenance of the minimum EBITDA of $150,000 required for this period. However, the Company's lenders and TEC have agreed to waive these defaults on condition of the following: (i) the Company shall not require new advances on the credit facility; (ii) should a subsidiary be divested by the Company, the funds generated by the divestment shall be used to reduce the credit facility; (iii) should assets be divested outside the normal course of business, the use of the funds generated by the divestment shall be subject to approval by the lenders and TEC; and (iv) the minimum daily closing price of the Class A shares of the Company shall not fall below $0.12 up to August 31, 2012 (otherwise, the Company shall be required to obtain a waiver in this regard from the lenders and TEC). Subsequent to August 31, 2012, the parties shall notably review the condition relating to the maintenance of a minimum closing price based on the advancement of the initiatives taken by the Company as part of its restructuring plan, i.e. as part of the strategic evaluation process currently under way and the resulting measures, as well as its complementary financing initiatives. The Company intends to collaborate with TEC to ensure the success of these initiatives. Based on the Company's cash position, the Company needs to raise supplementary funds in the short term.
| Profile |
Noveko International Inc. offers innovative solutions in the environmental and medical fields worldwide. Through its subsidiaries, the Company specializes primarily in the following business segments: the development, manufacturing and marketing of derivative products from its patented antimicrobial filtration technologies, mainly air filters, surgical masks and respirators, as well as other products with antibacterial properties such as hand sanitizers - and the development, manufacturing and marketing of medical equipment, including portable real-time ultrasound scanners for use in human and veterinary medicine.
Certain statements set forth in this press release constitute forward-looking statements. In some cases, these statements are identified by the use of terms such as "may", "could", "might", "intend", "should", "expect", "project", "plan", "believe", "estimate" or other comparable variants. These statements are based on the information available at the time they are written, on assumptions made by management and on the expectations of management, acting in good faith, regarding future events, including those relating to economic conditions, fluctuations in exchange rates and operating expenses, and the absence of unusual events entailing supplementary expenditures. Although management considers these assumptions and expectations reasonable based on the information available at the time they are written, they could prove inaccurate. Forward-looking statements are also subject, by their very nature, to known and unknown risks and uncertainties such as those related to the industry, acquisitions, labor relations, credit, key officers, supply and product liability. The actual results of Noveko International Inc. could differ materially from those indicated or underlying these forward-looking statements. The reader is therefore recommended not to unduly rely on these forward-looking statements. Forward-looking statements do not reflect the potential impact of special items, any business combination or any other transaction that may be announced or occur subsequent to the date hereof. Unless otherwise required under securities laws, the Company does not intend and undertakes no obligation to update or revise the forward-looking statements.
The reader is furthermore recommended, before making any decision to purchase or to sell any of our securities, to carefully consider the complete statement of the risk factors and uncertainties described in the Management's Report for the third quarter of 2012 as well as in the Management's Report and Annual Information Form for fiscal 2011, notably with respect to the financial position of the Company and its sources and requirements of funds.
| The Management's Report, consolidated financial statements and accompanying notes for the third quarter of 2012 will be filed on SEDAR (www.sedar.com) and available in the Investor Relations section of the Company's website (www.noveko.com). |
Chantal Vennat, Director,
Investor Relations and Corporate Communications
Noveko International Inc.
Tel: (514) 875-0606
http://www.noveko.com
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