Energy Recovery Reports Financial Results for the First Quarter of 2012
FIRST QUARTER HIGHLIGHTS:
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Reflecting decreased volume in what is projected to be the final quarter of a protracted industry downturn, net revenue was
$4.8 million due to the anticipated absence of mega-project shipments - Gross profit margin was 26%, up from 15% and 1% in the third and fourth quarters of 2011, respectively
-
Operating expenses decreased by
$1.6 million , or 21%, as compared to the first quarter of the prior year due to cost savings realized in 2012 as well as increased expenses in 2011 for the CEO transition and higher sales commissions -
Net loss was
$4.7 million , or($0.09) per share, due predominantly to the lack of revenue for mega-project shipments, which are expected to commence in the second quarter and continue thereafter -
As of
May 1, 2012 , share repurchases totaled approximately 1.2 million shares, or$2.6 million including broker commissions, demonstrating continued confidence in the Company's strategic direction
Even in the context of limited revenue, the Company experienced gross profit margin of 26% in the current period as compared to 15% and 1% in the third and fourth quarters of 2011, respectively. The sequential increase in gross profit margin was caused primarily by lower costs realized through plant consolidation, vertical integration, a step-up in production activity, and the absence of non-recurring expenses such as those recorded in the second half of 2011. While gross profit margin compared unfavorably with the first quarter of 2011, when the Company achieved 45% from increased revenue associated with mega-project shipments, the current level of gross profit margin should be viewed as an intermittent step in an evolving trend. As mega-project activity consisting wholly of PX devices materializes in the second quarter and continues through the balance of the year—due mainly to scheduled shipments from existing backlog, and to a lesser extent, new sales opportunities—the favorable product mix and increased volume should facilitate a meaningful and sustainable increase in gross profit margin.
Operating expenses were
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include our belief that the first quarter is the last quarter of a protracted industry downturn, our expectation that mega-project revenue will commence in the second quarter of 2012 and continue thereafter, our forecast of increasing levels of gross profit margin in subsequent quarters of 2012, our belief that operating expenses are right-sized and scalable for current and future revenue levels, our expectation of 40% revenue growth in 2012 as compared to 2011, our plan to diversify into new markets such as oil & gas, our expectation to continue the repurchase of shares, and our belief in strategic direction and expectation of future financial results. Because such forward-looking statements involve risks and uncertainties, the Company's actual results may differ materially from the predictions in these forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, delays in, or cancellation of, the construction of desalination plants; risks that our market diversification and other strategic efforts will not yield intended benefits; political unrest; the inability of our customers to obtain project financing; delays in governmental approvals; changes in end users' budgets for desalination plants or the timing of their purchasing decisions; our ability to ship new products to meet scheduled delivery times; the state of the global economy; our ability to develop other energy recovery solutions for markets outside of desalination; and other risks detailed in the Company's filings with the
Conference Call to Discuss First Quarter Results
The conference call scheduled tomorrow at
About
Unaudited Consolidated Financial Results
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
(in thousands, except per share data) | ||
(unaudited) | ||
|
Three Months Ended March 31, |
|
2012 | 2011 | |
Net revenue | $ 4,756 | $ 10,367 |
Cost of revenue | 3,504 | 5,703 |
Gross profit | 1,252 | 4,664 |
Operating expenses: | ||
General and administrative | 3,468 | 4,057 |
Sales and marketing | 1,482 | 2,070 |
Research and development | 694 | 1,029 |
Amortization of intangible assets | 262 | 346 |
Restructuring charges | 31 | — |
Total operating expenses | 5,937 | 7,502 |
Loss from operations | (4,685) | (2,838) |
Interest expense | (4) | (20) |
Other non-operating income, net | 72 | 194 |
Loss before income taxes | (4,617) | (2,664) |
Provision for (benefit from) income taxes | 66 | (906) |
Net loss | $ (4,683) | $ (1,758) |
Loss per share: | ||
|
$ (0.09) | $ (0.03) |
Diluted | $ (0.09) | $ (0.03) |
Number of shares used in per share calculations: | ||
|
52,618 | 52,586 |
Diluted | 52,618 | 52,586 |
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CONDENSED CONSOLIDATED BALANCE SHEETS | ||
(in thousands, except share data and par value) | ||
(unaudited) | ||
|
2012 |
2011 |
ASSETS | ||
Current assets: | ||
Cash and cash equivalents | $ 15,762 | $ 18,507 |
Restricted cash | 6,161 | 5,687 |
Short-term investments | 12,548 | 11,706 |
Accounts receivable, net of allowance for doubtful accounts of |
6,316 | 6,498 |
Unbilled receivables | 929 | 1,059 |
Inventories | 8,350 | 7,824 |
Deferred tax assets, net | 460 | 460 |
Prepaid expenses and other current assets | 4,359 | 4,929 |
Total current assets | 54,885 | 56,670 |
Restricted cash, non-current | 5,323 | 5,232 |
Long-term investments | 6,806 | 11,198 |
Land and building held for sale | 1,650 | 1,660 |
Property and equipment, net | 16,123 | 16,170 |
Goodwill | 12,790 | 12,790 |
Other intangible assets, net | 6,729 | 6,991 |
Other assets, non-current | 2 | 2 |
Total assets | $ 104,308 | $ 110,713 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: | ||
Accounts payable | $ 1,438 | $ 1,506 |
Accrued expenses and other current liabilities | 4,185 | 6,474 |
Income taxes payable | 29 | 21 |
Accrued warranty reserve | 864 | 852 |
Deferred revenue | 1,499 | 859 |
Current portion of long-term debt | 53 | 85 |
Current portion of capital lease obligations | 53 | 82 |
Total current liabilities | 8,121 | 9,879 |
Long-term debt | — | — |
Capital lease obligations, non-current | 7 | 18 |
Deferred tax liabilities, non-current, net | 1,575 | 1,516 |
Deferred revenue, non-current | 222 | 261 |
Other non-current liabilities | 2,083 | 2,085 |
Total liabilities | 12,008 | 13,759 |
Stockholders' equity: | ||
Preferred stock, |
— | — |
Common stock, |
53 | 53 |
Additional paid-in capital | 115,407 | 114,619 |
Notes receivable from stockholders | (24) | (23) |
Accumulated other comprehensive loss | (50) | (92) |
Treasury stock, at cost — 345,062 and 0 shares repurchased at |
(800) | — |
Accumulated deficit | (22,286) | (17,603) |
Total stockholders' equity | 92,300 | 96,954 |
Total liabilities and stockholders' equity | $ 104,308 | $ 110,713 |
CONTACT:Source:Alexander J. Buehler Chief Financial Officer (510) 483-7370