Energy Recovery Reports Unaudited Financial Results for the Third Quarter of 2013
THIRD QUARTER HIGHLIGHTS
- Continued gains in manufacturing efficiency and strong prices achieved through market leadership drove gross profit margin to 60%, up from 55% in the third quarter of 2012
- Disciplined cost management reduced operating expenses by 11% compared to the third quarter of 2012
- Strong order flow and existing backlog reinforce expectations of full-year revenue for 2013 that is in line with previous guidance
For the current quarter, the Company reported net revenue of
The Company achieved significant improvement in key profitability drivers, as gross profit margin increased from 55% in the third quarter of 2012 to 60% in the current quarter despite lower revenue. The company has undertaken substantial cost reduction efforts over the last two years, which include plant consolidation, vertical integration, targeted cost-out and value engineering exercises, and efficiency-enhancing initiatives to achieve lower unit costs and better production yields. Due to the successful implementation of these initiatives, the Company is able to enjoy, and even improve, gross profit margin to the extent that volume continues to grow and product mix and pricing remain stable.
Operating expenses decreased 11% from
The decrease in revenue was largely attributable to the timing of mega-project shipments, including one project that shipped during the first week of October. Consequently, due to a one-week delay in the scheduled shipment date, the Company recognized no revenue associated with mega-project shipments in the current quarter, whereas the third quarter of 2012 contained over
Of the
The Company's balance sheet and cash position remain healthy. Excluding current and non-current restricted cash of
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 are based on information currently available to us and on management's beliefs, assumptions, estimates, or projections and are not guarantees of future events or results. When used in this document, the words "anticipate," "can," "expect," "may," "remain," "should," "will," and similar expressions are intended to identify forward-looking statements, but are not exclusive means of identifying such statements. 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. All forward-looking statements are made as of today, and the Company assumes no obligation to update such statements. In addition to any other factors that may have been discussed herein regarding the risks and uncertainties of our business, please see "Risk Factors" in our Form 10-K filed with the
Conference Call to Discuss Third Quarter Results
The conference call scheduled for tomorrow,
About
Unaudited Consolidated Financial Results
|
||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(in thousands, except per share data) | ||||
(unaudited) | ||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||
2013 | 2012 | 2013 | 2012 | |
Net revenue |
|
|
|
|
Cost of revenue | 1,966 | 4,696 | 8,615 | 13,836 |
Gross profit | 2,902 | 5,802 | 11,195 | 13,714 |
Operating expenses: | ||||
General and administrative | 3,625 | 3,825 | 11,121 | 10,899 |
Sales and marketing | 1,737 | 1,860 | 5,607 | 5,114 |
Research and development | 1,027 | 1,495 | 3,246 | 3,055 |
Amortization of intangible assets | 230 | 262 | 691 | 785 |
Restructuring charges | 140 | 167 | 184 | 277 |
Total operating expenses | 6,759 | 7,609 | 20,849 | 20,130 |
Loss from operations | (3,857) | (1,807) | (9,654) | (6,416) |
Interest expense | — | (1) | — | (6) |
Other non-operating income (expense), net | 27 | 36 | 79 | 99 |
Loss before income taxes | (3,830) | (1,772) | (9,575) | (6,323) |
Provision (benefit) for income taxes | 36 | 54 | 258 | (253) |
Net loss |
|
|
|
|
Basic and diluted loss per share |
|
|
|
|
Basic and diluted shares used in per share calculation | 51,052 | 50,872 | 51,020 | 51,638 |
|
||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
(in thousands, except share data and par value) | ||
(unaudited) | ||
September 30, 2013 |
|
|
ASSETS | ||
Current assets: | ||
Cash and cash equivalents |
|
|
Restricted cash | 4,633 | 5,235 |
Short-term investments | 5,997 | 9,497 |
Accounts receivable, net of allowance for doubtful accounts of |
6,132 | 13,240 |
Unbilled receivables | 1,040 | 5,020 |
Inventories | 8,960 | 5,135 |
Deferred tax assets, net | 500 | 500 |
Land and building held for sale | — | 1,345 |
Prepaid expenses and other current assets | 1,313 | 4,245 |
Total current assets | 44,390 | 60,859 |
Restricted cash, non-current | 3,900 | 4,366 |
Unbilled receivables, non-current | — | 868 |
Long-term investments | 13,078 | 4,773 |
Property and equipment, net of accumulated depreciation of |
14,654 | 15,967 |
Goodwill | 12,790 | 12,790 |
Other intangible assets, net | 4,238 | 4,929 |
Other assets, non-current | 2 | 2 |
Total assets |
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: | ||
Accounts payable |
|
|
Accrued expenses and other current liabilities | 6,101 | 8,555 |
Income taxes payable | 24 | 39 |
Accrued warranty reserve | 1,036 | 1,172 |
Deferred revenue | 788 | 918 |
Current portion of capital lease obligations | — | 18 |
Total current liabilities | 9,285 | 12,856 |
Deferred tax liabilities, non-current, net | 1,873 | 1,706 |
Deferred revenue, non-current | 154 | 411 |
Other non-current liabilities | 2,112 | 2,200 |
Total liabilities | 13,424 | 17,173 |
Commitments and Contingencies (Note 9) | ||
Stockholders' equity: | ||
Preferred stock, |
— | — |
Common stock, |
53 | 53 |
Additional paid-in capital | 119,372 | 117,264 |
Accumulated other comprehensive loss | (107) | (79) |
Treasury stock, at cost, 1,782,603 shares repurchased at |
(4,000) | (4,000) |
Accumulated deficit | (35,690) | (25,857) |
Total stockholders' equity | 79,628 | 87,381 |
Total liabilities and stockholders' equity |
|
|
|
||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
(in thousands) | ||
(unaudited) | ||
Nine Months Ended September 30, |
||
2013 | 2012 | |
Cash Flows From Operating Activities | ||
Net loss |
|
|
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 2,801 | 2,945 |
Loss on disposal of fixed assets | 19 | — |
Non-cash restructuring charges | 184 | 243 |
Amortization of premiums/discounts on investments | 279 | 402 |
Interest accrued on notes receivables from stockholders | — | (1) |
Share-based compensation | 1,717 | 2,097 |
(Gain) loss on foreign currency transactions | (5) | 3 |
Deferred income taxes | 167 | 162 |
Provision for (recovery of) doubtful accounts | 248 | (69) |
Provision for warranty claims | 177 | 283 |
Valuation adjustments for inventory reserves | 81 | 20 |
Other non-cash adjustments | (88) | 45 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 6,869 | (3,674) |
Unbilled receivables | 4,848 | (1,361) |
Inventories | (3,906) | 1,283 |
Prepaid and other assets | 2,933 | 405 |
Accounts payable | (718) | 60 |
Accrued expenses and other liabilities | (2,635) | 30 |
Income taxes payable | (17) | 13 |
Deferred revenue | (387) | 1,198 |
Net cash provided by (used in) operating activities | 2,734 | (1,986) |
Cash Flows From Investing Activities | ||
Capital expenditures | (1,077) | (2,105) |
Proceeds from sale of assets held for sale | 1,161 | — |
Purchase of marketable securities | (13,104) | (861) |
Maturities of marketable securities | 8,000 | 8,261 |
Decrease in restricted cash | 1,068 | 611 |
Net cash (used in) provided by investing activities | (3,952) | 5,906 |
Cash Flows From Financing Activities | ||
Repayment of long-term debt | — | (85) |
Repayment of capital lease obligation | (18) | (76) |
Net proceeds from issuance of common stock | 425 | 7 |
Repurchase of common stock | — | (4,000) |
Net cash provided by (used in) financing activities | 407 | (4,154) |
Effect of exchange rate differences on cash and cash equivalents | (16) | 14 |
Net change in cash and cash equivalents | (827) | (220) |
Cash and cash equivalents, beginning of period | 16,642 | 18,507 |
Cash and cash equivalents, end of period |
|
|
CONTACT: Investor Relations Contact:Source:Joe Hassett Gregory FCA Communications 610-228-2110 joeh@gregoryfca.com Media Contact:Kristan Kirsh Energy Recovery 510.746.5012 kkirsh@energyrecovery.com