Genesis Worldwide Inc. Announces Third Quarter ...
FOR: GENESIS WORLDWIDE INC.
TSX, AIM SYMBOL: GWI
November 6, 2008
Genesis Worldwide Inc. Announces Third Quarter Fiscal 2008 Results
Licensing Division Achieves Sequential Operating Profitability and Signs Fourth License in Fiscal 2008 for the
Baltic Market
MISSISSAUGA, ONTARIO--(Marketwire - Nov. 6, 2008) - Genesis Worldwide Inc. ("Genesis" or the "Company"),
(TSX:GWI)(AIM:GWI), a leading provider of 'green' building technology, announces its financial results for the
third quarter ended September 30, 2008. The Company reports its financial statements in accordance with
Canadian generally accepted accounting principles ("GAAP") and reports in Canadian dollars.
Three Months Ended September 30, 2008
- Total revenue for the third quarter ended September 30, 2008 deceased
24.7% to $5,301,563, compared to $7,037,823 for the third quarter of 2007.
- Operating expenses, excluding severance, for the third quarter ended
September 30, 2008 decreased 16.6% to $2,679,749, compared to $3,214,409
for the second quarter of 2008.
- Revenue for the licensing division for the third quarter ended
September 30, 2008 decreased 15.2% to $2,746,520, compared to $3,239,065
for the same period in 2007. Comparative quarterly results will vary for
this division depending primarily on the timing of shipments of its
industrial products.
- Revenue for the structural products division for the third quarter ended
September 30, 2008 decreased 32.7% to $2,555,043, compared to $3,798,758
recorded in the third quarter of 2007.
- Total contribution margin decreased by 32.5% in the third quarter ended
September 30, 2008 to $1,677,391, compared to $2,486,840 for the same
quarter last year.
- Net loss for the third quarter ended September 30, 2008 increased to
$1,906,844, or ($0.06) per common share, compared to a net loss of
$872,748, or ($0.03) per common share for the third quarter of 2007.
- The cash balance for the three months ended September 30, 2008 was
$706,056.
- The Company continues to look at other options/alternatives to add
additional capital in the form of debt or new capital, which would allow
the Company to advance its growth initiatives.
Three Months Ended September 30, 2008
-------------------------------------
Structural
(unaudited, in thousands of dollars) Licensing Products Corporate Total
---------------------------------------------------------------------------
Revenue $ 2,746 $ 2,555 $ -- $ 5,301
Contribution margin 1,343 324 -- 1,667
Operating expenses (1,039) (1,019) (1,086) (3,144)
Income/(loss) before other expenses 304 (695) (1,086) (1,477)
Other income/(expenses) (165) (279) 14 (430)
Net income/(loss) for the quarter 139 (974) (1,072) (1,907)
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Financial Highlights
Nine Months Ended September 30, 2008
- Total revenue for the nine months ended September 30, 2008 increased 4.8%
to $16,809,744, compared to $16,045,385 for the same period in 2007.
- Revenue for the licensing division for the nine months ended September 30,
2008 increased 6.3% to $7,311,009, compared to $6,875,689 for the same
period in 2007.
- Revenue for the structural products division for the nine months ended
September 30, 2008 increased 3.6% to $9,498,735, compared to $9,169,696
for the first nine months of 2007.
- Total contribution margin for the nine months ended September 30, 2008
decreased 4.5% to $5,117,860, compared to $5,358,983 recorded in the same
period in 2007. Contribution margin, excluding costs associated with
defective products and services received from third parties, would have
increased to $5,947,860, an increase of 11.0%, compared to $5,358,983
recorded in the same period in 2007.
- Net loss for the nine months ended September 30, 2008 was $5,535,989, or
($0.18) per common share, compared to a net loss of $4,698,695, or ($0.19)
per common share, for the same period in 2007.
Nine Months Ended September 30, 2008
------------------------------------
Structural
(unaudited, in thousands of dollars) Licensing Products Corporate Total
---------------------------------------------------------------------------
Revenue $ 7,311 $ 9,499 $ -- $16,810
Contribution margin 4,087 1,031 -- 5,118
Operating expenses (3,945 (3,147) (2,453) (9,545)
Income/(loss) before other expenses 142 (2,116) (2,453) (4,427)
Other income/(expenses) (481) (688) 60 (1,109)
Net loss for the period (339) (2,804) (2,393) (5,536)
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Contracted Backlog
Contracted backlog for the licensing division is defined as undelivered contractual commitments, other than
minimum royalty obligations, and assumes that in cases of multi-year/multi-facility commitments by licensees,
subsequent facilities match the industrial technology configured for the first facility. Contracted backlog for
the structural products division is defined as the undelivered portion of signed construction contracts. The
timing of these contractual commitments into revenue is uncertain and the possibility exists that contractual
commitments can be de-booked.
A breakdown of the Company's contracted backlog is as follows:
- Total backlog as at September 30, 2008 was approximately $49,000,000,
representing a 48% increase over backlog of approximately $33,000,000
as at September 30, 2007.
- Backlog for the licensing division as at September 30, 2008 was
approximately $20,000,000. This excludes minimum royalty obligations.
- Backlog for the structural products division as at September 30, 2008 was
approximately $29,000,000.
Business Update
Licensing Division
- Achieved operating profitability (income before other expenses) of
$304,000, and net income of $139,000 for the third quarter of fiscal 2008;
- Operating expenses, excluding corporate reorganization costs, decreased by
19% as a result of cost cutting initiatives;
- Signed its fourth license agreement in 2008 with UAB Baltic Light Steel
Framing, targeting the Baltic region, which includes Lithuania, Latvia and
Estonia. The Company achieved its 2008 goal of attaining four licensees
one quarter ahead of target. The Company's Ireland office was successful
in securing this transaction;
- Backlog increased to $20,000,000, compared to $4,000,000 for the third
quarter of 2007;
- Completed the development, testing and manufacturing of its newest
Material Optimization Technology ("MOT") series, MOT 6000, for its central
Russia licensee, Greenford Trading, which was shipped in July 2008; and
- Expanded its process patent filings for its Coil-to-Panel ("CTP")
manufacturing line to markets in Dubai, Turkey, Russia, Ukraine, China,
India, Australia, and the European Union.
Structural Products Division
- Commenced on-site installation of four new projects;
- Signed contracts for new vertical building markets to provide light steel
framing to schools, portable buildings, and government assisted-living
affordable housing;
- the Genesis Solution can now be applied to structures eight storeys and
under, an increase of two storeys;
- Completed remedial work relating to defective products and services
provided by third party vendors in the previous quarter, incurring total
costs of $300,000 for the quarter.
- Expanded utilization of its MOT to produce roof solutions;
- Backlog was $29,000,000, which was consistent with the third quarter of
2007; and
- Operating expenses decreased by 13% as a result of cost cutting
initiatives.
Corporate Division
- Announced the appointment of its new Chief Financial Officer, Greg Kent.
"During the third quarter of 2008, the Company's licensing division, GenesisTP Inc., signed a new license
agreement for the Baltic region. This brings the total number of new license agreements for the 2008 fiscal
period to four, achieving the Company's fiscal year 2008 target one quarter early," stated Vince Mifsud,
Genesis' President and Chief Executive Officer. "We are also pleased to report that this division achieved
operating profit in the quarter."
Mr. Mifsud continued, "The Company's structural products division, KML Building Solutions, continued to enter
new vertical building markets, such as schools, portable buildings, and government assisted-living affordable
housing. During the quarter, this division completed the remedial work incurred as a result of what the Company
believes were defective products and services provided by third party vendors. With these costs behind us, the
deployment of MOT and a strong backlog, we believe that this division has a clear road map to achieving
operating profits."
Further information regarding the Company, and its business and operations, may be obtained from the Company's
continuous disclosure documents filed from time-to-time with the Canadian securities regulatory authorities.
These continuous disclosure documents are available through the Company's web site at www.genesisworldwide.com
or through the SEDAR website maintained by the Canadian securities regulatory authorities, which can be
accessed at www.sedar.com.
Conference Call
The Genesis management team will discuss its third quarter 2008 financial results on a conference call to be
held on Thursday, November 6, 2008 at 8:30 a.m. Eastern time (1:30 p.m. BST). There will be a short
presentation followed by a question and answer period lasting for approximately one (1) hour.
Conference Call Details
Date: Thursday, November 6, 2008
Time: 8:30 a.m. Eastern time (1:30 p.m. BST)
Local dial-in: 416-641-6123
North America toll-free: 866-300-7687
Global toll-free: 800-6578-9898 (dial the international access code of
the country you are calling from, i.e. a call from the United Kingdom
would be dialed 00-800-6578-9898)
A replay of the call will be available by dialing 416-695-5800 (local callers only), or toll-free at 1-800-408-
3053 (passcode 3274156#), from approximately 12:00 p.m. Eastern time on the date of the call through to
Thursday, November 13, 2008.
About Genesis Worldwide Inc.
Genesis develops and licenses 'green' building technology. Genesis offers licensees a turn-key solution which
includes software applications, industrial technologies, and a wide range of services. The Genesis Solution
encompasses engineered processes and materials that are environmentally sustainable or 'green'. Genesis is
headquartered in Mississauga, Ontario, Canada, and has licensees in the United States, Canada, Europe and the
Middle East. For additional information about the Company, visit www.genesisworldwide.com.
Caution Regarding Forward Looking Information
Certain statements in this press release which are not historical facts constitute forward-looking statements
or forward-looking information within the meaning of applicable securities laws ("forward-looking statements")
and are made pursuant to the "safe harbour" provisions of such laws. Statements related to the Company's
projected revenues, earnings, growth rates, performance, business prospects and opportunities are forward-
looking statements, as are any statements relating to future events, conditions or circumstances. The use of
terms such as "may", "will", "should", "plan", "believes", "predict", "potential" "anticipate", "expect",
"project", "target", "estimate", "continue" and similar terms are intended to assist in identification of these
forward-looking statements. These statements are based on certain factors and assumptions including expected
growth, results of operations, performance and business prospects and opportunities. These assumptions,
although considered reasonable by the Company at the time of preparation, may prove to be incorrect.
Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-
looking statements are not promises or guarantees of future performance and involve both known and unknown
risks and uncertainties that may cause the actual results, performance or achievements of the Company to differ
materially from the results, performance, achievements or developments expressed or implied by such forward-
looking statements.
Many factors could cause the actual results of the Company to differ materially from the results, performance,
achievements or developments expressed or implied by such forward-looking statements, including, without
limitation, those factors discussed under the heading "Risk Factors" in the Company's most recent Annual
Information Form ("AIF"), a copy of which is available on SEDAR at www.sedar.com. Forward-looking statements
are based on management's current plans, estimates, projections, beliefs and opinions, and the Company does not
undertake any obligation to update forward-looking statements should assumptions related to these plans,
estimates, projections, beliefs and opinions change.
Genesis Worldwide Inc.
Interim Consolidated Balance Sheets
(unaudited)
As at As at
September 30 December 31
2008 2007
$ $
-----------------------------
ASSETS
Current
Cash and cash equivalents 706,056 5,987,862
Accounts receivable 7,743,224 11,347,550
Inventories and deposits on inventory 689,306 895,686
Prepaid expenses 521,304 342,516
-----------------------------
Total current assets 9,659,890 18,573,614
Restricted cash 500,000 --
Long-term accounts receivable 431,250 287,500
Property, plant and equipment 5,153,359 4,530,567
Patent deferred costs 248,739 192,969
Intangible asset 1,848,310 2,050,548
-----------------------------
17,841,548 25,635,198
-----------------------------
-----------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 6,242,214 7,566,970
Deferred revenue - current portion 1,639,040 4,459,648
Term loan - current portion 559,561 --
Minimum royalty payment obligations 355,511 173,330
-----------------------------
Total current liabilities 8,796,326 12,199,948
-----------------------------
Long-term
Deferred revenue 431,250 287,500
Term loan 1,151,952 --
Minimum royalty payment obligations 1,105,123 1,377,869
-----------------------------
Total long-term liabilities 2,688,325 1,665,369
-----------------------------
-----------------------------
Shareholders' equity
Capital stock 56,733,075 56,733,075
Contributed surplus 1,201,479 1,078,474
Deficit (51,577,657) (46,041,668)
-----------------------------
Total shareholders' equity 6,356,897 11,769,881
-----------------------------
17,841,548 25,635,198
-----------------------------
-----------------------------
Genesis Worldwide Inc.
Interim Consolidated Statements of Loss and
Comprehensive Loss and Deficit
(unaudited)
Three months ended Nine months ended
---------------------------------------------------
September September September September
30 2008 30 2007 30 2008 30 2007
$ $ $ $
---------------------------------------------------
Revenues
Licensing 2,746,520 3,239,065 7,311,009 6,875,689
Structural products 2,555,043 3,798,758 9,498,735 9,169,696
---------------------------------------------------
Total revenues 5,301,563 7,037,823 16,809,744 16,045,385
---------------------------------------------------
Direct cost of revenues
Licensing 1,402,877 1,446,692 3,223,480 3,526,635
Structural products 2,231,295 3,104,291 8,468,404 7,159,767
---------------------------------------------------
Total direct cost of
revenues 3,634,172 4,550,983 11,691,884 10,686,402
---------------------------------------------------
1,667,391 2,486,840 5,117,860 5,358,983
---------------------------------------------------
Expenses
Research and development 278,665 264,249 1,005,939 793,538
SR&ED investment tax
credits (91,534) -- (165,025) (418,161)
Selling and marketing 678,784 501,862 1,982,541 1,327,786
Engineering and project
management 323,831 455,701 1,343,015 1,313,499
General and
administrative 1,138,259 1,422,218 3,826,673 3,249,935
Occupancy 351,744 442,538 1,087,159 1,070,078
Corporate
reorganization costs 464,448 -- 464,448 --
Plant commissioning and
restructuring costs -- 27,121 -- 776,418
---------------------------------------------------
3,144,197 3,113,689 9,544,750 8,113,093
---------------------------------------------------
Loss before other
expenses (1,476,806) (626,849) (4,426,890) (2,754,110)
---------------------------------------------------
Amortization of
property, plant and
equipment 220,763 133,030 657,101 509,091
Amortization of
intangible asset 67,413 67,413 202,238 202,238
Foreign exchange loss
(gain) (33,732) 36,289 (21,520) (13,331)
Interest (income)
/expense 67,560 (99,954) 15,778 (99,954)
Minimum royalty
accretion 71,966 74,804 219,434 223,276
Debenture and loan
interest expense 36,068 34,317 36,068 1,123,265
---------------------------------------------------
430,038 245,899 1,109,099 1,944,585
---------------------------------------------------
Net loss and
comprehensive loss for
the period (1,906,844) (872,748) (5,535,989) (4,698,695)
Deficit, beginning of
period (49,670,813) (45,359,753) (46,041,668) (41,533,806)
---------------------------------------------------
Deficit, end of period (51,577,657) (46,232,501) (51,577,657) (46,232,501)
---------------------------------------------------
---------------------------------------------------
Loss per share
Basic and diluted $ (0.06) $ (0.03) $ (0.18) $ (0.19)
---------------------------------------------------
---------------------------------------------------
Weighted average number
of shares outstanding 30,982,858 30,765,467 30,982,858 24,279,561
---------------------------------------------------
---------------------------------------------------
Genesis Worldwide Inc.
Interim Consolidated Statements of Cash Flows
(unaudited)
Three months ended Nine months ended
-----------------------------------------------
September September September September
30 2008 30 2007 30 2008 30 2007
$ $ $ $
-----------------------------------------------
OPERATING ACTIVITIES
Net loss for the period (1,906,842) (872,748) (5,535,989) (4,698,695)
Adjustments for non-cash
items
Amortization of property,
plant and equipment
and intangible asset 288,175 200,443 859,338 711,329
Stock-based compensation
expense 33,005 41,718 123,005 101,781
Debenture interest expense
accretion -- 34,317 -- 815,965
Minimum royalty accretion 71,966 74,804 219,434 223,276
-----------------------------------------------
(1,513,696) (521,466) (4,334,212) (2,846,344)
Changes in non-cash working
capital balances related to
operations
Accounts receivable 3,571,603 (4,435,344) 3,604,326 (4,106,453)
Inventories and deposits on
inventory 1,294,395 10,483 (83,184) (78,376)
Prepaid expenses 38,815 74,245 110,777 (356,331)
Accounts payable and
accrued liabilities (888,616) 1,097,062 (1,324,756) 687,876
Deferred revenue (2,939,831) 2,533,655 (2,820,608) 3,169,517
-----------------------------------------------
Cash used in operating
activities (437,330) (1,241,365) (4,847,657) (3,530,111)
-----------------------------------------------
FINANCING ACTIVITIES
Debenture proceeds 1,800,000 -- 1,800,000 2,000,000
Debenture repayment (88,487) (6,120,000) (88,487) (6,120,000)
Restricted cash (500,000) -- (500,000) --
Share issue proceeds (net
of transaction costs paid) -- 16,343,175 -- 16,343,175
-----------------------------------------------
Cash provided by financing
activities 1,211,513 10,223,175 1,211,513 12,223,175
-----------------------------------------------
INVESTING ACTIVITIES
Additions to property,
plant and equipment (41,845) (1,505,450) (1,279,892) (2,053,929)
Deferred IPO costs -- (68,603) -- (68,603)
Deferred patent costs (55,770) -- (55,770) --
Minimum royalties paid (150,000) (80,000) (310,000) (240,000)
-----------------------------------------------
Cash used in investing
activities (247,615) (1,654,053) (1,645,662) (2,362,532)
-----------------------------------------------
Net increase/(decrease) in
cash and cash equivalents
during the period 526,568 7,327,757 (5,281,806) 6,330,532
Cash and cash equivalents,
beginning of period 179,488 16,161 5,987,862 1,011,386
-----------------------------------------------
Cash and cash equivalents,
end of period 706,056 7,343,918 706,056 7,341,918
-----------------------------------------------
-----------------------------------------------
Supplemental cash flow
information
Interest paid 36,068 10,479 36,068 323,321
-----------------------------------------------
-----------------------------------------------
FOR FURTHER INFORMATION PLEASE CONTACT:
Genesis Worldwide Inc.
Catherine Smyth
Manager, Investor Relations
(905) 285-9909, ext. 302
Website: www.genesisworldwide.com
OR
Canaccord Adams
Robert Finlay / L. Warren Pimm
+44 020 7050 6500
Genesis Worldwide Inc.
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