LAVAL, QUEBEC--(Marketwire - Aug. 11, 2010) - Warnex Inc. (TSX:WNX) announced today financial results for the second quarter ended June 30, 2010.
Operating Highlights
- Increased second quarter revenues by 18% to $6.4 million compared to $5.4 million last year
- Generated earnings before unrealized foreign exchange loss on debentures of $0.2 million versus a loss of $0.8 million last year, representing an increase of $1.0 million in operating profit
- Generated net earnings of $11,295 for the second quarter compared to a net loss of $346,660 last year
- Obtained a licence for a colorectal cancer blood screening test from Epigenomics
- Announced that its Bioanalytical Services division successfully passed a Good Clinical Practices (GCP) inspection by the Austrian Agency for Health and Food Safety (AGES)
- Appointed a new director, Dr. Richard Lacombe, who has over 30 years of experience in the pharmaceutical and CRO industries
"We are pleased to have increased our quarterly revenues and to report positive net earnings for the second quarter. Both our Bioanalytical and Medical divisions showed revenue growth during the quarter while our Analytical division remained constant compared to last year," said Mark Busgang, President and CEO of Warnex. "Most notably, our operating earnings were improved by $1.0 million compared to the second quarter last year. In the coming quarter, we hope to finalize the restructuring of our balance sheet, while we continue to focus on growth in our top and bottom lines."
Financial Results
Consolidated revenue for the three-month period ended June 30, 2010, reached $6.4 million compared to $5.4 million during the same quarter a year ago, an increase of 18%. For the six-month period ended June 30, 2010, revenue amounted to $11.5 million compared to $13.0 million for the same period in 2009.
Net earnings for the quarter amounted to $11,295 or $0.00 per share compared to a net loss of $0.3 million or $0.01 per share for the same quarter in 2009. For the six-month period ended June 30, 2010, net loss totalled $0.8 million or $0.01 per share compared to net earnings of $0.8 million or $0.01 per share in 2009.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter amounted to $0.9 million versus $0.1 million for the same quarter last year. For the six-month period ended June 30, 2010, adjusted EBITDA amounted to $0.5 million compared to $2.0 million in 2009.
Gross margins for the three-month period ended June 30, 2010, amounted to $1.8 million or 28% of sales compared to $1.0 million or 19% of sales for the same quarter last year. The increase of $0.8 million in gross margin is mainly explained by the increase in revenue in the Bioanalytical division compared to the same quarter last year. Gross margin for the six-month period ended June 30, 2010, amounted to $2.6 million or 23% of sales compared to $4.1 million or 32% of sales in 2009. This decrease is mainly explained by a slow first quarter in the Bioanalytical division this year compared to last year as well as the execution of high margin projects in this division during the first quarter of 2009.
Selling and administrative expenses amounted to $1.6 million for the three-month period ended June 30, 2010, compared to $1.5 million last year. The increase of $0.1 million is mainly explained by an increased investment in our sales group, professional fees related to the transition to International Financial Reporting Standards ("IFRS"), the review of our ISO certification in the Medical division and an increase in the salary expense, despite a reduction in other expenses compared to last year. In proportion of revenue, administrative and selling expenses were lower than last year at 24% (2009 - 27%). For the six-month period ended June 30, 2010, selling and administrative expenses amounted to $3.1 million compared to $3.0 million for the same period in 2009.
Financial expenses decreased by $35,249, from $313,086 in the second quarter of 2009 to $277,837 in the second quarter of 2010, mainly due to less interest following repayments made on the long term debt. For the six-month period ended June 30, 2010, financial expenses amounted to $554,393 (2009 - $624,025).
The Company has entered into agreements with certain debenture holders to modify the maturity dates. The Company is also in the process of analyzing its cash flow needs and in reviewing the alternatives between its current debenture structure, seeking new investors or other financing strategies.
About Warnex
Warnex (www.warnex.ca) is a life sciences company devoted to protecting public health by providing laboratory services to the pharmaceutical and healthcare sectors. Warnex Analytical Services provides pharmaceutical and biotechnology companies with a variety of quality control services, including chemistry, chromatography, microbiology, method development and validation, and stability studies. Warnex Bioanalytical Services specializes in bioequivalence and bioavailability studies for clinical trials. Warnex Medical Laboratories provides specialized testing for the healthcare industry as well as pharmaceutical and central laboratory services. Warnex PRO-DNA Services offers DNA identification tests for paternity, maternity and other family relationships, as well as for immigration and forensic testing purposes. Warnex has three facilities located in Laval and Blainville, Quebec, and Thunder Bay, Ontario.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this news release are forward-looking and are subject to numerous risks and uncertainties, known and unknown. For information identifying known risks and uncertainties, relating to financial resources, liquidity risk, key customers and business partners, credit risk, foreign currency risk, government regulations, laboratory facilities, volatility of share price, employees, suppliers, and other important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the heading Risks and Uncertainties in Warnex's most recent Management's Discussion and Analysis, which can be found at www.sedar.com. Consequently, actual results may differ materially from the anticipated results expressed in these forward-looking statements.
| Interim Consolidated Balance Sheets |
|
|
|
|
| (Unaudited) |
|
|
|
|
| |
|
|
|
|
| |
June 30
2010 |
|
December 31
2009 |
|
| Assets |
|
|
|
|
|
|
| Current |
|
|
|
|
|
|
| |
Cash and cash equivalents |
$ |
249,274 |
|
$ |
894,031 |
|
| |
Accounts receivable |
|
3,806,093 |
|
|
2,880,919 |
|
| |
Work-in-progress |
|
129,595 |
|
|
531,142 |
|
| |
Inventory |
|
106,729 |
|
|
177,027 |
|
| |
Investment tax credits receivable |
|
801,000 |
|
|
712,471 |
|
| |
Prepaid expenses |
|
413,411 |
|
|
388,502 |
|
| |
|
5,506,102 |
|
|
5,584,092 |
|
| |
|
|
|
|
|
|
| Future income taxes |
|
1,221,000 |
|
|
1,221,000 |
|
| Property, plant and equipment |
|
6,761,040 |
|
|
7,375,516 |
|
| Intangible assets |
|
437,790 |
|
|
382,145 |
|
| Goodwill |
|
937,695 |
|
|
937,695 |
|
| |
|
|
|
|
|
|
| |
$ |
14,863,627 |
|
$ |
15,500,448 |
|
| |
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
| Current |
|
|
|
|
|
|
| |
Bank indebtedness |
$ |
320,000 |
|
$ |
- |
|
| |
Accounts payable |
|
3,333,501 |
|
|
3,008,594 |
|
| |
Deferred revenue |
|
485,987 |
|
|
411,599 |
|
| |
Current portion of long-term debt |
|
1,421,253 |
|
|
1,800,372 |
|
| |
Current portion of debentures |
|
324,177 |
|
|
- |
|
| |
|
5,884,918 |
|
|
5,220,565 |
|
| |
|
|
|
|
|
|
| Long-term debt |
|
157,675 |
|
|
447,661 |
|
| Liability component of debentures |
|
6,029,747 |
|
|
6,245,274 |
|
| |
|
|
|
|
|
|
| |
|
12,072,340 |
|
|
11,913,500 |
|
| |
|
|
|
|
|
|
| Shareholders' equity |
|
|
|
|
|
|
| |
Capital stock |
|
40,981,049 |
|
|
40,981,049 |
|
| |
Equity component of debentures |
|
312,288 |
|
|
312,288 |
|
| |
Contributed surplus |
|
2,456,224 |
|
|
2,466,016 |
|
| |
Deficit |
|
(40,958,274 |
) |
|
(40,172,405 |
) |
| |
|
2,791,287 |
|
|
3,586,948 |
|
| |
|
|
|
|
|
|
| |
$ |
14,863,627 |
|
$ |
15,500,448 |
|
| |
|
|
|
| |
|
|
|
| Interim Consolidated Statements of Contributed Surplus |
| (Unaudited) |
|
|
|
| |
|
|
|
| |
Three months ended
June 30 |
|
Six months ended
June 30 |
| |
2010 |
2009 |
|
2010 |
|
2009 |
| Balance, beginning of period |
$ |
2,425,012 |
$ |
2,445,078 |
|
$ |
2,466,016 |
|
$ |
2,445,043 |
| Stock-based compensation |
|
31,212 |
|
20,557 |
|
|
(9,792 |
) |
|
20,592 |
| Balance, end of period |
$ |
2,456,224 |
$ |
2,465,635 |
|
$ |
2,456,224 |
|
$ |
2,465,635 |
| |
|
|
|
|
|
| |
|
|
|
|
|
| Interim Consolidated Statements of Deficit |
| (Unaudited) |
|
|
|
|
|
| |
|
|
|
|
|
| |
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
| |
2010 |
|
2009 |
|
|
2010 |
|
2009 |
|
| Balance, beginning of period |
$ |
(40,969,569 |
) |
$ |
(38,905,400 |
) |
|
$ |
(40,172,405 |
) |
$ |
(40,008,157 |
) |
| Net earnings (loss) |
|
11,295 |
|
|
(346,660 |
) |
|
|
(785,869 |
) |
|
756,097 |
|
| Balance, end of period |
$ |
(40,958,274 |
) |
$ |
(39,252,060 |
) |
|
$ |
(40,958,274 |
) |
$ |
(39,252,060 |
) |
| |
|
|
|
| |
|
|
|
| Consolidated Statements of Accumulated Other Comprehensive Income |
| (Unaudited) |
|
|
|
| |
|
|
|
| |
Three months ended
June 30 |
|
Six months ended
June 30 |
| |
2010 |
2009 |
|
2010 |
2009 |
| Accumulated Other Comprehensive Income |
$- |
$- |
|
$- |
$- |
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Interim Consolidated Statements of Earnings and Comprehensive Income |
|
| (Unaudited) |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
| |
|
2010 |
|
2009 |
|
|
2010 |
|
2009 |
|
| Revenue |
|
$ |
6,372,426 |
|
$ |
5,421,474 |
|
|
$ |
11,463,096 |
|
$ |
12,979,129 |
|
| Cost of goods sold |
|
|
4,559,151 |
|
|
4,378,996 |
|
|
|
8,866,902 |
|
|
8,869,119 |
|
| Gross margin |
|
|
1,813,275 |
|
|
1,042,478 |
|
|
|
2,596,194 |
|
|
4,110,010 |
|
| Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Selling, general and administrative |
|
|
1,561,595 |
|
|
1,481,407 |
|
|
|
3,097,427 |
|
|
2,962,911 |
|
| |
Finance charges |
|
|
277,837 |
|
|
313,086 |
|
|
|
554,393 |
|
|
624,025 |
|
| |
Research and development tax credits |
|
|
(238,000 |
) |
|
- |
|
|
|
(326,000 |
) |
|
- |
|
| |
|
|
1,601,432 |
|
|
1,794,493 |
|
|
|
3,325,820 |
|
|
3,586,936 |
|
| Earnings (loss) before under noted item and income taxes |
|
|
211,843 |
|
|
(752,015 |
) |
|
|
(729,626 |
) |
|
523,074 |
|
| Unrealized foreign exchange gain (loss) on debentures |
|
|
(200,548 |
) |
|
405,355 |
|
|
|
(56,243 |
) |
|
233,023 |
|
| Earnings (loss) before income taxes |
|
|
11,295 |
|
|
(346,660 |
) |
|
|
(785,869 |
) |
|
756,097 |
|
| Income taxes |
|
|
- |
|
|
(75,000 |
) |
|
|
- |
|
|
225,000 |
|
| Recovery of income taxes due to utilization of prior years' losses |
|
|
- |
|
|
75,000 |
|
|
|
- |
|
|
(225,000 |
) |
| |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
| Net earnings (loss) and comprehensive income |
|
$ |
11,295 |
|
$ |
(346,660 |
) |
|
$ |
(785,869 |
) |
$ |
756,097 |
|
| Basic net earnings (loss) per share |
|
$ |
0.00 |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
$ |
0.01 |
|
| Fully diluted net earnings (loss) per share |
|
$ |
0.00 |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
$ |
0.01 |
|
| Weighted average number of shares outstanding |
|
|
67,117,191 |
|
|
64,983,858 |
|
|
|
67,117,191 |
|
|
64,602,905 |
|
| Weighted average number of fully diluted shares outstanding |
|
|
67,117,191 |
|
|
76,113,853 |
|
|
|
67,117,191 |
|
|
76,113,853 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Interim Consolidated Statements of Cash Flows |
|
| (Unaudited) |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
Three months ended June 30 |
|
|
Six months ended June 30 |
|
| |
|
2010 |
|
2009 |
|
|
2010 |
|
2009 |
|
| Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings (loss) |
|
$ |
11,295 |
|
$ |
(346,660 |
) |
|
$ |
(785,869 |
) |
$ |
756,097 |
|
| Items not affecting cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Amortization of property, plant and equipment |
|
|
346,117 |
|
|
389,166 |
|
|
|
691,117 |
|
|
771,409 |
|
| |
Amortization of intangible assets |
|
|
25,710 |
|
|
17,854 |
|
|
|
47,289 |
|
|
32,962 |
|
| |
Accretion of interest |
|
|
26,804 |
|
|
23,298 |
|
|
|
52,407 |
|
|
45,551 |
|
| |
Unrealized foreign exchange gain (loss) on debentures |
|
|
200,548 |
|
|
(405,355 |
) |
|
|
56,243 |
|
|
(233,023 |
) |
| |
Foreign currency fluctuation |
|
|
(46,132 |
) |
|
172,174 |
|
|
|
(22,106 |
) |
|
141,033 |
|
| |
Compensation cost for stock options |
|
|
31,212 |
|
|
20,557 |
|
|
|
(9,792 |
) |
|
20,592 |
|
| |
|
|
|
595,554 |
|
|
(128,966 |
) |
|
|
29,289 |
|
|
1,534,621 |
|
| |
Net change in non-cash working capital items |
|
|
(131,731 |
) |
|
(399,618 |
) |
|
|
(155,376 |
) |
|
(803,300 |
) |
| Net cash provided by (used in) operations |
|
|
463,823 |
|
|
(528,584 |
) |
|
|
(126,087 |
) |
|
731,321 |
|
| Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Acquisition of property, plant and equipment |
|
|
(23,896 |
) |
|
(42,481 |
) |
|
|
(76,641 |
) |
|
(178,328 |
) |
| |
Acquisition of intangible assets |
|
|
(38,047 |
) |
|
(29,221 |
) |
|
|
(102,934 |
) |
|
(124,707 |
) |
| Net cash used in investing activities |
|
|
(61,943 |
) |
|
(71,702 |
) |
|
|
(179,575 |
) |
|
(303,035 |
) |
| Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Increase (decrease) in operating line of credit |
|
|
(140,000 |
) |
|
- |
|
|
|
320,000 |
|
|
- |
|
| |
Proceeds from long-term debt |
|
|
- |
|
|
350,000 |
|
|
|
- |
|
|
350,000 |
|
| |
Repayment of long-term debt |
|
|
(326,141 |
) |
|
(310,772 |
) |
|
|
(669,105 |
) |
|
(694,155 |
) |
| Net cash provided by (used in) financing activities |
|
|
(466,141 |
) |
|
39,228 |
|
|
|
(349,105 |
) |
|
(344,155 |
) |
| Foreign exchange gain (loss) on cash held in foreign currencies |
|
|
11,918 |
|
|
(133,934 |
) |
|
|
10,010 |
|
|
(90,764 |
) |
| Decrease in cash and cash equivalents |
|
|
(52,343 |
) |
|
(694,992 |
) |
|
|
(644,757 |
) |
|
(6,633 |
) |
| Cash and cash equivalents, beginning of period |
|
|
301,617 |
|
|
3,121,847 |
|
|
|
894,031 |
|
|
2,433,488 |
|
| Cash and cash equivalents, end of period |
|
$ |
249,274 |
|
$ |
2,426,855 |
|
|
$ |
249,274 |
|
$ |
2,426,855 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|