BIOX announces 2014 second quarter results

TSX symbol: BX

TORONTO, May 12, 2014 /CNW/ - BIOX Corporation (BIOX) (TSX: BX) today announced its fiscal 2014 second quarter (Q2 2014) financial results for the three-month and six-month periods ended March 31, 2014.

Highlights

  • Production of methyl esters was 16.2 million litres in Q2 2014 compared to 10.6 million litres in the second quarter of 2013 (Q2 2013)
  • Sales were $15.7 million in Q2 2014, compared to $21.5 million in Q2 2013
  • Operating loss was $7.7 million in Q2 2014 compared to an operating income of $5.8 million in Q2 2013
  • Operating loss prior to non-cash items(1) was $1.5 million in Q2 2014 compared to an operating income prior to non-cash items $7.0 million in Q2 2013
  • Operating loss prior to non-cash items was $0.3 million in Q2 2014 for BIOX's operating segment (BIOX Canada Limited and BIOX USA Limited) compared to an operating income prior to non-cash items of $8.6 million in Q2 2013
  • Recorded a $20.1 million non-cash provision related to an impairment charge to non-current assets and unutilized tank storage at the New York Harbor facility
  • Net loss was $23.0 million Q2 2014 compared to net income of $5.4 million in Q2 2013
  • Loss per share was $0.50 in Q2 2014 compared to an earnings per share of $0.12 Q2 2013

"Production at our Hamilton plant remains strong. The facility continues to operate very effectively, despite the harsh weather conditions experienced during the period," said Kevin Norton, Chief Executive Officer of BIOX. "Our top line results reflect the durability of the plant and the proficiency of our sales and marketing in the face of an extremely challenging biodiesel market in the U.S. Conversely, the implementation of the Greener Diesel mandate in Ontario and our supply agreement with Shell Canada place us in a great position to capitalize on the increased demand we are seeing in the local market. The mandate and our relationship with Shell are key to diversifying our sales outside of the U.S. market."

Financial Highlights

Sales were $15.7 million and $33.0 million for the three-month and six-month periods ended March 31, 2014, respectively, compared with $21.5 million and $31.0 million for the corresponding periods last year. BIOX sold 12.9 million and 26.0 million litres of biodiesel for the three-month and six-month periods ended March 31, 2014, respectively, compared with 10.5 million and 15.3 million litres for the corresponding periods in 2013. The change in sales was primarily the result of the U.S. biodiesel tax incentive. The tax incentive expired on December 31, 2013 which negatively impacted average revenue per litre in fiscal Q2 2014. Moreover, in Q2 2013, the Company recognized approximately US$7.8 million in refundable tax credits related to sales to customers during calendar 2012 due to the retroactive reinstatement of the tax incentive in the U.S that had previously expired on December 31, 2011. The increase in litres sold during the six-month period of this year compared to the same period last year was due to lower production in 2013 as a result of the temporary shutdown of our Hamilton facility from October 25, 2012, to February 1, 2013.

Direct expenses were $15.8 million and $32.1 million for the three-month and six-month periods ended March 31, 2014, respectively, compared with $12.6 million and $23.1 million for the corresponding periods in 2013. The increase for the three and six-month periods was primarily the result of lower sales volume due to the temporary suspension of production at the Hamilton facility during the same period last year.

General and administrative (G&A) expenses were $1.4 million and $2.9 million for the three-month and six-month periods ended March 31, 2014, respectively, compared with $1.3 million and $2.8 million for the same periods last year.

Operating loss was $7.7 million and $9.4 million for the three-month and six-month periods ended March 31, 2014, respectively, compared with operating income of $5.8 million and $1.0 million in the corresponding periods last year.

Operating loss prior to non-cash items(1) was $1.5 million and $2.0 million for the three-month and six-month periods ended March 31, 2014, respectively, compared with operating income prior to non-cash items of $7.0 million and $3.3 million in the corresponding periods last year. The change in Q2 2014 was primarily due to the reinstatement of the U.S. biodiesel tax incentive and alternative fuel credit in the same period last year, which allowed the Company to collect approximately US$7.8 million in refundable tax credits from the U.S. Internal Revenue Service related to sales to customers during calendar 2012.  In the event that the Blender Tax Credit is reinstated on a retroactive basis, the Company would be able to recognize additional income and cash flow.

Combined operating loss prior to non-cash items(1) for BIOX's wholly-owned operating subsidiaries (BIOX Canada Limited and BIOX USA Limited) was $0.3 million for Q2 2014 and combined operating income prior to non-cash items of $0.5 million for the six-month period ended March 31, 2014, compared with combined operating income prior to non-cash items of $8.6 million and $7.4 million for the corresponding periods last year. The change is due primarily to the US$7.8 million in refundable tax credits recognized in Q2 2013, mentioned above.

Net loss was $23.0 million or $0.50 per common share and $24.9 million or $0.54 per common share for the three-month and six-month periods ended March 31, 2014, respectively, compared with a net income of $5.4 million or earnings of $0.12 per common share and net income of $0.3 million or $0.01 per common share for the corresponding periods last year. The change in Q2 2014 is due to the expiration of the biodiesel tax incentive in the U.S., a $4.9 million provision for unutilized tank storage at the New York Harbor facility as well as a $15.2 million impairment charge to non-current assets based on a decrease in the recoverable amount for these assets due to weakness in the biodiesel market that reduced the Company's expectations for discounted future cash flows from operations. The recoverable amount is sensitive to changes in key assumptions to the discounted cash flow projections that could result in a significant change in the recoverable amount.  For example, assuming all other variables remain constant, the use of a 15.6% discount rate would result in a recoverable amount equal to the carrying amount of the non-current assets, and therefore no impairment loss would be recorded.

As at March 31, 2014, BIOX's cash balance amounted to $9.2 million, compared with $15.9 million on September 30, 2013. BIOX's working capital balance at March 31, 2014, was $14.0 million compared with $17.5 million at September 30, 2013. BIOX believes that its future cash flow from operations combined with its current financial resources are sufficient to enable BIOX to meet its ongoing working capital requirements.

As at March 31, 2014, BIOX had 45,714,167 common shares outstanding, as well as options to purchase up to 2,775,000 common shares, and share purchase warrants to acquire up to 1,982,143 common shares.

Outlook

BIOX believes that the U.S. Renewable Fuel Standard 2 (RFS2), the full implementation of the biodiesel portion of the Canadian Renewable Fuel Content Regulations, and the Ontario biodiesel mandate, are important elements to a sustainable biodiesel industry in Ontario and throughout North America.

The announcement by the U.S. Environmental Protection Agency (EPA) of its Notice of Proposed Rule Making (NPRM) for the 2014 and 2015 Renewable Volume Obligation in November 2013 negatively impacted the value of biodiesel and Biomass-based diesel Renewable Identification Numbers (RINs). 2014 RINs traded at approximately $0.55 (or $0.83 per U.S. gallon) as of May 9, 2014.

The NPRM maintains the current volume requirement of Biomass-based diesel at 1.28 billion U.S. gallons for 2014 and 2015. At this level the 2014 and 2015 volume requirements would actually fall below the 1.8 billion U.S. gallons that the U.S. Biomass-based diesel industry produced in 2013. The proposal has completed a 60-day review period that included public hearings. The final announcement of the RVO levels for 2014 and 2015 will be an important signal for the sustainability of the biodiesel industry in the U.S. BIOX expects the decision will be announced in mid 2014.

While BIOX has historically sold the majority of its product into the U.S. market, the implementation of the Canadian regulations significantly increase the accessible market for its product in Canada. The implementation of a renewable diesel mandate in Ontario on April 1, 2014, will provide BIOX with market certainty in its local region, which supports the significant capital investment that it made in the Hamilton facility.

BIOX's inter-terminal pipeline and supply agreement with Shell is an example of how the Company can directly service primary suppliers with a secure supply of biodiesel under the new Canadian and Ontario regulations by the most efficient possible logistics. Management believes that, in time, the supply of biodiesel under this agreement has the potential to become a significant portion of BIOX's Hamilton production given the implementation of the Ontario mandate and as the Canadian Renewable Fuel Content Regulations extend eastward into Québec and the Atlantic provinces.

BIOX continues to pursue growth strategies that would expand its business through increasing the volume of biodiesel it produces, controls and distributes in strategic locations throughout North America.

Notice of Conference Call

BIOX will hold a conference call tomorrow, May 13, 2014, at 9:00 a.m. ET hosted by Mr. Kevin Norton, Chief Executive Officer, and Mr. Chris Clinning, Executive Vice President and Chief Financial Officer, to discuss BIOX's financial results and corporate developments. To access the conference call by telephone, dial (647) 427-7450 or (888) 231-8191. To access the telephone replay, dial (416) 849-0833 or (855) 859-2056 and enter reservation number 31439967. A live audio webcast of the call will be available at www.bioxcorp.com. The webcast will be archived for 90 days.

1) Note: Non-IFRS Measures.  Operating income prior to non-cash items is defined as operating income or loss less production facility depreciation and amortization, and less amortization of furniture, equipment and intangibles, and stock-based compensation. Management uses this measurement to monitor the operating cash flow of BIOX's business and believes this information is useful supplemental information to a reader of financial statements. This measurement may not be comparable to similar measures presented by other issuers.  Investors are cautioned that operating income (loss) prior to non-cash items should not be construed as an alternative to net income (loss) determined in accordance with IFRS as an indicator of BIOX's performance.

Reconciliation of Non-IRFS Measures

The following table presents a reconciliation of operating income prior to non-cash items to net loss for the three-month and six-month periods ended March 31, 2014 and 2013:

(in thousands)     Three months ended
March
Six months ended
March
          2014 2013 2014 2013
           $    $ $ $
Operating (loss) income before non-cash
items
    (1,475) 7,037 (1,983) 3,291
Deduct: Production facility
depreciation and
amortization
    (1,149) (1,044) (2,263) (1,955)
  Depreciation and
amortization of equipment
and intangible assets
    (93) (94) (179) (190)
  Share-based compensation     (115) (91) (163) (172)
  Provision for unutilized tank
storage
    (4,858) - (4,858) -
Operating (loss) income     (7,690) 5,808 (9,446) 974
Other income and expenses     (15,286) (406) (15,429) (717)
Net (loss) income     (22,976) 5,402 (24,875) 257

About BIOX Corporation
BIOX is a renewable energy company that owns and operates a 67 million litre per year continuous flow biodiesel production facility in Hamilton, Ontario. BIOX has an innovative, proprietary and patented production process that is capable of producing the highest quality, renewable, clean burning and biodegradable biodiesel fuel utilizing a variety of feedstocks - from pure seed oils to animal fats to recovered vegetable oils with no change to the production process. BIOX's high quality biodiesel fuel meets North American (ASTM D-6751) quality standards.

Forward-looking Statements
Certain statements in this press release constitute "forward-looking" statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, objectives or achievements of BIOX, or industry results, to be materially different from any future results, performance, objectives or achievements expressed or implied by such forward-looking statements. Such statements relate to, among other things, BIOX's long-term expectations for the biodiesel market in light of current market conditions, the implementation of an Ontario biodiesel mandate and its effect on BIOX, the significance of sales under the supply agreement with Shell, and the ability of BIOX to realize on its cost savings programs. These statements reflect BIOX's current views regarding future events and operating performance, are based on information currently available to BIOX, and speak only as of the date of this press release. These forward-looking statements involve a number of risks, uncertainties and assumptions and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such performance or results will be achieved. Those assumptions and risks include, but are not limited to, the fact that BIOX's results of operations and business outlook are highly dependent on a mix of legislation and producer payment programs and tax credits and upon commodity prices, which are subject to significant volatility and uncertainty. Many factors could cause the actual results, performance or achievements of BIOX to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including factors described in this press release and those discussed in BIOX's publicly available disclosure documents, as filed by BIOX on SEDAR (www.sedar.com) except as updated herein. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated or expected. Unless required by applicable securities law, BIOX does not intend and does not assume any obligation to update these forward-looking statements.To the extent any forward-looking statements herein constitute financial outlook, they were approved by management as of the date hereof and have been included to provide an understanding with respect to BIOX's financial performance and are subject to the same risks and assumptions referred to herein. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur and readers are cautioned that any financial outlook information contained in this news release should not be used for purposes other than for which it is disclosed herein.

Financial results included below:

BIOX Corporation              
Condensed consolidated interim statements of comprehensive (loss) income    
Three and six month periods ended March 31, 2014 and 2013          
(Unaudited)              
(Expressed in thousands of Canadian dollars, except share and per share amounts)            
           Three months ended       Six months ended 
             March 31,         March 31, 
        2014   2013   2014   2013
         $     $     $     $ 
                     
Revenue 15,707   21,478   32,976   30,953
                     
Cost of sales              
  Direct expenses 15,828   12,641   32,066   23,092
  Production facility depreciation and amortization 1,149   1,044   2,263   1,955
        16,977   13,685   34,329   25,047
                     
Gross margin (1,270)   7,793   (1,353)   5,906
                     
Operating expenses              
  General and administrative 1,354   1,334   2,893   2,845
  Depreciation and amortization of equipment and intangible assets 93   94   179   190
  Share-based compensation 115   91   163   172
  Expansion planning and development 4,858   466   4,858   1,725
        6,420   1,985   8,093   4,932
                     
Operating (loss) income (7,690)   5,808   (9,446)   974
                     
Other expenses              
  Impairment of non-current assets 15,197   -   15,197   -
  Financing cost 275   315   595   655
  Foreign exchange (gain) loss (152)   99   (303)   100
        15,320   414   15,489   755
                     
Net (loss) income before interest income and income taxes (23,010)   5,394   (24,935)   219
Income tax expense -   -   -   (18)
Interest income 34   8   60   56
Net (loss) income for the period (22,976)   5,402   (24,875)   257
Other comprehensive (loss) income              
  Foreign currency translation (loss) gain (26)   141   (63)   (138)
Comprehensive (loss) income (23,002)   5,543   (24,938)   119
                     
(Loss) earnings per common share              
  Basic (0.50)   0.12   (0.54)   0.01
  Diluted (0.50)   0.12   (0.54)   0.01
                     
Weighted average number of common shares outstanding              
  Basic   45,724,826   45,748,691    45,724,826    45,748,691
  Diluted   45,915,382   45,748,691    45,915,382    45,748,691



BIOX Corporation                          
Condensed consolidated interim statements of changes in equity                
Six month periods ended March 31, 2014 and 2013                    
(Unaudited)                          
(Expressed in thousands of Canadian dollars, except share and per share amounts)                
                         Accumulated         
         Common share capital             other         
                 Warrants     Equity     comprehensive         Total 
         Shares     Amount     reserve     reserve     income (loss)     Deficit     equity 
         #     $     $     $     $     $     $ 
                                 
Balance, September 30, 2012  45,748,691     167,787   3,151   2,559   20    (107,972)   65,545
Share-based compensation -   -   -   172   -   -   172
Net income -   -   -   -   -   257   257
Foreign currency translation loss -   -   -   -   (138)   -   (138)
Balance, March 31, 2013  45,748,691     167,787   3,151   2,731   (118)    (107,715)   65,836
                                 
Balance, September 30, 2013  45,748,691     167,787   3,151   2,926   (91)    (110,813)   62,960
Share-based compensation -   -   -   163   -   -   163
Share cancellation  (34,524)   (13)   -   -   -   -   (13)
Repurchased shares                          
  to be cancelled -   (1)   -   -   -   -   (1)
Net loss -   -   -   -   -   (24,875)   (24,875)
Foreign currency translation loss -   -   -   -   (63)   -   (63)
Balance, March 31, 2014  45,714,167     167,773   3,151   3,089   (154)    (135,688)   38,171

 

BIOX Corporation      
Condensed consolidated interim statements of financial position    
As at March 31, 2014 and September 30, 2013      
(Unaudited)      
(Expressed in thousands of Canadian dollars)      
         March 31,     September 30, 
        2014   2013
         $     $ 
             
Assets      
Current assets      
  Cash and cash equivalents 9,199   15,909
  Accounts receivable 6,384   5,839
  Prepaid expenses 255   839
  Inventory 7,246   5,143
        23,084   27,730
             
Restricted cash 1,526   1,800
Property, plant and equipment 30,433   46,930
Intangible assets 567   912
Deferred income tax assets 10,342   10,276
        65,952   87,648
             
Liabilities      
Current liabilities      
  Accounts payable and other liabilities 5,644   6,300
  Current portion of long-term debt 1,500   1,500
  Current portion of finance leases 29   31
  Current portion of provisions 1,955   2,434
        9,128   10,265
             
Finance leases 43   34
Long-term debt 10,100   10,849
Provisions 8,510   3,540
        27,781   24,688
             
Equity      
Common share capital 167,773   167,787
Warrants reserve 3,151   3,151
Equity reserve 3,089   2,926
Accumulated other comprehensive loss (154)   (91)
Deficit (135,688)   (110,813)
        38,171   62,960
        65,952   87,648

 

BIOX Corporation      
Condensed consolidated interim statements of cash flows    
Six month periods ended March 31, 2014 and 2013      
(Unaudited)      
(Expressed in thousands of Canadian dollars, except share and per share amounts)    
             Six months ended 
             March 31, 
        2014   2013
         $     $ 
             
Operating activities      
  Net (loss) income (24,875)   257
  Add (less) items not involving cash      
    Production facility depreciation and amortization 2,263   1,955
    Depreciation and amortization of equipment and intangible assets 179   190
    Financing costs 356   437
    Provision for unutilized tank storage 4,330   -
    Impairment of non-current assets 15,197   -
    Income taxes paid -   18
    Unrealized foreign exchange gain (197)   (186)
    Share-based compensation 163   172
    Accretion of asset retirement obligation 161   139
        (2,423)   2,982
             
  Net change in non-cash working capital balances      
    related to operations (2,566)   (3,184)
        (4,989)   (202)
             
Investing activity      
  Purchase of property, plant and equipment (1,027)   (3,284)
  Disposals of property, plant and equipment 12   -
  Decrease in restricted cash 274   3,568
  Share repurchase (14)   -
        (755)   284
             
Financing activities      
  Payments on finance leases (23)   (23)
  Increase in finance leases 28   -
  Proceeds from debt financing -   2,415
  Repayment of debt financing (750)   (750)
  Repayment of demand loan -   (5,282)
  Financing charges -   (2)
  Interest paid (354)   (436)
        (1,099)   (4,078)
             
Effect of exchange rate changes on cash held in foreign currency 133   48
             
Net decrease in cash and cash equivalents during the period (6,710)   (3,948)
Cash and cash equivalents, beginning of period 15,909   7,543
Cash and cash equivalents, end of period 9,199   3,595


 

SOURCE BIOX Corporation

For further information:

BIOX Corporation
Chris Clinning
Executive Vice President & CFO
Phone: (905) 521-8205 x253
E-mail: cclinning@bioxcorp.com

Investor Relations
Ross Marshall
TMX Equicom
Phone: (416) 815-0700 ext. 238
E-mail: rmarshall@tmxequicom.com