BURLINGTON, ON, Oct. 15 /CNW Telbec/ - EnGlobe Corp. (TSX: EG), a leading
international integrated environmental services company, today announced its
financial results for the second quarter ended June 30, 2008 as well as a
restructuring plan to improve EnGlobe's results going forward.
- Second quarter results released
- Restructuring plan initiated with implementation in third and fourth
- Site Assessment and Remediation ("SAR") division awarded new contracts
totalling approximately $41 million
- Credit agreement waiver and amendment with lenders
"EnGlobe's second quarter financial results were impacted by the poor
operational performance of the Organic Waste Management ("OWM") division and
non-recurring, non-cash charges related to this division. These challenges
have overshadowed the solid performance of EnGlobe's SAR and Tanknology
divisions, which represent approximately 70% of EnGlobe's annual revenue,"
said Andre Heroux, President and Chief Executive Officer of EnGlobe. "As a
result of our challenges, we have implemented a restructuring plan to improve
OWM and right-size EnGlobe's corporate cost structure going forward. This
plan, which is being implemented in the third and fourth quarters, is expected
to result in approximately $10 million of annual savings, which we are
confident will position EnGlobe for future success and growth. We are
beginning to see positive results from our restructuring plan and I have been
impressed by the support and actions of our employees in response to our
initiatives to build a stronger business going forward."
SECOND QUARTER RESULTS
Selected financial information (unaudited)
Quarter ended June 30 (In thousands of dollars, except per share amounts)
Second Quarter Second Quarter
Condensed Statements of Operations 2008 2007
Revenue 38,209 42,496
EBITDA(1) (4,002) 4,322
Net Loss (22,549) (178)
Net Loss per share, basic and diluted (0.26) (0.00)
(1) EBITDA as referred to in this press release is a non-GAAP measure.
See the Management's Discussion and Analysis for the definition and
the reconciliation to the consolidated statements of earnings.
Results of Operations
EG's second quarter results take into account a comprehensive review of
the performance and strategic orientation of the Company's operations. This
review was initiated upon the arrival of EG's new senior management team, with
a focus on the identification and resolution of business risks within the OWM
division. The analysis revealed that several key factors had materially
negatively changed for the OWM division, which led to the initiation of a
substantial restructuring. In addition, it was determined that these factors
should lead the Audit Committee and Board of Directors of EG to initiate a
review of the carrying amount of certain assets including inventory, property,
plant and equipment, intangible assets, goodwill and certain tax assets.
Following this review EG recorded a non-cash charge of $9.6 million to write
down the value of certain assets related to the OWM business unit, as well as
a $3.2 million non-cash write down of tax assets. In addition, it should be
noted that the OWM division's second quarter also experienced higher operating
costs relating to the cost of treatment and disposal. EG believes these higher
costs should not recur following the completion of its restructuring plan. The
items mentioned above impacted gross operating profit, EBITDA and Net Loss in
the second quarter.
In the second quarter, revenue was $38.2 million compared with
$42.5 million in the quarter ended June 30, 2007, a decrease of 10.1% that was
primarily a result of a reduction of volumes of waste managed as well as
competitive conditions in the sale of eco-products in the OWM division.
Gross operating profit in the quarter was $4.0 million compared with
$11.4 million in the quarter ended June 30, 2007. Gross operating profit
margin for the quarter was 10.4% compared with 26.9% in the same period of
2007. The decrease in gross operating profit was largely attributable to the
OWM division where treatment and disposal costs were higher than the second
quarter of the previous year as discussed above.
EBITDA for the quarter was negative $4.0 million compared with positive
$4.3 million in the quarter ended June 30, 2007.
A $22.5 million net loss was incurred in the latest quarter compared with
$0.2 million of net loss in the quarter ended June 30, 2007. As outlined
above, one-time non-cash charges related to the OWM business unit were the
largest contributor to the second quarter net loss. These non-cash charges
combined with lower EBITDA of the business, higher amortization of intangible
assets as well as increased restructuring costs resulted in the increased net
loss compared to the second quarter of 2007.
For the quarter ended June 30, 2008, cash flow used in continuing
operations was $9.1 million; with non-cash working capital changes consuming
$1.9 million. EG entered the third quarter with, and continues to have, ample
liquidity for normal operations.
EnGlobe Corp.'s full unaudited interim consolidated financial statements,
notes, and Management's Discussion and Analysis for the three-month period
ended June 30, 2008 are available at http://www.sedar.com.
Englobe's new senior management team initiated a process to focus on four
main priorities to restructure the business, which are the following:
1) Operational and financial turnaround of the OWM division;
2) Improve the efficiency of finance and administration functions to
support EnGlobe's operations;
3) Reduce corporate costs to reflect EnGlobe's size; and
4) Pursue aggressively SAR division's growth plan.
EnGlobe expects to save $10 million annually as a result of the OWM
division restructuring and the corporate cost reductions. In the third quarter
actions were taken that have resulted in $5 million of these savings beginning
to come into effect on an annualized basis. With the changes implemented
management believes that EG will be well positioned to capitalize on
profitable growth opportunities in the market.
OWM Division Turnaround
A focused restructuring effort is being executed that is transforming
this business into a smaller and profitable operation. The key steps that have
been undertaken to date include the renegotiation or exit of unprofitable
contracts; focus on the production and sales of a smaller number of core
eco-products that will generate profitable sales; and implementation of fixed
and variable cost reduction measures that will substantially reduce the
operating costs of OWM. To date, EnGlobe has reduced the OWM headcount by 40%
versus the prior year.
Improve the Efficiency of Finance and Administrative Functions
In the third quarter EnGlobe initiated a consolidation of its finance
operations to our centralized Quebec City location. This will complete the
final component of the integration of this function resulting in enhanced
financial support to our operations and more timely reporting. The
centralization of this corporate service will result in the closing of the
Ontario finance department and reduction in the overall number of staff
resulting in a reduction of indirect costs.
Corporate Cost Reductions
Company-wide cost reduction initiatives were initiated in the third
quarter and are being implemented to ensure a sustainable corporate structure
is in place that reflects the size of our organization. These cost reduction
measures will impact finance and accounting, marketing and communications,
corporate development, research and development, technical services and human
resources. To date, EnGlobe has reduced the Company's overall headcount by 24%
versus the prior year. The staff reductions have reduced substantial costs
while creating more effective and streamlined corporate operations.
Site Assessment and Remediation (SAR) Division Growth
SAR division continues to have a strong market position in Canada, the UK
and France. A key part of the long-term strategy of EnGlobe is to continue to
grow this business unit with focused investment in high return projects and
facilities. In the second quarter, SAR maintained its positioning and was
awarded new contracts totalling approximately $41 million, the largest being a
Defence Construction Canada contract with an estimated value of $24.5 million
for the remediation of the FOX-3 Distant Early Warning site at Dewar Lakes,
CREDIT AGREEMENT WAIVER AND AMENDMENT WITH LENDERS
As a result of the financial results of the OWM business as well as the
delayed filing of the second quarter financial results, EnGlobe has entered
into a Waiver and Amendment agreement with its senior lenders to waive a
breach of certain covenants until October 31, 2008. EnGlobe is confident that
it will be able to agree with its lenders on revised credit agreement terms in
the coming weeks. In addition, EnGlobe is in discussions with its largest
shareholder, ONCAP L.P., about providing additional support to the Company.
About EnGlobe Corp.
EnGlobe Corp. is a leading international integrated environmental
services company specializing in the management of organic-based waste streams
and contaminated soils, with an emphasis on beneficial reuse. EnGlobe offers
cost-effective solutions to municipal, commercial and industrial clients in
Canada, the northeastern United States, the United Kingdom and France through
its subsidiaries: Biogénie and Celtic Technologies Limited for site assessment
and remediation, GSI Environment Inc. for organic waste management, and
Tanknology Canada Inc. for tank testing and calibration. Shares of EnGlobe
trade on the Toronto Stock Exchange under the ticker symbol EG. Additional
information is available at www.englobecorp.com.
This press release contains certain forward-looking statements. Such
statements relate to, among other things, sales growth, expansion and growth
of the Company's business, future capital expenditures and the Company's
business strategy. Forward-looking statements are subject to inherent
uncertainties and risks including, but not limited to: general industry and
economic conditions, changes in the Company's relationships with its
suppliers, pricing pressures and other competitive factors, the availability
and costs of fuels and utilities, the results of the Company's ongoing efforts
to improve cost effectiveness, changes in regulatory requirements affecting
the Company's business and the availability and terms of financing. Other Risk
Factors are set out and described in the Company's Annual Information Form
which is available at www.sedar.com. Consequently, actual results and events
may vary significantly from those included in, contemplated by or implied by
such forward-looking statements. In evaluating forward-looking statements,
readers should specifically consider the various factors that could cause
actual events or results to differ materially from such forward-looking
For further information:
For further information: Investors: André Héroux, President and Chief
Executive Officer, EnGlobe Corp., (450) 929-4949 x 261; Media: Marie-Chantal
Turcotte, Director, Legal Affairs and Corporate Secretary, EnGlobe Corp.,
(418) 781-0191 x 5235