Genesis Worldwide Inc. announces second quarter 2010 financial results

VAUGHAN, ON, Aug. 13 /CNW/ - Genesis Worldwide Inc. ("Genesis" or the "Company"), (TSX: GWI), today announces its financial results for the second quarter ended June 30, 2010. All dollar amounts are in Canadian dollars unless otherwise stated.

    
    Business Update
    ---------------
    

The following are the Company's key business highlights -

    
    -   In pursuit of its newly adopted strategic plan, the Company completed
        a joint venture transaction with Codding Steel Frame Technologies
        ("CSFT"), an affiliate of Codding Enterprises L.P. ("Codding"). The
        new entity, Genesis Steel Frame Solutions L.P. ("GSFS LP"), will seek
        to grow its U.S. market share through maximizing the output of its
        Northern California operation, as well as through satellite
        operations in strategic locations. In addition, GSFS LP will work to
        establish other joint ventures throughout its new territory,
        including South and Central America.

    -   Codding Enterprises L.P. ("Codding"), a current shareholder of the
        Company, completed the purchase of the term loan from the Company's
        lender. In addition to a number of other favorable modifications to
        the terms of the loan, Codding will release part, or all of,
        Genesis' $500,000 in restricted cash.

    -   As part of the Company's new business strategy, the joint venture
        negotiations are continuing with Alexandria Steel Forming Co.
        ("Alexandria") in Egypt, and Manazil Steel Framing Co. ("Manazil") in
        Abu Dhabi. Middle East and Northern African markets are showing
        buoyancy and continued economic improvement. In addition, Genesis has
        signed a Memorandum of Understanding with Megastar, a substantial
        Vietnamese construction equipment company and a current licensee of
        the Company, to enter into a joint venture agreement to manufacture
        and erect the Genesis system in South East Asia.

    -   The special committee that was formed to negotiate the divestiture of
        KML Engineered Homes Ltd., a subsidiary of the Company, is continuing
        negotiations and the Company expects to finalize this transaction on
        or before August 31, 2010. This initiative further demonstrates the
        Company's commitment to pursue its new strategic direction.

        Although the Company believes it is likely that it will consummate
        these contemplated joint venture and divestiture transactions, there
        can be no assurance that these transactions will ultimately be
        finalized, or that, if finalized, they will be under the same terms
        and conditions as currently contemplated.
    

Now that Genesis has its new Board and management structure in place, and has reduced its operating expenses, management believes that the Company now possesses the relevant experience, expertise and cost structure to create long-term shareholder value.

    
    Financial Highlights
    --------------------

    -   Due to the restructuring activities, total revenue for the second
        quarter ended June 30, 2010 decreased 32.4% to $2,067,815, compared
        to $3,058,604 for the same period in 2009. Revenue for the licensing
        division for the second quarter of 2010 decreased 102.1% to negative
        $17,028, compared to $805,636 for the second quarter in 2009. This
        negative amount was attributed to a reversal of royalty revenue from
        a licensee of the Company, Codding, due to the termination of its
        license agreement as a result of the joint venture transaction.
        Licensing revenue for the six months ended June 30, 2010 decreased
        94.3% to $174,069, compared to $3,031,169 for the same period in
        2009. Revenue for the structural products division for the second
        quarter of 2010 decreased 7.5% to $2,084,843, compared to $2,252,968
        for the same quarter in 2009. Structural products revenue for the six
        months ended June 30, 2010 decreased 41.7% to $2,858,831, compared to
        $4,906,072 for the same period in 2009. The decrease in structural
        products revenue was a result of the Company's temporary inability to
        maintain consistent sustained production from manufacturing as it
        continued to manage working capital.

    -   Operating expenses for the second quarter ended June 30, 2010
        decreased 22.4% to $1,705,661, compared to $2,196,927 for the same
        period in 2009. Operating expenses for the six months ended June 30,
        2010 decreased 14.5% to $3,382,928, compared to $3,955,352. This
        reduction in operating expenses is a result of cost savings
        initiatives. The Company continues to evaluate operating costs in an
        effort to reduce costs. The operating expenses for the six months
        ended June 30, 2010 include costs for termination obligations.

    -   Net loss for the second quarter ended June 30, 2010 was $1,914,665,
        or ($0.03) per common share, compared to a net loss of $1,619,264, or
        ($0.05) per common share, for the second quarter of 2009. Net loss
        for the six months ended June 30, 2010 was $3,713,067, or ($0.07) per
        common share, compared to a net loss of $2,564,189, or ($0.08) per
        common share for the same period in 2009.
    

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.

About Genesis Worldwide Inc.

Genesis is a provider of green light steel building systems and solutions targeted at the global commercial, residential and institutional building sectors. Genesis delivers customized turnkey structural solutions including innovative light steel products, and provides software packages, industrial equipment, training programs, professional services and support ("Genesis Solution") to its customers and partners globally. Headquartered in the Greater Toronto Area in Ontario, Canada, Genesis has established a network of partners with engineering, manufacturing and distribution operations in Canada, the United States, the Middle East, Eastern Europe and Russia. 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 each 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, except required by law, 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.

                         CONSOLIDATED BALANCE SHEET
                                 (unaudited)


                                                        As at          As at
                                                      June 30    December 31
                                                         2010           2009
                                                            $              $
                                                -----------------------------
    ASSETS
    Current
    Cash                                                7,542         72,247
    Cash held in trust                                      -        100,000
    Restricted cash                                   500,000        500,000
    Accounts receivable                             1,479,836      2,818,204
    Inventory                                         242,499        346,219
    Prepaid expenses                                  203,981        255,719
                                                -----------------------------
    Total current assets                            2,433,858      4,092,389
    Mortgage receivable                               432,908        432,908
    Property, plant and equipment                   1,899,351      2,232,604
    Investment                                              -              -
    Intangible assets                                  17,582      1,015,101
                                                -----------------------------
                                                    4,783,699      7,773,002
                                                -----------------------------
                                                -----------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities        7,903,334      6,505,840
    Term loan - current portion                     1,018,560        991,587
    Deferred revenue                                  587,333        847,964
    Minimum royalty payment obligations               266,190        682,548
                                                -----------------------------
    Total current liabilities                       9,775,417      9,027,939
                                                -----------------------------
    Long-term
    Minimum royalty payment obligations                     -        578,058
                                                -----------------------------
    Total long-term liabilities                             -        578,058
                                                -----------------------------
    Commitments and contingencies

    Shareholders' equity
    Capital stock                                  61,690,108     61,114,911
    Contributed surplus                             1,821,639      1,842,492
    Deficit                                       (68,503,465)   (64,790,398)
                                                -----------------------------
    Total shareholders' equity                     (4,991,718)    (1,832,995)
                                                -----------------------------
                                                    4,783,699      7,773,002
                                                -----------------------------
                                                -----------------------------



    Genesis Worldwide Inc.

                       CONSOLIDATED STATEMENTS OF LOSS,
                        COMPREHENSIVE LOSS AND DEFICIT
                                 (unaudited)

                               Three months ended         Six months ended
                         ----------------------------------------------------
                              June 30      June 30      June 30      June 30
                                 2010         2009         2010         2009
                         ----------------------------------------------------
                                    $            $            $            $
                         ----------------------------------------------------
    Revenues
    Licensing                 (17,028)     805,636      174,069    3,031,169
    Structural products     2,084,843    2,252,968    2,858,831    4,906,072
                         ----------------------------------------------------
    Total revenues          2,067,815    3,058,604    3,032,900    7,937,241
                         ----------------------------------------------------

    Direct cost of
     revenues
    Licensing                  13,841       70,107       28,259    1,545,775
    Structural products     1,774,680    1,867,935    2,646,746    3,966,226
                         ----------------------------------------------------
    Total direct cost of
     revenues               1,788,521    1,938,042    2,675,005    5,512,001
                         ----------------------------------------------------
                              279,294    1,120,562      357,895    2,425,240
                         ----------------------------------------------------

    Expenses (other income)
    Research and
     development               31,989      125,678       94,707      325,222
    SR&ED tax credit                -      (45,000)           -      (95,000)
    Selling and marketing     133,012      402,780      424,560      704,334
    Engineering and
     project management       240,746      443,604      460,806      707,031
    General and
     administrative         1,002,361      920,780    1,784,530    1,613,985
    Occupancy                 297,553      349,085      618,325      699,780
                         ----------------------------------------------------
                            1,705,661    2,196,927    3,382,928    3,955,352
                         ----------------------------------------------------
    Loss before other
     expenses              (1,426,367)  (1,076,365)  (3,025,033)  (1,530,112)
                         ----------------------------------------------------
    Amortization of
     property, plant
     and equipment            161,585      232,546      333,253      466,204
    Amortization of
     intangible asset           1,552       71,383        3,103      140,787
    Foreign exchange gain      25,832          350         (906)      27,941
    (Income) loss from
     investments                    -            -            -            -
    Loss on disposal of
     property, plant and
     equipment                      -       26,974            -       31,517
    Bank interest expense
     and penalty charges       43,845         (395)      81,690       32,336
    Minimum royalty
     accretion                      -       62,049            -      128,190
    Debenture accretion             -       60,804            -       60,804
    Term loan and
     debenture interest
     expense                  255,484       89,188      270,894      146,298
                         ----------------------------------------------------
                              488,298      542,899      688,034    1,034,077
                         ----------------------------------------------------
    Net loss and
     comprehensive loss
     for the period        (1,914,665)  (1,619,264)  (3,713,067)  (2,564,189)

    Deficit, beginning
     of period            (66,588,800) (54,216,054) (64,790,398) (53,271,129)
                         ----------------------------------------------------
    Deficit, end of
     period               (68,503,465) (55,835,318) (68,503,465) (55,835,318)
                         ----------------------------------------------------
                         ----------------------------------------------------

    Loss per share
    Basic and diluted     $     (0.03) $     (0.05) $     (0.07) $     (0.08)
                         ----------------------------------------------------
                         ----------------------------------------------------
    Weighted average
     number of shares
     outstanding           56,462,351   30,982,858   54,063,337   30,982,858
                         ----------------------------------------------------
                         ----------------------------------------------------



    Genesis Worldwide Inc.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (unaudited)


                               Three months ended         Six months ended
                         ----------------------------------------------------
                              June 30      June 30      June 30      June 30
                                 2010         2009         2010         2009
                                    $            $            $            $
                         ----------------------------------------------------
    OPERATING ACTIVITIES
    Net loss for the year  (1,914,665)  (1,619,264)  (3,713,067)  (2,564,189)
    Adjustments for
     non-cash items
      Amortization of
       property, plant
       and equipment and
       intangible assets      163,137      303,929      336,356      606,991
      Loss on disposal of
       property, plant
       and equipment                -       26,974            -       31,517
      Stock-based
       compensation
       expense (recovery)       6,239       25,374      (20,853)      61,797
      Unrealized foreign
       exchange loss                -      (15,653)           -      (14,911)
      Debenture accretion           -       60,804            -       60,804
      Minimum royalty
       accretion                    -       62,049            -      128,190
      (Income) loss from
       investment                   -            -            -            -
                         ----------------------------------------------------
                           (1,745,289)  (1,155,787)  (3,397,564)  (1,689,801)
    Changes in non-cash
     working capital
     balances related
     to operations
      Accounts receivable     254,926       (3,753)   1,338,369      498,826
      Inventories and
       deposits on
       equipment               35,335       53,210      103,720      703,185
      Prepaid expenses          2,099       73,369       51,738       88,824
      Accounts payable
       and accrued
       liabilities          1,689,606     (568,331)   1,521,876     (536,361)
      Deferred revenue       (253,261)     265,533     (260,631)  (1,411,237)
      Cash held in trust            -            -      100,000            -
                         ----------------------------------------------------
    Cash used in
     operating activities     (16,584)  (1,335,759)    (542,492)  (2,346,564)
                         ----------------------------------------------------

    FINANCING ACTIVITIES
    Debenture proceeds              -    1,455,752            -    2,952,917
    Repayment on term loan          -     (138,928)     (97,410)    (275,654)
    Changes in long-term
     liability                      -       42,574            -      119,511
    Common stock issued             -            -      575,197            -
                         ----------------------------------------------------
    Cash provided by
     financing activities           -    1,359,398      477,787    2,796,774
                         ----------------------------------------------------

    INVESTING ACTIVITIES
    Additions to property,
     plant and equipment            -         (483)           -      (34,974)
    Disposals of property,
     plant and equipment            -      (12,988)           -       20,527
    Additions to
     intangible assets              -      (13,856)           -      (33,722)
    Minimum royalties paid          -     (150,000)           -     (300,000)
                         ----------------------------------------------------
    Cash used in
     investing activities           -     (177,327)           -     (348,169)
                         ----------------------------------------------------
    Net increase
     (decrease) in cash
     during the year          (16,584)    (153,688)     (64,705)     102,041
    Cash, beginning of
     period                    24,126      422,793       72,247      167,064
                         ----------------------------------------------------
    Cash, end of period         7,542      269,105        7,542      269,105
                         ----------------------------------------------------
                         ----------------------------------------------------

    Supplemental cash
     flow information
    Interest paid              20,260       56,263       35,670       85,116
                         ----------------------------------------------------
                         ----------------------------------------------------
    

SOURCE GENESIS WORLDWIDE INC.

For further information: For further information: Genesis Worldwide Inc., Catherine Smyth, Manager, Investor Relations, Tel: (905) 832-9286

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GENESIS WORLDWIDE INC.

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