ProSep reports 2009 first quarter financial results



    MONTREAL, May 14 /CNW/ - ProSep Inc. (TSX: PRP), dedicated to providing
process solutions to the oil and gas industry, today announced its financial
results for the three-month period ended March 31, 2009. All amounts are
reported in Canadian dollars unless otherwise stated.

    
    Selected Highlights

    -   Recorded revenues of $13.2 million, up 45% when compared to
        $9.1 million for the corresponding period of 2008.
    -   Generated gross margin of $3.2 million (24%) compared to $2.5 million
        (28%) for the corresponding period of 2008.
    -   Recorded net loss of $2 million for the three-month period ended
        March 31, 2009 compared to a net loss of $3.3 million for the
        corresponding period of 2008.
    -   Announced approximately $12 million(1) in new contracts during the
        quarter to supply process equipment to large national and
        international oil and gas producers.
    -   Sales backlog totalled at $ 24.1 million at April 1, 2009.
    -   Launched a new line of conventional produced water treatment
        products, complementing the Company's existing product portfolio.
    -   Received important industry recognition for ProSalt, a compact and
        highly efficient crude desalting technology.
    -   Initiated a program to recapitalize the organization while reducing
        overall debt.
    -   Concluded new covenant structure with DnB Nor, releasing 18 million
        NOK (approximately $3.4 million as of April 29, 2009) previously
        escrowed.
    -   Signed a long-term credit agreement with National Bank of Canada,
        providing for long term limited recourse financing against the Asset
        Backed Commercial Paper.

    --------------------------
    (1) Sales are usually announced in USD, a total of US$9.3 million was
        announced in 2008 or approximately $12 million CAD at average
        exchange rate of $1.25 USD/CAD.
    

    "Our 2009 first quarter revenues have shown significant growth of 45%
over last year's quarter. Our increased level of activity in South East Asia,
dedication to expanding our product lines and focus on leveraging operational
synergies are all recent initiatives that have supported our momentum," said
Jacques L. Drouin, President and CEO of ProSep Inc. "In order to continue
delivering strong results in this challenging environment, we are continually
focusing on actively promoting our new produced water treatment line and
proprietary products across our global distribution network."
    "We believe that worldwide reductions in CAPEX programs are not expected
to occur equally across all regions. In this context, our global
diversification strategy should continue to serve us well as we are now
positioned to target promising markets such as South East Asia and the
Middle-East," added Mr. Drouin. "In fact, in the last two quarters, ProSep has
been invited to quote on a large number of potential projects, mostly for
National Oil Companies. Even though lower hydrocarbon prices and global
reductions in capital spending programs have lengthened our industry's sales
cycle, we continue to experience a high level of activity."
    "The Company's current debt obligations and debt repayment schedule
impose a burden on projected growth and, in particular, debt servicing in the
parent Company cannot be met in the second half of 2009 due to debt covenants
restricting the use of available liquidities from operations. As a result, we
are currently exploring ways to reduce our overall debt, preserve our cash
position and align our credit facilities to better suit the capital needs of
the entire organization. We have initiated discussions with current
debtholders with a view to reorganizing our capital structure. The outcome of
these discussions may result in the swapping of all or part the Company's debt
for equity. If successful, a reorganization will significantly strengthen our
financial position and enable us to take better advantage of future market
opportunities," concluded Mr. Drouin.
    For more information, refer to ProSep's first quarter 2009 MD&A.

    Financial Results

    For the three-month period ended March 31, 2009 ProSep reported revenue
of $13.2 million, a 45% increase from $9.1 million during the comparable
period of 2008. The completion of major contracts as well as favourable
exchange rates allowed our US operations to achieve a revenue growth of 29%
(from $7.8 million in Q1-2008 to $10 million in Q1-2009). During the period,
average USD/CAD conversion rates for sales concluded at the US operations
account for about $1.8 million of revenue increase (from an average foreign
exchange rate of 1.01 for Q1-2008 to 1.24 for Q1-2009). Our Asia Pacific
operations also contributed to revenue increases and grew at the quickest rate
of all our operations with $2.2 million of revenues in Q1-2009 representing
17% of our consolidated revenues. For the previous comparable quarter of 2008,
this operation reported revenues of $0.8 million or 9% of consolidated
revenues. The increase is mainly attributable to two important contracts for
the delivery of fuel gas packages. The slight decrease of the ProPure and
Middle-East operation is explained by lower order intake related to timing of
contracts.
    Gross margin was $3.2 million or 24% of revenue for Q1-2009, and $2.5
million or 28% of revenues for the Q1-2008. Lower Q1-2009 gross margins are
mainly attributable to US contracts mix where contracts had a slightly lower
margin than in the previous comparable period due to their relative size.
Additionally, during the first quarter of 2008, the ProPure and Middle East
operation reported technology licence revenues of about $0.3 million for which
there was no cost. However, important Asia Pacific margin increases (from 5%
in Q1-2008 to 27% in Q1-2009) compensated for a fair portion of the margin
declines. This improvement is caused by increased revenues that allowed the
business unit to capture operational synergies.
    Earnings before interest, taxes, depreciation and amortisation (EBITDA)
stood at ($0.148) million for Q1-2009 compared to ($0.441) million for the
comparable period in 2008. Increased revenue and costs reduction programs
implemented in 2008 and 2009 account for this improvement, in line with the
Company's continued efforts to streamline operations, leverage global
synergies and control costs.
    Sales and marketing expenses were $0.5 million or 3.6% of revenues for
Q1-2009 compared to $0.6 million or 6.2% for Q1-2008. These reductions result
from a smaller sales and marketing team and better cost control measures at
the Company's Norwegian operations.
    General and administrative ("G&A") expenses were $2.7 million or 21% of
revenues for Q1-2009 compared to $2.1 million or 23% for Q1-2008. The increase
in G&A is mainly explained by a higher US conversion rate which accounts for
about $0.225 million and new hires at the US and Asia Pacific operations to
support growth, representing approximately $0.2 million. Pension accrual
charges related to reduction in staff at the Norwegian operations and various
head office and business unit expenses account for the remainder of the
increase in quarterly G&A.
    Research and development expenses decreased to $0.161 million or 1.2% of
revenues in Q1-2009 from $0.303 million or 3.3% in Q1-2008. The expenses
incurred by the Company relating to R&D activities (mostly salaries) have and
will continue to be reduced significantly as development activities are
increasingly conducted in collaboration with industry partners.
    The Company reported a net loss of $2 million or ($0.03) per share for
Q1-2009 compared to a net loss of $3.3 million or ($0.05) per share for
Q1-2008.
    Basic and diluted earnings (loss) per share was calculated using the
weighted-average number of common shares outstanding during the period:
64,443,451 shares for the first quarter ended March 31, 2009 and 62,556,566
shares for the corresponding quarter of 2008.
    At March 31, 2009, ProSep held cash and cash equivalents of $8.9 million.
    ProSep Inc. recently concluded a final credit agreement with National
Bank of Canada for long term limited recourse financing against the Asset
Backed Commercial Paper ("ABCP") as per the Pan-Canadian Investors Committee
approved restructuring. National Bank of Canada has agreed to provide ProSep
with a $7.2 million long term loan, secured by the new ABCP replacement notes,
in replacement of the previous demand loan secured with the ABCP that matured
on April 30, 2009. By concluding this new financing agreement National Bank of
Canada guaranties approximately 60% of the original ABCP value.
    The Company also agreed to a new covenant structure outlining its
45,000,000 NOK loan facility with DnB NOR Bank ASA (36,000,000 NOK at March
31, 2009) so as to release the 18,000,000 NOK (approximately $3.4 million as
of March 31, 2009) previously escrowed pending the renegotiation relating to
the new covenant structure.

    
    Selected Financial Highlights
    -------------------------------------------------------------------------
                                            Quarter ended      Quarter ended
    (000s)                                  March 31 2009      March 31 2008
    -------------------------------------------------------------------------
    Revenue                                       $13,187             $9,117
    -------------------------------------------------------------------------
    Gross margin                                   $3,217             $2,533
    -------------------------------------------------------------------------
    Gross margin percentage of sales                  24%                28%
    -------------------------------------------------------------------------
    EBITDA(*)                                       ($148)             ($441)
    -------------------------------------------------------------------------
    EBITDA percentage of sales                        n/a                n/a
    -------------------------------------------------------------------------
    Net loss                                      ($1,985)           ($3,338)
    -------------------------------------------------------------------------
    Basic and diluted loss per share               ($0.03)            ($0.05)
    -------------------------------------------------------------------------
    Weighted average number of shares
     (basic and diluted)                           64,443             62,557
    -------------------------------------------------------------------------
    As at:                                 March 31, 2009  December 31, 2008
    -------------------------------------------------------------------------
    Working capital(1)                             $3,316               $944
    -------------------------------------------------------------------------
    Total Assets                                  $71,197            $69,496
    -------------------------------------------------------------------------
    Long-term liabilities(2)                      $21,200            $20,695
    -------------------------------------------------------------------------
    Shareholder equity                            $17,609            $19,531
    -------------------------------------------------------------------------
    (*) EBITDA is a non-GAAP measure and the Company defines it as earnings
        or loss from operations excluding depreciation and amortization,
        financial charges and income taxes. Please refer to section called
        non GAAP measurement in the MD&A.
    (1) Excluding ABCP short term demand loan
    (2) Including ABCP related National Bank loan
    

    ProSep's quarterly consolidated financial statements are available on the
Company's website at www.prosepinc.com.
    ProSep filed its quarterly consolidated financial statements for the
three-month period ending March 31, 2009 and related management discussion and
analysis with securities regulatory authorities. The material will be
available through SEDAR at www.sedar.com and on the Company's website,
www.prosepinc.com.

    Amended Proxy Circular

    At the request of the Autorité des Marchés Financiers ("AMF"), the
Company amended and re-filed on the date of this press release, the Amended
Management Proxy Circular filed on April 23, 2009. The Circular has been
re-amended to incorporate a more detailed analysis of Form 51-102F6 in respect
of Executive Officers and Directors compensation. These changes are fully
detailed in the Accompanying Letter filed on www.sedar.com.

    Conference Call and Webcast Details

    ProSep will host a conference call on Thursday, May 14 at 8:00 a.m. (ET)
to discuss its 2009 first quarter financial results. To access the conference
call by telephone, dial 416-644-3427 or 1-800-588-4942. Please connect
approximately 15 minutes prior to the beginning of the call to ensure
participation.
    A live audio webcast of the conference call will be available at
www.newswire.ca. Please connect at least 15 minutes prior to the conference
call to ensure adequate time for any software download that may be required to
join the webcast. The webcast will be archived at www.prosepinc.com for 30
days.

    
    Note: Earnings before interest, taxes, depreciation and amortization
    (EBITDA) is a non-GAAP measure and the Company defines it as earnings or
    loss from operations excluding depreciation and amortization, financial
    charges and income taxes
    

    About ProSep Inc.

    ProSep Inc. is dedicated to providing process solutions to the oil and
gas industry. ProSep designs, develops, manufactures and commercializes
technologies to separate oil, water and gas generated by oil and gas
production. For more information, please visit www.prosepinc.com.

    Caution concerning forward-looking statements

    This press release may contain forward-looking statements, including
statements regarding the business and anticipated financial performance of
ProSep Inc. These statements are based, among others, on the Company's current
assumptions, expectations, estimates, objectives, plans and intentions
regarding projected revenues and expenses, the economic and industry
environments in which the Company operates or which could affect its
activities, the Company's ability to attract new clients and consumers as well
as its operating costs, raw materials and energy supplies which are subject to
a number of risks and uncertainties. Forward-looking statements can generally
be identified by the use of the conditional tense, the words "may", "should",
"would", "believe", "plan", "expect", "intend", "anticipate", "estimate",
"foresee", "objective" or "continue" or the negative of these terms or
variations of them or words and expressions of similar nature. Actual results
could differ materially from the conclusion, forecast or projection stated in
such forward-looking information. These statements are subject to a number of
risks and uncertainties that may cause actual results to differ materially
from those contemplated by the forward-looking statements. Some of the factors
that could cause such differences include but are not limited to the Company's
ability to develop, manufacture, and successfully commercialize value added
equipments and services, the availability of funds and resources to continue
its operations and pursue its projects, legislative or regulatory
developments, competition, technological change, changes in government and
economic policy, inflation and general economic conditions in geographic areas
where ProSep Inc. operates. These and other factors should be considered
carefully and undue reliance should not be placed on the forward-looking
statements.

    %SEDAR: 00009317EF




For further information:

For further information: ProSep Inc., Jacques L. Drouin, President &
CEO, (514) 522-5550 ext. 226, jdrouin@prosepinc.com; Patrice Daignault, CFO &
Corporate Secretary, (514) 522-5550 ext. 235, pdaignault@prosepinc.com

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PROSEP INC.

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