ProSep reports second quarter 2008 financial results



    
    - Quarter marked by revenue growth of 61% and first-ever positive
    EBITDA -
    

    MONTREAL, Aug. 13 /CNW/ - ProSep Inc. (TSX: PRP), dedicated to providing
process solutions to the oil and gas industry, today announced its financial
results for the three and six month periods ended June 30, 2008. All amounts
are reported in Canadian dollars unless otherwise stated.

    
    Highlights of the Second Quarter
    -   Revenues were $15.1 million, up 61% from $9.4 in the second quarter
        of 2007.
    -   EBITDA(*) was $1.4 million, marking the Company's first-ever quarter
        of positive performance.
    -   Net loss was $162,000 compared to a net loss of $2.9 million in the
        second quarter of 2007.
    -   Signed customer agreements valued at $24 million (US) to supply
        processing, treatment and separation equipment for use by the Kuwait
        Oil Company, Occidental of Elk Hills Inc., and Hudson Hope Gas Ltd.
    -   Completed a $5.1 million private placement financing.
    -   Following shareholder approval, changed company name to ProSep Inc.,
        and began trading under the symbol PRP on the Toronto Stock Exchange.

    Highlights Subsequent to Quarter End
    -   Named Patrice Daignault as Chief Financial Officer and Corporate
        Secretary effective September 2, 2008.
    -   Appointed David Laidley, Chairman Emeritus of Deloitte & Touche LLP,
        to the Company's board of directors.
    -   Signed customer agreements valued at approximately $10 million to
        supply process and separation equipment to be used by leading oil and
        gas companies, including BP Exploration Alaska and Petronas.
    

    "Our second quarter results demonstrate that our strategy to reorganize
the company along three geographic business units, implement focused global
sales, diversify our product mix and reduce costs is delivering results," said
Jacques L. Drouin, President and CEO, ProSep Inc. "Consistent with our plan,
we improved our EBITDA performance, increased our revenue backlog, grew our
customer base while reducing our expenses over the first quarter. In
particular, generating EBITDA of $1.4 million is a significant milestone as it
represents our first-ever quarter of positive performance."

    Financial Results

    Consolidated revenues for the second quarter ended June 30, 2008 were
$15.1 million, up 61% from $9.4 million in the second quarter of 2007. The
growth is attributable to higher sales of the Company's traditional products
that focus on the separation of gas, oil and water during upstream production
activities. For the six month period ended June 30, 2008, ProSep's
consolidated revenues were $24.3 million compared to $25.8 million generated
in the first six months of 2007 when the Company, operating as TORR Canada,
made a significant, single sale of its proprietary, water-treatment
technology.
    Gross profit for the second quarter of 2008 was $4.4 million or 29% of
revenues compared to a loss of $1.6 million in the second quarter of 2007. For
the six months ended June 30, 2008, ProSep's gross profit was $7.1 million or
29% of revenues, compared to a loss of $2.2 million in the first six months of
2007.
    EBITDA for the second quarter of 2008 was $1.4 million, compared to an
EBITDA loss of $2.6 million in the second quarter of 2007. For the six months
ended June 30, 2008, EBITDA was $935,836 compared to an EBITDA loss of
$4.5 million for the same period of 2007.
    Sales and marketing expenses for the second quarter of 2008 were
$429,000, up 26% from $341,000 in the second quarter of 2007. The majority of
those expenses are related to salaries, travel expenses and professional fees
paid to sales and marketing experts in Houston, Montreal and Norway. For the
six months ended June 30, 2008, sales and marketing expenses were $990,000, up
from $738,000 for the same period in 2007. The increase in sales and marketing
expenses is the result of expanded operations resulting from the acquisition
of Pure Group As in October, 2007.
    Research and development costs in the second quarter of 2008 were
$265,000 compared with $49,000 in the second quarter of 2007. For the six
months ended June 30, 2008, total research and development costs were $568,000
up from $170,000 for the same period in 2007. The increase in research and
development costs is also due to the expanded operations.
    General and administrative expenses, which include salaries, professional
fees and offices infrastructure, were $2.3 million for the second quarter of
2008 compared with $640,000 for the second quarter of 2007. For the six months
ended June 2008, general and administrative expenses totalled $4.6 million
compared with $1.4 million for the six months ended June 2007. The growth in
general and administrative expenses is also attributable to the expanded
operations.
    The net loss for the second quarter of 2008 was $162,000 compared with a
net loss of $2.9 million in the second quarter of 2007. For the six months
ended June 30, 2008, the net loss was $3.5 million compared with a net loss of
$4.8 million for the same period in 2007.
    As at June 30, 2008, ProSep held cash and cash equivalents of
$11.2 million.

    ProSep will host a conference call to discuss its second quarter 2008
financial results on August 14 at 8:30 a.m. ET. The conference call will also
be webcast live at www.newswire.ca and archived for 90 days at
www.prospepinc.com.

    
    (*) 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., formerly known as TORR Canada 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 contains forward-looking statements. Such statements
inherently involve numerous risks and uncertainties. Actual future results may
differ from the anticipated results expressed in the forward-looking
statements contained in this press release and ProSep does not undertake to
update this information. Investors are cautioned against placing undue
importance on forward-looking information contained herein and should consult
the final short form prospectus and the documents incorporated by reference
therein, which contain a more exhaustive analysis of risks and uncertainties
connected to ProSep's business.


    
    ProSep Inc.
    (Formerly TORR Canada Inc.)
    Consolidated statements of (loss) and comprehensive (loss)
    For the three-month and six-month periods
    ended June 30, 2008 and 2007
    (Unaudited)
                             Three months ended         Six months ended
                                   June 30                   June 30
    -------------------------------------------------------------------------
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------

                                    $            $            $            $

    Revenue                15,140,834    9,401,716   24,257,877   25,816,413
    Cost of goods sold     10,731,125   10,996,252   17,195,612   27,994,186
    -------------------------------------------------------------------------
    Gross margin            4,409,709   (1,594,536)   7,062,265   (2,177,773)
    -------------------------------------------------------------------------

    Expenses

      Sales and marketing     428,991      341,632      990,055      738,081
      Research and
       development            264,578       49,467      567,783      169,907
      General and
       administrative       2,339,243      640,592    4,568,591    1,404,213
    -------------------------------------------------------------------------
                            3,032,812    1,031,691    6,126,429    2,312,201
    -------------------------------------------------------------------------
                            1,376,897   (2,626,227)     935,836   (4,489,974)

    Decrease in fair
     value of investment
     in ABCP                        -            -      450,000            -
    Financial charges         566,352      196,827    2,525,222       78,812
    Amortization              377,284      105,008      741,141      222,362
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes             433,261   (2,928,062)  (2,780,527)  (4,791,148)
    -------------------------------------------------------------------------

    Current tax provision     564,859            -      770,027            -
    Future tax provision
     (recovery)                30,524            -      (50,618)           -
    -------------------------------------------------------------------------
    Income taxes              595,383            -      719,409            -
    -------------------------------------------------------------------------
    Net (loss) and
     comprehensive (loss)    (162,122)  (2,928,062)  (3,499,936)  (4,791,148)
    -------------------------------------------------------------------------


    Weighted average
     number of shares      62,556,566   46,700,673   62,556,566   46,698,509
    Basic and diluted
     (loss) per share           (0.00)       (0.06)       (0.06)       (0.10)
                           --------------------------------------------------
                           --------------------------------------------------



    ProSep Inc.
    (Formerly TORR Canada Inc.)
    Consolidated balance sheets
    As at June 30, 2008 and December 31, 2007
    (Unaudited)
                                                                     Audited
                                                        June 30  December 31
    -------------------------------------------------------------------------
                                                           2008         2007
    -------------------------------------------------------------------------
                                                              $            $

    Assets

    Current assets
      Cash and cash equivalents                      11,249,925    8,662,634
      Restricted cash                                 1,063,142    1,055,846
      Receivables                                    15,848,854   11,299,053
      Deferred contract costs                            70,034       66,048
      Inventories                                       449,904      615,430
      Prepaid expenses                                  662,278      418,222
      Derivative financial instruments                        -       12,450
    -------------------------------------------------------------------------
                                                     29,344,137   22,129,683

    Long-term investment                              6,750,000    7,200,000
    Property and equipment                            1,986,252    2,093,671
    Goodwill                                         20,407,126   20,407,126
    Intangible assets                                 8,191,400    8,530,759
    Future tax assets                                    69,198       72,596
    -------------------------------------------------------------------------
                                                     66,748,113   60,433,835
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities

    Current liabilities
      Bank credit facilities                         11,161,027   10,602,541
      Accounts payable and accrued liabilities       20,021,902   15,765,232
      Deferred revenue                                  430,907      349,515
      Derivative financial instruments                   23,571            -
      Current portion of long term debt               2,075,206    1,660,518
    -------------------------------------------------------------------------
                                                     33,712,613   28,377,806

    Interest payable                                    651,493      651,493
    Long-term debt                                   13,777,965   11,178,087
    Future tax liabilities                            1,108,776    1,162,791
    Pension obligation                                  413,266      391,650
    -------------------------------------------------------------------------
                                                     49,664,113   41,761,827
    -------------------------------------------------------------------------

    Shareholders' equity

      Share capital                                  55,144,398   55,144,398
      Contributed surplus                            12,299,557   10,132,726
      Deficit                                       (50,359,955) (46,605,116)
    -------------------------------------------------------------------------
                                                     17,084,000   18,672,008
    -------------------------------------------------------------------------
                                                     66,748,113   60,433,835
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    ProSep Inc.
    (Formerly TORR Canada Inc.)
    Consolidated statements of cash flows
    For the three-month and six-month periods
    ended June 30, 2008 and 2007
    (Unaudited)
                             Three months ended         Six months ended
                                   June 30                   June 30
                         ----------------------------------------------------
                                 2008         2007         2008         2007
                         ----------------------------------------------------
                                    $            $            $            $

    Operating activities

    Net loss and
     comprehensive loss      (162,122)  (2,928,062)  (3,499,936)  (4,791,148)
    Items not affecting
     cash
      Stock-based
       compensation           118,722      155,518      254,719      330,561
      Amortization of
       property &
       equipment              207,606       77,820      401,787      167,987
      Amortization of
       intangible assets      169,678       27,188      339,354       54,375
      Amortization of
       financing related
       costs                        -       70,583            -      141,166
      Accreted interest        77,448      123,746      139,179      237,530
      Accrued interest on
       long term
       investment                   -     (163,786)           -     (141,357)
      Decrease in fair
       value of investment
       in ABCP                      -            -      450,000            -
      Periodic pension
       cost                    12,400            -       21,616            -
      Future income taxes      30,524            -      (50,618)           -
      Change in fair value
       of derivative
       financial
       instruments           (203,977)    (161,150)      36,021     (187,000)
      Unrealized exchange
       (gain) loss           (162,608)           -    1,322,106            -
    -------------------------------------------------------------------------
                               87,671   (2,798,143)    (585,772)  (4,187,886)
    -------------------------------------------------------------------------

    Changes in non-cash
     operating working
     capital items            (43,091)   2,683,520     (254,949)    (298,956)
    -------------------------------------------------------------------------
                               44,580     (114,623)    (840,721)  (4,486,842)
    -------------------------------------------------------------------------

    Investing activities

    Acquisition of
     property &
     equipment               (242,283)    (101,034)    (294,748)    (363,465)
    Deferred costs                  -     (562,609)           -     (562,609)
    -------------------------------------------------------------------------
                             (242,283)    (663,643)    (294,748)    (926,074)
    -------------------------------------------------------------------------

    Financing activities

    Change in bank
     indebtedness                   -   (5,113,242)           -   (4,002,129)
    Increase in long term
     debt                   4,762,473                 4,762,473
    Share issue cost         (141,777)                 (141,777)
    Reimbursement of
     long-term debt          (893,609)        (586)    (897,936)      (1,158)
    Issuance of share
      capital                       -            -            -        1,667
    -------------------------------------------------------------------------
                            3,727,087   (5,113,828)   3,722,760   (4,001,620)
    -------------------------------------------------------------------------

    Effect of exchange
     rate on cash and
     cash equivalents          28,715            -      137,534            -
    Increase (decrease)
     in cash and cash
     equivalents            3,500,669   (5,892,094)   2,449,757   (9,414,536)
    Cash and cash
     equivalents,
     beginning of period    7,720,541   22,399,796    8,662,634   25,922,238
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                11,249,925   16,507,702   11,249,925   16,507,702
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00009317EF




For further information:

For further information: ProSep Inc., Jacques L. Drouin, President &
CEO, (514) 522-5550 ext. 226, jdrouin@prosepinc.com; The Equicom Group Inc.,
Joe Racanelli, (416) 815-0700 ext. 243, jracanelli@equicomgroup.com

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