FULL YEAR HIGHLIGHTS:
- Net revenue of $28.0 million
- Gross profit margin of 28%
- Restructuring charges of $3.3 million
- Net loss of $26.4 million
- Loss per share of $0.50
FOURTH QUARTER HIGHLIGHTS:
- Net revenue of $6.1 million
- Gross profit margin of 1%
- Restructuring charges of $2.8 million
- Net loss of $10.0 million
- Loss per share of $0.19
Energy Recovery Inc (Nasdaq:ERII), a global leader in the design
and development of energy recovery devices for desalination and
other industrial processes, announced today the unaudited results
of its fourth quarter and fiscal year ended December 31, 2011. In
the fourth quarter of 2011, the Company achieved net revenue of
$6.1 million, representing a 53% decrease over the same period of
2010 and a 24% increase over the third quarter of 2011. While
revenue from mega-project activity remained non-existent in the
fourth quarter as anticipated, OEM sales with respect to PX devices
and related products and services demonstrated an improvement when
compared to the third quarter of 2011 and the fourth quarter of
2010. Importantly, with several mega-project awards announced
recently, the Company finds itself with a strong backlog position,
which management believes will result in increased revenue in the
current year of 2012.
Precipitated by the closure of the manufacturing facility in
Michigan and the consolidation of production operations in
California, the Company recorded gross profit margin in the fourth
quarter of 1%, largely a manifestation of negative operating
leverage along with certain plant disruption and facility
integration costs that were recognized in cost of
revenue. Specifically, these costs included significant
unabsorbed overhead caused by uniquely low production volume,
inventory write-downs, valuation adjustments for excess or obsolete
inventory, severance costs associated with changes in corporate
manufacturing leadership, and other costs for the qualification of
new ceramics material. While the integration is substantially
complete, the Company has increased production activity
methodically in the first quarter of 2012 and expects to attain
targeted production levels and yields starting in the second
quarter of 2012.
In the fourth quarter of 2011, the Company had total operating
expenses of $10.6 million as compared to $5.4 million in the same
period of the prior year. This variance is attributable principally
to the $2.8 million in restructuring charges recorded in the fourth
quarter of 2011 and a gain on fair value remeasurement of $2.1
million in the same period of 2010, the latter of which related to
contingent consideration for the Company's acquisition of Pump
Engineering LLC.
Including restructuring charges of $2.8 million, the Company
reported a net loss of $10.0 million, or ($0.19) per share, for the
three months ended December 31, 2011 compared to net income of $0.5
million, or $0.01 per share, for the same period of last
year. For the fiscal year of 2011, including restructuring
charges of $3.3 million, the Company reported a net loss of $26.4
million, or ($0.50) per share, compared to a net loss of $3.6
million, or ($0.07) per share for the fiscal year of 2010.
Specific to full-year results, the Company recognized net
revenue of $28.0 million in 2011 as compared to $45.9 million in
2010. The decrease of 39% reflects no shipments for new
construction of mega-projects over the last three consecutive
quarters in 2011. Exacerbating the absence of mega-project
activity was the unanticipated slow-down in the OEM market, caused
by the sovereign debt crisis in the Euro zone and political turmoil
in the Middle East.
In the context of diminished revenue, the Company achieved a
gross profit margin of 28% in the full year of 2011 as compared to
48% in 2010, primarily a result of negative operating leverage
caused by low production levels during fiscal year 2011. Not
unlike those items described above that caused notable margin
erosion in the fourth quarter of 2011, gross profit margin for the
full year was also impacted by plant disruption and facility
integration costs. Moreover, total operating expenses
increased from $27.1 million in the full year of 2010 to $33.1
million in the full year of 2011. The increase of $6.0
million, or 22%, was caused primarily by restructuring charges in
2011, increased G&A expenses to facilitate the changeover of
the senior management team, and a gain on fair value remeasurement
in 2010.
Tom Rooney, President and Chief Executive Officer, commented,
"The annual results reflect what we consider to be the nadir in the
desalination market, with both MPD and OEM revenue significantly
affected by macroeconomic and geopolitical events around the
world. In this challenging market environment, the Company
took decisive steps to dramatically alter its cost structure
through restructuring and other cost-savings initiatives. As
we look forward, with a healthy backlog position that speaks to
relative strength in both MPD and OEM markets, and in the presence
of a much improved cost structure, a new management team, a newly
integrated manufacturing facility capable of producing all ceramic
components along with machining and assembling all products, and
ongoing implementation of strategic initiatives that should result
in market diversification, I am extremely hopeful and excited about
our prospects in 2012 and beyond. In summary, while we
experienced extraordinarily difficult market conditions in 2011 and
recognized substantial non-recurring expenses to better structure
and align our organization, I believe that ERI sits at a seminal
turning point, well-positioned for growth and margin expansion now
and in the future."
Forward-Looking Statements
This press release includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements include our belief that
we reached the nadir in the desalination market in 2011 and our
expectations for enhanced revenue in 2012, anticipated cost
savings, penetration of new markets, strategic direction, future
growth, margin expansion, earnings potential, and other future
prospects. Because such forward-looking statements involve
risks and uncertainties, the Company's actual results may differ
materially from the predictions in those forward-looking
statements. Factors that could cause actual results to differ
materially include, but are not limited to, delays in, or
cancellation of, the construction of desalination
plants; risks that our market diversification and other
strategic efforts will not yield intended benefits; political
unrest; the inability of our customers to obtain project financing;
delays in governmental approvals; changes in end users' budgets for
desalination plants or the timing of their purchasing decisions;
our ability to ship new products to meet scheduled delivery times;
the global economic crisis; our ability to develop other energy
recovery solutions for markets outside of desalination; and other
risks detailed in the Company's filings with the Securities and
Exchange Commission ("SEC"). All forward-looking statements
are made as of today, and the Company assumes no obligation to
update such statements. For more details relating to the risks and
uncertainties that could cause actual results to differ materially
from those anticipated in our forward-looking statements, please
refer to the Company's SEC filings.
Conference Call to Discuss Fourth Quarter and Fiscal
Year-End Results for 2011
The conference call scheduled today at 1:30 p.m. PST will be in
a "listen-only" mode for all participants other than the sell-side
investment professionals who regularly follow the Company. The
toll-free phone number for the call is 877-941-8609 or local
480-629-9692, and the access code is 4507700. Callers should dial
in approximately 15 minutes prior to the scheduled start time.
A telephonic replay will be available at 800-406-7325 or
303-590-3030 (access code: 4507700) until March 22, 2012. Investors
may also access the live call or the replay over the internet at
www.streetevents.com or tinyurl.com/earningscall-Mar2012. The
replay will be available approximately three hours after the live
call concludes.
About Energy Recovery Inc
Energy Recovery Inc (Nasdaq:ERII) designs and develops energy
recovery devices and pumps that significantly reduce energy
consumption for desalination and other industrial processes. In
total, Energy Recovery has more than 12,000 devices installed
worldwide, which are estimated to save our clients in excess of one
billion dollars in energy costs every year. The company is
headquartered in the San Francisco Bay Area with offices in key
centers worldwide, including Madrid, Shanghai, and Dubai. For
more information about Energy Recovery Inc, please visit
www.energyrecovery.com.
Unaudited Consolidated
Financial Results |
|
|
|
|
|
|
|
|
ENERGY RECOVERY,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in thousands, except
per share data) |
(unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Year
Ended |
|
December
31, |
December
31, |
|
2011 |
2010 |
2011 |
2010 |
Net revenue |
$6,115 |
$13,013 |
$28,047 |
$45,853 |
Cost of revenue |
6,027 |
7,311 |
20,248 |
23,781 |
Gross profit |
88 |
5,702 |
7,799 |
22,072 |
Operating expenses: |
|
|
|
|
General and administrative |
4,792 |
3,747 |
16,745 |
14,471 |
Sales and marketing |
1,627 |
2,243 |
7,997 |
8,205 |
Research and development |
900 |
1,000 |
3,526 |
3,943 |
Amortization of intangible
assets |
323 |
575 |
1,360 |
2,624 |
Loss (gain) on fair value
remeasurement |
171 |
(2,147) |
171 |
(2,147) |
Restructuring charges |
2,824 |
— |
3,294 |
— |
Total operating expenses |
10,637 |
5,418 |
33,093 |
27,096 |
Income (loss) from operations |
(10,549) |
284 |
(25,294) |
(5,024) |
Interest expense |
(4) |
(20) |
(34) |
(73) |
Other non-operating income
(expense), net |
56 |
(116) |
184 |
(137) |
Income (loss) before income taxes |
(10,497) |
148 |
(25,144) |
(5,234) |
Provision for (benefit from) income
taxes |
(476) |
(348) |
1,299 |
(1,626) |
Net income (loss) |
$(10,021) |
$496 |
$(26,443) |
$(3,608) |
|
|
|
|
|
Earnings (loss) per share: |
|
|
|
|
Basic |
$(0.19) |
$0.01 |
$(0.50) |
$(0.07) |
Diluted |
$(0.19) |
$0.01 |
$(0.50) |
$(0.07) |
|
|
|
|
|
Number of shares used in per share
calculations: |
|
|
|
|
Basic |
52,645 |
52,501 |
52,612 |
52,072 |
Diluted |
52,645 |
53,482 |
52,612 |
52,072 |
|
ENERGY RECOVERY,
INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(in thousands, except
share data and par value) |
(unaudited) |
|
|
|
|
December 31, |
December 31, |
|
2011 |
2010 |
ASSETS |
|
|
Current
assets: |
|
|
Cash and cash equivalents |
$18,507 |
$55,338 |
Restricted cash |
5,687 |
4,636 |
Short-term investments |
11,706 |
— |
Accounts receivable, net of
allowance for doubtful accounts of $248 and $44 at December 31,
2011 and 2010, respectively |
6,498 |
9,649 |
Unbilled receivables,
current |
1,059 |
2,278 |
Inventories |
7,824 |
9,772 |
Deferred tax assets, net |
460 |
2,097 |
Prepaid expenses and other
current assets |
4,929 |
4,428 |
Total current
assets |
56,670 |
88,198 |
Restricted cash,
non-current |
5,232 |
2,244 |
Long-term investments |
11,198 |
— |
Land and building held for
sale |
1,660 |
— |
Property and equipment,
net |
16,170 |
22,314 |
Goodwill |
12,790 |
12,790 |
Other intangible assets,
net |
6,991 |
8,352 |
Other assets, non-current |
2 |
19 |
Total
assets |
$110,713 |
$133,917 |
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current
liabilities: |
|
|
Accounts payable |
$1,506 |
$1,429 |
Accrued expenses and other
current liabilities |
6,474 |
5,248 |
Income taxes payable |
21 |
13 |
Accrued warranty reserve |
852 |
1,028 |
Deferred revenue, current |
859 |
2,341 |
Current portion of long-term
debt |
85 |
128 |
Current portion of capital
lease obligations |
82 |
160 |
Total current
liabilities |
9,879 |
10,347 |
Long-term debt |
— |
85 |
Capital lease obligations,
non-current |
18 |
144 |
Deferred tax liabilities,
non-current, net |
1,516 |
317 |
Deferred revenue,
non-current |
261 |
157 |
Other non-current
liabilities |
2,085 |
2,067 |
Total
liabilities |
13,759 |
13,117 |
Commitments and
Contingencies |
|
|
Stockholders' equity: |
|
|
Preferred stock, $0.001 par
value; 10,000,000 shares authorized; no shares issued or
outstanding |
— |
— |
Common stock, $0.001 par value;
200,000,000 shares authorized; 52,645,129 and 52,596,170
shares issued and outstanding at December 31, 2011 and 2010,
respectively |
53 |
53 |
Additional paid-in capital |
114,619 |
112,025 |
Notes receivable from
stockholders |
(23) |
(38) |
Accumulated other comprehensive
loss |
(92) |
(80) |
(Accumulated deficit) retained
earnings |
(17,603) |
8,840 |
Total stockholders'
equity |
96,954 |
120,800 |
Total liabilities and
stockholders' equity |
$110,713 |
$133,917 |
CONTACT: Alexander J. Buehler
Chief Financial Officer
(510) 483-7370
Energy Recovery (NASDAQ:ERII)
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