Energy Composites Corporation (�ECC�) (OTCBB:ENCC), a leading
provider of composites-based solutions to the clean-tech sector,
today announced results for the quarter ended March 31, 2009. ECC
delivered a 48.7% increase in revenues for the quarter compared to
the same period in 2008 and a 20.8% increase in gross profit.
During 2008, ECC enjoyed a beneficiary relationship with
Fiberglass Piping & Fitting Company (�FPF�), a piping
distribution company owned by ECC�s largest shareholder, and
M&W Fiberglass, LLC (�M&W�), a predecessor company to
Advanced Fiberglass Technologies, Inc. (�AFT�). Both M&W and
FPF were considered variable interest entities throughout 2008,
thus requiring that ECC report financial performance on a
consolidated basis for 2008. On December 30, 2008, ECC terminated
that beneficial relationship with both entities. The figures used
in the remainder of this release reflect ECC�s results on a
stand-alone basis by removing the results of M&W and FPF.
�
1st Qtr2009
�
1st Qtr2008
Revenue $ 2,412,669 $ 1,623,014 Cost of goods sold � 1,968,202 � �
1,284,666 � Gross profit 444,467 338,348 Selling, general and
administrative expenses � 892,316 � � 528,360 � Income (loss) from
operations (447,849 ) (190,012 ) Interest expense, including
non-cash amortization of debt discounts related to convertible debt
� (1,614,642 ) � (165,527 ) Net loss, including effect of income
tax provision � (990,642 ) � (193,527 ) EBITDA, excluding non-cash
charges � ($336,339 ) � ($122,788 )
The increase in revenues quarter over quarter was attributable
to continuing volume improvements in and strengthening of in-plant
production for ECC�s core markets (flue-gas desulfurization,
chemical storage, water handling and bio-fuels). ECC experiences
softer seasonal field service revenues in the first quarter of each
year since most plant outages for the Company�s core market
customers occur during the spring, summer and fall. In interpreting
financial results, ECC uses EBITDA as the most meaningful
measurement of performance because of the substantial effect of
non-cash charges to the income statement due to the method of
accounting for convertible debt. The increase in current quarter
EBITDA loss is largely driven by the continued investment the
Company is making in growth, including investments in selling,
estimating, designing and contract management infrastructure.
Sam Fairchild, ECC�s CEO, stated that, �Our expansion and
diversification strategy continues apace, with solid core market
results in spite of economy-wide weaknesses. We are investing in
our WindFiber� strategy, and have announced our plans to construct
a 350,000 square foot wind blade production plant in Wisconsin
Rapids over the next twelve months. We are also investing in a
stronger sales and marketing platform as well as more solid
in-house capability to prepare bids, design composite solutions,
engineer product outcomes and manage contract execution. Upgrading
these capabilities has been a priority over the quarter, and we
have made great progress against our internal targets.�
Mr. Fairchild continued, �We are confident that making these
platform investments now will pay shareholders substantial
dividends throughout the rest of 2009 and during 2010. We are
bullish on the 2010 and beyond wind market, as well as demand for
cost-effective replacements for wastewater infrastructure. Flue gas
desulfurization infrastructure demand is driven by strict
regulatory requirements, and we are now seeing a new uptick in
activity in petrochemical, mining, biofuels and methane digestors.
The rest of 2009 and all of 2010 appears to be very favorable for
the value proposition we offer customers in each of our market
sectors.�
�We are pleased with our progress on internal efficiency and
production excellence over the quarter,� Jamie Mancl, ECC�s founder
and President, added. �ECC is really turning out superior composite
structures. Our recent completion of a large chlor-alkali tank
contract allowed us to put some new production concepts into place,
as well as put our new home-built vertical winder through its
paces. Our Employee-Associates really came through, and many of
these new production concepts will help to drive value in the
quarters to come.�
Mr. Mancl said, �We have also put a huge amount of effort into
the launch of our WindFiber� strategy, and we are very excited
about the materials, production, design and logistics innovations
we will bring to the wind energy market.�
ECC reported a net loss from operations during the first quarter
of 2009 of $0.4 million, compared to $0.2 million during the first
quarter of 2008. Much of that shift was the result of higher cost
of goods sold (�COGS�), itself the product of raw materials,
manufacturing labor and manufacturing overhead. The rest of the
2008 operational loss was driven by ECC�s investment in the selling
and corporate overhead required to facilitate and manage ECC�s
growth plan. Selling, general and administrative expenses (�SGA�)
increased from 33% of revenue in the first quarter of 2008 to 37%
in the first quarter of 2009. Much of this increase came from
increased headcount in ECC�s sales and marketing force and the
administrative resources to support the sales effort. Most of the
remainder of the SGA increase relates to increased corporate
headcount and associated expenses to accommodate the requirements
associated with being a public company.
Jeff Keuntjes, ECC�s Vice President, Finance, noted that �Our
operating results are within our operating plan�s expected range,
but our loss from operations is three percentage points higher than
I expected. We believe that we will enjoy substantial improvement
in manufacturing overhead as a percentage of revenues as production
volumes increase over 2009. I also expect that new production
efficiencies we have been developing over the last several months
will also drive additional EBITDA during 2009.�
ECC recorded non-cash amortization of debt discounts for
warrants and beneficial conversion feature related to the
convertible debt � ECC�s primary source of capital in 2008 � of $1
million in the quarter. In addition, ECC recorded a net income tax
benefit of $0.6 million for the first quarter of 2009, resulting in
a net loss of $0.9 million for the first quarter of 2009 compared
to a net loss of $0.2 million for the first quarter of 2008.
Sam Fairchild said, �We are on schedule to deliver a high level
of shareholder return for 2009, 2010 and beyond. Our strategic
platform investments, coupled with our market positioning and our
progress on innovations will begin to drive substantial value as
the economy strengthens and the wind energy market returns to its
previous growth pace. ECC�s Employee-Associates have been at the
core of this progress, and Jamie and Jennifer Mancl join me in
thanking them for their continued belief in our model and in what
we are trying to accomplish. Our future ability to deliver value
will also depend in part on the continuing strength of our
relationship with the City of Wisconsin Rapids, Wisconsin, the
State of Wisconsin, and our many local partners.�
About Energy Composites Corporation
ECC operates a world-class, automated 73,000 sq. ft.
climate-controlled manufacturing facility in Wisconsin Rapids, WI,
employing advanced composite materials to design, engineer and
manufacture complex composite structures, vessels and processing
systems for a range of clean-tech applications that include: wind
energy system components, flue gas desulfurization for power
plants, infrastructure for biofuel storage and processing,
infrastructure for managing waste water and drinking water storage,
advanced municipal utilities infrastructure, and caustic material
storage and handling systems for the petrochemical, mining and the
pulp and paper industries. ECC also provides 24/7 field service
crews nationwide for wind energy system composites maintenance,
repair and overhaul; industrial retrofit, shutdown and maintenance;
system installation; and repair and inspection services. For
additional information, visit our website at
www.energycompositescorp.com or contact Sam Fairchild at
1-800-787-5439.
Certain statements found in this press release may constitute
forward-looking statements. Forward-looking statements are based on
current expectations and include any statement that does not
directly relate to a current or historical fact. Such statements
are generally identifiable by the terminology used, such as
�anticipate,� �believe,� �intend,� �expect,� �plan,� or other
similar words. Our forward-looking statements in this release
generally relate to our expectations and beliefs with respect to
our growth and expansion activities and plans. Although it is not
possible to foresee all of the factors that may cause actual
results to differ from our forward-looking statements, such factors
include, among others, the following: (i) unforeseen delays, costs
or liabilities associated with our growth and expansion plans; (ii)
fluctuations in general economic conditions; and (iii) those risks
described from time to time in our reports to the Securities and
Exchange Commission. Investors should not consider any list of such
factors to be an exhaustive statement of all of the risks,
uncertainties or potentially inaccurate assumptions that could
cause our current expectations or beliefs to change. Shareholders
and other readers should not place undue reliance on
�forward-looking statements� as such statements speak only as of
the date of this release. We undertake no obligation to update
publicly or revise any forward-looking statements, other than as
required by law.
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