Energy Composites Corporation (“ECC”) (OTCBB: ENCC) a leading
provider of composites-based solutions to the clean-tech sector,
today announced results for its fiscal year ended December 31,
2009. ECC announced full year revenues of $8.3 million, down from
$8.7 million ($9.2 million on a consolidated basis) in 2008.
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 ECC.
Both FPF and M&W were considered variable interest entities in
2008, thus requiring that ECC report financial performance on a
consolidated basis with these entities 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.
2009 2008 Revenue 8,331,786 $ 8,674,276
Cost of goods sold 6,851,225 7,455,339 Gross
profit 1,480,561 1,218,937 Selling, general and administrative
expenses 3,792,764 3,370,882 Loss from
operations (2,312,203 ) (2,151,945 ) Other expense
(1,932,383 ) (4,175,385 ) Income tax (provision) benefit (1,855,000
) 2,215,000 Net loss attributable to ECC (6,099,586 )
(4,112,330 )
The 3.9% decline in revenues year over year reflected a $531,000
increase in revenue from product sales and a $874,000 decrease in
revenue in field services, largely attributable to postponement and
downsizing of outage-related projects driven by poor economic
conditions. During the period, ECC reported a 3.7% improvement in
gross margin, indicating strong progress in reducing manufacturing
overheads, improving labor and asset utilization, and migrating
towards higher margin business. The Company reported a 6.6%
increase in selling, general and administrative expenses, derived
primarily from the ramp up of its investment in the launch of the
WindFiber™ wind blade production strategy.
Sam Fairchild, ECC’s CEO, stated that, “Given the unprecedented
weakening of the U.S. economy during 2009, I am relatively happy
with our performance. Several of the strategic initiatives we
started in late 2008 – leveraging our innovations in materials,
design, manufacturing processes and product technologies and
deepening our relationship with certain core customers, paid off
for us in 2009 as we experienced a revenue decline that was
substantially smaller than the levels reported by Lucintel for the
composites fabrication industry. Holding our own in the context of
top line was an important accomplishment, and I congratulate our
associates for their efforts to preserve and grow market share
during the period. Other strategic initiatives we started in 2008
and continued in 2009 will bear fruit in 2010, including recently
finished redesign of our sales and marketing strategy. Now that Jim
Thomas, our national sales director, has his regional sales
structure in place, I am confident that he will deliver significant
revenue growth over 2010, 2011 and beyond.”
“We had hoped for much better results from our field services
division”, Fairchild continued, “especially given our substantial
investment during 2008 in field services capacity. The good news is
that the outage and field services work that did not happen in 2009
has not gone away, and we are confident that the market will catch
up with our capacity during 2010. I still believe that our decision
to invest in the winders and other equipment needed for field
services as well as deepen the capability of our field services
team was the right one, and initial indications during the first
few months of 2010 are that our clients will accelerate their
demand for our field services throughout the year. I also want to
congratulate our associates on their success in driving up gross
margin in these particularly hard economic times. Those systemic
changes in manufacturing overheads, labor productivity and, most
importantly, proposal pipeline quality as we begin to leverage the
advantages of our innovations will be with us for many years to
come.”
“Our proposal pipeline for 2010 reflects our commitment to
growing our field services operations,” Jamie Mancl, ECC’s founder
and President, added. “We have a strong mix of onsite production
projects, including near-site projects where we produce oversized
tanks at a Great Lakes port for loading onto barges for delivery
and installation, as well as a surge of maintenance, repair and
overhaul opportunities across all of our legacy sectors, including
flue gas desulfurization infrastructure at coal-fired power plants.
I expect our results for 2010 in field services will be
dramatically better than they were in 2009. I also expect that our
RTP-1 accreditation process, which we tried to complete in 2009,
will finish in 2010. Holding RTP-1 credentials will allow us to
increase the size and bandwidth of our proposal pipeline and
provide us with an additional measure of pricing strength. Both of
these developments will generate further improvements in our
profitability since on-site revenues generally contribute higher
gross margins than our traditional manufacturing operations.”
ECC reported a slight increase of $160,258 in operating loss for
2009, primarily attributable to the planned selling, general and
administrative costs associated with the implementation of the
Company’s WindFiber™ strategy, the strengthening of the sales and
marketing team, and a modest reduction in our total revenues, in
sharp contrast with our composite fabrication peer group. Most of
these investments and revenue results were offset by improvements
in gross margin.
Jeff Keuntjes, ECC’s Vice President for Finance, noted that,
“Except for revenues from field services operations, all of our
operating numbers are within our operating plan’s expected range. I
am particularly pleased with the results from our team’s efforts to
improve gross margin. We have faced a particularly difficult
economic environment during 2009, and have weathered it, all told,
better than we might have predicted. While some of that weakness
has manifested itself in the first quarter of 2010, we are seeing
hard evidence that the capital goods market is returning,
especially around field services. We continue our efforts to
improve gross margin for 2010, especially around our reform of our
proposal pipeline to focus more on bid opportunities where we can
leverage our innovations in materials, including our XLCR
abrasion-resistant coatings, design, production processes and
product technologies.”
ECC recorded non-cash amortization of residual debt discounts
for warrants and beneficial conversion feature related to the
convertible debt – ECC’s primary source of capital – and interest
expense of $1.9 million, as well as a net income tax benefit of
$1.6 million. ECC also reserved a 100% valuation allowance against
its deferred tax assets with a non-cash charge of $3.4 million in
accordance with generally accepted accounting principles that
require such accounting treatment when there is not a clear
expectation of near-term use of the asset. ECC stated that it fully
anticipates making use of the tax asset in 2010 and 2011, but that
the Company’s planned investments in WindFiber™ during 2010 makes
it appropriate to make the reservation as of the end of 2009. These
non-cash charges result in a net loss of $6.1 million for 2009
compared to a net loss of $4.1 million for 2008.
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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