Genesis Worldwide Inc.
TSX : GWI
AIM : GWI

Genesis Worldwide Inc.

August 06, 2008 02:00 ET

Genesis Worldwide Announces Second Quarter Fiscal 2008 Results

Strong New Signed Customer Orders of $18.7 Million Achieved During the Quarter

MISSISSAUGA, ONTARIO--(Marketwire - Aug. 6, 2008) - Genesis Worldwide Inc. ("Genesis" or the "Company"), (TSX:GWI)(AIM:GWI), a leading provider of 'green' structural building technology using light steel, announces its financial results for the second quarter ended June 30, 2008. The Company reports its financial statements in accordance with Canadian generally accepted accounting principles ("GAAP") and reports in Canadian dollars.

Financial Highlights

Six Months Ended June 30, 2008

- Total revenue for the first six months ended June 30, 2008 increased 27.8% to $11,508,181, compared to $9,007,562 for the first half of 2007.

- Revenue for the licensing division for the first six months ended June 30, 2008 increased 25.5% to $4,564,489, compared to $3,636,624 for the same period last year.

- Revenue for the structural products division for the first six months ended June 30, 2008 increased 29.3% to $6,943,692, compared to $5,370,938 for the first six months of 2007.

- Total contribution margin for the first six months ended June 30, 2008 increased 20.1% to $3,450,469, compared to $2,872,143 for the first six months of 2007.

- Net loss for the six months ended June 30, 2008 was $3,629,145, or ($0.12) per common share, compared to a net loss of $3,825,947, or ($0.18) per common share, for the same period in 2007.



Six Months Ended June 30, 2008
------------------------------
(unaudited, in thousands Structural
of dollars) Licensing Products Corporate Total
----------------------------------------------------------------------------
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Revenue $ 4,564 $ 6,944 $ -- $ 11,508
Contribution margin 2,744 707 -- 3,450
Operating expenses 2,906 2,128 1,366 6,401
Loss before other expenses (162) (1,422) (1,366) (2,950)
Other expenses (316) (409) 46 (679)
Net loss for the quarter (478) (1,831) (1,320) (3,629)
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Three Months Ended June 30, 2008

- Total revenue for the second quarter ended June 30, 2008 deceased 23.8% to $3,826,054, compared to $5,018,264 for the second quarter of 2007.

- Revenue for the licensing division for the second quarter ended June 30, 2008 decreased 49.7% to $1,347,004, compared to $2,677,846 for the same period in 2007. Comparative quarterly results will vary for this division depending primarily on the timing of shipments of its industrial products.

- Revenue for the structural products division for the second quarter ended June 30, 2008 increased 5.9% to $2,479,050, compared to $2,340,418 recorded in the second quarter of 2007.

- Total contribution margin decreased by 22.0% in the second quarter ended June 30, 2008 to $1,168,188, compared to $1,498,333 for the same quarter last year. This was primarily impacted by installation cost overruns experienced by the structural products division, due mainly to defective products and services it received from certain vendors, which the Company remedied at its own expense.

- Net loss for the second quarter ended June 30, 2008 increased to $2,388,586, or ($0.08) per common share, compared to a net loss of $1,727,168, or ($0.08) per common share for the second quarter of 2007. This was due primarily to the installation cost overruns described above.



Three Months Ended June 30, 2008
--------------------------------
(unaudited, in thousands Structural
of dollars) Licensing Products Corporate Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 1,347 $ 2,479 $ -- $ 3,826
Contribution margin 1,298 (131) -- 1,168
Operating expenses 1,549 1,052 613 3,214
Loss before other
expenses (250) (1,183) (613) (2,046)
Other income (expenses) (133) (229) 19 (342)
Net loss for the quarter (383) (1,412) (594) (2,388)
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Contracted Backlog

The Board of Directors has determined that it is important to provide the Company's shareholders and investors with ongoing visibility with respect to contracted backlog.

Contracted backlog for the licensing division is defined as undelivered contractual commitments, other than minimum royalty obligations, and assumes that in cases of multi-year/multi-facility commitments by licensees, subsequent facilities match the industrial technology configured for the first facility. Contracted backlog for the structural products division is defined as the undelivered portion of signed construction contracts.

The timing of these contractual commitments into revenue is uncertain and the possibility exists that contractual commitments can be de-booked.

A breakdown of the Company's contracted backlog is as follows:

- The Company achieved record backlog as at June 30, 2008 of approximately $49,000,000, representing a 40% increase over backlog of approximately $35,000,000 as at June 30, 2007. Total new deals signed for the quarter were $18,700,000.

- Backlog for the licensing division as at June 30, 2008 was approximately $19,000,000. This excludes minimum royalty obligations.

- Backlog for the structural products division as at June 30, 2008 was approximately $30,000,000.

Business Update

- During the second quarter of 2008, the Company concluded a fixed asset term loan for its structural products division, KML Engineered Homes Ltd., with a reputable, global financial institution for $1.8 million, netting $1.3 million in available capital.

- Genesis announces the departure of Mr. John Gardner, as Executive Chairman of the Company. The Board would like to thank Mr. Gardner for his contributions over the past two years and wish him well in his future endeavors. The role of Executive Chairman will be eliminated and Mr. Richard Black, a director of the Company, will assume the duties of the Chairman of the Board.

Licensing Division

- Signed a new license agreement with Metallist Ltd., for the southern region of Russia, which includes the purchase of the Company's Coil-To-Panel ("CTP") line;

- Signed a new license agreement with Sawabeh International Group, for the Kingdoms of Saudi Arabia and Bahrain, for three plants over a five year period;

- Deployed its Material Optimization Technology ("MOT") at its California licensee; and

- Completed the development, testing and manufacturing of its newest MOT series, MOT 6000, for its central Russia licensee, Greenford Trading, which was shipped in July 2008.

Structural Products Division

- Signed $8.2 million in new sales orders with both existing customers and eight new customers;

- Gained momentum in new institutional market for this division. Signed contracts to provide light steel framing for a school and school portables in the Greater Toronto Area;

- Finalized the installation of the MOT at its Vaughan, Ontario plant; and

- Reported backlog of approximately $30,000,000.

"The second quarter of 2008 can be characterized as having mixed operating results," stated Vince Mifsud, Genesis' President and Chief Executive Officer. "The Company signed two new license agreements in the second quarter, one in Saudi Arabia, and the other in southern Russia. This brings the total number of new license agreements for this fiscal period to three. Our target for fiscal 2008 is four license agreements, so we are pleased with our results thus far. We believe the licensing division is building good momentum."

Mr. Mifsud continued, "The Company's structural products division had strong new deal signings during the second quarter of approximately $8.2 million, and also deployed its MOT technology. This division experienced installation cost overruns during the second quarter amounting to approximately $530,000, primarily as a result of what the Company believes were defective products and services provided by third party vendors, with remedial costs being borne by the Company. However, we remain optimistic that operating results for this division will improve as a result of the record backlog in customer contracts, with expected margins of approximately 18% - 20%, and the deployment of its MOT."

Further information regarding the Company, and its business and operations, may be obtained from the Company's continuous disclosure documents filed from time-to-time with the Canadian securities regulatory authorities. These continuous disclosure documents are available through the Company's web site at www.genesisworldwide.com or through the SEDAR website maintained by the Canadian securities regulatory authorities, which can be accessed at www.sedar.com.

Conference Call

The Genesis management team will discuss its second quarter 2008 financial results on a conference call to be held on Wednesday, August 6, 2008 at 8:30 a.m. Eastern time (1:30 p.m. BST). There will be a short presentation followed by a question and answer period lasting for approximately one (1) hour.



Conference Call Details

Date: Wednesday, August 6, 2008
Time: 8:30 a.m. Eastern time (1:30 p.m. BST)
Local dial-in: 416-641-6123
North America toll-free: 866-300-7687
Global toll-free: 800-6578-9898 (dial the international access code of the
country you are calling from, i.e. a call from the United Kingdom would be
dialed 00-800-6578-9898)


A replay of the call will be available by dialing 416-695-5800 (local callers only), or toll-free at 1-800-408-3053 (passcode 3268297#), from approximately 12:00 p.m. Eastern time on the date of the call through to August 13, 2008.

About Genesis Worldwide Inc.

Genesis develops and licenses structural building technology aimed at the residential, commercial and institutional building markets. Genesis offers licensees a turn-key solution enabling them to custom design, manufacture and install complete light steel building structures. The Genesis Solution encompasses engineered processes and materials that are environmentally sustainable or "green". Genesis is headquartered in Mississauga, Ontario, Canada and currently has eleven licensees worldwide. For additional information about the Company, visit www.genesisworldwide.com.

Caution Regarding Forward Looking Information

Certain statements in this press release which are not historical facts constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements") and are made pursuant to the "safe harbour" provisions of such laws. Statements related to the Company's projected revenues, earnings, growth rates, performance, business prospects and opportunities are forward-looking statements, as are any statements relating to future events, conditions or circumstances. The use of terms such as "may", "will", "should", "plan", "believes", "predict", "potential" "anticipate", "expect", "project", "target", "estimate", "continue" and similar terms are intended to assist in identification of these forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect.

Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance or achievements of the Company to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements.

Many factors could cause the actual results of the Company to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements, including, without limitation, those factors discussed under the heading "Risk Factors" in the Company's most recent Annual Information Form ("AIF"), a copy of which is available on SEDAR at www.sedar.com. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and the Company does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.




Genesis Worldwide Inc.

Interim Consolidated Balance Sheets
(unaudited)
As at As at
June 30 December 31
2008 2007
$ $
----------------------------
ASSETS
Current
Cash and cash equivalents 179,488 5,987,862
Accounts receivable 11,314,829 11,347,550
Inventories and deposits on inventory 2,087,505 895,686
Prepaid expenses 649,283 535,485
----------------------------
Total current assets 14,231,105 18,766,583
Long-term accounts receivable 431,250 287,500
Property, plant and equipment 5,332,277 4,530,567
Intangible asset 1,915,723 2,050,548
----------------------------
21,910,355 25,635,198
----------------------------
----------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 7,130,830 7,566,970
Deferred revenue - current portion 4,578,871 4,459,648
Minimum royalty payment obligations 338,966 173,330
----------------------------
Total current liabilities 12,048,667 12,199,948
----------------------------

Long-term
Deferred revenue 431,250 287,500
Minimum royalty payment obligations 1,199,702 1,377,869
----------------------------
Total long-term liabilities 1,630,952 1,665,369
----------------------------

Shareholders' equity
Capital stock 56,733,075 56,733,075
Contributed surplus 1,168,474 1,078,474
Deficit (49,670,813) (46,041,668)
----------------------------
Total shareholders' equity 8,230,736 11,769,881
----------------------------
21,910,355 25,635,198
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Genesis Worldwide Inc.

Interim Consolidated Statement of Loss and
Comprehensive Loss and Deficit
(unaudited)

Three months ended Six months ended
------------------------------------------------
June 30 June 30 June 30 June 30
2008 2007 2008 2007
$ $ $ $
------------------------------------------------
Revenues
Licensing 1,347,004 2,677,846 4,564,489 3,636,624
Structural products 2,479,050 2,340,418 6,943,692 5,370,938
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Total revenues 3,826,054 5,018,264 11,508,181 9,007,562
------------------------------------------------
Direct cost of revenues
Licensing 48,201 1,555,272 1,820,603 2,079,943
Structural products 2,609,665 1,964,659 6,237,109 4,055,476
------------------------------------------------
Total direct cost
of revenues 2,657,866 3,519,931 8,057,712 6,135,419
------------------------------------------------
1,168,188 1,498,333 3,450,469 2,872,143
------------------------------------------------
Expenses
Research and development 294,053 298,138 727,274 529,289
SR&ED investment
tax credits (16,274) (418,161) (73,491) (418,161)
Selling and marketing 713,022 439,953 1,303,758 825,924
Engineering and
project management 554,447 471,619 1,019,184 857,798
General and administrative 1,313,690 808,650 2,688,413 1,827,717
Occupancy 355,471 323,957 735,415 627,540
Plant commissioning and
restructuring costs - 526,706 - 749,297
------------------------------------------------
3,214,409 2,450,862 6,400,553 4,999,404
------------------------------------------------
Loss before other expenses (2,046,221) (952,529) (2,950,084) (2,127,261)
------------------------------------------------
Amortization of property,
plant and equipment 235,448 198,881 436,338 376,061
Amortization of
intangible asset 67,169 67,412 134,825 134,825
Foreign exchange
loss (gain) (32,923) (36,413) 12,212 (49,620)
Interest income (1,348) - (51,782) -
Minimum royalty accretion 74,019 74,145 147,468 148,472
Debenture and loan
interest expense - 470,614 - 1,088,948
------------------------------------------------
342,365 774,639 679,061 1,698,686
------------------------------------------------
Net loss and comprehensive
loss for the period (2,388,586) (1,727,168) (3,629,145) (3,825,947)

Deficit, beginning
of period (47,282,227)(43,632,585)(46,041,668)(41,533,806)
------------------------------------------------
Deficit, end of period (49,670,813)(45,359,753)(49,670,813)(45,359,753)
------------------------------------------------
------------------------------------------------
Loss per share
Basic and diluted $ (0.08) $ (0.08) $ (0.12) $ (0.18)
------------------------------------------------
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Weighted average number
of shares outstanding 30,982,858 20,982,858 30,982,858 20,982,858
------------------------------------------------
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Genesis Worldwide Inc.

Interim Consolidated Statements of Cash Flows
(unaudited)

Three Months Ended Six Months Ended
-----------------------------------------------
June 30 June 30 June 30 June 30
2008 2007 2008 2007
$ $ $ $
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OPERATING ACTIVITIES
Net loss for the period (2,388,586) (1,727,168) (3,629,145) (3,825,947)
Adjustments for
non-cash items
Amortization of property,
plant and equipment
and intangible asset 302,617 266,293 571,163 510,886
Stock-based compensation
expense 45,000 51,501 90,000 60,063
Debenture interest
expense accretion - 342,215 - 809,453
Minimum royalty accretion 74,019 74,145 147,468 148,472
-----------------------------------------------
(1,966,950) (993,014) (2,820,514) (2,297,073)

Changes in non-cash
working capital balances
related to operations
Accounts receivable (910,490) (380,269) 32,721 (102,359)
Inventories and deposits
on inventory (1,042,474) 1,476,668 (1,191,819) (88,859)
Prepaid expenses (221,528) (619,127) (113,798) (430,576)
Accounts payable and
accrued liabilities 708,410 (626,933) (436,140) (381,720)
Deferred revenue 2,516,486 791,801 119,223 1,067,112
-----------------------------------------------
Cash used in operating
activities (916,546) (350,874) (4,410,327) (2,233,475)
-----------------------------------------------

FINANCING ACTIVITIES
Debenture proceeds - - - 2,000,000
-----------------------------------------------
Cash provided by
financing activities - - - 2,000,000
-----------------------------------------------

INVESTING ACTIVITIES
Additions to property,
plant and equipment (752,768) (349,171) (1,238,047) (548,479)
Deferred IPO costs - (53,271) - (53,271)
Minimum royalties paid (80,000) (80,000) (160,000) (160,000)
-----------------------------------------------
Cash used in
investing activities (832,768) (482,442) (1,398,047) (761,750)
-----------------------------------------------

Net decrease in cash and
cash equivalents
during the period (1,749,314) (833,316) (5,808,374) (995,225)
Cash and cash equivalents,
beginning of period 1,928,802 849,477 5,987,862 1,011,386
-----------------------------------------------
Cash and cash equivalents,
end of period 179,488 16,161 179,488 16,161
-----------------------------------------------
-----------------------------------------------

Supplemental cash
flow information
Interest paid - 171,018 - 312,842
-----------------------------------------------
-----------------------------------------------

Contact Information

  • Genesis Worldwide Inc.
    Catherine Smyth
    Manager, Investor Relations
    (905) 285-9909, ext. 302
    Website: www.genesisworldwide.com
    or
    Canaccord Adams
    Robert Finlay
    +44 020 7050 6500