Warnex Inc.
TSX : WNX

Warnex Inc.

August 10, 2011 17:01 ET

Warnex Reports Second Quarter 2011 Results

LAVAL, QUEBEC--(Marketwire - Aug. 10, 2011) - Warnex Inc. (TSX:WNX) announced today financial results for the second quarter ended June 30, 2011.

Operating Highlights

  • Signed a credit support agreement with Persistence Capital Partners to guarantee Warnex's obligations under its existing banking facilities
  • Held its Annual Meeting at which four new directors were elected: Dr. Patrice Hugo, Mr. Michael Singer, Dr. Marc LeBel and Mr. Joseph Walewicz
  • Subsequent to the quarter, signed an agreement in principle with the holders of all of its outstanding debentures to extend the maturity date to November 8, 2011, and modify other terms of their debentures
  • Subsequent to the quarter, announced the reorganization of its subsidiary, Warnex Analytical Services Inc. As part of this restructuring, Warnex will shut down the operations of its analytical laboratories located in Laval, Quebec, and consolidate all of its analytical services at its Neopharm Laboratories facility located in Blainville, Quebec.

"We did not meet our objectives this quarter for revenues and earnings and are working diligently to improve our results with a goal of attaining profitability. With our announced restructuring of the Analytical Services subsidiary, we expect to improve the efficiency of those operations, which will result in significant savings," said Mark Busgang, President and CEO of Warnex. "At the same time, we are continuing to work on the restructuring of our balance sheet. The extension of the maturity dates of our long-term debentures has provided us with the time and opportunity to restructure the balance sheet in an orderly fashion, while continuing to deliver high-quality services to our clients."

Financial Results

Consolidated revenue for the three-month period ended June 30, 2011, amounted to $4.8 million compared to $6.4 million during the same quarter a year ago, a decrease of 25%. For the six-month period ended June 30, 2011, revenue amounted to $10.6 million compared to $11.5 million for the same period in 2010.

Net loss for the quarter amounted to $0.8 million or $0.01 per share compared to net earnings of $2,672 or $0.00 per share for the same quarter in 2010. For the six-month period ended June 30, 2011, net loss totalled $0.9 million or $0.01 per share compared to a net loss of $0.9 million or $0.01 per share in 2010.

For the three-month period ended June 30, 2011, the Company had negative earnings before interest, taxes, depreciation and amortization (EBITDA) of $0.2 million versus a positive EBITDA of $0.8 million for the same quarter last year. For the six-month period ended June 30, 2011, EBITDA amounted to $0.2 million compared to $0.5 million in 2010.

Gross margin for the three-month period ended June 30, 2011, amounted to $0.8 million or 17% of sales compared to $1.8 million or 28% of sales for the same quarter last year. The decrease of $1.0 million in gross margin is mainly explained by the decrease in revenues in the Bioanalytical and Analytical divisions compared to the same quarter of last year while fixed expenses remained constant. Gross margin for the six-month period ended June 30, 2011, amounted to $2.4 million or 23% of sales compared to $2.5 million or 22% of sales in 2010.

For the three-month period ended June 30, 2011, selling expenses remained similar to last year at $0.3 million. In proportion of revenue, selling expenses were higher than last year at 6% (5% in 2010). For the six-month period ended June 30, 2011, selling expenses were similar to last year at $0.6 million.

General and administrative expenses for the quarter remained similar to last year at $1.2 million. In proportion of revenue, general and administrative expenses were higher than last year at 24% (19% in 2010). For the six-month period ended June 30, 2011, general and administrative expenses were similar to last year at $2.5 million.

Financial expenses for the quarter remained similar to last year at $0.3 million. For the six-month period ended June 30, 2011, financial expenses were similar to last year at $0.6 million.

Research and development tax credits for the quarter decreased to $0.1 million in 2011 from $0.2 million in 2010. For the six-month period ended June 30, 2011, research and development tax credits amounted to $0.2 million compared to $0.3 million in 2010.

About Warnex

Warnex (www.warnex.ca) is a life sciences company devoted to protecting public health by providing laboratory services to the pharmaceutical and healthcare sectors. Warnex Analytical Services provides pharmaceutical and biotechnology companies with a variety of quality control services, including chemistry, chromatography, microbiology, method development and validation, and stability studies. Warnex Bioanalytical Services specializes in bioequivalence and bioavailability studies for clinical trials. Warnex Medical Laboratories provides specialized testing for the healthcare industry as well as pharmaceutical and central laboratory services. Warnex PRO-DNA Services offers DNA identification tests for paternity, maternity and other family relationships, as well as for immigration and forensic testing purposes. Warnex has three facilities located in Laval and Blainville, Quebec, and Thunder Bay, Ontario.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this news release are forward-looking and are subject to numerous risks and uncertainties, known and unknown. For information identifying known risks and uncertainties, relating to financial resources, liquidity risk, key customers and business partners, credit risk, foreign currency risk, government regulations, laboratory facilities, volatility of share price, employees, suppliers, and other important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the heading Risks and Uncertainties in Warnex's most recent Management's Discussion and Analysis, which can be found at www.sedar.com. Consequently, actual results may differ materially from the anticipated results expressed in these forward-looking statements.

Interim Consolidated Balance Sheets
(Unaudited)
June 30
2011
$
December 31
2010
$
January 1
2010
$
Assets
Current assets
Cash and cash equivalents 36,833 244,456 894,031
Trade and other receivables 3,727,887 3,478,299 3,593,390
Work-in-progress 408,276 328,289 531,142
Inventory 340,772 355,132 177,027
Prepaid expenses 534,539 293,636 388,502
5,048,307 4,699,812 5,584,092
Non-current assets
Deferred income taxes 1,221,000 1,221,000 1,221,000
Property, plant and equipment 6,038,181 6,569,217 7,868,974
Intangibles 376,115 407,185 382,145
Goodwill 937,695 937,695 937,695
13,621,298 13,834,909 15,993,906
Liabilities
Current liabilities
Bank loan 1,140,000 580,000 -
Trade and other payables 2,861,270 2,125,900 2,209,825
Provisions 850,317 773,215 798,769
Deferred revenue 911,674 921,532 411,599
Current portion of long-term debt 269,039 894,716 1,800,372
Liability component of debentures 6,057,017 6,100,181 -
12,089,317 11,395,544 5,220,565
Long-term liabilities
Long-term debt - 5,722 447,661
Liability component of debentures - - 6,187,516
12,089,317 11,401,266 11,855,742
Shareholders' equity
Capital stock 40,981,049 40,981,049 40,981,049
Other reserves 2,803,559 2,803,559 2,772,306
Deficit (42,252,627 ) (41,350,965 ) (39,615,191 )
1,531,981 2,433,643 4,138,164
13,621,298 13,834,909 15,993,906
Interim Consolidated Statements of Changes in Equity
(Unaudited)
Capital
stock
$
Other reserves
$
Deficit
$
Total
$
Balance, December 31, 2010 40,981,049 2,803,559 (41,350,965 ) 2,433,643
Share-based compensation - - - -
Net and comprehensive loss - - (901,662 ) (901,662 )
Balance, June 30, 2011 40,981,049 2,803,559 (42,252,627 ) 1,531,981
Balance, January 1, 2010 40,981,049 2,772,306 (39,615,191 ) 4,138,164
Share-based compensation - 31,212 - 31,212
Net and comprehensive loss - - (893,752 ) (893,752 )
Balance, June 30, 2010 40,981,049 2,803,518 (40,508,943 ) 3,275,624
Interim Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
Three months ended
June 30
Six months ended
June 30
2011
$
2010
$
2011
$
2010
$
Revenue 4,751,213 6,372,426 10,579,383 11,463,096
Cost of goods sold 3,953,430 4,583,824 8,169,594 8,916,248
Gross margin 797,783 1,788,602 2,409,789 2,546,848
Operating expenses
Selling 308,102 331,651 628,053 629,510
General and administrative 1,158,417 1,204,944 2,472,993 2,508,921
Finance 299,684 286,787 573,683 571,926
Research and development tax credits (124,500 ) (238,000 ) (249,000 ) (326,000 )
1,641,703 1,585,382 3,425,729 3,384,357
Profit (loss) before under noted item and income taxes (843,920 ) 203,220 (1,015,940 ) (837,509 )
Unrealized foreign exchange gain (loss) on debentures 10,072 (200,548 ) 114,278 (56,243 )
Profit (loss) before income taxes (833,848 ) 2,672 (901,662 ) (893,752 )
Income taxes - - - -
Net profit (loss) and comprehensive income (loss) (833,848 ) 2,672 (901,662 ) (893,752 )
Basic loss per share (0.01 ) 0.00 (0.01 ) (0.01 )
Diluted loss per share (0.01 ) 0.00 (0.01 ) (0.01 )
Weighted average number of shares outstanding 67,117,191 67,117,191 67,117,191 67,117,191
Weighted average number of diluted shares outstanding 67,117,191 67,117,191 67,117,191 67,117,191
Interim Consolidated Statements of Cash Flow
(Unaudited)
Three months ended
June 30
Six months ended
June 30
2011
$
2010
$
2011
$
2010
$
Operations
Net earnings (net loss) (833,848 ) 2,672 (901,662 ) (893,752 )
Items not affecting cash:
Depreciation of property, plant and equipment 320,040 370,790 634,901 740,463
Amortization of intangibles 24,612 25,710 48,712 47,289
Accretion of interest on debentures 31,514 35,754 71,114 69,940
Unrealized foreign exchange loss (gain) on debentures (10,072 ) 200,548 (114,278 ) 56,243
Share-based compensation - 31,212 - 31,212
Foreign currency fluctuation (14,362 ) (46,132 ) 4,242 (22,106 )
(482,116 ) 620,554 (256,971 ) 29,289
Net change in non-cash working capital items 374,560 (156,731 ) 250,224 (155,376 )
Net cash provided by (used in) operations (107,556 ) 463,823 (6,747 ) (126,087 )
Investing activities
Acquisition of property, plant and equipment (11,625 ) (23,896 ) (103,865 ) (76,641 )
Acquisition of intangibles (781 ) (38,047 ) (17,642 ) (102,934 )
Net cash used in investing activities (12,406 ) (61,943 ) (121,507 ) (179,575 )
Financing activities
Increase (decrease) in bank loan 260,000 (140,000 ) 560,000 320,000
Repayment of long-term debt (278,955 ) (326,141 ) (631,399 ) (669,105 )
Net cash used in financing activities (18,955 ) (466,141 ) (71,399 ) (349,105 )
Foreign exchange gain (loss) on cash held in foreign currencies (285 ) 11,918 (7,970 ) 10,010
Decrease in cash and cash equivalents (139,202 ) (52,343 ) (207,623 ) (644,757 )
Cash and cash equivalents, beginning of period 176,035 301,617 244,456 894,031
Cash and cash equivalents, end of period 36,833 249,274 36,833 249,274

Contact Information