 |
| Crailar© |
Sales increase to $1.2 million, up 71% sequentially.
Adjusted EBITDA for Q3 2014 was a loss $0.9 million.
VICTORIA, Nov. 12, 2014- CRAiLAR Technologies Inc. ("CL" or the "Company") (TSXV: CL) (OTCQB: CRLRF), which produces and markets CRAiLAR® Flax fiber The Friendliest Fiber On The Planet™, today reported sales of $1.2 million and a net loss of $1.5 million or $0.02 per share for the Third Quarter ended September 27, 2014 which includes a non-cash derivative liability gain of $0.7 million. This compares with nil sales and a net loss of $5.7 million or $0.13 per share for the Third Quarter 2013, which includes a non-cash inventory impairment charge of $2.5 million. The Company's Adjusted EBITDA for the Quarter was a loss of $0.9 million, a reduction of $0.5 million from Third Quarter 2013's Adjusted EBITDA loss of $1.4 million. For further information regarding Adjusted EBITDA, including a reconciliation of Adjusted EBITDA to net loss, see non-GAAP Financial Measures below.
Sales for Third Quarter 2014 increased 71% from Second Quarter 2014 despite the quarter being shortened by a government-mandated three-week summer vacation in Belgium. Variable margin was 11% but was impacted by labor inefficiencies and rework caused by equipment downtime. General and administrative spending for the quarter declined by $0.4 million or 25% from the same period last year. Cash and cash equivalents and investments at Sept 27, 2014 were $4.8 million up from $1.2 million at December 31, 2013. Cash at the end of the Third Quarter does not include collection of $1 million of Third Quarter billings from a large customer. We have since developed a billing and payment procedure with that customer to remove this bottleneck going forward. The increase in cash equivalents of $3.6 million resulted from $6.4 million of cash used in operations and $1.1 million of cash invested in property and equipment offset by $11.1 million of cash from financing activities from the sale of equity of $9.1 million and a $3.0 million from the IKEA working capital and equipment financing loan partially offset by loan pay-downs of $0.8 million and deferred issuance costs of $0.1 million.
During the second half of Q-3 the Company launched projects to increase production capacity, including hiring additional employees; upgrading kiers; installing a second dryer; installing a chemical delivery system; and installing a heat exchanger. When completed, these projects will allow the Company to boost plant capacity and reduce conversion costs. Also during the Quarter the Company's 40 year-old plant experienced equipment failures as production was increased, some of which was caused by lack of preventative maintenance. The Company has hired a new plant manager and a fulltime mechanic to operate the facility in a proactive manner. The mechanic is performing break-fix repairs and instituted a preventive maintenance regime and gradually the plant is experiencing fewer disruptions. Commissioning of the second dryer this month will also alleviate a production choke and add important redundancy.
The Company also co-developed two technology breakthroughs to bleach and lighten flax fibers. Bleaching, desired by many customers, increases production time by 50% and conversion costs by over 40%. Both co-developed bleaching technologies when implemented will significantly reduce cycle time, chemicals, water and cost; creating a substantial competitive barrier. Finally, the Company had separate production planning sessions with two large customers, which evolved into dedicated facility discussions. The Company is encouraged by interest in dedicated facilities, but these discussions, while very promising, are in the early stages.
Non-GAAP Financial Measures
Regulation G, "Conditions for Use of Non-GAAP Financial Measures," and other provisions of the Securities Exchange Act of 1934, as amended, define and prescribe the conditions for use of certain non-GAAP financial information. We provide "EBITDA," which is a non-GAAP financial measure that consists of net income (loss) before (a) interest expense, net (b) accretion expense, and (c) depreciation and amortization. "Adjusted EBITDA" further adjusts EBITDA to exclude share-based compensation expense, facility commissioning expense, gain on settlement of debt, gain on disposal of assets, impairment loss on inventory, rent inducement expense, and fair value adjustment to derivative liabilities.
We believe that these non-GAAP financial measures provide important supplemental information to management and investors. These non-GAAP financial measures reflects an additional way of viewing aspects of our operations that, when viewed with the U.S. GAAP results and the accompanying reconciliation to corresponding U.S. GAAP financial measures, provides a more complete understanding of factors and trends affecting our business and results of operations.
Our management uses EBITDA and Adjusted EBITDA as a measure of our Company's operating performance because it assists in comparing our operating performance on a consistent basis by removing the impact of items not directly resulting from core operations. Internally, these non-GAAP measures are also used by management for planning purposes, including the preparation of internal budgets; for allocating resources to enhance financial performance; for evaluating the effectiveness of operational strategies; and for evaluating our capacity to fund capital expenditures and expand our business. We also believe that analysts and investors use these measures as supplemental measures to evaluate the overall operating performance of development stage companies. Additionally, we believe that lenders or potential lenders use EBITDA and Adjusted EBITDA to evaluate our ability to repay loans.
These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with U.S. GAAP and should not be relied upon to the exclusion of U.S. GAAP financial measures. Management strongly encourages investors to review our consolidated financial statements in their entirety and to not rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. In addition, we expect to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring.
The table below reconciles net loss to Adjusted EBITDA for the periods presented (in thousands):
For the thirteen weeks ended
| |||||||||
|
Sept 27,
|
Sept 28,
|
||||||||
|
2014
|
2013
|
||||||||
|
Net loss
|
($1,472)
|
($5,674)
|
|||||||
|
Interest expense, net
|
563
|
588
|
|||||||
|
Accretion expense
|
64
|
-
|
|||||||
|
Amortization and depreciation
|
141
|
289
|
|||||||
|
EBITDA
|
(704)
|
(4,797)
|
|||||||
|
Share-based compensation
|
393
|
607
|
|||||||
|
Facility commissioning
|
89
|
149
|
|||||||
|
Gain on settlement of debt
|
-
|
-
|
|||||||
|
Gain on disposal of assets
|
-
|
-
|
|||||||
|
Impairment loss on inventory
|
-
|
2,549
|
|||||||
|
Rent inducement expense
|
8
|
40
|
|||||||
|
Fair value adjustment to derivative liabilities
|
(652)
|
28
|
|||||||
|
Adjusted EBITDA
|
($866)
|
($1,424)
|
|||||||
Conference Call
A conference call to discuss the company's Third Quarter ended September 27, 2014 results is scheduled to begin at 8:00 am Eastern Standard Time (5:00 am Pacific Standard Time) on Thursday November 13, 2014. Participants may access the call by dialing 877-705-6003 (North America) or 201-493-6725 (international), 5 to 10 minutes before the call and ask for the CRAiLAR Technologies Inc. Third Quarter 2014 Conference Call. In addition, the call will be broadcast live over the Internet and accessible through website: http://public.viavid.com/index.php?id=111892
If you are unable to participate during the live call, an audio replay will be available until midnight on November 27, 2014 by dialing 877-660-6853 or 201-612-7415 for international callers, and entering pin number 13595267. A transcript will be available approximately 24 hours after the call on CRAiLAR's investor page.
About CRAiLAR Technologies Inc.
CRAiLAR Technologies Inc. is focused on bringing cost-effective, sustainable bast fiber-based products to market that are environmentally friendly natural fiber alternatives with equivalent or superior performance characteristics to cotton, wood or fossil-fuel based fibers. The Company's business operations consist primarily of the production of its natural and proprietary CRAiLAR®Flax fibers targeted at the natural yarn and textile industries, as well as the deployment of its CRAiLAR® processing technologies in the cellulose pulp and composites industries.
For more information, visit www.crailar.com.
Neither the TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Safe Harbor Statement
This news release includes certain statements that may be deemed "forward-looking statements". All statements in this news release, other than statements of historical facts, are forward-looking statements. Forward-looking statements or information are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements or information and including, without limitation, risks and uncertainties relating to: any market interruptions that may delay the trading of the Company's shares, technological and operational challenges, needs for additional capital, changes in consumer preferences, market acceptance and technological changes, dependence on manufacturing and material supplies providers, international operations, competition, regulatory restrictions and the loss of key employees. In addition, the Company's business and operations are subject to the risks set forth in the Company's most recent Form 10-K, Form 10-Q and other SEC filings which are available through EDGAR at www.sec.gov. These are among the primary risks we foresee at the present time. The Company assumes no obligation to update the forward-looking statements.
CRAiLAR Technologies Inc.Consolidated Balance Sheets
(In Thousands US Dollars)
(Unaudited)
(In Thousands US Dollars)
(Unaudited)
|
September 27,2014
|
December 28,2013
| |||
|
ASSETS
|
||||
|
Current
|
||||
|
Cash and cash equivalents
|
$
|
4,790
|
$
|
1,193
|
|
Accounts receivable
|
1,516
|
223
| ||
|
Inventory
|
842
|
945
| ||
|
Prepaid expenses and deposits
|
226
|
291
| ||
|
7,374
|
2,652
| |||
|
Deferred Debt Issuance Costs
|
1,115
|
1,442
| ||
|
Property and Equipment, net
|
17,820
|
17,240
| ||
|
Intangible Assets, net
|
138
|
156
| ||
|
$
|
26,448
|
$
|
21,490
| |
|
LIABILITIES
|
||||
|
Current
|
||||
|
Accounts payable
|
$
|
1,868
|
$
|
2,378
|
|
Accrued liabilities
|
1,735
|
2,342
| ||
|
Unearned revenue
|
271
|
248
| ||
|
Notes payable
|
-
|
477
| ||
|
Current portion of loans payable
|
528
|
634
| ||
|
Current portion of long term debt
|
143
|
-
| ||
|
Derivative Liabilities
|
3,622
|
-
| ||
|
8,166
|
6,079
| |||
|
Deferred Income Tax Liability
|
184
|
199
| ||
|
Loans Payable
|
413
|
551
| ||
|
Long Term Debt
|
18,780
|
16,675
| ||
|
27,544
|
23,504
| |||
|
STOCKHOLDERS' DEFICIT
|
||||
|
Capital Stock
|
||||
|
Authorized: 100,000,000 common shares without par value
|
||||
|
Issued and outstanding : 50,428,003 common shares
|
40,226
|
34,889
| ||
|
(December 28, 2013 - 47,806,031)
|
||||
|
Additional Paid-in Capital
|
10,775
|
9,934
| ||
|
Accumulated Other Comprehensive Income
|
1,338
|
585
| ||
|
Deficit
|
(53,436)
|
(47,423)
| ||
|
(1,096)
|
(2,014)
| |||
|
$
|
26,448
|
$
|
21,490
| |
CRAiLAR Technologies Inc.Consolidated Statements of Operations
(In Thousands US Dollars)
(Unaudited)
(In Thousands US Dollars)
(Unaudited)
|
Period endedSept 27,2014
|
Period endedSept 28,2013
| |||
|
Revenues
|
$
|
1,159
|
$
|
15
|
|
Cost of sales
|
||||
|
Materials and direct product production costs
|
1,032
|
22
| ||
|
Production facility overhead costs
|
74
|
193
| ||
|
Facility commissioning costs
|
89
|
149
| ||
|
Depreciation
|
115
|
226
| ||
|
Impairment Loss on Inventory
|
2,549
| |||
|
1,310
|
3,140
| |||
|
Gross loss
|
(151)
|
(3,124)
| ||
|
Expenses
|
||||
|
Marketing and promotion
|
105
|
173
| ||
|
Amortization and depreciation
|
26
|
62
| ||
|
General and administrative
|
1,173
|
1,555
| ||
|
1,304
|
1,791
| |||
|
Loss before other items
|
(1,455)
|
(4,915)
| ||
|
Other income (expenses)
|
||||
|
Accretion expense
|
(64)
|
-
| ||
|
Gain on debt settlement
|
-
|
-
| ||
|
Research and development
|
(42)
|
(130)
| ||
|
Gain on disposal of assets
|
-
|
-
| ||
|
Interest
|
(563)
|
(588)
| ||
|
Write down of equipment
|
-
|
(13)
| ||
|
Fair value adjustment derivative liabilities
|
652
|
(28)
| ||
|
(17)
|
(759)
| |||
|
Net loss
|
$
|
(1,472)
|
$
|
(5,674)
|
|
Other comprehensive income
|
||||
|
Exchange differences on translating to presentation currency
|
1,239
|
(443)
| ||
|
Comprehensive loss
|
$
|
(233)
|
$
|
(6,117)
|
|
Loss per share (basic and diluted)
|
$
|
(0.02)
|
$
|
(0.13)
|
|
Weighted average number of common shares outstanding
|
59,778,003
|
44,472,698
| ||
CRAiLAR Technologies Inc.Consolidated Statements of Cash Flows
(In US Dollars)
(Unaudited)
(In US Dollars)
(Unaudited)
|
Period ended Sept 27, 2014
|
Period endedSept 28, 2013
| |||||
|
Cash flows used in operating activities
|
||||||
|
Net loss
|
$
|
(6,013)
|
$
|
(11,930)
| ||
|
Adjustments to reconcile net loss to net cash from operating activities
|
||||||
|
Amortization and depreciation
|
427
|
875
| ||||
|
Accretion of debt and amortization of deferred debt issuance costs
|
824
|
324
| ||||
|
Fair value adjustment of derivative liability
|
(916)
|
(453)
| ||||
|
Gain on disposal of assetts
|
-
|
(1)
| ||||
|
Gain on Settlements of Debt
|
(234)
|
-
| ||||
|
Rent
|
24
|
114
| ||||
|
Stock-based compensation
|
841
|
1,643
| ||||
|
Write down of equipment
|
-
|
13
| ||||
|
Write down of inventory
|
-
|
3,423
| ||||
|
Changes in working capital assets and liabilities
|
||||||
|
(Increase) decrease in accounts receivable
|
(1,293)
|
33
| ||||
|
Decrease (increase) in inventory
|
103
|
(2,937)
| ||||
|
Decrease (increase) in prepaid expenses
|
65
|
(165)
| ||||
|
Increase (decrease) in accounts payable
|
(341)
|
608
| ||||
|
Increase in accrued liabilities
|
146
|
959
| ||||
|
Net cash used in operating activities
|
(6,367)
|
(7,493)
| ||||
|
Cash flows used in investing activities
|
||||||
|
Acquisition of property and equipment
|
(1,092)
|
(2,735)
| ||||
|
Acquisition of intangible assets
|
(21)
|
(89)
| ||||
|
Net cash flows used in investing activities
|
(1,113)
|
(2,824)
| ||||
|
Cash flows used in financing activities
|
||||||
|
Issuance of capital stock and warrants
|
9,060
|
240
| ||||
|
Promissory notes payable
|
(661)
|
-
| ||||
|
Loans payable
|
(186)
|
-
| ||||
|
Proceeds from long term debt
|
3,000
|
-
| ||||
|
Proceeds from convertible debenture
|
-
|
8,143
| ||||
|
Deferred issuance costs for convertible debenture
|
(52)
|
(876)
| ||||
|
Net cash flows from financing activities
|
11,161
|
7,507
| ||||
|
Effect of exchange rate changes on cash and cash equivalents
|
(84)
|
280
| ||||
|
Increase (decrease) in cash and cash equivalents
|
3,597
|
(2,530)
| ||||
|
Cash and cash equivalents, beginning
|
1,193
|
2,877
| ||||
|
Cash and cash equivalents, ending
|
$
|
4,790
|
$
|
347
| ||
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
||||||
|
AND NON-CASH FINANCING AND INVESTING ACTIVITIES:
|
||||||
|
Cash paid for interest
|
$
|
996
|
$
|
277
| ||
|
Capital stock issued in settlement of accounts payable & accruals
|
$
|
632
|
-
| |||
|
Capital stock issued as share issue costs
|
$
|
132
|
$
|
-
| ||
SOURCE Crailar Technologies Inc. through CNW by press release ©
http://www.hemptown.com
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