TORONTO, ONTARIO — (Marketwire) — 10/12/11 — Organic Resource Management Inc. (TSX VENTURE: ORI) (“ORMI” or “the Company”) today announced its financial results for the three and twelve-month periods ended June 30, 2011.
Fiscal 2011 Highlights:
Q4 2011 Highlights:
“2011 was a year of reinvestment,” said Charles Buehler, Chairman and Chief Executive Officer of ORMI. “In July, we purchased a property in Woodstock, Ontario that we plan to develop into the Company–s first combined liquid and solid food waste transfer station. In September, we initiated a comprehensive eight-month in-laboratory feedstock R&D program and implemented our new Customer Relationship Management (“CRM”) operating system which significantly enhanced customer communication and the management of customer equipment. In January, we hired a Director of Biogas Development to develop feedstock technologies that will maximize biogas performance in anaerobic digesters. This followed the addition of a Vice President of Sales & Marketing and a Director of Engineering in the fourth quarter of last year. Throughout the year we invested in significant upgrades to our Toronto processing facility in order to improve the quality of the feedstock going to ADs, as well as the decanted water being discharged to the sewer system.”
“Although these initiatives have negatively impacted the Company–s profitability for the year,” continued Mr. Buehler, “they were undertaken to position the Company to take advantage of anticipated accelerated growth opportunities in the future.”
As previously announced, revenues and gross margins for the year were negatively impacted as a result of service reductions initiated by two major national accounts in January 2011. The feedstock R&D program and the expenditures associated with the upgrades to the Company–s main processing facility, as noted above, further contributed to lower margins. Operating expenses were higher due to a number of unusual expenditures, including consulting fees relating to the on-going review of strategic alternatives, as previously announced, and a bad debt expense relating to a national restaurant chain that filed for bankruptcy.
During the fourth quarter, the Company recognized a goodwill impairment loss relating to the acquisition of the Company–s Ontario-based subsidiary in 2002, as noted below. A provision was also established for estimated fines which may be imposed by the City of Toronto for exceeding certain wastewater discharge standards. The potential fines relate to a recent decision by the City to begin enforcing discharge standards under its sewer-use bylaw, even though the Company has been operating for over 20 years with the tacit consent of the City.
“2011 was a challenging year,” added Mr. Buehler, “However, I am confident that our corporate strategy is continuing to position ORMI to play a major role in the emerging food waste to renewable energy industry.”
Fiscal 2011 Financial Results
Total revenues were $13,985,000 for the year ended June 30, 2011, an increase of $265,000 or 2% from $13,720,000 for the year ended June 30, 2010. Total gross margin was $5,233,000 for the year, a decrease of $374,000 or 7% from $5,607,000 last year. As a percentage of revenue, gross margin was 37% for the year, down from 41% last year. The lower gross margin was mainly due to increased service coverage of the Montreal market at incrementally higher labour and trucking costs, increased transportation costs due to higher feedstock volumes, the addition of a third shift to increase feedstock and wastewater processing capabilities, higher insurance costs and the in-laboratory R&D program noted above.
During the fourth quarter of fiscal 2011, the Company recognized an impairment loss of $2,435,000 representing 100% of the goodwill relating to the acquisition of the Company–s Ontario-based subsidiary in 2002, which was subsequently amalgamated with the parent company on July 1, 2007. A comparison of the former subsidiary–s fair value to its carrying cost as at June 30, 2011 determined that impairment had occurred.
Total operating expense was $8,103,000 for the year ended June 30, 2011, an increase of $3,125,000 or 63% from $4,978,000 for the year ended June 30, 2010. Excluding the $2,435,000 write-down of goodwill, total operating expense was $5,668,000 for the year, an increase of $690,000 or 14% from last year. This increase was mainly due to the senior management additions in the fourth quarter of fiscal 2010 and third quarter of fiscal 2011, legal fees related to the incorporation of the Company–s subsidiary in the United States, and higher insurance costs, as well as the bad debt expense, financial advisor consulting fees and provision for the City of Toronto fine noted above. Partially offsetting these increased expenses were lower advertising and investor relations costs. Amortization costs were also higher due to the acquisition of the Woodstock building, major upgrades to feedstock and wastewater processing equipment, the addition of new trucks to the fleet, and the implementation of the Company–s new CRM operating system.
The net loss for the year ended June 30, 2011 was $2,780,000, a decrease in net income of $3,457,000 from net income of $677,000 for the year ended June 30, 2010. Excluding the write-down of goodwill, the net loss for the year was $345,000.
EBITDA was $1,156,000 for the year, a decrease of $869,000 or 43% from $2,025,000 last year.
Cash flows from operating activities were $733,000 for the year ended June 30, 2011, a decrease of $546,000 or 43% from $1,279,000 for the year ended June 30, 2010. This decrease was due to lower cash flows from operations, down $932,000 or 50% from $1,859,000 in fiscal 2010 to $927,000 in fiscal 2011, as well as an increase in accounts receivable and inventory, partly offset by an increase in accounts payable and decrease in prepaid expenses. The year-over-year decrease in cash flows from operations can mainly be attributed to the drop in gross margin and increase in selling, general and administrative expenses, for the reasons noted above.
Q4 Financial Results
Total revenues were $3,538,000 for the quarter, an increase of $52,000 or 1% from $3,486,000 for the same period last year. Total gross margin was $1,263,000, a decrease of $240,000 or 16% from total gross margin of $1,503,000 for the same period last year. Gross margin as a percentage of revenue was 36% compared to 43% for the same period last year. The increased service coverage of the Montreal market, higher recycling truck labour and operating costs, the laboratory feedstock R&D program, higher plant labour costs, higher insurance costs and the impact of re-pricing a major national chain, all contributed to lower margins for the quarter.
Total operating expense was $3,955,000 for the quarter, an increase of $2,559,000 from $1,396,000 for the same period last year. Excluding the write-down of goodwill, total operating expense was $1,520,000 for the quarter, an increase of $124,000 or 9% from last year. This increase was mainly due to the provision for the potential City of Toronto wastewater discharge fine and related legal fees, consulting fees related to the strategic alternatives review, and the senior staff hired in the third quarter, partly offset by lower advertising and investor relations expenses.
The net loss for the quarter was $2,655,000, a decrease in net income of $2,799,000 from net income of $144,000 for the same period last year. Excluding the write-down of goodwill, the net loss for the quarter was $220,000.
EBITDA was $182,000 for the quarter, a decrease of $365,000 from $547,000 for the same period last year.
Cash flows from operating activities were $27,000 for the quarter, a decrease of $259,000 from $286,000 for the same period last year. This decrease was mainly due to a reduction in cash flows from operations, reflecting the decrease in EBITDA, partly offset by a decrease in accounts payable. Cash flows from operations were $123,000 for the quarter, a decrease of $433,000 or 78% from $556,000 for the same period last year.
Annual General and Special Meeting
The Company will be holding its annual general and special meeting on December 13, 2011, at 4:00 pm at the office of McMillan LLP, Suite 4400, BCE Place, Bay Wellington Tower, 181 Bay Street, Toronto, Ontario.
The comparative financial statements for the three and twelve months ending June 30, 2011 along with other information may be obtained through the Company–s website at , or on SEDAR at .
This press release is available on the Company–s official on-line investor relations site for investor commentary, feedback and questions. Investors are asked to visit the investor relations section of the Company–s website at . Alternatively, investors are asked to e-mail all questions and correspondence to where they can also request addition to the Company–s investor e-mail list to receive all future press releases and updates directly.
About Organic Resource Management Inc.
Organic Resource Management is Canada–s largest provider of vacuum truck services for the collection, processing and recycling of food-related organic residuals. ORMI services in excess of 10,000 grease interceptors for industrial, commercial and institutional food industry customers across Canada on a regularly-scheduled basis. Further information about ORMI may be obtained at the Company–s web site at .
Non-GAAP Measures
The Company reports its financial results in accordance with GAAP. However, this press release contains references to certain non-GAAP financial measures such as “EBITDA” and “Cash Flows from Operations”. Non-GAAP financial measures are used by management to evaluate the performance of the Company. Non-GAAP financial measures do not have any meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other reporting issuers. Investors are cautioned that non-GAAP measures, such as those presented herein, should not be construed as an alternative to net income determined in accordance with GAAP as indicators of the Company–s performance or to cash flows from operating activities as a measure of liquidity and cash flow.
EBITDA means net (loss) income before income taxes, interest, amortization and share based compensation. Cash Flows from Operations means cash flows from operating activities before changes in non-cash operating assets and liabilities.
Forward-Looking Statements
Certain information contained in this press release may be forward-looking and therefore subject to unknown risks or uncertainties. The actual results, performance or achievements of Organic Resource Management Inc. may differ materially from the results, performance or achievements of the Company expressed or implied by such forward-looking statements.
Contacts:
Organic Resource Management Inc.
Charles Buehler
Chairman and CEO
416-580-8574