ARISE Technologies Reports Third-Quarter 2009 Results
Third quarter sales drop by 58%, year to year sales increase by 17.6%
WATERLOO - ARISE Technologies Corporation reported its financial results for the third quarter and nine months ended September 30, 2009. Financial results conform to Canadian generally accepted accounting principles and all currency amounts are in Canadian dollars unless otherwise noted. These results are substantially the same as the preliminary results released on November 2, 2009.
Third Quarter Highlights:
- Received Letter of Intent from Germany's NRW for up to
(euro) 9.54 million
- Announced creation of ARISE Technology Centre
- Ranked 15th on the Deloitte Technology Fast 50(TM) list of Canadian
- Welcomed the launch of Ontario's Feed-in Tariff ("FIT") program
- Produced first PV cells using ARISE 7N+ silicon
- Signed installation agreement with QuickContractors.com
- Entered agreement in respect of $10 million equity facility
"The third quarter of 2009 was an important period for ARISE. After working through the downturn in the solar industry, we began to see positive signs of increased demand in the marketplace. As we announced earlier this month in our preliminary results release, we are also beginning to see improvement across all of our businesses. Third-quarter shipments, production output, and PV cell manufacturing metrics all improved, compared with the second quarter of this year," said Vern Heinrichs, ARISE's President and Chief Executive Officer.
"We expect fourth-quarter shipments to be about 7 MW, which should help us to exceed our target of 15 MW in shipments by the end of 2009."
"We continue to face working capital issues but have undertaken a number of initiatives in an effort to resolve them," stated Mr. Heinrichs. "We remain focused on driving towards profitability in each of our Divisions and diversifying our revenue streams through the growth of our Systems Division. We believe the Ontario Green Energy Act's FIT program has the potential to be a catalyst for significant growth for our Systems business. We also expect to increase our PV cell production at our German plant early in 2010."
"This has been a challenging time for ARISE but we remain committed to our vision and strategy for the company. We have emerged from a nearly unprecedented period of economic turmoil and believe that the future is bright for the solar industry. We are addressing our near-term challenges and expect to begin 2010 well-positioned to reach our long-term goals," added Mr. Heinrichs.
Third quarter 2009 sales amounted to $6.6 million, compared with $15.9 million in the 2008 period. Sales for the first nine months of 2009 were $20.4 million, compared with $16.8 million in the first nine months of 2008. PV cells accounted for 98.3% of 2009 third-quarter sales and 97.5% for the first nine months of the year, with the balance in both periods being generated by the Company's Systems Division. Sales declines in the quarter were largely attributable to significant industry-wide PV cell price reductions, deferral of purchases by customers, and a manufacturing yield issue affecting ARISE PV cells produced late in the third quarter. The yield issue has since been resolved. ARISE believes the purchase reductions are a temporary result of the global recession.
Gross loss for the third quarter of 2009 was $2.0 million, compared with a loss of $2.6 million in the 2008 period. The gross loss was largely realized by the PV Cell Division which reported a loss of $2.0 million for the period. Also included in the gross loss for the quarter is a $945,000 provision reported by the PV Cell Division against the inventory affected by the yield issue noted above. For the first nine months of 2009, gross loss was $20.3 million, compared with a loss of $3.9 million in the first nine months of 2008. The significant increase in gross loss is mainly due to a $14.9 million valuation write-down of inventory related assets.
ARISE continues to focus on tightly managing its costs. Operating expenses for the 2009 third quarter were $4.5 million, compared with $5.0 million in the 2008 period. For the first nine months of 2009, operating expenses were $15.3 million, down from $16.0 million in the 2008 period. Operating expenses are comprised of research and development, general and administrative, selling and marketing, and depreciation and amortization.
R&D expenses decreased marginally to $1.4 million in the 2009 third quarter from $1.5 million in the same period in 2008. For the nine months ended September 30, 2009, R&D expenses increased to $5.7 million from $4.5 million in the first nine months of 2008.
General and administrative (G&A) expenses declined to $2.2 million in the 2009 third quarter compared with $2.5 million in the 2008 third quarter, mainly due to decreased stock-based compensation expense. For the nine months ended September 30, 2009, G&A expenses were $7.0 million, down from $9.1 million for the same period the prior year.
Selling and marketing expenses for the 2009 third quarter were $426,000, compared with $569,000 in the third quarter of 2008. For the nine months ended September 30, 2009, selling and marketing expenses were $1.2 million, compared with $1.6 million in the same period in 2008. For both 2009 periods, the decrease was predominately due to reduced consulting and feasibility expenses.
Net interest expense for the third quarter was $518,000, compared with $704,000 in the 2008 period. Despite increased borrowing from Commerzbank AG, interest expense decreased as a result of lower EONIA and EURIBOR interest rates. For the nine months ended September 30, 2009, net interest expense was $1.7 million, compared with $749,000 for the first nine months of 2008.
Other income and expenses in the 2009 third quarter, includes a foreign exchange gain of $1.6 million, compared with a foreign exchange gain of $238,000 in the same quarter of 2008. Other income and expenses in the first nine months of 2009 includes a foreign exchange gain of $2.9 million, compared with a foreign exchange gain of $713,000 in the 2008 period. The largest component of the foreign exchange gain resulted from the translation into Canadian dollars of financial liabilities of the company's wholly owned subsidiary, ARISE Technologies Deutschland GmbH, ("ARISE Germany"), which are denominated in Euros.
ARISE recorded a net loss for the third quarter 2009 of $5.4 million (a loss of $0.04 per basic and diluted share), compared with a net loss $8.2 million (a loss of $0.06 per basic and diluted share) in the 2008 quarter. The decreased net loss for the quarter is due to improved gross profit, decreased operating expenses, and a significant foreign exchange gain. For the first nine months of 2009, the net loss amounted to $33.8 million (a loss of $0.27 per basic and diluted share), compared with a net loss of $20.1 million (a loss of $0.17 per basic and diluted share) in the 2008 first nine months. On a year-to-date basis, net loss increased largely due to a $14.9 million valuation write-down of an inventory asset.