Basin Water, Inc. (NASDAQ:BWTR) reported financial results for
the second and third quarters of 2008. As previously announced, the
Company was unable to release results for the two quarters until a
comprehensive review of prior financial results had been completed.
That review has now been completed, and restatements of results for
all of 2006, all of 2007, and the first quarter of 2008 have been
disclosed in a separate press release. The Company has also filed
with the Securities and Exchange Commission its restated Annual
Report on Form 10-K/A for the years ended December 31, 2007 and
2006 and its restated Quarterly Report on Form 10-Q/A for the
quarter ended March 31, 2008.
The Company also disclosed cash and cash equivalents as of
December 31, 2008, and discussed the benefits of its recent
acquisition of Envirogen, a biofilter and bioreactor business,
improvements in operational efficiency, and strategic initiatives
it has undertaken, which are described below.
Second Quarter 2008 Financial Results
For the quarter ended June 30, 2008, Basin Water reported total
revenues of $3.1 million, compared with restated revenues of $2.2
million in the year earlier quarter. The Company reported a net
loss for the second quarter of $6.0 million, compared with a
restated net loss of $2.5 million in the prior year second
quarter.
The increased loss was due mostly to higher selling, general and
administrative expenses, including costs related to expansion of
the Company�s sales force nationally, a larger workforce due to the
acquisition of Mobile Process Technology Co. (MPT), and increased
legal costs. Cash and cash equivalents at June 30, 2008, were $23.5
million, compared with $36.0 million on December 31, 2007.
Third Quarter 2008 Financial Results
For the quarter ended September 30, 2008, the Company reported
total revenues of $2.8 million, compared with restated revenues of
$2.4 million in the third quarter 2007. The Company reported a net
loss for the third quarter of $14.7 million, compared with a
restated net loss in the year earlier third quarter of $11.9
million. Cash and cash equivalents as of September 30, 2008, were
$16.9 million, compared with $36.0 million on December 31, 2007.
The Company�s assets also include a $7.6 million increase in plant
property and equipment which is in part related to ion exchange
units that were partially manufactured in anticipation of sales and
the Company�s transition to outsourcing as well as water treatment
units returned to the Company in connection with the Envirogen
acquisition, which is discussed further below. The Company hopes to
sell or lease some of these units in 2009 and therefore recover the
invested capital.
The larger loss in the current-year quarter was due mostly to
higher selling, general and administrative expenses, which included
$5.0 million of goodwill impairment charges resulting from a
decline in the customer base and revenues of the Company�s MPT
business. Basin Water acquired Mobile Process Technology Co., a
provider of technology and services to the water treatment and
industrial process markets, in September 2007. The impairment
charge was taken because management believes lower business levels
due to the current economic climate within the acquired customer
base of MPT will affect future business results.
In addition, the Company experienced significantly increased
selling, general and administrative expenses due to higher staffing
costs and legal and accounting fees related to its now-completed
restatement and litigation.
Envirogen Acquisition
Results for the third quarter of 2008 also reflect consolidation
of the results of Envirogen, which comprises biofilter and
bioreactor businesses that Basin Water acquired from Shaw
Environmental and Infrastructure, Inc., on September 18, 2008, for
approximately $4.0 million in cash and other consideration. The
Company�s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008, provides additional details about the
transaction.
�We believe the Envirogen acquisition strengthens Basin Water,�
said Michael Stark, CEO. �This business has historically produced
$8 million to $12 million in annual revenue, and we are pleased
with its performance since the acquisition. Envirogen expands our
industrial wastewater treatment and municipal potable water
treatment capabilities and places us in the municipal wastewater
treatment market for certain customer needs,� he said.
�Additionally, Envirogen�s strong technical resources bolster
our ability to meet the process engineering, detailed engineering
and construction management needs of the extended range and
technical complexity of numerous municipal and industrial projects
that we are currently pursuing. Lastly, because Envirogen has built
strong relationships with consulting engineers as a business
strategy, we intend to leverage those relationships to promote
Basin Water�s other groundwater contaminant removal technologies.
We believe Envirogen opens an additional sales channel for us,
through consulting engineers, in addition to our existing sales
channel directly to end users.�
Additional Information
Basin Water also said that its unaudited cash and cash
equivalents as of December 31, 2008, were $11.5 million, compared
with $36.0 million a year earlier.
�With the work required for the financial restatement process
behind us, we can focus on the future of Basin Water,� Mr. Stark
said. �We now have current financial statements, an expanded
technology offering, a national sales force, and an experienced
management team. There is no doubt that the near term will be
influenced by the current national economic situation, but we are
hopeful that Basin Water has entered a brighter day,� he said.
Mr. Stark said that the Company has begun to see results from
the expansion of its national sales force. �During the last three
quarters, we have won half a dozen new contracts for equipment
sales and, in some instances, related long-term service contracts.
These new contracts will begin producing revenue in 2009. We have
reached the stage of firm proposals with other potential customers,
and we are hopeful that these will turn into additional business
for us in coming months.�
Basin Water also has taken significant steps in recent months to
increase efficiency, he said. �We determined that we could
cost-effectively outsource the manufacturing of our ion exchange
units, allowing us to close our manufacturing facility in Rancho
Cucamonga. Force reductions will reduce compensation and related
costs by nearly $2.0 million annually,� he said. He noted that the
Envirogen acquisition basically offsets the head count reduction
but expands revenue and margin.
The Company also has aggressively stepped up collection of
accounts receivable and focused on converting work in progress and
unbilled amounts into billed receivables, he said.
Mr. Stark also discussed strategic initiatives the Company has
undertaken. �We are working actively to secure a successful future
for Basin Water. The Board has retained Canaccord Adams to help
explore any and all long-term strategies for the Company.�
Conference Call Scheduled for Tuesday, February 17,
2009
Basin Water will conduct a conference call with investors on
Tuesday, February 17, 2009, at noon EST during which time it will
discuss its current business and prospects, the restated financial
results, and delayed 2008 quarterly reports that was issued
yesterday.
The conference call will be broadcast live over the Internet by
Thomson Financial, and can be accessed on Basin Water's Web site at
www.basinwater.com. From the home page, click on the Investor
Relations tab for the webcast link at least 15 minutes prior to the
start of the call to register and download any necessary audio
software. For those unable to participate in the live broadcast,
the call will be archived and accessible on the company's Web site
for a period of time.
The conference call is also being distributed through the
Thomson StreetEvents. Individual investors can listen to the call
at www.earnings.com. Institutional investors can access the call
via www.streetevents.com.
About Basin Water
Basin Water, Inc. designs, builds and implements systems for the
treatment of contaminated groundwater, industrial process water and
air streams from municipal and industrial sources. It provides
reliable sources of drinking water for many communities, and the
ability to comply with environmental standards and recover valuable
resources from process and wastewater streams. Basin Water has
developed proprietary, scalable ion-exchange, biological and other
treatment systems that effectively process contaminated water and
air in an efficient, flexible and cost effective manner. Additional
information may be found on the Company's web site:
www.basinwater.com.
Forward Looking Statements
This press release contains forward-looking statements made in
reliance on the safe harbor provisions of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements may
be identified by their use of words, such as �estimate,� �expect,�
�intend,� �anticipate� and other words and terms of similar
meaning, in connection with any discussion of the Company�s
financial statements, business, financial condition, results of
operations or liquidity. Actual results may differ materially from
these expectations due to various risks and uncertainties,
including: negative reactions from the Company�s stockholders,
creditors or customers to the Company�s restatement of its
financial statements, the existence of other errors that may
require further adjustment of the Company�s financial statements,
the impact and result of any litigation, investigation or other
action by The Nasdaq Stock Market, the SEC, any other governmental
agency or other parties related to the Company�s restatement of its
financial statements, the Company�s ability to manage its capital
to meet future liquidity needs and continue operations, the
effectiveness of any cost-saving measures by the Company, the
Company�s limited operating history, significant operating losses
associated with certain of the Company�s contracts, significant
fluctuations in its revenues from period to period, the success of
the Company�s strategic partners, its long sales cycles, market
acceptance of its technology, the geographic concentration of its
operations and customers, its ability to meet customer demands and
compete technologically, the Company�s ability to enter into
service and maintenance contracts with system sales, the Company's
ability to renegotiate loss contracts with its customers, the
Company�s ability to protect its intellectual property, regulatory
approvals of the Company�s systems, changes in governmental
regulation that may affect the water industry, particularly with
respect to environmental laws, the Company�s ability to attract and
retain qualified personnel and management members, and changes in
the board of directors and management members. More detailed
information about these risks and uncertainties are contained in
the Company�s filings with the Securities and Exchange Commission,
including the company�s Annual Report on Form 10-K/A for the year
ended December 31, 2007 and subsequent Quarterly Reports on Form
10-Q, as amended. The Company cautions readers not to place undue
reliance on any forward-looking statements, which speak only as of
the date on which they are made. The Company assumes no obligation
to update these forward-looking statements to reflect any change in
future events.
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