Advertisement
Net revenues for the 2008 third quarter increased to $11.2 millioncompared with net revenues of $1.5 million for the third quarter of 2007.Growth was driven by a $1.9 million increase in net revenues from theCompany's NutraCea segment and $7.8 million from its Irgovel subsidiary whichwas acquired in 2008. Net revenues for the third quarter of 2007 were offsetby $1.5 million of returned product.
Advertisement
Sequentially, net revenues for the third quarter of 2008 increased 8.6%over second quarter 2008 net revenues of $10.3 million. The Company's twobusiness segments, NutraCea and Irgovel, recorded net revenues of $3.4 millionand $7.8 million, respectively, for third quarter of 2008.
Net loss for the third quarter of 2008 decreased to $4.5 million, or($0.03) per share, compared to a net loss of $4.8 million or ($0.03) pershare, in the comparable period of 2007. The decreased net loss for the 2008third quarter was primarily due to the increased gross margin of $2.6 million,offset by a net increase of $2.4 million in operating expenses, other expensesand income, and income taxes.
Sequentially, NutraCea realized a reduction in net loss from the $6.1 lossreported in the second quarter of 2008 compared with the $4.5 million net lossreported in the third quarter of 2008. Our NutraCea segment had a loss beforeincome taxes of $5.0 million compared with a net loss before income taxes of$6.9 million in the second quarter of 2008. The Irgovel segment, which wasacquired in February 2008, reported income before income taxes of $718,000 forthird quarter of 2008.
Sales, General and Administrative (SG&A) expenses totaled $6.5 million forthe third quarter of 2008, compared with SG&A expenses of $4.6 million for thethird quarter of 2007. The $1.9 million increase was due to $1.2 million ofSG&A costs from our Irgovel segment and a $726,000 increase from our NutraCeasegment.
Brad Edson, President and CEO of NutraCea commented, "Driven by strongexecution of our business model we realized continued improvement in ouroperations this quarter with results coming in-line with expectations. We areparticularly pleased with our consistent sequential sales progress, andsequential improvement reflected in decreased operating costs, reflectingupward repricing, increasing utilization, as well as the improved bottom lineperformance quarter-over-quarter and sequentially. Results were marked by astrong performance from our recently acquired rice-bran oil manufacturingbusiness unit, Irgovel, which remains on target to achieve the previouslyforecasted $30 million annualized revenue run rate. Additionally, in supportof our expansion strategy, we are aggressively pursuing incremental salesopportunities for our NutraCea core SRB product line and achieved notablegrowth this period increasing sales by approximately $373,000 in addition toan intentional building of inventory for new customer orders anticipated inthe fourth quarter 2008 and first quarter 2009.
Additionally, in a continued effort to enhance our financial position andbalance sheet, we recently announced the signing of a proposal letter toobtain a $10.0 million credit facility through Wells Fargo Bank. We alsoissued $5.0 million of Series D Convertible Preferred Stock to twoinstitutional investors. This financing is expected to provide the resourcesnecessary to complete all projects that we currently have under constructionincluding the planned capacity and technological enhancements at Irgovel".
Leo Gingras, COO, stated, "We remain focused on capitalizing on andextending our success within Irgovel. We are on track to add an additional45,000 tons of annual capacity at Irgovel by the end of first quarter 2009which would give us a total annual capacity of 115,000 tons. Based on existingresults this would produce a corresponding increase in gross and net revenueof at least 60%. We also anticipate that our proprietary and new patent filedtechnology will have been installed and operating when this additionalcapacity comes on line. When fully operational, we believe this couldadditionally more than double the estimated level of profitability of Irgovelfor each quarter going forward. Further, we are moving forward with anotherplanned expansion which is currently estimated to increase the Irgovel annualcapacity to over 200,000 tons by the first quarter 2010. "
Nine Month Results
For the first nine months of 2008 the Company's net revenues increased 60%to $26.5 million compared with revenues of $16.5 million for the first ninemonths of 2007. This $10.0 million increase is attributable to $16.2 millionin sales contributed by our Irgovel segment, offset by a $2.7 million declinein product sales and a net decline of $5.0 million of license fee revenues byour NutraCea segment.
The Company's net loss for the first nine months of 2008 totaled $17.4million, or ($0.12) per share, compared with a net loss of $3.0 million, or($0.02) per share, in the same period of 2007. The $14.4 million net lossincrease for the nine month period was primarily due to the $4.2 milliondecrease in gross profits, a $6.5 million increase in operating expenses and a$3.7 million net increase in other expenses and income taxes.
Sales, General and Administrative expenses for the first nine months of2008 were $17.5 million, compared to SG&A expenses of $12.5 million for thefirst nine months of 2007. This increase is due to a $2.5 million, or 20%,increase in our NutraCea segment to expand investment in personnel,infrastructure, and sales and marketing activities to meet anticipated futuredemands and $2.5 million of SG&A from our Irgovel subsidiary. SG&A expensesfor our Irgovel subsidiary consist of marketing, selling, and administrativeexpenses.
Brad Edson, President and CEO of NutraCea stated, "We are moving aheadwith our China facility and it is anticipated to be over seven times the sizeof our existing facility in Brazil. This project will incorporate state of theart technology and because of scale is anticipated to generate results thatare more than seven times greater than what we are currently achieving inBrazil. This project is progressing and we hope to obtain all the necessarypermits and approvals shortly and break ground in the first quarter of 2009.
The Company is closing in on being able to realize some of the benefits ofthe tremendous amount of effort it has applied towards stabilizing Wheat Bran.We are moving closer to realizing the benefits of these efforts and we believewe are about a year ahead of schedule of deploying this technology into themarketplace. This offers tremendous upside to the company without requiring acorresponding burden of capital. Additionally the Company is finalizingdetails to further extract incremental value from our Stabilized Rice Branwithin the United States with certain initiatives that are now underway. Bothof these items will be more fully discussed on the conference call.
"We are proud of the results achieved during the past year and our abilityto expand our presence and produce healthy revenue gains. We have built astronger, more balanced company, and given our global position and recentlyenhanced financial condition are nicely positioned to leverage the capacitythat we have now built. We believe the Company is now close to an inflectionpoint, where our capacity and the ability to utilize it should allowsufficient revenue to be able to be produced to move it into sustainedprofitability. We continue to proceed into the fourth quarter withexpectations for increased top line growth, and continued improvement inbottom line performance. We are optimistic of achieving our goals for theremainder of the year and delivering sequentially improving results, both topline and bottom line, throughout 2009 and beyond."
About NutraCea
NutraCea is a world leader in production and utilization of stabilizedrice bran. They hold many patents for stabilized rice bran productiontechnology and proprietary neutraceutical formulas ranging from arthritis,chronic bowel conditions, and effective diabetes control to cardiovasculardisease treatment protocols. NutraCea's proprietary technology enables thecreation of food and nutrition products to be unlocked from rice bran,normally a waste by-product of standard rice processing. Committed to helpingthe underfed, they're heavily involved in providing product and technology fordeveloping countries through NutraCea's RiceAde feeding program. Moreinformation can be found in the Company's filings with the SEC, and you canvisit the NutraCea Web site http://www.NutraCea.com.
Forward-Looking Statements
This release contains forward-looking statements, including statementsregarding the likelihood that the bank will proceed with the completion of thecredit facility as described in the proposal letter, or that it will proceedwith any credit facility, the ability of NutraCea to comply with theconditions set forth in the loan proposal or that the bank will extend credit,even if such conditions are met, and the availability of any funds pursuant tothat facility, due to the non-binding nature of the loan proposal, ourexpectations that the Series D Preferred Stock financing will provide theresources necessary to complete all projects currently under construction, theability of Irgovel to remain on target to achieve forecasted revenue, thetiming and cost of completion of projects under construction and the increasedcapacity resulting from the completion of those projects, the anticipatedcapacity and the progress and timing of receipt of permits and start ofconstruction of the China facility, our belief regarding the deployment of ourStabilized Wheat Bran technology about one year ahead of schedule and theupside of our Stabilized Wheat Bran technology, our belief that we are closeto an inflection point, where our capacity and the ability to utilize itshould allow sufficient revenue to be able to be produced to move NutraCeainto sustained profitability, and our expectations for increased top linegrowth and continued improvement in bottom line performance. Actual resultsmay differ from those projected, due to a number of risks and uncertainties,including, but not limited to, the matters specified in the Company's filingswith the Securities and Exchange Commission. These statements are made basedupon current expectations that are subject to risk and uncertainty. TheCompany does not undertake to update forward-looking statements in this newsrelease to reflect actual results, changes in assumptions or changes in otherfactors affecting such forward-looking information. Assumptions and otherinformation that could cause results to differ from those set forth in theforward-looking information can be found in the Company's filings with theSecurities and Exchange Commission, including the Company's most recentperiodic report.NUTRACEA AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS September 30, December 31, 2008 2007 ASSETS (Unaudited) Current assets: Cash and cash equivalents $8,702,000 $41,298,000 Restricted cash 2,363,000 758,000 Trade accounts receivable, net of allowance for doubtful accounts of $3,404,000 and $2,999,000, respectively 2,992,000 2,346,000 Inventories 4,945,000 1,808,000 Notes receivable, net of allowance for doubtful notes receivable of $573,000 and $250,000, respectively 921,000 2,936,000 Deposits and other current assets 3,248,000 2,545,000 Total current assets 23,171,000 51,691,000 Restricted cash 1,344,000 1,791,000 Notes receivable, net of current portion - 5,039,000 Property and equipment, net 46,652,000 19,328,000 Investment in joint ventures 11,751,000 1,191,000 Patents and trademarks, net of accumulated amortization 5,139,000 5,743,000 Other non-current 124,000 - Goodwill, net of $1,300,000 impairment 52,668,000 39,510,000 Total assets $140,849,000 $124,293,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $15,126,000 $7,596,000 Notes payable, current portion 710,000 23,000 Total current liabilities 15,836,000 7,619,000 Long-term liabilities: Notes payable, net of current portion 4,379,000 77,000 Total liabilities 20,215,000 7,696,000 Commitments and contingencies - - Shareholders' equity: Common stock, no par value, 350,000,000 shares authorized, 167,994,000 and 144,108,000 shares issued and outstanding 199,185,000 177,813,000 Accumulated deficit (78,594,000) (61,216,000) Foreign currency cumulative translation adjustment 43,000 - Total shareholders' equity 120,634,000 116,597,000 Total liabilities and shareholder's equity $140,849,000 $124,293,000 NUTRACEA AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2008 2007 2008 2007 Revenues Product sales, net discounts $11,193,000 $3,048,000 $26,563,000 $13,031,000 Less sales returns - (1,551,000) (119,000) (1,551,000) Licensing and royalty revenue 8,000 23,000 39,000 5,033,000 Total revenues 11,201,000 1,520,000 26,483,000 16,513,000 Cost of sales 8,704,000 1,635,000 20,775,000 6,611,000 Gross profit (loss) 2,497,000 (115,000) 5,708,000 9,902,000 Operating expenses Research and development expenses 266,000 155,000 1,268,000 446,000 Selling, general and administrative expenses 6,484,000 4,576,000 17,534,000 12,546,000 Professional fees 303,000 747,000 3,385,000 2,742,000 Total operating expenses 7,053,000 5,478,000 22,187,000 15,734,000 (Loss) from operations (4,556,000) (5,593,000) (16,479,000) (5,832,000) Other income (expense) Interest income 176,000 778,000 597,000 2,167,000 Interest expense (107,000) - (448,000) - Gain on settlement - - - 1,250,000 Gain (loss) on disposal of assets 211,000 - (462,000) (309,000) Loss on equity investments (35,000) (36,000) (115,000) (286,000) Total loss before income tax (4,311,000) (4,851,000) (16,907,000) (3,010,000) Income tax expense (222,000) 67,000 (541,000) (18,000) Net loss from continuing operations (4,533,000) (4,784,000) (17,448,000) (3,028,000) Minority interest - - 70,000 - Net loss $(4,533,000) $(4,784,000) $(17,378,000) $(3,028,000) Basic and diluted loss per share: Basic loss per share $(0.03) $(0.03) $(0.12) $(0.02) Fully diluted loss per share $(0.03) $(0.03) $(0.12) $(0.02) Weighted average basic number of shares outstanding 167,866,000 141,084,000 147,947,000 131,054,000 Weighted average diluted number of shares outstanding 167,866,000 141,084,000 147,947,000 131,054,000
SOURCE NutraCea
