EnGlobe performed well in the fourth quarter, despite an increasingly difficult economic environment. Revenues were up in most verticals, and we successfully contained costs, stated Andre Heroux, chief executive officer (CEO) of EnGlobe. It’s unclear how long the global downturn will last, but our focus remains on the long term, and we will continue to invest in strategic growth areas such as soil treatment facilities in Europe.

Fourth Quarter Financial Highlights:

In the fourth quarter, revenue was CAD41 million compared with CAD39.9 million, up CAD1.1 million or equivalent of 2.8%.

The company’s revenue growth was driven by significant growth in the company’s Site Assessment and Remediation (SAR) division, which is mainly attributable to the acquisition, in March 2008, of Celtic Technologies Limited (Celtic) and a major new contract in Northern Canada. Celtic contributed CAD7.3 million of revenue in the fourth quarter.

The company’s Organic Waste Management (OWM) division, however, experienced a planned decrease of revenue that totaled CAD6.4 million. As part of the company’s previously communicated reorganization plan, OWM is now concentrating on activities that generate positive financial contribution. This has resulted in the progressive phasing out of certain contracts and business activities, which is translating into lower revenues, but higher margin with reduced risk.

Revenue for the Tank Testing and Calibration division was comparable to the same period in 2007 with no significant difference in the level of activity.

Gross operating profit in the quarter was CAD11.1 million compared with CAD12.3 million in the quarter ended December 31, 2007, a decrease of CAD1.2 million or equivalent to 9.8%. As a percentage of sales, gross operating profit margin for the fourth quarter was 27.2% compared with 30.7% in the same period of 2007. The decrease in gross operating profit is primarily attributable to the OWM division of the corporation, where treatment and disposal costs increased, as well as lower margins were earned on sales of compost due to a more competitive market.

Adjusted earnings before income tax, depreciation and amortization (EBITDA) for the fourth quarter was CAD3.9 million compared with CAD3.8 million in the quarter ended December 31, 2007. The increase is principally a result of Celtic’s contribution of CAD1.9 million, which compensates for a significant decrease in the OWM division of the corporation.

Amortization of intangible assets for the quarter ended December 31, 2008 was CAD1.2 million, an increase of CAD0.5 million compared to the quarter ended December 31, 2007, mainly due to the Celtic acquisition in March 2008.

For the quarter ended December 31, 2008, there was a cash inflow of CAD2.3 million generated by our operating, investing and financing activities compared to an outflow of CAD4.7 million for the same period in 2007.

We are pleased to have accomplished further improvements in our financial and operational milestones, stated Andre Heroux, president and CEO. We achieved this success through a focused strategy designed to grow the SAR line of business while restructuring OWM and reducing corporate costs and expenses. These activities have resulted in two consecutive quarters of strong operating profit with the corporation generating adjusted EBITDA of CAD10.3 million for the second half of 2008. Our focus will remain on improving our operational efficiencies and profitability, and conserving cash throughout the company. Despite a challenging economic outlook ahead, we believe that we will continue to grow market share as clients focus now more than ever on improving efficiency and reducing operating expenses.

Year 2008 Financial Summary and Highlights:

The Celtic acquisition on March 25, 2008 contributed CAD18.8 million of additional revenue in the company’s SAR division. This increase has been offset by lower revenue from existing operations mainly due to a reduction in revenue from the SAR United Kingdom markets and OWM division. In 2008, the company undertook a detailed review of its OWM operation that has led to major changes in its strategy. The company now concentrates its OWM operation on contracts and activities that generate positive financial contribution and is progressively phasing out those not reaching expectations.

Revenues for the Tank Testing and Calibration division were comparable to the same period in 2007.

Gross operating profit margin for the year was 22.9% compared with 29.4% in 2007.

The reduction in gross profit is primarily attributable to the negative margin of CAD1.4 million for the OWM division of the company, where treatment and disposal costs increased significantly, as well as lower margins were earned on compost sales due to a more competitive market. Further, the value of compost also significantly decreased during 2008, and the company recorded an inventory non-cash write-down of CAD2.6 million. This unforeseen decrease, which was identified and recorded in Q2, has resulted in a change of management’s estimate of the expected realizable value of its compost. In response to this unexpected turn of events, the company has been implementing corrective actions to return OWM to a profitable business model. As part of this initiative, starting in the third quarter of 2008, the company has renegotiated certain contracts, limited its compost sales to products that generate an acceptable contribution, and has substantially reduced its fixed and variable staffing levels.

Adjusted Ebitda for the year ended December 31, 2008 was CAD5.1 million compared to CAD14.7 million for the year ended December 31, 2007, a decrease of CAD9.6 million. As mentioned above, year over year, the acquisition of Celtic generated Adjusted EBITDA of CAD3.9 million while the existing SAR operations realized lower Adjusted EBITDA mainly due to its European operations experiencing lower revenues. All OWM activities have experienced a significant decline as explained above. Unsatisfied with these results, the company has reviewed all of its operations and has put in place an action plan to improve profitability. As discussed above, the restructuring plan has begun to generate improved performance for the company.

For the year ended December 31, 2008, cash used in operations was CAD1.1 million compared with cash used in operations of CAD5.9 million for the year ended December 31, 2007. Cash used in operating activities reflected the change in non-cash working capital items that generated CAD6.8 million, offset by CAD7.9 million derived from our net loss, less items not affecting cash and cash equivalents. In comparison, for the year ended December 31, 2007, the cash provided by operating activities before working capital charges was CAD3 million, offset by non-cash working capital items which used CAD9 million.