Company Highlights and Accomplishments:
Corporate:
Announced the consolidation of the company’s research and development (R&D) organization to include the Jennings, Los Angeles, pilot and demonstration-scale biofuels facilities under Greg Powers, executive vice president (EVP) of R&D;
Appointed James E. Levine, an experienced energy banking and finance executive from Goldman Sachs, as EVP and chief financial officer (CFO) to support the company in rebuilding its capital structure and securing necessary financing for commercial projects; and
Implemented aggressive expense management initiatives to decrease operating expenses as compared to prior quarters.
Biofuels Business:
Announced the second phase of a significant corporate partnership with BP through a 50/50 joint venture to develop, own and operate cellulosic ethanol facilities using non-food feedstocks with a total commitment of $45 million in funding and assets from the two partners;
Identified Highlands county, Florida as the location for a first commercial-scale cellulosic ethanol facility. This facility will be developed as part of the company’s joint venture with BP and is expected to provide the region with around 140 full-time jobs once commercial operations begin. This project was awarded a $7.0 million grant as part of Florida’s Farm to Fuel initiative;
Submitted, through the joint venture formed between Verenium and BP, a loan guarantee application to the U.S. Department of Energy under their present solicitation; and
Began the optimization phase of the company’s 1.4 million-gallon-per-year demonstration-scale plant in Jennings, Los Angeles.
Specialty Enzymes Business:
Achieved first quarter product gross margin improvement of nearly $1.5 million on relatively flat product revenue as compared to the previous year;
Announced the launch of Veretase alpha-amylase, a high performance enzyme that improves the economics and efficiency of the sweetener and beverage alcohol production markets; and
Signed a collaboration agreement with Alfa Laval for the Purifine PLC Enzyme to expand Purifine’s global market penetration in the edible oil industry by jointly marketing enzymatic degumming of vegetable oils using Verenium’s Purifine PLC enzyme and Alfa Laval’s engineering services and equipment.
Financial Results:
Total revenues for the first quarter of 2009 were $14.4 million compared to $15.2 million in the year-ago quarter, with product revenues representing more than 70% of total revenues in both periods.
Product revenues for the first quarter of 2009 were $10.6 million compared to $11.2 million in the year-ago quarter, representing a decrease of 6%. Gross shipments of Phyzyme, the company’s phytase for the animal feed industry sold through Danisco Animal Nutrition, remained at levels comparable to 2008. However, reported Phyzyme revenue in the first quarter of 2009 was lower than reported revenue reported in the year-ago quarter, due to a larger percentage of Phyzyme being manufactured by Danisco, for which the company only recognizes the net profit share component in revenue pursuant to current accounting rules. The decrease in product revenue also reflects the company’s discontinuation of its Bayovac-SRS and Quantum product lines during early 2008. The decrease in product revenue from these sources was offset in part by an increase in revenue from Fuelzyme, the company’s alpha amylase for corn ethanol.
Product gross margin improved in the first quarter of 2009, versus year-ago quarter, reflecting improved profit share from Danisco, improved capacity utilization and improved manufacturing yields.
Excluding cost of product revenues, total operating expenses increased from $24.5 million for the three months ended March 31 2008, to $27.0 million for the three months ended March 31, 2009. The year-over-year increase in total operating expenses (excluding cost of product revenues) relates mainly to the acceleration of biofuels development and commercialization efforts in 2009. Total operating expenses include gross expenses incurred to support ongoing development related to the company’s consolidated joint ventures with BP, Galaxy and Highlands. BP’s share of the company’s total first quarter of 2009 operating expenses of $27.0 was $7.9 million which is included below operating expenses as Loss attributed to noncontrolling interest in consolidated entities.
Non-cash, share-based compensation expense included in operating expenses for the first quarter of 2009 was $2.5 million compared to $3.5 million in the year-ago quarter.
Net interest expense for the three months ended March 31, 2009 was $3.2 million, net of $1.0 million in capitalized interest related to the company’s demonstration facility, compared to $2.1 million for the three months ended March 31, 2008, net of $0.9 million in capitalized interest in the year-ago quarter. These expenses related almost exclusively to the cash and non-cash interest expense from the company’s convertible debt instruments. Of total net interest expense for the first quarter of 2009, $1.4 million represents non-cash interest expense related to the company’s 8% convertible notes, compared to $0.5 million in non-cash interest in the year-ago quarter.
Net loss for the first quarter of 2009 was $0.3 million. In comparison, net loss in the year-ago quarter was $23.1 million. The decrease in net loss for the current period is largely attributable to the non-cash gain from accounting for fair value adjustments related to the company’s 8% convertible notes. Adjusted for the non-cash gain from accounting for fair value adjustments and in 2008, a loss on debt exchange and conversions related to the 8% convertible notes, the company’s non-GAAP pro-forma net loss for the first quarter of 2009 was $13.6 million, as compared to $18.9 million in the year-ago quarter. The company believes that excluding the non-cash impact of these items provides a more consistent measure of operating results.
The company had a strong start to 2009, beginning with the announcement of The company’s 50/50 joint venture with BP for developing commercial cellulosic ethanol facilities. This critical partnership firmly positions us, along with BP, to be a first mover in the field of next-generation ethanol, stated Carlos A. Riva, president and chief executive officer of Verenium. As The company look toward commercial operations, The company continue to be very encouraged by the political climate and support for alternative energy and, specifically, biofuels.
Despite the continued challenging economic environment, The company remain committed to effectively managing The company’s business, including the stringent management of corporate resources, in order to deliver on The company’s vision of building a market-leading, next-generation biofuels business. The company are focused and committed to rebuilding a healthy capital structure for Verenium in order to set the foundation for future growth and success, said James E. Levine, EVP and CFO.
