Daniel B. O’Brien, chief executive officer, states, The global economic slowdown continues, as the media informs us daily. This affects FSI in each of its division and market segments. However, despite continued inventory reduction and more aggressive just in time ordering from our customers, we still managed solid revenue and positive operating cash flow in Q1. Reduced volumes at the end of 2008 prevented us from selling all the high cost raw materials we had converted into finished goods and resulted in higher than predicted Cost of Goods Sold into the beginning of 2009. This pressure on margins finally relaxed in the second half of the quarter.
Basic weighted average shares used in computing per share amounts in Q1 were 14,062,567 for 2009 and 14,057,467 for 2008.
Non-GAAP operating cash flow: For the 3 months ending March 31, 2009, net income reflects $166,375 of non-cash charges (depreciation and stock option expenses) and $147,176 in new factory construction costs. These items are either non-cash items or items not related to operations or current operating activities of the company. Adjusting for these items, the company shows operating cash flow of $180,322, or $0.1 per share. This compares with operating cash flow of $670,303, or $0.05 per share, in the corresponding three months of 2008.
O’Brien added, ‘FSI’s sugar to aspartic acid plant, in Alberta, is much closer to completion. The steam permit we were waiting for has been issued and we are confident that we can begin commercial operation in September to coincide with the earliest possible availability of sugar beet juice from the 2009 crop. Production from the Alberta plant will allow FSI to supply the only renewably-based poly-aspartic acid in the world. This will allow access to customers who demand this level of environmentally sound behavior as well as insulating the company from future oil price shocks.’
The NanoChem division continues to contribute most of the company’s sales and cash flow, and new opportunities are unfolding to further increase sales in this division. NanoChem sales have been less seasonal than those of the company’s WaterSavr and Flexible Solutions Ltd divisions. This has lead to less volatility in total revenue figures quarter over quarter. However, in the future, Q1 and Q2 sales may be much larger than sales in Q3 and Q4. This is largely due to potential growth in agricultural product sales (sales which tend to occur mostly in Q1 and Q2).
