Cereplast, Inc. (OTCBB:CERP), manufacturer of proprietary bio-based
sustainable plastics, today reported financial results for the fiscal
year ended December 31, 2007.
For the year ended December 31, 2007, Cereplast reported gross
sales of $2.3 million, compared with gross sales of $0.8 million in
fiscal year 2006, representing a 181% year-over-year increase. The
increase in
sales is a result of volume growth in the Company's
Compostables(TM) Resins, which were introduced commercially at the end
of 2006 and reflects the initial introduction of finished products made
by converter customers. Operating expenses increased by $8.6 million,
or 252%, to $12.0 million for the year ended December 31, 2007 compared
to the year ended December 31, 2006.
The Company reported a net loss of $11.7 million, or $0.05 per
share, for the year ended December 31, 2007, compared with a net loss
of $3.4 million, or $0.02 per share, for fiscal year 2006. The net loss
for 2007 includes $7.8 million of non-cash expenses resulting from the
issuance of options under the employee stock option plan, issuance of
restricted stock to employees as part of compensation and the
termination of the equity line of financing. The number of shares used
in the calculation of earnings per share was 238.4 million for fiscal
2007, as compared to 199.0 million for fiscal year 2006. The increase
in the number of shares primarily reflects the shares issued in the
Company's July 2007 offering.
Net cash used in operating activities was $4.8 million for fiscal
year 2007, which compares to net cash used in operating activities of
$2.4 million for 2006. Cash and short-term investments at December 31,
2007 totaled $8.7 million.
"Over the past year, we have experienced tremendous success in all
aspects of our business, and the tripling of our revenue in 2007
demonstrates that the demand for our bioplastic is growing rapidly,"
said Frederic Scheer, Cereplast's chairman and CEO. "I am confident
that our growth will continue in 2008 as customers continue to
introduce finished products made from Cereplast's bioplastics."
"Cereplast Hybrid Resins(TM) already have triggered significant
attention in the marketplace and we continue to see growing interest in
our line of Compostables(TM) resin," continued Scheer. "We believe that
the increased focus on our products is being fueled by fossil fuel
prices that recently reached $110 for a barrel of crude, and by
continually mounting environmental awareness."
Operating Highlights
Product Development and Intellectual Property - Cereplast has
developed and is commercializing proprietary bio-based resins through
two complementary product families: Cereplast Compostables(TM) Resins,
a renewable, ecologically sound substitute for single-use
petroleum-based plastics and Cereplast Hybrid Resins(TM), which replace
50% or more of the petroleum-based content of durable petroleum-based
plastics with materials from renewable resources. Currently, Cereplast
has about 12 mark registrations on file, and has 26 patents granted and
patent applications pending in the United States and abroad.
-- Cereplast Compostables(TM) Resins are renewable, ecologically
sound substitutes for petroleum-based plastic products, replacing
nearly 100% of the petroleum-based additives used in traditional
plastics. Compostables(TM) Resins are made primarily from abundantly
available and low-cost natural raw materials such as plant starch from
renewable crops such as corn, tapioca, wheat and potatoes. These resins
meet the same product specifications of traditional plastic resins and
can be processed with the existing equipment used by converters today.
More importantly, Compostables(TM) Resins deliver comparable or
superior performance characteristics at prices competitive with
conventional paper and plastic products while minimizing the harmful
impact on the environment. Introduced in November 2006, the Company has
increased its commercially available grades of Compostables(TM) Resins
to 30 formulations. Recently, Cereplast announced the first-ever
freeze-tolerant resin, which retains structural rigidity in freezing
temperatures and is ideal for frozen food applications.
Compostables(TM) Resins target primarily single-use disposables
and fully address the needs of plastic converters serving the
foodservice disposable packaging market. The Company has started to
target markets outside of foodservice ware, where its resins have been
used to produce limited commercial quantities of products targeted at
the health and beauty sector, advertising, and consumer products.
Products made from Cereplast Compostables(TM) Resins will compost
in municipal or commercial composting facilities in less than 180 days
as per ASTM requirements and will not leave any harmful chemical
residues. Compostables(TM) Resins received the "New Material of the
Year Award" from the Society of Plastic Engineers in 2006.
-- Cereplast Hybrid Resins(TM), introduced in October 2007,
replace 50% or more of the petroleum content in conventional plastics
with renewable materials and are cost-competitive with petroleum-based
resin. Like Cereplast Compostables(TM) Resins, Hybrid Resins(TM) can
run on existing equipment and can be processed at a lower manufacturing
temperature than petroleum-based plastics, requiring no additional
capital investment. As an effective, affordable alternative for brand
owners and converters interested in replacing petroleum-based resins,
Hybrid Resins(TM) can be used in a wide variety of durable applications
and markets, including the automotive industry, consumer electronics,
the medical field, cosmetic packaging, furniture, and construction.
Cereplast currently has one grade of Hybrid Resins(TM),
Biopropylene(TM). Since its introduction, more than 50 companies have
requested samples for testing and many major trade magazines have
published articles on the performance, cost and environmental benefits
of the new resin. Late last year, Hybrid Resins(TM) won the inaugural
AUTOPLAST SPEICON award for the Highest Contribution in Plastic
Material Development Used in the Auto Industry.
Production - During 2007, the Company focused on refining and
improving its production process and capacity. Cereplast currently has
about 50 million pounds of production capacity at its Hawthorne,
California facility, with a proprietary state-of-the-art process
designed by Cereplast specifically for processing bio-plastics at high
speed. The Company also is developing a new bioplastic production
facility in Seymour, Indiana which will become one of the world's
largest bioplastic plants. The new plant will enable the Company to
increase production by 50 million pounds by the end of 2008 and by an
additional 500 million pounds by early 2010.
Customer Development - The Company's pipeline of customer
prospects continues to grow. To date we have developed formal
relationships with five of the top six thermoforming converters in the
United States for packaging and single use disposable products, which
account for 75% of the total thermoforming production in the United
States. More than 100 companies have requested and been provided
samples of the Company's bioplastic resin and 60 customers have
purchased resin for trials and testing. Thirty-four of these customers
have advanced to prototype testing and qualification of more than 100
different products applications. Ten customers - including Alcoa,
Genpak, Innoware, SoloCup, Penley and Pace Industries - have
commercialized and introduced 68 different bioplastic products using
the Company's resin.
Corporate Infrastructure - The Company continues to be successful
in attracting and retaining the necessary talent to manage its growth,
including significant additions to its operations and sales functions.
The Company now has 58 full time employees.
"We made significant progress in 2007 and Cereplast's resins are
now starting to be adopted in a wide variety of different industries
beyond food service," added Scheer. "Our Cereplast Hybrid Resins(TM)
are expanding the reach of Cereplast into the world of durable
applications where sustainability is the main driver."
Business Outlook
During 2008, Cereplast's business goals and strategies will focus
on (i) confirming and expanding the use of its Compostables(TM) in
single use applications by working closely with brand owners and
converters, and (ii) targeting several large industries for more
durable applications where sustainability is the main reason and where
compostability is not an option, such as the automotive industry,
consumer electronics, cosmetics, and others. Among the developments to
look for in 2008 are:
Product Development and Leadership - To date, more than 68
different products have been made using Cereplast resins. Cereplast's
continuing interaction with its customers and suppliers has improved
the performance and expanded the spectrum of uses for its resins, while
reducing material and manufacturing costs. This interface, combined
with a rigorous research and development effort, will allow the Company
to continue to develop and refine beneficial properties in its resins -
such as sustainability, compostability, thermal properties and
printability - and develop new, cost-competitive formulations in
conjunction with customer requirements.
Expanding Production Capabilities - In December 2007, Cereplast
announced the location of its new bioplastic production facility in
Seymour, Indiana which will become one of the largest bioplastic
production plants in the world. The location of the Seymour plant puts
it in close proximity to various raw material sources and makes it an
ideal manufacturing and logistics location. The Company has begun to
survey the facility and is in the process of installing machinery for
the production of bio-resins.
The facility will be developed in three phases, with the timing or
each phase dependent on market demand. The goal in Phase I will be to
add equipment capable of manufacturing approximately 50 million pounds
of bio-resin annually by the end of 2008. Phase II will bring an
additional 50 million pounds of annual production capacity. By 2010,
the new facility will allow Cereplast to produce up to an additional
500 million pounds of bioplastics per year.
Expand Customer Relationships - As a solutions provider to both
brand owners and converters Cereplast works closely with its customers
to understand their needs, help them develop solutions to address their
customer base and identify opportunities to employ the Company's
products. Cereplast's strategy for strengthening relationships with its
customers is to continue to focus on these initiatives. This includes:
-- Helping brand owners follow the "green" trend and possibly
develop a "green" identity with consumers by looking for ways to make
packaging more environmentally friendly while satisfying performance
and cost requirements.
-- Helping converters better utilize our resins in their
traditional manufacturing processes and assist them with product
positioning and in managing end-user customer demand.
Pursue Strategic Alliances, JDAs and JVs - We will continue to
pursue strategic business relationships that complement our product
portfolio or create a channel to market and increase our rate of
growth. We have built strategic alliances with suppliers, distributors,
converters and brand owners to develop and commercialize our products
and to bring them to market more quickly than we otherwise could on our
own. To date, this includes formal relationships with five of the top
six thermoforming converters in the United States for packaging and
single use disposable products, which account for 75% of the total
thermoforming production in the country, and more than 60 additional
customers. The Company continues to work towards contracts with
recognizable Tier 1 brand owners.
Joint development agreements (JDA) and joint ventures (JV) have
and will continue to serve and important function in Cereplast's
growth. The Company will continue to develop strategic alliances to
market, distribute and sell plastics manufactured with its resin
technology.
International Expansion - Cereplast will start to target the
European plastics market, where environmental legislation is more
stringent than in the U.S. and where there is greater focus on these
issues. The Company believes that this strongly pro-environment
position may lead to additional opportunities in 2008 and beyond.
Strengthening Management and the Board of Directors - Earlier this
year, Jacques Vincent, vice chairman and advisor to the chairman at
Groupe Danone, joined Cereplast's board of directors. Vincent brings
worldwide business expertise and financial experience that will be
important in the growth of the Company. During 2008, Cereplast will
seek to strengthen its management team and board by attracting
personnel experienced and knowledgeable in the chemical and plastics
industry, operations, sales and marketing, or international commerce.
Source: Cereplast, Press Release
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