CRAILAR TECHNOLOGIES INC 
By First Quarter Highlights:
-- Commences production at acquired European production facility
-- Shipped flax fiber to key customers
-- Produced and shipped trial hemp quantities
-- Adjusted EBITDA for Q1 was a loss of $1.3 million
PORTLAND, OR, May 15, 2014 /PRNewswire/ - CRAiLAR Technologies Inc. ("CL" or the "Company") (TSXV: CL) (OTCQB: CRLRF), which produces and markets CRAiLAR® Flax fiber The Friendliest Fiber On The Planet(TM), today reported sales of $0.4 million and a net loss of $2.6 million or $0.05 per share for the first quarter ended March 29, 2014 which includes a non-cash derivative liability expense of $0.3 million or $0.01 per share and facility commissioning costs of $0.3 million or $0.01 per share. This compares with nil sales and a net loss of $3.2 million or $0.08 per share for the first quarter of 2013 that includes a non-cash inventory impairment charge of $0.4 million. The Company's Adjusted EBITDA for the quarter was a loss of $1.3 million, a reduction of $0.4 million from first quarter 2013's Adjusted EBITDA loss of $1.7 million. For further information regarding Adjusted EBITDA, including a reconciliation of Adjusted EBITDA to net loss, see non-GAAP Financial Measures below.
During the First Quarter, the Company began optimizing its European production facility purchased in December 2013 as it commenced production and shipped high quality CRAiLAR Flax fiber. The Company incurred $0.3 million of incremental costs to outsource certain production steps and to train new employees to boost the number of shifts. The Company also experienced production inefficiencies while the plant was undergoing modification. The additional outsourcing costs were viewed as an investment to satisfy initial customer demand. The necessary equipment to bring the CRAiLAR process in-house is expected to be operational by the end of the second quarter. Once installed and ramped up, this equipment is expected to eliminate outsourcing costs. Additional equipment to provide energy, chemical and labor savings is scheduled to be installed and operational by the end of the third quarter.
"The first quarter was an exciting period for CRAiLAR as we began filling customer orders with the best fiber we have ever produced," stated Kenneth C. Barker, Chief Executive Officer. "Customer feedback continues to be very positive; our customers are increasing the blend levels of CRAiLAR in their products; and we are receiving 2015 order forecasts in excess of our current capacity. We are also excited by the hemp opportunity, a great fiber for denim and durable fabric applications."
Barker continued, "While we are pleased with the fiber we are producing, we are anxious to complete commissioning our plant in order to achieve production efficiencies and develop feedstock sources to expand margin. Assuming the elimination of commissioning costs and excluding fixed plant expenses, our variable contribution margin for the first quarter was 17% despite the production inefficiencies experienced while construction was underway, We have a logical path to expand variable contribution margin and we look forward to updating investors in future quarters."
Cash and cash equivalents and investments at March 29, 2014 were $3.9 million up from $1.2 million at our fiscal year eneded December 28, 2013. The increase in cash equivalents of $2.7 million resulted from $2.2 million of cash used in operations and $0.6 million of cash invested property and equipment offset by $5.2 million of cash from financing activities from a private placement of equity of $3.1 million and $2.1 million from the IKEA working capital and equipment financing loan.
The Company expects second quarter 2014 sales in excess of $1.0 million; more than double sales for the first quarter 2014. Capacity will be limited during the second quarter as equipment installation requires the interruption of production while the plant is being configured to optimize CRAiLAR production. The Company expects those modifications to be completed in the second quarter.
Non-GAAP Financial Measures
The table below reconciles net loss to Adjusted EBITDA for the periods presented (in thousands):
Thirteen Weeks Ended
March 29, 2014 March 30, 2013
(in thousands)
Net Loss $ (2,576) $ (3,230)
Interest 541 312
expense, net
Fair value 262
adjustment (74)
derivative
liabilities
Amortization 128 294
and
depreciation
EBITDA (1,645) (2,698)
Stock-based 71 555
compensation
Facility 252
commissioning
expense
Impairment - 396
loss
Rent - 37
inducement
expense
Adjusted $ (1,322) $ (1,710)
EBITDA
Regulation G, "Conditions for Use of Non-GAAP Financial Measures," and other provisions of the Securities Exchange Act of 1934, as amended, define and prescribe the conditions for use of certain non-GAAP financial information. We provide "EBITDA," which is a non-GAAP financial measure that consists of net income before (a) interest income (expense), net; (b) income tax provision (benefit); (c) amortization of intangibles and impairment loss and (d) depreciation and amortization. "Adjusted EBITDA" further adjusts EBITDA to exclude share-based compensation expense, facility commissioning expense, non-cash write-downs of equipment and inventory and non-cash rent expense.
We believe that this non-GAAP financial measure provides important supplemental information to management and investors. This non-GAAP financial measure reflects an additional way of viewing aspects of our operations that, when viewed with the GAAP results and the accompanying reconciliation to corresponding GAAP financial measures, provides a more complete understanding of factors and trends affecting our business and results of operations.
Our management uses Adjusted EBITDA as a measure of our Company's operating performance because it assists in comparing our operating performance on a consistent basis by removing the impact of items not directly resulting from core operations. Internally, this non-GAAP measure is also used by management for planning purposes, including the preparation of internal budgets; for allocating resources to enhance financial performance; for evaluating the effectiveness of operational strategies; and for evaluating our capacity to fund capital expenditures and expand our business. We also believe that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of development stage companies. Additionally, we believe that lenders or potential lenders use Adjusted EBITDA to evaluate our ability to repay loans.
This non-GAAP financial measure is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review our consolidated financial statements in their entirety and to not rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. In addition, we expect to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring.
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Conference Call
A conference call to discuss the company's first quarter and year ended March 29, 2014 results is scheduled to begin at 2:00 pm Pacific Daylight Time (5:00 pm Eastern Daylight Time) on Thursday, May 15, 2014. Participants may access the call by dialing 877-407-4176 (North America) or 201-493-6780 (international), 5 to 10 minutes before the call and ask for the CRAiLAR Technologies Inc. First Quarter 2014 Conference Call. In addition, the call will be broadcast live over the Internet and accessible through website: http://public.viavid.com/index.php?id=106834. If you are unable to participate during the live call, an audio replay will be available until midnight on May 29, 2014 by dialing 877-870-5176 within the United States or 858-384-5517 for international callers, and entering pin number 13582446. A transcript will be available approximately 24 hours after the call on CRAiLAR's investor page.
About CRAiLAR Technologies Inc.
CRAiLAR(R) Technologies Inc. offers cost-effective and environmentally sustainable natural fiber in the form of flax, hemp and other bast fibers for use in textile, industrial, energy, medical and composite material applications. Produced using a fraction of water and chemical inputs compared with other natural fibers, CRAiLAR Flax is the newest natural fiber introduction to the market in decades. The Company supplies its CRAiLAR Flax to IKEA, HanesBrands, Georgia-Pacific, Tuscarora Yarns, Target Corp. and Kowa Company for commercial use, and to Levi Strauss & Co., Ashland, PVH Corp., Cotswold Industries, Cone Mills and Lenzing for evaluation and development. The Company was founded in 1998 as a provider of environmentally friendly, socially responsible clothing. For more information, visit www.crailar.com.
Neither the TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Safe Harbor Statement
This news release includes certain statements that may be deemed "forward-looking statements". All statements in this news release, other than statements of historical facts, are forward-looking statements. Forward-looking statements or information are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements or information and including, without limitation, risks and uncertainties relating to: any market interruptions that may delay the trading of the Company's shares, technological and operational challenges, needs for additional capital, changes in consumer preferences, market acceptance and technological changes, dependence on manufacturing and material supplies providers, international operations, competition, regulatory restrictions and the loss of key employees. In addition, the Company's business and operations are subject to the risks set forth in the Company's most recent Form 10-K, Form 10-Q and other SEC filings which are available through EDGAR at www.sec.gov. These are among the primary risks we foresee at the present time. The Company assumes no obligation to update the forward-looking statements.
CRAiLAR
Technologies Inc.
(A Development
Stage Company)
Consolidated
Balance Sheets
(In US Dollars)
(Unaudited)
March 29, December 28,
2014 2013
ASSETS
Current
Cash and cash $ 3,867,218 $ 1,193,365
equivalents
Accounts receivable 785,218 223,105
Inventory 876,238 945,040
Prepaid expenses 451,568 290,872
and deposits
5,980,242 2,652,382
Deferred Debt 1,333,895 1,442,023
Issuance Costs
Property and 17,650,131 17,240,012
Equipment, net
Intangible Assets, 157,604 155,545
net
$ 25,121,872 $ 21,489,962
LIABILITIES
Current
Accounts payable $2,711,204 $2,377,901
Accrued liabilities 2,677,731 2,342,153
Unearned revenue 239,226 247,655
Notes payable 532,036 476,614
Current portion of 615,088 634,486
loans payable
Current portion of 60,467 -
long term debt
6,835,752 6,078,809
Deferred Income Tax 198,869 199,131
Liability
Loans Payable 514,202 551,190
Long Term Debt 18,300,961 16,674,686
25,849,784 23,503,816
STOCKHOLDERS'
DEFICIT
Capital Stock
Authorized:
100,000,000 common
shares without par
value
Issued and 38,100,356 34,889,370
outstanding :
50,679,097 common
shares
(December 28, 2013
- 47,806,031)
Additional Paid-in 10,004,951 9,934,322
Capital
Accumulated Other 1,165,425 585,301
Comprehensive
Income
Deficit (11,485,251) (11,485,251)
Deficit accumulated (38,513,393) (35,937,596)
in the development
stage
(727,912) (2,013,854)
$ 25,121,872 $ 21,489,962
CRAiLAR Technologies Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In US Dollars)
(Unaudited)
Period ended Period ended
March 29, March 30,
2014 2013
Revenues $ 435,450 $ -
Cost of sales
Materials and direct 359,647 -
product production
costs
Production facility 98,235 -
overhead costs
Facility 251,825 -
commissioning costs
Depreciation 103,851 -
813,558
Gross loss (378,108) -
Expenses
Marketing and 82,670 199,359
promotion
Amortization and 24,140 51,937
depreciation
General and 1,235,197 2,288,781
administrative
1,342,007 2,540,077
Loss before other (1,720,115) (2,540,077)
items
Other income
(expenses)
Accretion expense (262,452)
Research and (52,597) (56,270)
development
Interest (540,633) (311,525)
Impairment loss on - (396,377)
inventory
Fair value adjustment - 73,979
derivative
liabilities
(855,682) (690,193)
Net loss $ (2,575,797) $ (3,230,270)
Other comprehensive
income
Exchange differences 580,124 197,980
on translating to
presentation currency
Comprehensive loss $ (1,995,673) $ (3,032,290)
Loss from continuing $ (0.05) $ (0.08)
operations per share
(basic and diluted)
Weighted average 48,188,001 43,029,135
number of common
shares outstanding
CRAiLAR Technologies Inc.
(A Development Stage
Company)
Consolidated Statements
of Cash Flows
(In US Dollars)
Period ended Period ended
(Unaudited) March 29, 2014 March 30, 2013
Cash flows used in
operating activities
Net loss from $ (2,575,797) $ (3,230,270)
continuing operations
Adjustments to
reconcile net loss to net
cash from operating
activities
Accretion expense 262,452 -
Amortization and 127,991 293,691
depreciation
Amortization of deferred 106,306 85,531
debt issuance costs
Fair value adjustment of - (73,979)
derivative liability
Rent (8,214) 36,519
Stock-based compensation 70,629 555,273
Write down of inventory - 396,377
Changes in working
capital assets and
liabilities
(Increase) decrease in (598,882) 18,572
accounts receivable
Decrease (increase) in 32,268 (106,151)
inventory
(Increase) in prepaid (207,774) (111,609)
expenses
Increase in accounts 233,303 253,839
payable
Increase (decrease) in 343,792 (772,149)
accrued liabilities
Increase in loan payable 6,261 -
Net cash used in (2,207,665) (2,654,356)
operating activities of
continuing operations
Cash flows used in
investing activities
Acquisition of property (553,642) (1,895,353)
and equipment
Acquisition of intangible (20,637) (2,131)
assets
Net cash flows used in (574,279) (1,897,484)
investing activities
Cash flows used in
financing activities
Issuance of capital stock - 192,873
and warrants
Net proceeds from loans 2,136,338 -
Proceeds from private 3,079,242 -
placement
Proceeds from convertible - 4,713,238
debenture
Deferred issuance costs (11,140) (481,962)
for convertible debenture
Net cash flows from 5,204,440 4,424,149
financing activities
Effect of exchange rate 251,357 197,980
changes on cash and cash
equivalents
Increase (decrease) in 2,673,853 70,289
cash and cash equivalents
Cash and cash 1,193,365 2,877,210
equivalents, beginning
Cash and cash $ 3,867,218 $ 2,947,499
equivalents, ending
SUPPLEMENTAL CASH FLOW
INFORMATION
AND NON-CASH FINANCING
AND INVESTING ACTIVITIES:
Cash paid for interest $ 6,261 $ 277,397
Capital stock issued as $ 131,744 $ -
share issue costs
SOURCE Crailar Technologies Inc.
