CTS Catalytic

 

TIDMCTS TIDMCTSU 
 
RNS Number : 0268A 
Catalytic Solutions, Inc. 
01 October 2009 
 

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| For Immediate Release               |                           1 October 2009 | 
+-------------------------------------+------------------------------------------+ 
 
 
Catalytic Solutions, Inc. 
("The Company") 
 
 
 BUSINESS trading update 
 
 
Catalytic Solutions, Inc. (AIM: CTS and CTSU), the Company behind Mixed Phase 
Catalyst (MPC ) technology, provides a business trading update following the 
sale of its energy systems business which was announced today.  The Company is 
in the process of finalizing its results for the half year ended 30 June 2009 
and will publish these results as soon as possible. 
 
 
Key Points 
  *  Modest growth in revenues in H1 2009 compared with H1 2008 
  *  Sale of energy systems business (Applied Utility Systems, Inc.) on 1 October 
  2009 for US$10 million, US$8.5 million cash at closing 
  *  US$6.8 million of debt repaid to secured lenders on 1 October 2009 
  *  Forbearance from secured lender extended to 30 November 2009 
 
Commenting on the key points and outlook, Charles F. Call, Chief Executive 
Officer of Catalytic Solutions, Inc. said: 
"Despite the unprecedented global recession, in the first half of this year our 
Company grew revenues modestly. The global slowdown affected both our catalyst 
business and the heavy-duty diesel systems business negatively. The year-on-year 
decline in these two businesses was offset by strong revenues in the energy 
systems business. In the second half of the year, we expect a stronger 
performance in the heavy-duty diesel systems business as the global economy 
stabilizes and we benefit from the additional demand created by the fiscal 
actions taken by the state and federal governments in the United States. Our 
catalyst business is expected to remain stable for the balance of the year. 
Since the beginning of the year, the Company has made progress in improving its 
liquidity and reducing debt, with the recently announced sale of the energy 
systems business to Johnson Matthey. This transaction has provided a time 
extension within which to continue to pursue additional sources of capital. Our 
low liquidity position still requires that we are successful in recapitalizing 
our balance sheet in the near term. Our bankers have agreed to extend 
forbearance on the remaining debt due to them until 30 November 2009. We 
continue to explore several options including the sale of company shares and/or 
assets." 
 
 
First Half Business Review 
Heavy-duty diesel systems business: The Company's heavy-duty diesel systems 
business specializes in the design and manufacture of verified exhaust emissions 
control solutions for original equipment manufacturers (OEMs), aftermarket and 
retrofit markets in order to reduce exhaust emissions created by on-road diesel, 
off-road diesel, stationary diesel, gasoline and alternative fuel engines 
including propane and natural gas. During the first half of 2009, this business 
group strengthened its position in the heavy-duty diesel retrofit market by 
receiving critical product verifications from the State of California Air 
Resources Board (CARB) - California enforces some of the most stringent diesel 
emissions regulations within the United States - and the United States 
Environmental Protection Agency (EPA). These key emissions products are fully 
compliant with recently implemented emissions control regulations and in some 
cases were the very first approved products of their type. The unprecedented 
economic slowdown experienced by the global economy had a negative impact on 
this business. Delays in U.S. state funding availability coupled with a slow 
down in the industrial and mining sector led to low revenues in the first half 
which declined versus a strong first half in 2008.  The Company has one of the 
broadest CARB and EPA verified product portfolios and it is well positioned to 
benefit from the increased EPA funding for diesel emissions control under the 
U.S. economic stimulus bill and from the resumption of state government funding 
for diesel retrofit during the second half of 2009. 
Light-duty vehicle/heavy-duty diesel catalyst business: The Company's catalyst 
business produces catalyst formulations for gasoline, diesel and natural gas 
induced emissions that offer superior performance, proven durability and cost 
effectiveness for multiple markets and a wide range of applications. As 
announced in the fourth quarter of 2008, a sharp slowdown in the automotive 
sector has impacted the catalyst business. However, sharp declines in shipments 
to Honda experienced in the first half of 2009 were partially offset by new 
business from Renault which started shipping in June 2008. Sales were down 
approximately 8% year-over-year in this business.  The restructuring of this 
business group in the second half of 2008 has enabled it to focus on targeted 
growth opportunities, strengthen development of next-generation technology and 
run more efficiently within a challenging global economy. The Company believes 
its customers value its innovative technology and the associated economic 
benefits.  The Company anticipates that business from these customers has an 
opportunity to grow as the global economy and demand for automobiles improves, 
the Company's technology increasingly penetrates additional vehicle models with 
these customers and it develops new business in diesel emissions catalysts. 
Energy systems business: The energy systems business provides emissions control 
and energy systems solutions for industrial and utility boilers, process 
heaters, gas turbines and generation sets used largely by major utilities, 
industrial process plants, OEMs, refineries, food processors, product 
manufacturers and universities. This business group continued to make progress 
with orders totaling $9.0 million booked during the first half of 2009. 
As announced today, this business was sold to Johnson Matthey. The proceeds from 
the sale will be utilized to pay down debt and to provide working capital. 
Research and development: The Company's product development activities continue 
to add to its portfolio and improve its technology leadership. The Company has 
introduced several next-generation products for testing and validation across 
all the key markets.  The Company believes this technology leadership has the 
potential to bring significant new revenue streams to the Company. 
Europe and Asia expansion:  The Company's Asian joint venture with TKK continues 
to make progress in its start-up efforts.  The Company has started the pilot 
production line at the joint venture facilities in Japan and expect the joint 
venture to start making inroads to the Asian diesel emissions market over the 
next few years. 
Liquidity: The primary challenge facing the Company is liquidity. At 30 June 
2009, The Company had US$4.0 million in cash and indebtedness of US$16.1 
million. At the conclusion of the sale of the energy systems business, in which 
it received US$8.5 million in cash at closing, the Company will repay US$6.8 
million of debt.  The Company's remaining secured lender, Fifth Third Bank, has 
agreed to extend forbearance on the remaining debt until 30 November 2009 in 
order to allow the Company time to seek additional capital. At 1 October 2009 
the Company expects to have sufficient cash on hand to operate the business 
through the end of the forbearance period.  However, the Company's access to 
working capital continues to be limited, a working capital deficit remains and 
debt obligations and anticipated operating losses exceed cash reserves. Failure 
to raise additional capital will result in the Company neither having sufficient 
cash to repay the loan from Fifth Third nor being able to continue to operate. 
In order to address the Company's ability to operate as a going concern, the 
Company continues to explore alternatives to recapitalize the Company. 
Alternatives under consideration include the sale of Company stock and/or a sale 
of the Company's assets. At this time no assurances can be provided that the 
Company will be successful in its continuing efforts to recapitalize the balance 
sheet or in its work with lenders on loan modifications. In the event that the 
Company is not successful in these efforts in the immediate future, there is 
substantial doubt that the Company will be able to continue operations without 
filing a petition of bankruptcy. There can be no assurances that in that event 
the Company would be able to reorganize through bankruptcy, and it might be 
forced to effect a liquidation of its assets. 
Business Outlook 
So far, the Company has weathered the global economic slowdown, with a modest 
increase in sales in the first half of the year. The Company took actions in 
late 2008 and early 2009 that have reduced its cost-base and have provided a 
structure that it believes will accelerate its path to profitability should its 
sales of catalysts and heavy-duty diesel systems start to grow with 
an improvement in the global economic environment.  The Company's research and 
development resources continue to focus on introducing innovative solutions to 
the markets in which it participates. 
The remaining businesses show signs of stabilizing during the second half of 
2009. The U.S. government stimulus funding coupled with greater clarity from 
U.S. state government programs is now beginning to benefit the 
Company's heavy-duty diesel systems business which has seen an increase in order 
intake.  The catalyst business, after dropping off significantly in the fourth 
quarter of 2008, has stabilized. 
 
 
For further details please contact: 
+--------------------------------+----------------------+-------------------------+ 
| Catalytic Solutions, Inc.      | Canaccord Adams      | Buchanan Communications | 
| Charlie Call, Chief Executive  | Robert Finlay        | Charles Ryland          | 
| Officer                        | Guy Blakeney         | Ben Willey              | 
| Tel: +1 (805) 639-9463         | Bhavesh Patel        | Christian Goodbody      | 
| Steve Golden, Chief Technical  | Tel: 020 7050 6500   | Tel: 020 7466 5000      | 
| Officer                        |                      |                         | 
| Tel: +1 (805) 639-9464         |                      |                         | 
| Nikhil Mehta, Chief Financial  |                      |                         | 
| Officer                        |                      |                         | 
| Tel: +1 (805) 639-9461         |                      |                         | 
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About Catalytic Solutions, Inc. 
Catalytic Solutions, Inc. is a global manufacturer and distributor of emissions 
control systems and products, focused in the heavy-duty diesel and light-duty 
vehicle markets. The Company's emissions control systems and products are 
designed to deliver high value to our customers while benefiting the global 
environment through air quality improvement, sustainability and energy 
efficiency. Catalytic Solutions, Inc. is listed on AIM of the London Stock 
Exchange (AIM: CTS and CTSU) and currently has operations in the USA, Canada, 
France, Japan and Sweden as well as an Asian joint venture.  The Company's 
website is www.catalyticsolutions.com 
This announcement and the information contained herein is restricted and is not 
for publication, release or distribution in whole or in part in, or into, the 
United States of America, Canada, Australia, The Republic of Ireland, Japan or 
South Africa. 
 
 
The material set forth herein is for informational purposes only and is not 
intended, and should not be construed, as an offer of securities for sale into 
the United States or any other jurisdiction. The securities of the Company 
described herein have not been registered under the U.S. Securities Act of 1933, 
as Amended (the "Securities Act"), or the laws of any state, and may not be 
offered or sold within the United States, except pursuant to an exemption from, 
or in a transaction not subject to, the registration requirements of the 
Securities Act and applicable state laws. There is no present intention to 
register the Company's securities in the United States or to conduct a public 
offering of securities in the United States. 
 
 
This announcement and the information contained herein include forward-looking 
statements.  Forward-looking statements are identified by words such as 
"believe," "anticipate," "expect," "intend," "plan," "will," 
"may," "should," "could," "think," "estimate" and "predict," and 
other similar expressions.  In addition, any statements that refer to 
expectations, projections or other characterizations of future events or 
circumstances are forward-looking statements.  We based these forward-looking 
statements on our current expectations and projections about future events.  Our 
actual results could differ materially from those discussed in, or implied by, 
these forward-looking statements.  Factors that could cause actual results to 
differ from those implied by the forward-looking statements include a number of 
risks and uncertainties, which could have a material impact on the Company's 
long-term performance and prospects.  Additional factors are discussed in our 
AIM admission document, which was published in November 2006. The Company 
assumes no responsibility to update any of the forward-looking statements 
contained herein. Further, any indication in this announcement of the price at 
which common shares have bought or sold in the past cannot be relied upon as a 
guide to future performance. 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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