Westaim announces 2008 year-end results

CALGARY, Feb. 18 /PRNewswire-FirstCall/ – The Westaim Corporation announced today that for the year ended December 31, 2008, it recorded a net loss of $10.2 million, or 11 cents per share, on revenues of $22.4 million compared to a net loss of $58.0 million, or 62 cents per share, on revenues of $31.8 million in the previous year. For the three months ended December 31, 2008, the Company posted a net income of $2.7 million, or 3 cents per share, compared to a net loss of $26.8 million, or 28 cents per share, in the same period in the previous year.

The loss from continuing operations for the year ended December 31, 2008 was $1.7 million compared to a loss of $2.8 million in 2007. At the operations level, this improvement resulted from lower manufacturing and research and development costs compared to 2007 and $4.9 million of severance costs included in the 2007 results, all of which was offset by $10.1 million milestone revenue earned by NUCRYST Pharmaceuticals Corp. in 2007. The improvement in results also benefitted from a $7.3 million favourable change in foreign exchange gains as a result of the stronger U.S. dollar in 2008 as well as lower write-downs in the value of asset-backed commercial paper (ABCP). These improvements were partially offset by an $8.7 million gain on the sale of real estate in 2007. The loss from discontinued operations, which includes windup and operating costs at the Company’s wholly owned subsidiary, iFire Technology Ltd., declined significantly in 2008 to $8.5 million compared to $55.2 million in 2007. This improvement is the result of reduced operating costs of $26.7 million and lower severances and net asset write-downs in 2008 compared to 2007.

At December 31, 2008, Westaim had $46.8 million in consolidated cash and cash equivalents, compared to $31.0 million at December 31, 2007. Westaim’s cash position, excluding cash and cash equivalents held by its 74.7 per cent owned subsidiary NUCRYST Pharmaceuticals Corp., was $18.0 million. In addition, Westaim held ABCP with a book value of $4.3 million.

“Westaim’s strong cash position is a significant advantage for the Company as we continue our review of strategic alternatives,” said Drew Fitch, President & CEO of Westaim. “Westaim’s cash resources, together with the return of capital to be received from NUCRYST in Q1 2009, will provide the Company a strong consolidated footing as we examine new investment opportunities to enhance shareholder value.”

The Westaim Corporation’s common shares are listed on The Toronto Stock Exchange under the trading symbol WED. Westaim holds a 74.7 percent interest in NUCRYST Pharmaceuticals Corp. (NASDAQ: NCST; TSX: NCS).

A more detailed discussion of Westaim’s 2008 consolidated year end results can be found in the 2008 audited consolidated financial statements and Management’s Discussion and Analysis, which will be available at www.westaim.com and www.sedar.com

This news release contains forward-looking statements. These statements are based on current expectations that are subject to risks and uncertainties, and Westaim can give no assurance that these expectations are correct. Various factors could cause actual results to differ materially from those projected in such statements, including but not limited to statements regarding Westaim’s pursuit of strategic alternatives and examination of possible new investment opportunities in an effort to enhance shareholder value. Westaim disclaims any intention or obligation to revise forward-looking statements whether as a result of new information, future developments or otherwise. Accordingly, readers are advised not to place undue reliance on forward-looking statements, and should not rely on this information at any date other than the date of this news release. All forward-looking statements are expressly qualified in their entirety by this cautionary statement.

    THE WESTAIM CORPORATION
    Financial Highlights
    (unaudited)
    (thousands of dollars except per share data)

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                                  Three Months Ended     Twelve Months Ended
                                      December 31             December 31
                                  ------------------     -------------------
    Consolidated Statements
     of Operations                  2008        2007        2008        2007
    -------------------------------------------------------------------------

    Revenue                    $   6,969   $  11,174   $  22,397   $  31,830
    (Loss) income from
     continuing operations        (1,224)      1,169      (1,735)     (2,830)
    Net income (loss)              2,746     (26,807)    (10,235)    (58,033)
    Net (loss) income per
     common share - basic and
     diluted
      Continuing operations        (0.01)       0.01       (0.02)      (0.03)
      Net income (loss)             0.03       (0.28)      (0.11)      (0.62)
    Weighted average number
     of common shares
     outstanding (thousands)      94,215      94,136      94,207      94,070

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                                  Three Months Ended     Twelve Months Ended
                                      December 31             December 31
                                  ------------------     -------------------
    Segmented Information           2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenue from continuing
     operations
      Nucryst Pharmaceuticals  $   6,969   $  11,174   $  22,397   $  31,830
    -------------------------------------------------------------------------
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    (Loss) income from
     continuing operations
      Nucryst Pharmaceuticals  $   1,295   $   3,209   $  (2,838)  $  (4,771)
      Other (including
       corporate costs)           (2,519)     (2,040)      1,103       1,941
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    (Loss) income from
     continuing operations     $  (1,224)  $   1,169   $  (1,735)  $  (2,830)
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    Consolidated Balance        December    December
     Sheets                     31, 2008    31, 2007
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    Cash and cash equivalents  $  46,768   $  30,993
    Current assets                59,783      51,561
    Other assets                  17,494      31,826
    Current liabilities            9,841       8,461
    Shareholders' equity          50,002      56,371

    THE WESTAIM CORPORATION
    Consolidated Statements of Operations, Comprehensive Loss and Deficit
    (unaudited)

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                                  Three Months Ended     Twelve Months Ended
                                      December 31             December 31
                                  ------------------     -------------------
    (thousands of dollars
     except per share data)         2008        2007        2008        2007
    -------------------------------------------------------------------------

    Revenue                    $   6,969   $  11,174   $  22,397   $  31,830
    Costs
      Manufacturing                3,577       3,226      12,603      14,617
      Research and development     1,016       1,334       4,582       6,356
      General and administrative   2,896       2,660       9,666       9,348
      Depreciation and
       amortization                  497         403       1,937       2,093
      Corporate costs              1,591       1,845       5,068      10,856
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    Operating (loss) income       (2,608)      1,706     (11,459)    (11,440)

      Foreign exchange gain
       (loss)                      2,452        (305)      3,510      (3,804)
      Interest                       141         141         712       1,822
      Change in fair value
       of third party asset-
       backed commercial paper      (856)     (1,067)     (1,706)     (4,048)
      Loss on sale of third
       party asset-backed
       commercial paper                -      (1,067)          -      (1,067)
      Write-down of capital
       assets                       (215)          -        (215)     (1,203)
      Gain on sale of capital
       assets                          -          75           -       8,722
      Dilution gain                    -           -       6,000       4,525
      Gain on sale of investments      -       2,648         534       2,648
      Gain (loss) on issuance and
       repurchase of shares of
       subsidiary                    121         (14)         96        (134)
      Non-controlling interest      (259)       (806)        804       1,293
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    (Loss) income from continuing
     operations before income
     taxes                        (1,224)      1,311      (1,724)     (2,686)

    Income tax expense                 -        (142)        (11)       (144)
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    (Loss) income from
     continuing operations        (1,224)      1,169      (1,735)     (2,830)
    Income (loss) from
     discontinued operations
     net of income taxes           3,970     (27,976)     (8,500)    (55,203)
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    Net income (loss)          $   2,746   $ (26,807)  $ (10,235)  $ (58,033)
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    (Loss) income per common
     share
      Continuing operations -
       basic and diluted       $   (0.01)  $    0.01   $   (0.02)  $   (0.03)
      Net income (loss) -
       basic and diluted            0.03       (0.28)      (0.11)      (0.62)

    Weighted average number
     of common shares
     outstanding (thousands)      94,215      94,136      94,207      94,070
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    Consolidated Statements of
     Comprehensive Loss

    Net income (loss) for
     the period                $   2,746   $ (26,807)  $ (10,235)  $ (58,033)
    Unrealized gain (loss)
     on translation of net
     foreign operations            2,021        (145)      2,899      (1,103)
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    Comprehensive income
     (loss)                    $   4,767   $ (26,952)  $  (7,336)  $ (59,136)
    -------------------------------------------------------------------------
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    Consolidated Statements
     of Deficit

    Deficit at beginning
     of period                 $(388,862)  $(349,074)  $(375,881)  $(317,848)
    Net income (loss) for
     the period                    2,746     (26,807)    (10,235)    (58,033)
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    Deficit at end of period   $(386,116)  $(375,881)  $(386,116)  $(375,881)
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    THE WESTAIM CORPORATION
    Consolidated Balance Sheets
    (unaudited)

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                                                   December 31   December 31
    (thousands of dollars)                                2008          2007
    -------------------------------------------------------------------------

    ASSETS

    Current
      Cash and cash equivalents                      $  46,768     $  30,993
      Accounts receivable                                6,272        14,931
      Inventories                                        3,535         4,373
      Other                                                772           674
      Current assets held for sale                       2,436           590
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                                                        59,783        51,561

    Investments                                          4,262         5,968
    Capital assets                                      11,486        12,581
    Capital assets held for sale                         1,103        10,086
    Intangible assets                                      643           799
    Intangible assets held for sale                          -         2,392
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                                                    $   77,277     $  83,387
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    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current
      Accounts payable and accrued liabilities      $    6,956     $   7,018
      Accounts payable and accrued liabilities
       held for sale                                     2,885         1,443
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                                                         9,841         8,461

    Deferred gain                                            -           218
    Provision for site restoration                       6,580         6,580
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                                                        16,421        15,259
    -------------------------------------------------------------------------

    Non-controlling interest                            10,854        11,757

    Shareholders' equity
      Capital stock                                    426,280       426,262
      Contributed surplus                                8,718         7,769
      Accumulated other comprehensive income (loss)      1,120        (1,779)
      Deficit                                         (386,116)     (375,881)
    -------------------------------------------------------------------------
                                                        50,002        56,371
    -------------------------------------------------------------------------

                                                     $  77,277     $  83,387
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    THE WESTAIM CORPORATION
    Consolidated Cash Flow Statements
    (unaudited)

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                                  Three Months Ended     Twelve Months Ended
                                      December 31             December 31
                                  ------------------     -------------------
    (thousands of dollars)          2008        2007        2008        2007
    -------------------------------------------------------------------------

    Operating Activities
    (Loss) income from
     continuing operations     $  (1,224)  $   1,169   $  (1,735)  $  (2,830)
    Items not affecting cash
      Gain on sale of capital
       assets                          -         (75)          -      (8,722)
      Change in fair value of
       third party asset-backed
       commercial paper              856       1,067       1,706       4,048
      Loss on sale of third
       party asset-backed
       commercial paper                -       1,067           -       1,067
      Depreciation and
       amortization                  497         403       1,937       2,093
      Stock-based compensation
       expense                       276         667       1,027       2,469
      Non-controlling interest       259         806        (804)     (1,293)
      (Gain) loss on issuance
       and repurchase of
       shares of subsidiary         (121)         14         (96)        134
      Write-down of capital
       assets                        215           -         215       1,203
      Dilution gain                    -           -      (6,000)     (4,525)
      Gain on sale of
       investments                     -      (2,648)       (534)     (2,648)
      Accounts receivable              3      (4,407)      9,057      (7,190)
      Inventories                    662       1,508         838       4,128
      Other                         (553)      1,087         (90)        (98)
      Accounts payable and
       accrued liabilities        (2,435)     (5,808)        270       1,131
    -------------------------------------------------------------------------
    Cash (used in) provided
     from continuing operations   (1,565)     (5,150)      5,791     (11,033)
    Cash used in discontinued
     operations                     (565)     (3,462)     (5,712)    (19,739)
    -------------------------------------------------------------------------
    Cash (used in) provided from
     operating activities         (2,130)     (8,612)         79     (30,772)
    -------------------------------------------------------------------------

    Investing activities
      Capital expenditures          (166)       (402)     (1,243)     (2,376)
      Maturity of short-term
       investments                     -           -           -      46,904
      Purchase of short-term
       investments                     -           -           -     (29,453)
      Purchase of short-term
       investments reclassified
       to investments                  -           -           -     (14,400)
      Reclassification of cash
       equivalents to investments      -         (16)          -      (2,650)
      Proceeds on sale of third
       party asset-backed
       commercial paper                -       5,968           -       5,968
      Intangible assets               (6)        (11)        (39)        (72)
      Intangible assets -
       discontinued operations         -         (12)          -        (480)
      Proceeds on sale of
       capital assets                 65          75          65      14,437
      Proceeds on sale of
       subsidiary                      -           -       1,816           -
      Proceeds on sale of
       investments                     -       1,582           -       1,582
      Proceeds on sale of
       discontinued operations     8,165          15       8,165          24
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    Cash provided from investing
     activities                    8,058       7,199       8,764      19,484
    -------------------------------------------------------------------------

    Financing activities
      Repurchase of common
       shares by subsidiary          (63)          -         (63)          -
      Issuance of common shares
       of subsidiary                   -           -       1,000          14
      Issuance of common shares        -           -           -          27
      Issuance of convertible
       debentures of subsidiary        -           -       3,500           -
      Net cash outflow on
       deconsolidation of former
       subsidiary                      -           -           -      (2,306)
    -------------------------------------------------------------------------
    Cash (used in) provided
     from financing activities       (63)          -       4,437      (2,265)
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash and cash
     equivalents                   1,756          29       2,495        (489)
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    Net increase (decrease) in
     cash and cash equivalents     7,621      (1,384)     15,775     (14,042)
    Cash and cash equivalents
     at beginning of period       39,147      32,377      30,993      45,035
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    Cash and cash equivalents
     at end of period          $  46,768   $  30,993   $  46,768   $  30,993
    -------------------------------------------------------------------------
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    Cash and cash equivalents
     is comprised of:
      Cash                     $   4,332   $  12,537   $   4,332   $  12,537
      Cash equivalents            42,436      18,456      42,436      18,456
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                                  46,768      30,993      46,768      30,993
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    Supplemental disclosure
     of cash flow information:
      Non-cash capital asset
       additions included in
       accounts payable and
       accrued liabilities     $       5   $     452   $       5   $     452
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SOURCE Westaim Corporation