20-20 Technologies Reports Third Quarter Results



    LAVAL, QC, Sept. 11 /CNW Telbec/ - 20-20 Technologies Inc. (TSX: TWT),
the world leader in 3D interior design and furniture manufacturing software,
today announced its results for the third quarter and nine months ended
July 31, 2008. All amounts are in U.S. dollars unless otherwise indicated.

    Third Quarter Highlights

    
    - Revenues up 20.5% to $20.4 million

    - Web-based and manufacturing solutions attract marquee clients: IKEA,
      Sears Wellborn Forest Products and Solid Comfort

    - EBITDA of $906,000, compared to $1.1 million in Q3 2007

    - Operating loss of $384,000, before charge of $968,000 due to
      implementation of restructuring plan

    - Cost alignment measures being implemented; will yield $6.1 million in
      annualized savings
    

    "We are making sales execution and a return to profitability our top
priorities," said Jean Mignault, Co-Chairman of the Board and CEO. "Even
though the residential point-of-sale portion of our business in the United
States continues to have a negative impact on our performance, we believe that
the measures we have implemented thus far will have a positive impact on our
bottom line in the coming quarters. We continue to be alert to trends in each
region, adapting and realigning our organization as needed."
    "To restore profitability and protect our ability to invest and grow, we
undertook to realign our costs with revenues and consolidate our worldwide
operations to create a better-integrated organization," said Jean-Francois
Grou, President and COO. "These measures, announced in July, will result in a
reduction of $6.1 million in annual operating costs through the abolition of
nearly 90 positions, representing 13% of our workforce."
    "We believe that these actions will progressively contribute to improving
our profitability starting in the fourth quarter, and expect the full impact
to be felt during the 2009 fiscal year," Mr. Grou added. "We continue to seek
synergies from our expanded operations to generate revenue growth and will
manage our cost structure throughout 2009 to keep costs from increasing."

    Revenues

    Revenues increased by 20.5% to $20.4 million in the third quarter,
compared to $16.9 million last year. Revenues for the nine-month period grew
by 18.0% to $59.0 million from $50.0 million a year ago. The increase for the
quarter and nine-month period was essentially due to acquisitions made during
the year.
    Driven by the addition of Planit Fusion(*), European countries accounted
for 45.2% of revenues or $9.2 million for the quarter, 88.7% higher than last
year (17.8% organic growth). For the first nine months of the year, European
revenues increased by $10.1 million or 66.4% (19.8% organically) compared to
the same period in 2007. The growth was partially due to currency gains.
Revenues generated in North America represented 51.7% and 54.7% of total
revenues for the third quarter and nine months, respectively.
    Revenues from license sales increased by 3.4%, or $0.2 million, to
$6.5 million in the third quarter. After the first nine months of the year,
license sales increased by 8.0%, or $1.5 million, over last year.
    Revenues from maintenance and other recurring revenues increased by
29.9%, or $2.1 million, to $9.3 million for the third quarter, accounting for
45.6% of total revenues, and by 28.7% or $5.9 million for the nine months.
    Revenues from professional services increased by 31.5%, or $1.1 million,
to $4.6 million, for the third quarter. For the first nine months of the year,
revenues from professional services increased by 14.5% or $1.6 million to
$12.6 million.

    Operating Income

    On June 11, 2008, the Company announced that it had approved and
initiated a restructuring plan in order to restore profitability to acceptable
levels and to align its cost structure to the realities of current market
conditions in North America, as well as to benefit from cost synergies related
to the Planit Fusion(*) acquisition. The total estimated restructuring charge,
primarily related to employee severance associated with the operational
restructuring plan, is $968,000 and is recorded as a restructuring charge line
item in the consolidated statement of operations.
    The Company incurred an operating loss of $1.4 million in the third
quarter, compared to an operating income of $857,000 for the same period last
year. This decrease is mainly due to the impact of the restructuring charge,
expensed R&D costs in the third quarter of 2008 (capitalized in 2007), and the
effect of currency exchange on Canadian expenses. For the nine-month period,
the operating loss was $2.2 million, compared to operating income of
$4.0 million a year ago.
    EBITDA decreased slightly to $0.9 million for the third quarter from
$1.1 million for the same period in 2007.

    Net Results 20-20 recorded a translation exchange loss of approximately
$213,000 (2007 - $315,000) relating principally to its net monetary asset
holdings in each of the three currencies and in particular the U.S. dollar,
which gained in value against the Canadian dollar at the end of the quarter.
In addition, the Company recorded a financial expense in the quarter of
$324,000 (2007 - income of $261,000) for a net financial expense of $537,000
compared to a net financial expense of $54,000 in fiscal 2007.
    For the first nine months of the year, the Company recorded an exchange
gain of approximately $604,000 (2007 - loss of $748,000) related to its
foreign monetary asset position, and recorded financial expenses of $109,000
(2007 - income of $695,000) for a net financial income of $495,000 (2007 -
expense of $53,000). As a result, the Company incurred a net loss of
$1.6 million or $0.08 per share, fully diluted, for the third quarter,
compared to net earnings of $0.5 million or $0.03 per share for the same
period in 2007. For the nine-month period, the net loss was $1.0 million or
$0.05 per share, compared to net earnings of $3.0 million or $0.16 per share
for the same period in 2007.

    New Business

    In July the Company announced the signature of two significant strategic
projects:

    
    - IKEA has committed to a long term agreement to utilize 20-20's Virtual
      Planner, its unique 3D Web visualization space planning tool. The
      software will be deployed on a global basis by IKEA.

    - Wellborn Forest Products, an Alabama-based manufacturer of home
      cabinets, has selected 20-20's as its strategic partner utilizing the
      Company's InSight manufacturing execution system integrated with
      Microsoft Dynamics AX products.

    In addition:

    - Solid Comfort Inc, a premier manufacturer of wood furniture and
      cabinets specializing in hotel/motel guestroom furniture, has selected
      20-20 inSight's manufacturing execution system and Microsoft Dynamics
      AX as their new enterprise technology solution.

    - As announced today, Sears Holdings Management Corporation, the leading
      appliance and fourth largest broadline retailer in North America which
      uses 20-20's Virtual Planner, has chosen 20-20 to provide all its Sears
      Home Improvement Products' Project Consultants with licenses of its
      flagship kitchen and bath design software, 20-20 Design.
    

    Outlook

    "In light of the current economic conditions prevalent in North America,
which are now expected to persist into 2009 and initial signs of softness in
Europe, we are adopting a disciplined approach to execution. 20-20 must become
an efficient worldwide integrated operation to maximize bottom line results.
We need to deliver results to our shareholders," concluded Mr. Mignault.

    Conference Call Information

    20-20 will host a conference call to discuss these results today,
September 11, 2008 at 2 p.m. (EST). The call will be accessible by telephone
at 514-807-8791 and 1-800-731-5774. The call will be webcast at
www.2020technologies.com on the Investors page, Events Calendar section. An
audio replay of the conference call will be available until midnight on
.Thursday, September 18, 2008. To access it, dial 416-640-1917 or
1-877-289-8525 and enter the pass code: 21282243#.
    Please note that 20-20 Technologies' full financials and MD&A are
available on SEDAR as well as on the Company's web site,
www.2020technologies.com.

    About 20-20 Technologies Inc.

    20-20 Technologies is the world's leading provider of computer-aided
design, business and manufacturing software solutions tailored for the
interior design and furniture industries. Dealers and retailers use its
desktop and Web-based products and solutions for the residential and
commercial markets. 20-20 offers a unique proprietary end-to-end solution,
integrating the entire breadth of functions in interior design. It provides a
bridge for data communication from the point-of-sale to manufacturing and
world-leading enterprise resource planning (ERP) systems, including
computer-aided engineering and plant floor automation software. Operating in
thirteen countries with more than 600 employees, 20-20 is a publicly traded
company (TWT) on the Toronto Stock Exchange (TSX). For more information, visit
www.2020Technologies.com.

    Non-GAAP Measures

    References in this press release to the term "EBITDA" are related to cash
earnings. EBITDA is defined for these purposes as Operating Income before
restructuring charges plus amortization and depreciation expenses, less
capitalized development costs. EBITDA is not a recognized measure under GAAP
in Canada and may not be comparable to similar measures used by other
companies.

    Forward-Looking Statements

    Certain statements contained in this news release constitute
forward-looking information within the meaning of securities laws.
    Implicit in this information, particularly in respect of future operating
results and economic performance of the Company are assumptions regarding
projected revenues and expenses. These assumptions, although considered
reasonable by the Company at the time of preparation, may prove to be
incorrect. Readers are cautioned that actual future operating results and
economic performance of the Company are subject to a number of risks and
uncertainties, including general economic, market and business conditions and
could differ materially from what is currently expected.
    For more exhaustive information on these risks and uncertainties, please
refer to our most recently filed annual information form, available at
www.sedar.com. Forward-looking information contained in this report is based
on management's current estimates, expectations and projections, which
management believes are reasonable as of the current date. You should not
place undue importance on forward-looking information and should not rely upon
this information as of any other date. While we may elect to do so, we are
under no obligation and do not undertake to update this information at any
particular time unless required by applicable securities law.

    ((*)) Planit is a trademark of Planit Holdings Limited (used with
    permission).

    
    20-20 Technologies Inc.
    CONSOLIDATED BALANCE SHEETS
    (Amounts in thousands of U.S. dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                         31 July, October 31,
    -------------------------------------------------------------------------
                                                            2008        2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                      (Unaudited)
                                                               $           $
    ASSETS
    Current assets
      Cash and cash equivalents                           15,280      25,280
      Short-term investments                                   -      18,495
      Accounts receivable                                 21,638      16,629
      Contracts in progress                                  536         378
      Prepaid expenses                                     1,677       1,949
      Future income taxes                                    504         167
    -------------------------------------------------------------------------
                                                          39,635      62,898
    Property and equipment                                 3,673       3,941
    Intangibles (Note 9)                                  13,168       5,665
    Goodwill                                              61,011      29,407
    Future income taxes                                       23         995
    Other assets                                             488       1,157
    -------------------------------------------------------------------------
                                                         117,998     104,063
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES
    Current liabilities
      Accounts payable                                    11,503       9,885
      Income taxes payable                                     -         355
      Purchase considerations payable                        171           -
      Deferred revenue                                    16,393      15,384
      Long-term debt                                         136          54
      Future income taxes                                    547          70
    -------------------------------------------------------------------------
                                                          28,750      25,748
    Long-term debt                                        15,611         463
    Leasehold inducements                                    419         410
    Non-controlling interest                                  28           -
    Future income taxes                                    4,331       1,807
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          49,139      28,428
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Capital stock (Note 10)                               58,264      58,183
    Common stock options                                   1,485       1,600
    Contributed surplus                                      962         963
    Deficit                                               (5,614)     (4,474)
    Accumulated other comprehensive income                13,762      19,363
    -------------------------------------------------------------------------
                                                          68,859      75,635
    -------------------------------------------------------------------------
                                                         117,998     104,063
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    20-20 Technologies Inc.
    CONSOLIDATED EARNINGS
    (Amounts in thousands of U.S. dollars, except earnings per share,
    unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                  Three months ended       Nine months ended
                                             July 31                 July 31
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $
    Revenues
      License sales                6,479       6,264      19,821      18,358
      Maintenance and other
       recurring revenues          9,314       7,168      26,586      20,650
      Professional services        4,614       3,509      12,639      11,036
    -------------------------------------------------------------------------
                                  20,407      16,941      59,046      50,044
    -------------------------------------------------------------------------
    Cost of revenues
      License sales                  709         725       2,205       2,116
      Maintenance and services     4,631       3,851      14,284      11,632
    -------------------------------------------------------------------------
                                   5,340       4,576      16,489      13,748
    -------------------------------------------------------------------------
    Gross margin                  15,067      12,365      42,557      36,296
    -------------------------------------------------------------------------
    Operating expenses
      Sales and marketing          7,026       5,780      20,088      15,409
      Research and development
       (Note 4)                    4,985       2,410      12,856       7,340
      General and administrative   3,486       3,212      10,761       9,298
      Restructuring costs
       (Note 5)                      968           -         968           -
      Stock-based compensation
       (Note 6)                      (46)        106          67         271
    -------------------------------------------------------------------------
                                  16,419      11,508      44,740      32,318
    -------------------------------------------------------------------------
    Operating income (loss)       (1,352)        857      (2,183)      3,978

    Financial expenses (income)      537          54        (495)         53
    -------------------------------------------------------------------------
    Earnings (loss) before
     income taxes and non-
     controlling interest         (1,889)        803      (1,688)      3,925
    -------------------------------------------------------------------------
    Income taxes
      Current                       (288)        325        (683)        880
      Future                          (6)        (71)          4          22
    -------------------------------------------------------------------------
                                    (294)        254        (679)        902
    -------------------------------------------------------------------------
    Earnings (loss) before non-
     controlling interest         (1,595)        549      (1,009)      3,023
    Non-controlling interest          (9)          -          17           -
    -------------------------------------------------------------------------
    Net earnings (loss)           (1,586)        549      (1,026)      3,023
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share (Note 7)
      Basic                        (0.08)       0.03       (0.05)       0.16
    -------------------------------------------------------------------------
      Diluted                      (0.08)       0.03       (0.05)       0.16

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    20-20 Technologies Inc.
    CONSOLIDATED CASH FLOWS
    (Amounts in thousands of U.S. dollars, unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                  Three months ended       Nine months ended
                                             July 31                 July 31
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $
    OPERATING ACTIVITIES
    Net earnings                  (1,586)        549      (1,026)      3,023
    Non-cash items
      Amortization                 1,290       2,004       3,520       5,545
      Leasehold inducements          (27)         13           -          27
      Stock-based compensation       (37)         98          (6)        263
      Capitalized interest on
       long term debt                  6           6          19          18
      Future income taxes             (6)        (71)          4          22
      Unrealized loss (gain) on
       forward exchange contracts      -          57           -        (191)
      Changes in working capital
       items                         128       1,755      (2,054)        372
    -------------------------------------------------------------------------
    Cash flows from (used in)
     operating activities           (232)      4,411         457       9,079
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Business acquisitions (Note 8)  (757)        (95)    (41,587)       (895)
    Short-term investments             -       5,469           -       8,013
    Short-term investments
     dispositions                      -           -      17,597           -
    Property and equipment          (125)       (178)       (812)       (764)
    Development costs - internal       -      (1,794)          -      (4,980)
    Other assets                      (1)       (135)        654        (454)
    -------------------------------------------------------------------------
    Cash flows from (used in)
     investing activities           (883)      3,267     (24,148)        920
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Increased in long-term debt        -           -      15,000           -
    Repayment of long-term debt      (32)         (3)        (87)        (30)
    Common shares repurchased        (40)       (164)       (243)       (164)
    Options exercised                 11           3          63          20
    -------------------------------------------------------------------------
    Cash flows from (used in)
     financing activities            (61)       (164)     14,733        (174)
    -------------------------------------------------------------------------

    Effect of changes in exchange
     rate on cash held in foreign
     currencies                      200         768      (1,042)        940
    -------------------------------------------------------------------------
    Net increase (decrease) in
     cash and cash equivalents      (976)      8,282     (10,000)     10,765
    Cash and cash equivalents,
     beginning of period          16,256       7,820      25,280       5,337
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                15,280      16,102      15,280      16,102
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Media Relations: Rick Leckner, MaisonBrison,
(514) 731-0000

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