Adeptron reports Fourth Quarter and Annual results for 2007



    2007: Q4 revenues higher by 21% from Q3

    Stock Symbol: ATQ
    Listing: Toronto Stock Exchange (TSX)
    Outstanding Shares: 36.7 Million
    Web Site: www.adeptron.com

    TORONTO, March 31 /CNW/ - Adeptron Technologies Corporation (ATQ: TSX)
("Adeptron" or the "Company"), a specialist at delivering integrated product
solutions and support to the global technology and electronics industry, today
reports unaudited fourth quarter and audited annual financial results for the
three and twelve month periods ended December 31, 2007.
    For 2007, Adeptron reported a loss of $6.9 million ($0.19 loss per share)
compared to net income of $1.6 million ($0.05 earnings per share) for the year
in 2006. The 2007 loss includes a non-cash charge of $5.5 million for the
write-off of goodwill, and restructuring charges of $651,000 for the
consolidation of two Markham facilities into one facility and employee
termination costs. The loss before the write-off of goodwill and restructuring
charges, was $674,000.
    F. Michael Marti, President and CEO of Adeptron, commented, "In the last
half of 2007, we completed the majority of restructuring of our operations,
including the consolidation of the Markham facilities and the execution of our
plan to generate efficiency improvements in response to the expected
continuation of a strong Canadian currency in 2008. As a result, 2007 fourth
quarter and annual results were negatively impacted by restructuring charges
and write-down of goodwill, a non-tangible asset."
    "We enter 2008 with some momentum. In the fourth quarter of 2007, sales
rose 21% to $9.9 million compared to sales of $8.2 million in the third
quarter of 2007", said Marti. "This signals an expected resurgence in our
sales growth as Adeptron's customers resumed more traditional order quantities
from the unusually low levels in the third quarter of 2007. The Company has
also engaged with some new customers as our U.S. and Ottawa based business
activity grows. The Company expects that these new relationships should
contribute to sales growth in 2008."
    Marti continued, "We enter 2008 with a lower cost structure resulting
from the restructuring activities in 2007. In the first quarter of 2008, we
will have completed the remainder of our restructuring activities, thus
lowering our future cost structure even further. Based on current market
conditions in North America, and the rest of the world, the Company
anticipates that the effects of foreign currency exchange rate movements
involving the Canadian dollar will not be as significant nor as adverse as
they have been since the start of the strengthening of the Canadian dollar
back in 2003."
    "The Company has previously announced a proposed $6 million private
placement by R.H. Global Technologies Ltd. and the intended subsequent
repayment of the Company's outstanding $5 million subordinated debenture. In
the event that the proposed private placement is approved by the shareholders,
and both transactions are completed, Adeptron's balance sheet will be
significantly strengthened. In addition, interest costs (cash and non cash)
thereafter will be reduced by approximately $900,000 per annum", said Marti.
    For the three months ended December 31, 2007 ("Fourth Quarter"), sales
were $9.9 million compared to $10.9 million for the corresponding period of
2006, a decrease of $1.0 million, or 9%. This decrease is primarily
attributable to a reduction in sales generated from the Company's former
largest customer, partially offset by increased orders from other customers.
During the Fourth Quarter the US dollar was weaker by approximately 14% versus
the Canadian dollar when compared to the average exchange rate for the fourth
quarter of 2006. Therefore the decrease in sales was also partly due to the
fact that approximately 69% (average for 2007) of the Company's sales were
derived from U.S.-based and domestic-based customers with sales denominated in
US$.
    For the twelve months ended December 31, 2007 ("Year"), sales totalled
$38.4 million compared to $43.8 million for the year 2006, a decrease of
$5.4 million, or 12%. As previously announced, the Company's former largest
revenue-contributing customer moved a significant portion of its outsourcing
requirements to China and this resulted in approximately $9.9 million less
sales in 2007, from this still ongoing customer, than in 2006. The second
factor, for the decrease in revenues was the continued strengthening of the
Canadian dollar relative to the US dollar throughout 2007. These decreases
were partially offset by increased sales to other customers. In addition, the
acquisition of PCA in the U.S. contributed approximately $1.8 million in new
revenue.
    The gross profit percentage decreased to 14.6% for the Fourth Quarter
compared to 18.2% for the same period in the prior year, but increased from
10.5% in the third quarter of 2007. This decrease in gross profit percentage
is attributable to the lower sales levels for the Fourth Quarter, the foreign
currency exchange rate impact, and a change in the customer sales mix.
    The gross profit percentage decreased to 14.6% for the Year compared to
17.6% in the prior year. This decrease in gross profit percentage for the Year
is attributable to the same factors as stated above which led to the gross
profit decrease for the Fourth Quarter.
    Selling, General and Administrative ("SG&A") expense for the Fourth
Quarter was $1.2 million (12.1% of sales) compared to SG&A expense of
$1.3 million (11.9% of sales) for the same period of 2006.
    SG&A expense for the Year was $4.8 million (12.6% of sales), compared to
SG&A expense of $5.0 million (11.4% of sales) for the prior year.
    The Fourth Quarter loss in 2007 was approximately $5.9 million ($0.16
loss per share) compared to net income of approximately $310,000 ($0.01
earnings per share) in the fourth quarter of 2006. The write-off of goodwill
previously associated with the Canadian reporting unit in the amount of
approximately $5.53 million, and being non-cash, accounted for the majority of
this loss. In addition, in the Fourth Quarter the Company recorded
restructuring charges of $201,000. The Fourth Quarter loss before the
write-off of goodwill and restructuring charges was approximately $195,000.
    EBITDA(1) for the Fourth Quarter of 2007, excluding the non-cash
write-off of goodwill, was approximately $210,000 compared to approximately
$890,000 in the corresponding quarter of 2006.
    EBITDA(1) for the Year, excluding the non-cash write-off of goodwill, was
$780,000 compared to approximately $3.3 million in 2006.
    The working capital deficiency, defined as current assets less current
liabilities, at December 31, 2007 was $2.3 million compared to working capital
of $4.85 million at December 31, 2006. The decrease in working capital is the
result of several factors. In 2007, the Company paid $1.3 million cash and
incurred an additional $280,000 of acquisition costs upon the purchase of the
San Jose operations, purchased approximately $900,000 of capital assets, and
repaid $250,000 of its term loan with its senior lender. The Company has also
classified approximately $4.5 million of debt as current liability on the
consolidated balance sheet at December 31, 2007 because of its default on
certain financial covenants with its senior lender and its subordinated
debenture lender.
    On February 25, 2008, the Company announced that it had entered into a
letter of intent in respect of a proposed private placement transaction
whereby the Company will issue common shares at $0.10 per share for gross
proceeds of $6 million. The Company has set May 7, 2008 as the date for a
Special Meeting of Adeptron shareholders at which time the shareholders will
be asked to approve the proposed transaction. The proceeds of the proposed
transaction are intended to repay the principal and accrued interest thereon
to its subordinated debenture-holder. The remainder of the proceeds of the
proposed transaction is intended to replenish working capital. During the last
half of 2007, the Company engaged in various restructuring activities with the
expectation that management expects to reduce future operating costs and
increase future positive cash flows.
    The Company believes that the combination of the new equity, repayment of
the subordinated debenture and elimination of the associated interest expense,
and, the expected expense and cash savings of the restructuring activities,
will allow it to continue its banking relationship with its current senior
lender. As a result, the Company believes that it will be able to meet its
short-term cash flow requirements. However, the outcome of all of the actions
and events described above cannot be predicted at this time and hence the
Company's ability to continue as a going concern is uncertain.

    2008 Outlook

    The Company expects sales for the first quarter of 2008 to be similar to
the sales in the Fourth Quarter. Based on information currently available to
the Company, sales are expected to increase relatively significantly in the
second quarter of 2008 over the level in the previous quarter and achieve the
highest level in the past several quarters.

    2007 Financial Summary

    Selected comparative financial information for the three-month and
twelve-month periods ended December 31, 2007 and 2006 is shown below. (All
numbers below expressed in thousands, except per share information and gross
margin percentages):

    
    Income Statement                3-Month    3-Month   12-Month   12-Month
    000's                            Period     Period     Period     Period
                                   ---------  ---------  ---------  ---------
                                    Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,
                                       2007       2006       2007       2006
                                   ---------  ---------  ---------  ---------

    Sales                            $9,917    $10,852    $38,406    $43,832
    Gross Profit                      1,448      1,970      5,598      7,733
    Gross Profit %                    14.6%      18.2%      14.6%      17.6%
    Net Income (loss)               ($5,927)       307     (6,856)     1,614
    Net Income (loss) per share
    - basic & diluted                ($0.16)     $0.01     ($0.19)     $0.05
    Weighted average number of
     shares outstanding - diluted    36,707     38,192     36,334     35,213
    EBITDA(*)                          $211       $889       $780     $3,340

    Adeptron's 2007 audited financial statements and MD&A are available on
Adeptron's web site at www.adeptron.com and www.sedar.com.

    EBITDA(*) reconciliations, as reported above, to GAAP Net Income/(Loss) for
the three-month and twelve-month periods ended December 31, 2007 and 2006 are
shown below. (All numbers below expressed in thousands):


                                    3-Month    3-Month   12-Month   12-Month
                                     Period     Period     Period     Period
                                   ---------  ---------  ---------  ---------
                                    Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,
                                       2007       2006       2007       2006
                                   ---------  ---------  ---------  ---------

    Net income (loss) per GAAP      ($5,927)      $307    ($6,856)    $1,614
    Add:
    Interest on term loan                 6         14         56         15
    Interest on subordinated
     debenture                          252        197        818        235
    Interest on bank operating loan      93         71        294        390
    Interest on subordinated notes      Nil        Nil        Nil        302
    Interest on notes payable            17        Nil         41        Nil
    Depreciation and amortization       265        163        867        604
    Stock-based compensation             35        137        124        180
    Goodwill impairment               5,531        Nil      5,531        Nil
    Tax Recovery                        (61)       Nil        (95)       Nil
    EBITDA(1)                          $211       $889       $780     $3,340

    (*) - EBITDA represents Earnings before Interest, Taxes, Depreciation,
        Amortization, Goodwill impairment, and Stock-based Compensation.
    

    EBITDA(1)is not a recognized measure under Canadian generally accepted
accounting principles. However, management believes that EBITDA(*) is a useful
supplemental measure to net income (loss), as it provides investors with an
indication of cash earnings prior to debt service, capital expenditure, income
tax and other non-cash items. Readers should be cautioned, however, that
EBITDA(*) should not be construed as an alternative to net income (loss)
determined in accordance with generally accepted accounting principles as an
indicator of the Company's performance or to cash flows from operating,
investing and financing activities as a measure of liquidity and cash flows.
The Company's method of calculating EBITDA(*) may differ from the methods by
which other companies calculate EBITDA(*) and, accordingly, the EBITDA(*) used
herein may not be comparable to measures used by other companies.

    About Adeptron:

    Adeptron's business is Integrating Ideas with Solutions(TM) within the
technology and electronics industries, to enhance our customers' competitive
advantage. Adeptron delivers global product solutions and support for the
complete product life cycle, including design, prototyping, supply chain
management, manufacturing, assembly, testing, product assurance, distribution
and after-sales service solutions. Adeptron's facilities are ISO 9001:2000
registered.
    Adeptron is a public company whose common shares are listed for trading
on The Toronto Stock Exchange under the symbol: "ATQ". The Company has
approximately 36.7 million common shares outstanding. Visit Adeptron at:
www.adeptron.com or www.investorfile.com.

    THIS NEWS RELEASE MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION
RELATING TO SUCH MATTERS AS EXPECTED FINANCIAL PERFORMANCE, BUSINESS
PROSPECTS, TECHNOLOGICAL DEVELOPMENTS, DEVELOPMENT ACTIVITIES AND LIKE
MATTERS. THESE STATEMENTS INVOLVE RISK AND UNCERTAINTIES, INCLUDING BUT NOT
LIMITED TO RISK FACTORS DESCRIBED IN DOCUMENTS FILED WITH REGULATORY
AUTHORITIES, SUCH AS THE COMPANY'S MOST RECENTLY FILED ANNUAL AND QUARTERLY
REPORTS AND ANNUAL INFORMATION FORM. ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE PROJECTED AS A RESULT OF THESE RISKS AND SHOULD NOT BE RELIED UPON
AS A PREDICTION OF FUTURE EVENTS. ADEPTRON TECHNOLOGIES CORPORATION UNDERTAKES
NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE ON WHICH SUCH STATEMENT IS MADE, OR TO REFLECT
THE OCCURRENCE OF UNANTICIPATED EVENTS.
    %SEDAR: 00012076E




For further information:

For further information: Adeptron Company Contact: F. Michael Marti,
President & Chief Executive Officer, Tel: (416) 705-6534,
fmmarti@adeptron.com; Adeptron Investor Relations: Gerry Wimmer,
INVESTORFILE.com, Tel: (416) 360-8895, Toll Free: 1-888-894-8222,
gwimmer@investorfile.com

Organization Profile

ADEPTRON TECHNOLOGIES CORPORATION

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890