Rutter Inc. Releases Second Quarter Financial Results



    ST. JOHN'S, April 13 /CNW/ - Rutter Inc. (TSX: RUT) - Today, Rutter Inc.
released unaudited financial statements for its second quarter ended February
28, 2007. Summary information is provided in this release and the full
statements are available on the Company's website at www.rutter.ca or on the
SEDAR website at www.sedar.com.
    Revenue for the second quarter of fiscal 2007 was $17,289,000, down
$900,000 or 4.9% from revenue of $18,189,000 reported for the same quarter
last year. This was due to decreases in Technologies and Engineering Services
segment revenues of $446,000 and $454,000 respectively. For the first six
months, revenue was $34,937,000 reflecting a decrease of $2,024,000 or 5.5% as
compared to the prior year. This was due to decreases of $552,000 in the
Technologies segment and $1,472,000 in the Engineering Services segment
respectively.
    Rutter is reporting EBITDA(1) of $1,843,000 for the quarter, a
significant improvement as compared to $161,000 reported for the same period a
year ago. This is due to improvements in all areas of the Company's
operations. Technologies segment EBITDA was $1,254,000 as compared to $886,000
reported for the same period in 2006. Engineering Services is reporting EBITDA
of $1,211,000 as compared to $158,000 reported last year. Corporate costs have
decreased to $622,000 compared to $883,000 during the second quarter last
year. For the six month period, EBITDA is up 12.6% or $157,000 overall.
Significant reductions in corporate costs and Technologies segment EBITDA
improvements were offset by a decline in Engineering Services segment EBITDA.
    For the quarter ended February 28, 2007, Rutter Inc. is reporting net
earnings of $2,000, a break even in terms of both basic and diluted earnings
per share, an improvement from a loss of $422,000 or $0.01 per share for the
same period in fiscal 2006. Year to date the Company is reporting a net loss
of $1,545,000 or $0.04 per share. EBITDA earnings have not translated into
improved net earnings on a year to date basis due to severance and contract
termination costs of $526,000, a provision for withholding taxes of $231,000
and increases of $385,000 in interest and bank charges.
    "Management indicated at the beginning of the year, that more emphasis
would be placed on improving operational efficiencies and on ensuring that the
products we sell and the contracts we take on have the kind of margins we need
to be a profitable company," said Donald I. Clarke, Chairman and CEO of Rutter
Inc. "We made a commitment to make timely adjustments and absorbed losses
early in the year associated with some of those tough decisions. Despite a
revenue drop of $900,000 over the same quarter a year ago expenses were down
and EBITDA up in all areas, an indication that we are working smarter and
bringing in the right business," said Clarke.

    
    -------------------------------------------------------------------------
                           Revenue & Earnings Data
                   (in thousands except per share amounts)
    -------------------------------------------------------------------------
                               Q2 2007     Q2 2006     6 Months     6 Months
                                                           2007         2006
    -------------------------------------------------------------------------
    Revenue:
    -------------------------------------------------------------------------
    Technologies                $8,743      $9,189      $18,160      $18,712
    -------------------------------------------------------------------------
    Engineering Services         8,546       9,000       16,777       18,249
    -------------------------------------------------------------------------
                               $17,289     $18,189      $34,937      $36,961
    -------------------------------------------------------------------------
    EBITDA:
    -------------------------------------------------------------------------
    Technologies                $1,254        $886        1,914       $1,563
    -------------------------------------------------------------------------
    Engineering Services         1,211         158          842        1,411
    -------------------------------------------------------------------------
    Corporate Costs               (622)       (883)      (1,355)      (1,730)
    -------------------------------------------------------------------------
                                $1,843        $161       $1,401       $1,244
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net Earnings (Loss)            $ 2       $(422)     $(1,545)        $ 82
    -------------------------------------------------------------------------
    Earnings (Loss) Per Share      $ -      $(0.01)      $(0.04)         $ -
    -------------------------------------------------------------------------

    Segment Performance

    Technologies

    Revenue for the quarter is $8,743,000, a decrease of 4.9% over the prior
year. This decrease is attributable to increased revenues of $1,827,000 for
company owned products offset by decreased revenues of $2,273,000 for third
party manufacturing. Rutter continues to see increased VDR demand although
price competition has brought down average selling prices. Radar sales in the
quarter were strong as well. Decreases in third party manufacturing sales
occurred in both the military and telecommunications market segments. These
are in line with expectations and the Company has previously stated that its
major military customer's activity levels would decline in the first half of
2007 and are expected to rebound in 2008. On a year to date basis revenues
from company owned products increased from $5,924,000 to $9,290,000, an
increase of $3,366,000 or 57% while revenues for third party manufacturing
decreased from $12,788,000 to $8,870,000, a decrease of $3,918,000 or 31%.
    Technologies segment EBITDA for the quarter was $1,254,000, an increase of
$368,000 or 41.5% and for the six month period was $1,914,000, an increase of
$351,000 or 22.5%. The overall change in EBITDA for both the quarter and on a
year to date basis is a direct result of the change in mix of sales between
third party manufacturing and company owned products, the latter which tend to
deliver better margins.

    Engineering Services

    Revenue in the Engineering Services segment for the current quarter
declined by $454,000 or 5.0% when compared to the same period last year and
declined by $1,472,000 or 8.1% on a year to date basis compared to same period
last year.
    For the quarter, Brazilian operation revenues increased by $427,000 and
the North American engineering operation revenues decreased by $881,000 over
the same quarter of the prior year. The Brazilian operation is maintaining and
growing its book of business due to a robust local oil and gas market and in
the current quarter successfully negotiated significant change orders on three
contracts. In North America, revenues from the Company's industrial client
base have decreased over the prior year due to project delays and a slowdown
in oil and gas work in the Newfoundland operation. On a year over year basis,
the same trend is evident in Engineering Services with an increase in
Brazilian revenues of $911,000 offset by a decline in North American revenues
of $2,383,000.
    EBITDA in the Engineering Services segment was $1,211,000, an increase of
$1,053,000 from the $158,000 achieved in the prior year. Year to date EBITDA
was $842,000 versus $1,411,000, a decrease of $569,000. Improvements in the
EBITDA of the North American operation account for $449,000 of the increased
EBITDA in the quarterly comparison. Decreases in professional fees, travel
costs and salary costs have contributed to this improvement. Brazilian results
showed an increase in quarterly EBITDA of $604,000 compared to the same period
last year. Year to date, the Brazilian EBITDA has increased more modestly at
$275,000 due to competitive pricing pressures in the first quarter.

    Subsequent Event

    Subsequent to the quarter end, the Board of Directors approved plans for a
major acquisition as well as a related financing and private placement (see
April 13th press release "Rutter to expand through acquisition of Hinz
Automation" for further details). Hinz is a well respected, privately held
company with a 35 year history of leadership in delivering automation
solutions. With offices in Saskatoon, Calgary, Edmonton, Vancouver, Denver and
San Diego, Hinz is very well established in Western North America. With
225 employees, the Company is similar in size to Rutter Engineering &
Automation (REA) and reported revenues of $42.4 million in its audited
consolidated financial statements for the year ended September 30, 2006. For
the same period, the normalized EBITDA(2) was $6.8 million.

    Conclusion and Outlook Summary

    "Our Technologies segment will continue to be impacted by the cycle of its
military manufacturing contracts with increases expected in 2008. VDR demand
will continue to be strong and we are pleased with the market share we are
winning as this market unfolds," said Clarke. "Radar sales were particularly
strong this quarter but have now slowed as the season for ice navigation
technology passes."
    "In Engineering Services, Brazil is expected to continue to deliver a
strong performance. Adjustments made to Engineering Services in North America
last quarter combined with a series of changes initiated since July 2006, are
resulting in improved performance and we expect North America to continue to
show significant quarter over quarter improvement in costs and margins. We
stated last quarter that we believe the business is there to affect a
turnaround in 2007. As indicated by significant quarterly EBITDA improvements,
and thanks in no small part to the leadership of Glenn Willar, we are that
much closer," said Clarke.
    Clearly, there will be a tremendous impact in the Engineering Services' in
the coming quarters as the acquisition of Hinz should more than double the
annual revenue of this segment of our business. There is an excellent fit
between Rutter's experience and relationships in the international offshore
oil and gas sector and Hinz' onshore experience in a booming western oil and
gas economy. REA and Hinz have no geographic overlap and in addition to
synergies in oil and gas, there are complementary strengths in forestry,
utilities, heavy industrial, food and beverage and other sectors.

    About Rutter Inc. - Represented worldwide, Rutter Inc. is a global
enterprise focused on providing innovative, 21st century technologies and
engineering solutions that improve the efficiency and safety of marine,
transportation and operations in other industrial sectors. Key activities of
the enterprise include product development and marketing, technology
manufacturing and automation and control systems engineering. For more
information see www.rutter.ca.

    Forward-Looking Statements

    This press release may contain forward-looking statements that involve
risks and uncertainties. These forward-looking statements reflect our current
expectations and are subject to a number of risks and uncertainties including,
but not limited to, change in technology and general market conditions. Due to
the many risks and uncertainties, Rutter Inc. cannot assure that
forward-looking statements that may be contained in this press release will be
realized.

    The TSX has not reviewed and does not accept responsibility for the
    adequacy or accuracy of this release.


    --------------------------------
    (1) "The Company defines EBITDA as Net earnings (loss) before interest
        expense, income taxes, depreciation and amortization, non-controlling
        interest, foreign exchange gains (losses), equity income, gain on
        extinguishment of debt and other costs. This is identified on the
        Company's financial statements as "Earnings (loss) before undernoted
        items". EBITDA is not a measure of financial performance under
        Canadian generally accepted accounting principles ("GAAP") and may
        not be comparable to a similar measure used by other companies. The
        Company has included information concerning EBITDA because it
        believes it is a useful financial indicator commonly used by
        investors. Management uses EBITDA as one measure to assess the
        operating performance of its business units.

    (2) "Normalized EBITDA" here refers to net earnings before interest,
        income taxes, depreciation and amortization, foreign exchange gains
        (losses), and shareholder bonuses. EBITDA is not a measure of
        financial performance under Canadian generally accepted accounting
        principles ("GAAP") and may not be comparable to a similar measure
        used by other companies.
    
    %SEDAR: 00022015E




For further information:

For further information: Paul Snow, Director of Communications &
Investor Relations, (709) 368-3174


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