Virtek reports fiscal 2009 second quarter results



    
    -  Sales rose to $13.7 million
    -  Income from operations of $1.0 million versus loss of $1.5 million in
       prior year
    -  Cash and short-term investments rose to $10.3 million as of July 31,
       2008
    -  Incurred special charges regarding hostile takeover defense and review
       of alternative transactions of $1.3 million
    

    WATERLOO, ON, Sept. 11 /CNW/ - Virtek Vision International Inc. (TSX:VRK)
("Virtek" or the "Company"), a leading provider of high value industrial laser
solutions, today announced its financial results for the second quarter ended
July 31, 2008.
    Sales for the second quarter of fiscal 2009 rose 16% to $13.7 million
from $11.8 million in the corresponding quarter of fiscal 2008. Net income,
excluding special charges related to the takeover defense and review of
alternative transactions, amounted to $0.8 million or $0.02 per share in the
quarter compared to a loss from continuing operations of $1.4 million ($0.04
per share) in the prior year second quarter. The special charges include the
fees of legal, financial and investment advisors utilized by the Special
Committee of the Board of Directors to evaluate the unsolicited bid and to
consider alternative transactions. Overall, the net loss was $479,000 ($0.01
per share), compared to a net loss of $2.1 million ($0.06 per share) in the
quarter ended July 31, 2007.
    "We have achieved two quarters of improved operational results. Our
positive operating results and strong balance sheet in the first six months of
this fiscal year demonstrate that our business is on track for profitable
growth. During the second half of this year we expect economic conditions in
North America to remain challenging. We will continue to explore opportunities
in Europe and Asia. In the Marking & Engraving business, improvements based on
our efforts include the fiscal 2009 second quarter delivery of a North
American production unit of our FOBA "G" series deep engraving machines, built
on schedule in our Waterloo facility," said Stephen J. Sorocky, Virtek's
President and Chief Executive Officer.
    In the first six months of fiscal 2009 sales were $25.9 million, slightly
higher than $25.2 in the first half of fiscal 2008. Net income for the first
six months of this fiscal year amounted to $1.3 million before special
charges. Net income including special charges was $2,000 ($0.00 per share)
compared to a loss of $2.1 million ($0.06 per share) in the six months ended
July 31, 2007.
    The fiscal 2009 sales increase was due to improvement in both operating
segments: Imaging & Templating, and Marking & Engraving. Imaging & Templating
sales rose to $6.2 million in the fiscal 2009 second quarter from $5.6 million
in the same period last year. Increases in transportation and imaging revenues
were offset by a continued decline in demand for prefabricated construction
products. Marking & Engraving sales climbed to $7.5 million in the three
months ended July 31, 2008 from $6.2 million in the same period last year.
    Gross margin held steady at 54%. Operating expenses fell $200,000,
primarily due to lower general and administrative costs. EBITDA rose to
$115,000 in the fiscal 2009 second quarter, an improvement of $1.2 million,
from a loss of $1.1 million in the prior year period.
    "The hostile takeover bid for Virtek launched in May 2008 led to a review
and consideration of various alternative transactions in order to maximize
shareholder value. Our most recent news release, dated September 5, 2008,
describes the $1.05 per share offer from Gerber Scientific for all of Virtek's
issued and outstanding shares at a significant premium to the share price
earlier this year" said Mr. Sorocky. "From an operational standpoint, we have
focused throughout this period on implementing successful business strategies
and enhancing Virtek's performance. I am proud of the focus and dedication of
our staff and partners during this time. Our operational results clearly show
our progress in delivering consistent profitability."
    Virtek's sales order backlog remained strong at $5.6 million at July 31,
2008.
    Geographically, sales remained strong in North America (46% in the
quarter ended July 31, 2008 compared to 51% in the fiscal 2008 second quarter)
and Europe (47% in the quarter ended July 31, 2008 compared to 43% in the
fiscal 2008 second quarter). Asian sales were 6% in the fiscal 2009 second
quarter compared to 4% in the same period last year.
    Virtek's net cash position was $8.3 million at July 31, 2008, up from
$7.7 million at April 30, 2008 and $7.3 million at January 31, 2008. For the
latest three-month period, net cash increased $600,000 compared to a decrease
of $1.3 million in the prior year.

    Conference Call

    Virtek will hold an investor conference call to discuss the fiscal 2009
second quarter financial results on Friday, September 12, 2008 at 10:30 a.m.
Eastern Time. To participate in the conference call please dial, toll free in
North America 1-800-733-7571 or 416-644-3414 within the Toronto area or
internationally. Replays of the conference call will be available on our
website at www.virtek.ca for three months.

    About Virtek Vision International Inc.

    Virtek Vision International Inc. is a leading provider of high value
industrial laser solutions focused on the needs of the global manufacturing
sector, providing templating, inspection, marking and engraving products.
Virtek serves customers in the prefabricated construction, transportation,
metalworking, tool and die and mold making industries worldwide. Virtek is a
full service provider, with services including manufacturing, development,
integration, training, after sales support and installation. The Company
delivers high value to our customers, including feature-rich systems with a
quick payback, productivity enhancements and total turnkey solutions. The
majority of Virtek's sales are in the United States and Europe. Virtek
maintains offices in Waterloo, Ontario, Canada; Boston, Massachusetts, United
States; Ludenscheid and Nurnberg, Germany; and Busto Arsizio, Italy. Please
visit www.virtek.ca for more information.

    Forward-looking Statements

    Except for historical information provided herein, this press release may
contain information and statements of a forward-looking nature concerning the
future performance of the Company. These statements are based on suppositions
and uncertainties as well as on management's best possible evaluation of
future events. Such factors may include, without excluding other
considerations, fluctuations in quarterly results, evolution in customer
demand for the Company's products and services, the impact of price pressures
exerted by competitors, and general market trends or economic changes. As a
result, readers are advised that actual results may differ from expected
results.



    
    CONSOLIDATED BALANCE SHEETS

    As at                                            July 31,    January 31,
    Canadian dollars in thousands                        2008           2008
    UNAUDITED                                               $              $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                           2,700          5,316
    Short-term investment                               7,603          3,049
    Accounts receivable                                10,257         10,197
    Inventory                                           9,099          7,583
    Prepaid expenses                                      669            556
    Future tax asset                                        -            200
    Current portion of promissory note receivable         609            609
    -------------------------------------------------------------------------
                                                       30,937         27,510
    -------------------------------------------------------------------------
    Capital assets                                      2,957          3,196
    Investment tax credits                                120             84
    Goodwill                                            1,070          1,070
    Intangible assets                                   1,007          1,039
    Long-term portion of promissory note receivable       584            584
    -------------------------------------------------------------------------
                                                        5,738          5,973
    -------------------------------------------------------------------------
    Total assets                                       36,675         33,483
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES, NON-CONTROLLING INTEREST
     AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                                   2,025          1,071
    Accounts payable and accrued liabilities            8,612          7,214
    Deferred revenue                                    2,412          1,671
    -------------------------------------------------------------------------
                                                       13,049          9,956
    Lease inducements                                      79            113
    -------------------------------------------------------------------------
                                                       13,128         10,069
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Non-controlling interest                              308            307
    -------------------------------------------------------------------------
    Commitments and contingencies

    Shareholders' equity
    Share capital                                      41,754         41,754
    Contributed surplus                                   492            474
    Deficit                                           (18,283)       (18,397)
    Accumulated other comprehensive loss                 (724)          (724)
    -------------------------------------------------------------------------
                                                       23,239         23,107
    -------------------------------------------------------------------------
    Total liabilities, non-controlling interest
     and shareholders' equity                          36,675         33,483
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF OPERATIONS

                                   Three months ended       Six months ended
                                        July 31                 July 31
    Canadian dollars in thousands,
     except per share data          2008        2007        2008        2007
    UNAUDITED                          $           $           $           $
    -------------------------------------------------------------------------

    Sales                         13,738      11,817      25,898      25,161
    Cost of goods sold             6,314       5,493      12,351      11,920
    -------------------------------------------------------------------------
    Gross margin                   7,424       6,324      13,547      13,241
    -------------------------------------------------------------------------
    Expenses
    Selling, general and
     administrative                5,101       5,236       9,495       9,806
    Research and development       1,098       1,166       2,154       2,349
    Amortization                     404         374         814         748
    Foreign exchange (gain) loss    (174)      1,068        (410)      1,827
    -------------------------------------------------------------------------
                                   6,429       7,844      12,053      14,730
    -------------------------------------------------------------------------
    Income (loss) from operations    995      (1,520)      1,494      (1,489)
    -------------------------------------------------------------------------
    Other income (expense)
    Interest income                   50          41         114          82
    Interest expense - short term    (43)       (109)        (86)       (194)
    Interest expense - long term      (5)         (6)         (9)        (12)
    Special charges               (1,284)          -      (1,284)          -
    -------------------------------------------------------------------------
                                  (1,282)        (74)     (1,265)       (124)
    -------------------------------------------------------------------------
    Income (loss) before
     provision for income taxes,
     non-controlling interest
     and discontinued operations    (287)     (1,594)        229      (1,613)

    Provision for income taxes      (205)        (12)       (226)        (39)
    Non-controlling interest          13         178          (1)        180
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations          (479)     (1,428)          2      (1,472)
    Loss from discontinued
     operations                        -        (647)          -        (602)
    -------------------------------------------------------------------------
    Net income (loss)               (479)     (2,075)          2      (2,074)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Earnings (loss) per share
     basic and diluted
      From continuing operations   (0.01)      (0.04)       0.00       (0.04)
      From discontinued
       operations                      -       (0.02)          -       (0.02)
    -------------------------------------------------------------------------
                                   (0.01)      (0.06)       0.00       (0.06)
    -------------------------------------------------------------------------
    Weighted average number of
     shares outstanding
      Basic                    33,473,241  33,473,241  33,473,241  33,287,606
      Diluted                  33,473,241  33,473,241  33,473,241  33,287,606
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF DEFICIT

                                   Three months ended       Six months ended
                                        July 31                 July 31
    Canadian dollars in thousands   2008        2007        2008        2007
    UNAUDITED                          $           $           $           $
    -------------------------------------------------------------------------

    Deficit, beginning of period (17,804)    (20,582)    (18,397)    (20,583)

    Application of inventory
     accounting policy change                                112           -
    Net income (loss)               (479)     (2,075)          2      (2,074)
    -------------------------------------------------------------------------
    Deficit, end of period       (18,283)    (22,657)    (18,283)    (22,657)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                   Three months ended       Six months ended
                                        July 31                 July 31
    Canadian dollars in thousands   2008        2007        2008        2007
    UNAUDITED                          $           $           $           $
    -------------------------------------------------------------------------

    Net income (loss) for period    (479)     (2,075)          2      (2,074)
    Other comprehensive income
     (loss): unrealized gain on
     translating financial
     statements of self-sustaining
     foreign operations                -         (28)          -          91
    -------------------------------------------------------------------------
    Comprehensive income (loss)
     for period                     (479)     (2,103)          2      (1,983)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other comprehensive
     income (loss), beginning of
     period                         (724)         81        (724)        (38)

    Unrealized gain on translating
     financial statements of
     self-sustaining foreign
     operations                        -         (28)          -          91
    -------------------------------------------------------------------------
    Accumulated other comprehensive
     income (loss), end of period   (724)         53        (724)         53
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   Three months ended       Six months ended
                                        July 31                 July 31
    Canadian dollars in thousands   2008        2007        2008        2007
    UNAUDITED                          $           $           $           $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net income (loss) from
     continuing operations          (479)     (1,428)          2      (1,472)
    Add (deduct) non-cash items:
      Amortization                   404         374         814         748
      Non-controlling interest       (13)       (178)          1        (180)
      Stock-based compensation       106          47         134          83
      Investment tax credits         (36)          -         (36)          -
      Future tax provision           200           -         200           -
      Lease inducements              (13)        (19)        (34)        (38)
    Net change in non-cash working
     capital components from
     operations                      634       2,303         272         376
    -------------------------------------------------------------------------
    Cash (applied to) provided by
     operating activities            803       1,099       1,353        (483)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Purchase of capital assets      (200)       (227)       (343)       (367)
    Additions to intangible assets   (20)        (29)        (29)        (54)
    Increase in short-term
     investments                  (4,523)                 (4,554)
    Acquisition costs                  -      (1,258)          -      (1,258)
    Restricted cash and investment     -       1,448           -       1,535
    -------------------------------------------------------------------------
    Cash applied to investing
     activities                   (4,743)        (66)     (4,926)       (144)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Increase in bank indebtedness    555      (1,043)        954         (84)
    Net proceeds from issuing
     common shares                     -           -           -       3,688
    -------------------------------------------------------------------------
    Cash provided by (applied to)
     financing activities            555      (1,043)        954       3,604
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net cash applied to
     discontinued operations           -        (828)          -      (1,316)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Effect of foreign exchange on
     cash and cash equivalents         1           9           3           7
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash provided (applied) in
     the period                   (3,384)       (829)     (2,616)      1,668
    Cash and cash equivalents,
     beginning of period           6,084       3,948       5,316       1,451
    Cash and cash equivalents,
     end of period                 2,700       3,119       2,700       3,119
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: about Virtek Vision International Inc. please
visit www.virtek.ca or contact Peter Monsberger, VP Finance and CFO, Tel:
(519) 746-7190, Fax: (519) 746-3383, e-mail: peter.monsberger@virtek.ca;
Stephen J. Sorocky, President and CEO, Tel. (519) 746-7190, Fax. (519)
746-3383, e-mail: stephen.sorocky@virtek.ca; Investor Relations Contact: Jo
Mira Clodman, Clodman Hecht Communications Inc., (416) 787-3773, e-mail:
jomira@clodmanhecht.com

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VIRTEK VISION INTERNATIONAL INC.

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