Virtek Vision Reports Fiscal First-Quarter Results



    
    -   Sales of Marking & Engraving products up 44%, but gain is offset by
        decline in Imaging & Templating segment
    -   Breakeven net income reflects consolidated sales decline, foreign
        exchange loss, and changes in product mix
    -   Conference call Wednesday at 10:00 a.m. (EDT)
    

    WATERLOO, ON, June 12 /CNW/ - Virtek Vision International Inc. (TSX:
VRK), a leading developer and provider of high-value industrial laser
solutions, today announced its financial results for the fiscal 2008 first
quarter ended April 30, 2007. All references to quarters or years are for the
fiscal periods and all currency amounts are in Canadian dollars unless
otherwise noted.
    "As expected, our consolidated results for the first quarter were
significantly affected by the downturn in construction markets in the United
States and a decline in our aerospace business. In addition, the strengthening
of the Canadian dollar in relation to the U.S. dollar resulted in a
significant foreign exchange loss," said Bob Sandness, President and Chief
Executive Officer
    "Although we were breakeven in the quarter, we are encouraged by the
sales growth in the Marking & Engraving segment. We believe that this business
offers the best opportunities for revenue and earnings growth, and the
creation of sustainable value for our shareholders," Mr. Sandness continued.

    First-Quarter Results
    ---------------------
    First-quarter 2008 sales were $15.2 million, down 7 percent from
$16.3 million in the 2007 period as lower Imaging & Templating sales more than
offset a 44 percent gain in Virtek's Marking & Engraving business.
    Gross margin at 50 percent for the first quarter is comparable with the
2007 first quarter. The margin on Marking & Engraving sales is generally lower
than that for the Imaging & Templating segment. Operating expenses, comprising
selling, general, and administrative (SG&A) and research and development, were
41 percent of sales in the 2008 quarter, compared with 37 percent in the 2007
first quarter. The company recorded a loss on foreign exchange of $0.8 million
compared to a gain of $56,000 in the 2007 first quarter.
    The reduced level of sales combined with the modest increase in expenses
and the foreign exchange loss resulted in a decline in EBITDA (earnings before
interest, taxes, depreciation, and amortization) to $0.5 million from
$2.2 million in the prior-year quarter. Virtek considers EBITDA to be an
effective measure of each of its business' contribution to its operating
performance and as an indirect measure of operating cash flow. However, EBITDA
has no standardized meaning under Canadian generally accepted accounting
principles (GAAP).
    Net income was $1 thousand ($0.00 per basic and diluted share), compared
with $1.7 million net income ($0.06 per basic and diluted share) in the 2007
first quarter. On February 7, 2007, Virtek completed an offering of
4.8 million common shares for gross proceeds of $4.176 million. Reflecting
this offering, earnings per share are calculated on an increased weighted
average number of shares outstanding of 33,095,713 basic and 33,229,477 shares
diluted, compared with 28,286,965 shares basic and 28,352,932 diluted in the
2007 first quarter.

    Growth in Marking & Engraving Sales Offset by Imaging & Templating
    ------------------------------------------------------------------
    Decline
    -------
    Marking & Engraving sales rose 44 percent in the quarter to $7.2 million
from $5.0 million in the 2007 first quarter. The gain mainly resulted from
increased business in Europe ($1.4 million of the increase). Asian and North
American customers evenly accounted for the balance of the increase. The
gains, particularly in North America, are indicative of investments made
during the past three years to sell multiple systems to key customers.
    Gross margin for Marking & Engraving declined one point to 44 percent due
to product mix, while increased operating expenses were mainly related to
marketing and sales programs. Together with a $48,000 loss in foreign
exchange, compared with a gain in the 2007 first quarter of $328,000, this
resulted in a net loss for the 2008 first quarter of $435,000 compared with a
net loss in the 2007 first quarter of $28,000 for Marking & Engraving.
    Sales of the Imaging & Templating segment were down 29 percent to
$8.0 million from $11.3 million a year earlier. The decline was attributable
to the weakness in the U.S. housing market and the reduced demand for Virtek's
prefabricated construction products, which declined $2.1 million. The company
also saw a return to normal sales levels in the aerospace market. In the 2007
first quarter, Virtek recorded substantially higher than normal aerospace
sales due to the completion of the initial procurement for Boeing's 787
program. Imaging sales rose in the 2008 first quarter as the company sold
LaserQC Expert systems. In addition, Virtek made its first European sale under
its agreement with Amada Corporation's MetalSoft division. Sales in the iLS
product line rose $0.6 million in the 2008 first quarter due to progress in
completion of the Boeing contract.
    The Imaging & Templating segment also achieved a two-point increase in
gross margin to 55 percent compared with a year ago, as a result of the sales
mix and improved performance by the iLS product line. Operating expenses
declined as the result of lower commissions and tradeshow expenses. These
improvements were partially offset by a foreign exchange loss of $0.7 million
compared with a loss in the 2007 first quarter of $0.3 million. Net income for
the segment declined to $0.4 million from $1.7 million.
    At the end of the 2008 first quarter, Virtek's backlog was $4.6 million,
compared with $6.8 million at the 2007 year-end and $9.1 million at the end of
the 2007 first quarter. The backlog comprises $3.5 million of orders for
Marking & Engraving (compared with $4.0 million at the end of 2007) and
$1.1 million of Imaging & Templating orders ($2.8 million at the 2007
year-end). Caution should be used in considering backlog as a definitive
indicator of future sales as the time from order to delivery for the company's
products and systems is often a matter of weeks and, as a result, Virtek's
outlook can quickly shift up or down.

    Outlook
    -------
    "We know that this will be a challenging year for Virtek," said Mr.
Sandness. "The rapid rise in the value of the Canadian dollar is putting
increased pressure on our profitability. We believe, however, that there are
encouraging signs for our business in a number of respects.
    "To combat the affects of the stronger Canadian dollar, we are continuing
to invest in engineering innovation to reduce product cost and thereby protect
our bottom line. A good example of this innovation is the recent introduction
of our low-cost, replaceable green laser projector. We are currently shipping
it to customers in the prefabricated construction market and we also will be
introducing it into the aerospace market later this year. This product will
both reduce our manufacturing cost and increase our recurring revenue as
customers purchase spare lasers for future replacement," he continued.
    "We are proceeding with establishing manufacturing in Waterloo for our
FOBA "G" series of deep engraving machines that are now only produced in
Germany. This will result both in lower costs and faster delivery times to our
customers in North America. By reducing the product costs for the U.S.
marketplace, we anticipate a margin improvement on future Marking & Engraving
sales.
    "Our acquisition this week of the remaining 25 percent of FOBA Technology
& Services GmbH will further contribute to our efforts to create value for
Virtek's shareholders," Mr. Sandness said.

    Conference Call and Webcast

    Virtek will hold a conference call for analysts and investors to discuss
its first-quarter results on Wednesday, June 13, 2007 at 10:00 a.m. (Eastern).
    Bob Sandness, President and Chief Executive Officer will be available to
answer questions during the call.
    To participate in the call, please dial 416-644-3416 or 1-800-732-9307 at
least five minutes prior to the start of the call.
    A live audio webcast of the conference call will be available at
www.newswire.ca and www.virtek.ca.
    An archived recording of the call will be available at 416-640-1917 or
1-877-289-8525 (Passcode No. 21235433) from noon on June 13 to 11:59 p.m. on
June 20. An archived recording of the webcast also will be available at
Virtek's website.

    Forward-looking Statements

    This news release may contain information and statements of a
forward-looking nature concerning the future performance of the company. Any
such forward-looking statements are based on current suppositions and
expectations that are subject to significant risks and uncertainties. These
include, but are not limited to, the effects of general economic conditions on
the customers and markets that we serve, the impact of price pressures exerted
by competitors, changes that may take place in our costs and expenditures, the
results of our research and development programs, and other factors discussed
in our Management Discussion and Analysis and other regulatory filings. We
assume no obligation to update the forward-looking statements or to update the
reasons why actual results could differ from those reflected in the
forward-looking statements.

    About Virtek

    Virtek Vision International Inc. is a leading developer and provider of
high-value industrial laser solutions focused on the needs of the global
manufacturing sector providing templating, inspection, marking and engraving
products and systems integration solutions. 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 research and development, manufacturing, integration,
training, after-sales support, and installation. The company provides high
value for its customers, feature-rich systems with a quick pay-back,
productivity enhancements, and total turnkey solutions. Based in Waterloo,
Ontario, Canada, Virtek also has offices in Boston, Massachusetts, USA;
Ludenscheid and Nurnberg, Germany; and Busto Arsizio, Italy. Please visit
www.virtek.ca for more information.



    
    CONSOLIDATED BALANCE SHEETS

    As at                                              April 30,  January 31,
    Canadian dollars in thousands                          2007         2007
    UNAUDITED                                                 $            $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                             3,948        1,451
    Restricted cash and investment                        1,448        1,535
    Accounts receivable                                  13,290       13,720
    Costs and estimated earnings in excess of billings      724            8
    Inventory                                             8,925        8,876
    Prepaid expenses                                      1,031          751
    Future tax asset                                        144          144
    -------------------------------------------------------------------------
                                                         29,510       26,485
    -------------------------------------------------------------------------
    Capital assets                                        3,923        3,835
    Investment tax credits                                  130           84
    Future tax asset                                        456          456
    Goodwill                                              1,346        1,346
    Intangible assets                                       964          956
    -------------------------------------------------------------------------
                                                          6,819        6,677
    -------------------------------------------------------------------------
    Total assets                                         36,329       33,162
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES, NON-CONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                                     2,355        1,384
    Accounts payable and accrued liabilities              9,555       10,762
    Deferred revenue                                      1,825        1,295
    Billings in excess of costs and estimated earnings       34          962
    -------------------------------------------------------------------------
                                                         13,769       14,403
    Lease inducement                                        172          191
    -------------------------------------------------------------------------
                                                         13,941       14,594
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Non-controlling interest                                721          723
    -------------------------------------------------------------------------
    Commitments and contingencies

    Shareholders' equity
    Share capital                                        41,754       38,115
    Contributed surplus                                     414          351
    Deficit                                             (20,582)     (20,583)
    Accumulated other comprehensive income                   81          (38)
    -------------------------------------------------------------------------
                                                         21,667       17,845
    -------------------------------------------------------------------------
    Total liabilities, non-controlling interest and
     shareholders' equity                                36,329       33,162
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF OPERATIONS                 Three months ended
                                                               April 30
    Canadian dollars in thousands, except per share data   2007         2006
    UNAUDITED                                                 $            $
    -------------------------------------------------------------------------

    Sales                                                15,158       16,252
    Cost of goods sold                                    7,642        8,051
    -------------------------------------------------------------------------
    Gross margin                                          7,516        8,201
    -------------------------------------------------------------------------
    Expenses
    Selling, general and administrative                   4,874        4,659
    Research and development (net of investment tax
     credits of $46, nil in 2006)                         1,380        1,386
    Amortization                                            428          379
    Foreign exchange loss (gain)                            758          (56)
    -------------------------------------------------------------------------
                                                          7,440        6,368
    -------------------------------------------------------------------------
    Income from operations                                   76        1,833
    -------------------------------------------------------------------------
    Other income (expenses)
    Interest income                                          40           29
    Interest expense - short term                           (85)        (123)
    Interest expense - long term                             (6)         (17)
    -------------------------------------------------------------------------
                                                            (51)        (111)
    -------------------------------------------------------------------------
    Income before provision for income taxes and
     non-controlling interest                                25        1,722

    Provision for income taxes                              (26)         (31)
    Non-controlling interest                                  2           23
    -------------------------------------------------------------------------
    Net income                                                1        1,714
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Earnings per share
      Basic                                                0.00         0.06
      Diluted                                              0.00         0.06
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Weighted average number of shares outstanding
      Basic                                          33,095,713   28,286,965
      Diluted                                        33,229,477   28,352,932
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF DEFICIT                    Three months ended
                                                               April 30
    Canadian dollars in thousands                          2007         2006
    UNAUDITED                                                 $            $
    -------------------------------------------------------------------------

    Deficit, beginning of the period                    (20,583)     (22,734)
    Net income                                                1        1,714
    -------------------------------------------------------------------------
    Deficit, end of the period                          (20,582)     (21,020)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME       Three months ended
                                                               April 30
    Canadian dollars in thousands                          2007         2006
    UNAUDITED                                                 $            $
    -------------------------------------------------------------------------

    Net income for the period                                 1        1,714
    Other comprehensive income: unrealized gain on
     translating financial statements of self-sustaining
     foreign operations                                     119           (7)
    -------------------------------------------------------------------------
    Comprehensive income for the period                     120        1,707
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other comprehensive income, beginning
     of period                                              (38)        (465)
    Unrealized gain on translating financial statements
     of self-sustaining foreign operations                  119           (7)
    -------------------------------------------------------------------------
    Accumulated other comprehensive income, end of period    81         (472)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF CASH FLOWS                 Three months ended
                                                               April 30
    Canadian dollars in thousands                          2007         2006
    UNAUDITED                                                 $            $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net income                                                1        1,714
    Add (deduct) non-cash items:
      Amortization                                          428          379
      Interest accretion                                      -            8
      Non-controlling interest                               (2)         (23)
      Stock-based compensation                               35           45
      Lease inducements                                     (19)         (17)
    Change in non-cash working capital components from
     operations                                          (2,495)      (2,121)
    -------------------------------------------------------------------------
    Cash applied to operating activities                 (2,052)         (15)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Purchase of capital assets                             (147)        (227)
    Additions to intangible assets                          (36)        (116)
    Restricted cash and investment                           87           17
    -------------------------------------------------------------------------
    Cash applied to investing activities                    (96)        (326)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Increase in bank indebtedness                           959          677
    Repayment of note and bank loan payable                   -       (1,062)
    Net proceeds from issuing common shares               3,688          279
    -------------------------------------------------------------------------
    Cash provided by (applied to) financing activities    4,647         (106)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Effect of foreign exchange on cash and cash
     equivalents                                             (2)          18
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash provided (applied) in the period                 2,497         (429)
    Cash and cash equivalents, beginning of period        1,451        2,272
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period              3,948        1,843
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00006230E




For further information:

For further information: Peter Monsberger, Vice-President, Finance and
CFO, (519) 746-7190, (519) 746-3383 (FAX), Email: peter.monsberger@virtek.ca;
or Bob Sandness, President and Chief Executive Officer, (519) 746-7190, (519)
746-3383 (FAX), Email: bob.sandness@virtek.ca; Investor and Media Relations:
Richard Wertheim, Managing Partner, Wertheim + Company Inc., (416) 594-1600
(Bus.), (416) 518-8479 (Cell), Email: wertheim@wertheim.ca

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