Coretec Inc.
TSX : CYY

Coretec Inc.

May 15, 2006 18:02 ET

Coretec Inc. Reports Q1 Earnings Per Share of $0.04

TORONTO, ONTARIO--(CCNMatthews - May 15, 2006) - Coretec Inc. (TSX:CYY) -

Quarterly revenues of $24.1 million at highest level since 2001

Gross Profit improves to 26% of sales

Strong sequential gain in EBITDA

Coretec Inc. (TSX:CYY) today reported its financial results for the first quarter ending March 31, 2006. Sales in the 2006 first quarter were $24.1 million, an increase of $2.5 million sequentially or 12% as compared to sales of $21.6 million in Q4 2005, and up $4.8 million or 25% from sales of $19.3 million in the same period of the prior year. The results achieved represent the highest quarterly revenue level since Q1 of 2001.

In the 2006 first quarter, the Company recorded gross profit of $6.2 million or 26% of sales as compared to $4.1 million or 21% of sales in the comparable period in 2005. Income from operations in Q1 2006 increased to $1.3 million as compared to a loss of $0.8 million in the prior year quarter. Net profit for the period was $0.8 million or $0.04 per share versus a net loss of $0.8 million or ($0.04) per share in the 2005 first quarter.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter of 2006 was $2.2 million, compared to EBITDA of $1.0 million in the first quarter of 2005.

"We are pleased with the ongoing top line and bottom line improvement that we have experienced over the second half of 2005 and into the first quarter of 2006. We experienced sequential revenue growth at all sites and unusually strong conditions in our offshore brokerage business in the most recent quarter. This growth in consolidated revenues and profitability was achieved despite the challenges associated with foreign exchange movements that impact both revenues and gross margin at our Toronto operations as well affect the translation of our non-Canadian dollar denominated monetary assets on our balance sheet." said Paul Langston, Coretec's President and Chief Executive Officer.

Mr. Langston continued, "PCB industry conditions have been quite strong since mid 2005, consistent with the seasonality of prior years. However, we believe that some of the surge in demand is attributable to inventory expansion by EMS and OEM companies in reaction to extended component leadtimes and the looming RoHS deadline in July 2006. We believe our preparedness with respect to RoHS will bode well for us from a near term demand perspective but we are anticipating industry activity to return to a more sustainable growth rate for the balance of the year. On that note, industry analysts Henderson Ventures, are projecting relatively stable growth for 2006 and 2007, i.e. in the 3.0-3.5% range per annum."

Coretec Inc. had 18,639,553 shares outstanding as at March 31, 2006.

Coretec is one of the leading designers and fabricators of printed circuit boards for the prototype and quick turnaround production segments of the North American and European markets. Coretec distinguishes itself from its competitors by providing complete printed circuit board solutions, including design, advanced prototyping and quick turnaround production across an outstanding range of product technologies.

This news release includes forward-looking statements related to Coretec's future growth, industry trends, performance and financial and operational results. Such forward-looking statements are based on assumptions and expectations and involve significant risks and uncertainties which would cause actual results to vary materially from those contained in the forward-looking statements. Such risks and uncertainties include, but are not limited to, potential changes in the economy and the electronics and printed circuit board industries, customer order levels, product mix and inventory build-up; lower than expected or delayed sales; currency fluctuations; pricing and other competitive pressures in the electronics and printed circuit board industries; Coretec's ability to reduce costs; Coretec's ability to integrate past and any future acquisitions; and other risks and uncertainties listed in Coretec's various public filings at www.sedar.com including Coretec's most recent AIF and MD&A. These and other factors should be considered carefully and undue reliance should not be placed on Coretec's forward-looking statements. Coretec does not undertake to update any forward-looking statement that is contained in this press release or other communications.

Additional information about Coretec Inc. is available at www.coretec-inc.com.



Coretec Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands - unaudited)

March 31, December 31,
2006 2005
$ $
---------------------------------------------------------------------
(unaudited) (unaudited)
ASSETS
Current
Cash 589 1,728
Restricted short-term deposit 1,064 1,057
Accounts receivable 16,419 14,471
Inventories 4,994 4,312
Income taxes recoverable 56 182
Prepaid expenses 1,285 1,341
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Total current assets 24,407 23,091
Mortgage receivable 1,050 1,050
Property, plant and equipment, net 25,336 25,478
Other assets 460 633
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51,253 50,252
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness 3,024 2,599
Accounts payable and accrued liabilities 10,421 10,257
Current portion of long-term debt 1,390 1,554
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Total current liabilities 14,835 14,410
Long-term debt 4,944 5,214
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Total liabilities 19,779 19,624
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Shareholders' equity
Share capital 61,044 61,036
Contributed surplus 538 459
Deficit (30,108) (30,867)
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Total shareholders' equity 31,474 30,628
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51,253 50,252
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Coretec Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share amounts - unaudited)




Three months ended
March 31,

2006 2005
$ $
---------------------------------------------------------------------

Sales 24,116 19,349
Cost of sales 17,886 15,254
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Gross profit 6,230 4,095
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Expenses
Selling, general and administrative 3,580 3,343
Depreciation and amortization 1,303 1,527
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4,883 4,870
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Income (loss) from operations 1,347 (775)
Interest and other expenses 181 248
Foreign exchange (gain) loss 192 (81)
Write-down of fixed assets 215 -

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Income (loss) from continuing operations 759 (942)
Income from discontinued operations - 126
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Net income (loss) for the quarter 759 (816)
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Earnings (loss) per share:
From continuing operations basic and diluted $0.04 $(0.05)
Net loss per share basic and diluted $0.04 $(0.04)
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Coretec Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands - unaudited)


Three months ended
March 31,

2006 2005
$ $
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OPERATING ACTIVITIES
Income (loss) for the year from continuing
operations 759 (942)
Non-cash items
Depreciation 1,303 1,527
Stock-based compensation 79 106
Write-down of fixed assets 215 -
Unrealized foreign exchange loss 56 285
Amortization of deferred finance charges 14 53
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2,426 1,029
Net change in non-cash working
capital balances related to operations (2,322) (1,593)
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Cash provided by (used in)
operating activities 104 (564)
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FINANCING ACTIVITIES
Repayments of long-term debt (454) (316)
Increase in bank indebtedness 425 1,306
Repayment of shareholder loan 8 -
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Cash provided by (used in) financing
activities (21) 990
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INVESTING ACTIVITIES
Purchase of capital assets (1,376) (1,158)
Increase in short-term deposit (7) -
Decrease in other assets 159 70
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Cash used in investing activities (1,224) (1,088)
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Effect of exchange rate changes on cash 2 (14)
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Net decrease in cash during the period (1,139) (676)
Change in cash from discontinued operations - 1,504
Cash, beginning of period 1,728 354
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Cash, end of period 589 1,182
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Supplemental cash flow information
Interest paid 170 195
Income taxes paid - -


Coretec Inc.
Selected financial Information (000's)
%
% Change
Q1/06 Q1/05 Change Q4/05 Q1/Q4
----------------- -------
Continuing operations:
Revenue 24,116 19,349 25% 21,610 12%
Gross Profit 6,230 4,095 52% 4,635 34%
Income (loss) 759 (816) N/A 186 308%


Reconciliation of %
EBITDA(i)from continuing % Change
operations Q1/06 Q1/05 Change Q4/05 Q1/Q4
----------------- -------
Income (loss) for the
period from continuing
operations 759 (816) 186
Add/(Deduct):
Interest 181 248 195
Depreciation and
amortization 1,303 1,527 1,378
Provision for income
tax - - (69)
----------------- -------
EBITDA from continuing
operations 2,243 959 134% 1,690 33%


(i)EBITDA is not a measure recognized under Canadian generally accepted accounting principles ("GAAP"). EBITDA is calculated as earnings before interest and certain other expenses, provision for income taxes, and depreciation and amortization. Management believes that many of the Company's shareholders, creditors, other stakeholders and analysts prefer to assess the Company's performance using EBITDA in addition to the GAAP measures. The Company's method of calculating EBITDA may differ from other companies and accordingly may not be comparable to measures used by other companies.

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