Virtek Vision International Inc.
TSX : VRK

Virtek Vision International Inc.

April 20, 2007 08:00 ET

Virtek Reports Year End and Fourth Quarter Results

Revenue reaches record level with improved profitability in fiscal 2007

WATERLOO, ONTARIO--(CCNMatthews - April 20, 2007) - 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 fiscal year and quarter ending January 31, 2007.

For the twelve-month period ending January 31, 2007, the Company reported net income of $2.2 million or $0.08 per share on revenue of $63.8 million versus net income of $0.9 million or $0.03 per share on revenue of $51.9 million reported for the same period last year.

"I am pleased with the growth in revenue and net income achieved during fiscal 2007," stated Bob Sandness, Virtek's president and CEO. "Solid growth in our Imaging & Templating segment, especially transportation, which includes Intelligent Laser Systems ("iLS"), and the growth of Marking & Engraving in Asia Pacific and the Americas resulted in a 23 percent increase in revenue and near record profits. Given the uneven nature of our quarterly results, it is important that investors look at Virtek on an annual basis."

For the three-month period ending January 31, 2007, the Company reported net income of $1.3 million or $0.04 per share on revenue of $17.9 million, versus net income of $0.8 million or $0.03 per share on revenue of $14.9 million reported for the same period last year. The fourth quarter results for fiscal 2007 reflect the increased sales in the Marking & Engraving segment, which accounted for 45 percent of revenue versus 38 percent in the same period last year.

On a segmented basis, Marking & Engraving sales for fiscal 2007 were $27.9 million, a 28 percent increase from $21.7 million in fiscal 2006 (fourth quarter sales increased by $2.5 million or 45 percent over the prior year period). Imaging & Templating sales for fiscal 2007 were $36.0 million, a 19 percent increase from $30.2 million reported in fiscal 2006 (fourth quarter sales increased by $0.5 million or six percent over the prior year period).

As of January 31, 2007, the Company had a sales order backlog amounting to $6.8 million versus a sales order backlog of $10.6 million as at January 31, 2006.

The Marking & Engraving segment backlog increased to $4.0 million at January 31, 2007 from $2.9 million at January 31, 2006. The backlog for the Imaging & Templating segment decreased to $2.8 million at January 31, 2007 from $7.7 million at January 31, 2006 due to the completion of an Aerospace purchasing cycle and decreased housing starts in the U.S.

During the fourth quarter, Virtek's book-to-bill ratio was 0.79 compared to a rate of 1.08 in the third quarter of this year and 1.46 in the fourth quarter of fiscal 2006.

The Company's gross margin for fiscal 2007 was 48 percent compared to 49 percent in fiscal 2006. Gross margin for the fourth quarter was 49 percent up one percentage point from 48 percent in the comparable period last year. The Imaging & Templating segment gross margin has decreased by three percentage points from 55 percent in fiscal 2006 to 52 percent in fiscal 2007 (fourth quarter gross margin was 58 percent versus 59 percent in the prior year period). This decrease is due to a change in product mix along with increased warranty costs as reported in the third quarter. The Marking & Engraving segment gross margin has increased by four percentage points to 43 percent in fiscal 2007 from 39 percent in fiscal 2006 (fourth quarter gross margin was 39 percent versus 30 percent in the prior year period). This increase is due to a change in sales mix to higher value systems.

For fiscal 2007 selling, general and administrative (SG&A) expenses have increased by 24% or $4.0 million to $20.6 million compared to $16.6 million in fiscal 2006. SG&A was 32 percent of sales for both fiscal periods. The increase is attributable to increased staffing levels in FOBA North American operations and the iLS product line, increased sales related costs, as well as incremental costs incurred to develop the iLS product line and set up FOBA North America manufacturing operations.

Research and development (R&D) costs were $6.2 million or 10 percent of sales in fiscal 2007. Virtek is committed to managing R&D costs while continuing to invest in new software and product development to meet market demands.

"While we made excellent progress in fiscal 2007, there are still many opportunities to grow. Our Marking & Engraving 'growth engine', helped increase sales to Asia Pacific by $4.0 million or 145 percent over fiscal 2006. Similarly, revenue in our iLS product line unit grew by $2.8 million during fiscal 2007. We will continue to pursue strategic alliances similar to the ones negotiated with Metris for iLS and the Amada Group for LaserQC. In addition, we remain focused on investing in product development to meet customer needs and increase our margins," added Mr. Sandness.

Virtek ended the year with working capital from continuing operations of $12.1 million versus $10.4 million at January 31, 2006, and a net cash position of $1.6 million versus $3.2 million at January 31, 2006. Based on the Company's projected cash flows and credit facilities the Company has sufficient liquidity to cover ongoing operations. The financing completed on February 7, 2007 provided the Company with net proceeds for general corporate purposes including expanded working capital and the ability to consider strategic acquisitions.

While we anticipate reduced demand for our prefabricated construction and traditional transportation product lines in fiscal 2008, we also anticipate growth in demand for our Marking & Engraving and iLS product offerings.



CONSOLIDATED BALANCE SHEETS

As at January 31, January 31,
Canadian dollars in thousands 2007 2006
UNAUDITED $ $
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ASSETS
Current
Cash and cash equivalents 1,451 2,272
Restricted cash and investment 1,535 1,562
Accounts receivable 13,720 11,277
Costs and estimated earnings in excess of
billings 8 454
Inventory 8,876 6,420
Prepaid expenses 751 772
Future tax asset 600 600
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26,941 23,357
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Capital assets 3,835 3,471
Investment tax credits 84 84
Goodwill 1,346 1,346
Intangible assets 956 498
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6,221 5,399
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Total assets 33,162 28,756
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LIABILITIES, NON-CONTROLLING INTEREST AND
SHAREHOLDERS' EQUITY
Current
Bank indebtedness 1,384 616
Accounts payable and accrued liabilities 10,704 8,410
Deferred revenue 1,295 1,968
Billings in excess of costs and estimated
earnings 962 815
Current portion of note and bank loan payable - 1,102
Current liabilities of discontinued operations 58 174
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14,403 13,085
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Lease inducements 191 262
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14,594 13,347
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Non-controlling interest 723 524
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Shareholders' equity
Share capital 38,115 37,790
Deficit (20,583) (22,734)
Contributed surplus 351 294
Cumulative translation adjustment (38) (465)
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17,845 14,885
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Total liabilities, non-controlling interest and
shareholders' equity 33,162 28,756
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CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended Twelve months ended
Canadian dollars in thousands, January 31 January 31
except per share data 2007 2006 2007 2006
UNAUDITED $ $ $ $
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Sales 17,934 14,885 63,843 51,904
Cost of goods sold 9,086 7,740 33,117 26,682
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Gross margin 8,848 7,145 30,726 25,222
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Expenses
Selling, general and
administrative 5,883 4,805 20,601 16,562
Research and development 1,693 1,244 6,168 5,224
Amortization 420 433 1,583 2,078
Foreign exchange loss (gain) (547) 554 (498) 873
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7,449 7,036 27,854 24,737
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Income from operations 1,399 109 2,872 485
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Other income (expenses)
Interest income 15 25 93 74
Interest expense - short
term (101) (79) (434) (321)
Interest expense - long term (7) (22) (39) (78)
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(93) (76) (380) (325)
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Income before recovery of
(provision for) income
taxes and non-controlling
interest 1,306 33 2,492 160

Recovery of (provision for)
income taxes (58) 629 (116) 555
Non-controlling interest 7 136 (225) 179
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Net income 1,255 798 2,151 894
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Basic earnings per share 0.04 0.03 0.08 0.03
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Diluted earnings per share 0.04 0.03 0.08 0.03
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Weighted average number of
shares outstanding -
basic 28,673,241 28,266,249 28,585,270 28,264,963
Weighted average number of
shares outstanding -
diluted 29,220,480 28,274,568 28,887,369 28,268,632

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CONSOLIDATED STATEMENTS OF DEFICIT

Three months ended Twelve months ended
January 31 January 31
Canadian dollars in thousands 2007 2006 2007 2006
UNAUDITED $ $ $ $
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Deficit, beginning of the
period (21,838) (23,532) (22,734) (23,628)
Net income 1,255 798 2,151 894
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Deficit, end of the period (20,583) (22,724) (20,583) (22,734)
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CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended Twelve months ended
January 31 January 31
Canadian dollars in thousands 2007 2006 2007 2006
UNAUDITED $ $ $ $
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OPERATING ACTIVITIES
Net income 1,255 798 2,151 894
Add (deduct) non-cash items:
Amortization 400 433 1,583 2,099
Interest accretion - 12 8 62
Non-controlling interest (7) (136) 225 (179)
Future income taxes - (600) - (600)
Stock-based compensation 24 30 144 106
Leasehold inducements (18) (15) (71) (65)
Net change in non-cash working
capital components
from operations 597 2,376 (2,680) 1,988
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Cash provided by operating
activities 2,251 2,898 1,360 4,305
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INVESTING ACTIVITIES
Purchase of capital assets (249) (326) (1,416) (950)
Additions to intangible assets (146) (210) (565) (254)
Restricted cash and investment 47 45 27 100
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Cash applied to investing
activities (348) (491) (1,954) (1,104)
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FINANCING ACTIVITIES
Increase (decrease) in bank
indebtedness (1,645) (572) 705 (632)
Repayment of note and bank loan
payable (11) (9) (1,132) (1,143)
Proceeds from issuing common
shares - 8 316 8
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Cash applied to financing
activities (1,656) (573) (111) (1,767)
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Net cash applied to discontinued
operations (14) (26) (116) (267)
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Effect of foreign exchange on cash
and cash equivalents (28) (36) - (2)
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Net cash provided (applied) in the
period 205 1,722 (821) 1,165
Cash and cash equivalents,
beginning of period 1,246 500 2,272 1,107
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Cash and cash equivalents, end of
period 1,451 2,275 1,451 2,272
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Conference Call

Virtek will hold an investor conference call to discuss the fiscal year 2007 financials today at 10 a.m. Eastern Time. To participate in the conference call please dial, toll free in North America 1-800-769-8320, or 416-695-6130 within the Toronto area or internationally. Replays of the conference call will be available on our website at www.virtek.ca.

Annual Meeting

The 2007 Annual General Meeting of shareholders of Virtek Vision International Inc. will be held on Tuesday May 29, 2007 at 4:00pm at the InterContinental Toronto Centre hotel, Kingsway room, 255 Front Street West, Toronto, Ontario. A reception will follow the meeting.

About Virtek Vision International Inc.

Virtek Vision International Inc. is a leading provider of high value industrial laser solutions focussed 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 manufacturing, development, integration, training, after sales support and installation. The Company provides high value for our customers, feature-rich systems with a quick pay-back, 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, USA; 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.

Contact Information

  • Virtek Vision International Inc.
    Peter Monsberger
    VP Finance and CFO
    (519) 746-7190
    (519) 746-3383 (FAX)
    Email: peter.monsberger@virtek.ca
    or
    Virtek Vision International Inc.
    Bob Sandness
    President and CEO
    (519) 746-7190
    (519) 746-3383 (FAX)
    Email: bob.sandness@virtek.ca
    Website: www.virtek.ca
    or
    Investor Relations Contact:
    Genoa Management Limited
    John Sadler
    1-866-430-6247
    Email: info@genoa.ca