Stock Symbol: ATQ
Listing: Toronto Stock Exchange (TSX)
Web Site: www.adeptron.com
TORONTO, Nov. 15 /CNW/ - Adeptron Technologies Corporation (TSX : ATQ) ("Adeptron" or the "Company"), a specialist at delivering integrated product solutions and support to the global technology and electronics industry, today reports unaudited financial results for the three-month and nine-month periods ended September 30, 2010.
Effective January 1, 2010, the functional currency of Adeptron was changed from Canadian to U.S. dollars. Concurrent with this change in functional currency, Adeptron adopted the U.S. dollar as its reporting currency. Accordingly, all balance sheet and income statement amounts stated in this press release are expressed in U.S. dollars.
Q3 2010 Financial Highlights:
- Sales increased by $2.37 million or 28% over the third quarter of
2009 to $11 million
- Gross profit as a percentage of sales increased to 5.9% compared to
3.2% for the same period last year
- Gross Profit increased to $0.65 million compared to $0.27 million for
the same period last year
- Net loss of $2.42 million compared to net loss of $1.03 million for
the same period last year
- Severance and termination benefits recorded during the quarter
totaled $0.78 million
- Loss includes a non-cash charge for goodwill impairment of
$1.14 million
- Adjusted EBITDA of $0.00 million compared to an Adjusted EBITDA loss
of $0.44 million for the same period last year
- Loss of $0.02 per share compared to loss of $0.01 per share last year
Trent Carruthers, Interim CEO of Adeptron stated, "Approximately 80% of this quarter's loss is attributable to a non-recurring and non-cash goodwill charge and charges for severance and termination benefits. This means that the $0.5 million of loss shows a great improvement in operational results compared to the same period last year."
"The Company continued to make changes in the third quarter that are expected to improve long-term profitability and shareholder value. In the third quarter, Adeptron incurred significant severance and termination benefits relating to direct and indirect labour as well as SG&A. As a result of these adjustments the fourth quarter should see a reduction in the Company's overall payroll and related expenses by approximately $0.3 million compared to the third quarter. Because of the timing of some of the direct and indirect labour adjustments, Adeptron already experienced some improvements to its labour efficiency in this quarter and that contributed to the improved gross profit compared to the same period last year. We expect future positive effects of these employee terminations of this quarter will be evidenced in the fourth quarter of this year by an improvement in the gross profit as a percentage of sales."
Carruthers continued, "Management determined that as of the end of this third quarter that there was an impairment to the goodwill related to its San Jose, California-based operations and accordingly has recorded a non-cash charge in this third quarter for the goodwill amounting to $1.14 million. At the same time, we are anticipating strong sales in the last quarter of this year in San Jose as we fulfill previously pushed out orders that resulted from supply chain issues and shortages."
Carruthers added, "In this third quarter, the Company reduced inventories by $0.52 million compared to the end of the second quarter this year. We anticipate that further reductions in inventories in the fourth quarter may approach $1 million which will improve cash flow."
Carruthers ended by saying, "Adeptron was able to secure additional financing from its major shareholder, R.H. Global Technologies Ltd. ("RGT"), in the amount of $1.2 million by way of an unsecured subordinated loan which has created an immediate financial benefit to the Company by increasing working capital which will help support new and existing turnkey customer requirements. Adeptron continues to work with RGT, the Company's lenders and others to secure additional financing to fund its growing operations until the Company is in a position where it is generating positive cash flows and profitability. Given that the loan from RGT was not included as part of its covenant calculations in the third quarter the Company was in violation of one of its financial covenants at September 30, 2010. Subsequent to September 30, 2010, the Company secured a Waiver and Amendment to Credit Agreement covering this default."
Q3-2010 - Financial Summary
Selected comparative financial information for the three-month and nine-month periods ended September 30, 2010 and 2009 is shown below. (All numbers below expressed in thousands of U.S. dollars, except per share information and gross margin percentages):
Income Statement 3-Month 3-Month 9-Month 9-Month
Period Period Period Period
----------- ----------- ----------- -----------
September September September September
30, 2010 30, 2009 30, 2010 30, 2009
----------- ----------- ----------- -----------
Sales $10,976 $8,606 $34,946 $29,306
Gross Profit 653 273 2,259 2,183
Gross Profit % 5.9% 3.2% 6.5% 7.4%
Net Income (loss) (2,420) (1,031) (3,082) (2,420)
Adjusted EBITDA(2) 7 (444) 303 (336)
Basic & diluted income
(loss) per share ($0.02) ($0.01) ($0.03) ($0.03)
Number of common shares
outstanding 96,708 96,708 96,708 96,708
EBITDA(1) and Adjusted EBITDA(2) reconciliations to GAAP Net Income/(Loss) for the three-month and nine-month periods ended September 30, 2010 and 2009 are shown below. (All numbers below expressed in thousands of U.S. dollars):
3-Month 3-Month 9-Month 9-Month
Period Period Period Period
----------- ----------- ----------- -----------
September September September September
30, 2010 30, 2009 30, 2010 30, 2009
----------- ----------- ----------- -----------
Net income (loss)
per GAAP ($2,420) ($1,031) ($3,082) ($2,420)
Add (deduct):
Interest expense 193 221 605 641
Income tax expense
(recovery) - (147) (20) (347)
Depreciation and
amortization 303 356 940 969
-------------------------------------------------------------------------
EBITDA(1),(3) ($1,924) ($601) ($1,557) ($1,157)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Embedded foreign
currency derivatives - 146 (92) 444
Stock-based compensation 9 11 30 68
Severance and termination
benefits 778 - 778 309
Goodwill impairment 1,144 - 1,144 -
-------------------------------------------------------------------------
Adjusted EBITDA(2),(3) $7 ($444) $303 ($336)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) EBITDA means earnings before interest, taxes, depreciation and
amortization.
(2) Adjusted EBITDA means earnings before interest, taxes, depreciation,
amortization, loss on settlement of subordinated debenture, stock-
based compensation, embedded foreign currency derivatives, goodwill
impairment and severance and termination benefits.
(3) EBITDA and Adjusted EBITDA are not recognized measures under Canadian
generally accepted accounting principles. However, management
believes that EBITDA and Adjusted EBITDA as herein defined are useful
supplemental measures to net income (loss), as it provides investors
with an indication of cash earnings prior to debt service, capital
expenditures, income taxes and other non-recurring and non-cash
items. Readers should be cautioned, however, that EBITDA and Adjusted
EBITDA should not be construed as an alternative to net income (loss)
determined in accordance with generally accepted accounting
principles as an indicator of the Company's performance or to cash
flows from operating, investing and financing activities as a measure
of liquidity and cash flows. The Company's method of calculating
EBITDA and Adjusted EBITDA may differ from the methods by which other
companies calculate EBITDA and Adjusted EBITDA and, accordingly, the
EBITDA and Adjusted EBITDA used herein may not be comparable to
measures used by other companies.
The working capital deficiency, defined as current assets less current liabilities, as at September 30, 2010, was $0.402 million compared to $0.258 million at December 31, 2009, representing an increase in working capital deficiency of $0.144 million. This increase in working capital deficiency can be explained by an increase in the bank loan and by the increase in accounts payable which has been partially offset by an increase in accounts receivable and inventory. The latter relates to the Company meeting demands of its customers.
Adeptron's unaudited 2010 third quarter financial statements and MD&A will be available on Adeptron's web site on November 15, 2010 at www.adeptron.com and the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com.
About Adeptron:
Adeptron is a specialist at delivering integrated product solutions and support to the global technology and electronics industry. As a leading global provider of complete Electronics Manufacturing Services (EMS), Adeptron offers world class manufacturing facilities and global partners throughout Canada, the United States, Israel and China, allowing the Company to provide its customers the flexibility and scalability to competitively achieve total solutions to their present and future electronics outsourcing needs. Adeptron is a public company whose common shares are listed for trading on the Toronto Stock Exchange (TSX) under the symbol: "ATQ". Visit Adeptron at: www.adeptron.com.
THIS NEWS RELEASE MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO SUCH MATTERS AS EXPECTED FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, TECHNOLOGICAL DEVELOPMENTS, DEVELOPMENT ACTIVITIES AND LIKE MATTERS. THESE STATEMENTS INVOLVE RISK AND UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO RISK FACTORS DESCRIBED IN DOCUMENTS FILED WITH REGULATORY AUTHORITIES, SUCH AS THE COMPANY'S MOST RECENTLY FILED ANNUAL AND QUARTERLY REPORTS AND ANNUAL INFORMATION FORM. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED AS A RESULT OF THESE RISKS AND SHOULD NOT BE RELIED UPON AS A PREDICTION OF FUTURE EVENTS. ADEPTRON TECHNOLOGIES CORPORATION UNDERTAKES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE ON WHICH SUCH STATEMENT IS MADE, OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
For further information: Adeptron Company Contact: Trent Carruthers, Interim Chief Executive Officer, Tel: 613-744-3043 x3232, [email protected]; Adeptron Company Contact: Jon Szczur, Chief Financial Officer, Tel: 905-470-0109 x2299, [email protected]
Share this article