Mr. Trent Carruthers reports
ADEPTRON 2010 RESULTS
Adeptron Technologies Corp. has released its audited financial results for the year ended Dec. 31, 2010, and unaudited financial results for the three months ended Dec. 31, 2010.
Effective Jan. 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 dollar amounts stated in this news release are expressed in U.S. dollars.
2010 financial results:
- Sales increased by $9,228,000, or 24 per cent, in 2010 compared with the same period in 2009.
- Gross margin increased to 7.1 per cent, compared with 5.3 per cent last year.
- The company recorded a net loss of $3,426,000 for 2010, compared with a loss of $3,871,000 in 2009.
- Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) improved by $1,654,000 to $408,000, compared with negative $1,246,000 last year.
- The loss of four cents per share did not change from the same period last year.
Fourth quarter 2010 financial results:
- Sales increased by $3,587,000, or 41.6 per cent, over the fourth quarter of 2009 to $12,219,000.
- Gross margin was 8.9 per cent, compared with negative 2.1 per cent for the same period last year.
- The company recorded a net loss of $345,000, compared with a net loss of $1,451,000 for the same period last year.
- The company had adjusted EBITDA of $105,000, compared with adjusted EBITDA of negative $910,000 for the same period last year.
- The company recorded a loss of one cent per share, compared with a loss of two cents per share last year.
"For the latter half of the 2009 year and the 2010 year, the overall electronics industry saw evidence of an allocation market where companies such as Adeptron had to compete for components. This made procurement of materials to produce customer's finished product extremely challenging. To this end, we experienced supplier decommits on deliveries, resulting in much longer lead times for raw material. In turn, this put pressure on working capital and extended delivery dates to our customers. As 2010 came to a close and most recently, we have seen improvements in the marketplace, with most component lead times settling back to normal levels. Furthermore, Adeptron continued to reduce its work force at various levels in the organization to improve long-term profitability and shareholder value. The associated severance costs were charged to severance and termination benefits. We do not anticipate any significant restructuring charges in 2011, but will continue to manage labour efficiency and material costs, our two largest expenses, prudently. Most important was the decision to close our San Jose operations, which was necessary in order to remain competitive. Despite our Markham and Ottawa sites performing well, the losses and related goodwill write-off incurred in San Jose contributed significantly to an overall loss for 2010. These planned reductions are expected to increase manufacturing efficiencies and lower costs by more effectively using resources and technology, improving plant processes, eliminating excess capacity, and better aligning production with market demand," stated Trent Carruthers, chief executive officer of Adeptron.
Mr. Carruthers continued: "It is very important to note that after adjusting for non-cash charges expensed during 2010 that the net loss of approximately $3.4-million is reduced to an approximately $1.1-million cash loss. Further to this, the company incurred significant restructuring, severance and benefit charges of approximately $790,000 that it does not expect to recur in 2011.
"At this time our management group is clearly focused on the 2011 year and beyond. Our growth strategy in 2011 is supported by the recent hiring of new EMS sales veterans in Markham and Ottawa. Our sales strategy focuses on selling our vast capabilities and experience in system integration solutions to existing customers and new sales funnel opportunities. In parallel, we are focused on increasing our presence in the medical and military/aerospace market segments where we showed improved growth in 2010. Our objective for 2011 is to deliver overall stability, improved operating margins and a road map to annual profitability."
Mr. Carruthers ended by saying, "It is also very positive that we continue to have the support in various facets of our business from our major shareholder, RGT, as well as our customers and suppliers alike."
Gross profit for the year increased $1,347,000, or 67.2 per cent, to $3,352,000, compared with $2,005,000 for the year 2009. Gross profit, expressed as a percentage of sales for the year 2010, was up to 7.1 per cent, compared with 5.3 per cent for 2009. The increase in gross profit for the year is primarily due to cost reductions in labour in the latter half of the year, but also due to increased sales and product mix. The turnkey sales from the company's second-largest customer represented 11 per cent of total sales, compared with 6 per cent in the prior year. Higher turnkey sales in 2010 contributed to the higher gross profit. Gross profit for the fourth quarter of 2010 increased $1,271,000 to $1,093,000 compared with the same period in 2009. Gross profit as a percentage of sales for the fourth quarter of 2010 was 8.9 per cent, compared with negative 2.1 per cent for the same period in 2009. The increase in gross profit and percentage in the fourth quarter of 2010 in comparison with the same period in 2009 is largely due to higher sales and a reduction in labour costs. Although procurement issues have continued to improve in 2010, some of the lingering effects of longer lead times and credit issues continued to have an unsettling effect on production in the fourth quarter.
Selling, general and administrative (SG&A) expense for the year 2010 increased 22 per cent to $4,617,000, compared with $3,783,000 for the same period in 2009. The increase is largely due to an appreciation of the Canadian dollar year over year, salary expense reallocations between direct labour, indirect labour and SG&A, and an increase in consulting expenses and professional fees, with offsets from reductions in travel, stock-based compensation, management fees and investor relations. The percentage of SG&A as a percentage of sales for 2010 was 9.8 per cent, down from 10 per cent in 2009. SG&A expenses increased $371,000 to $1,341,000 in the fourth quarter, compared with $970,000 for the same period in 2009. The increase in SG&A expense for the fourth quarter is largely due to a customer claim (accrued) of $165,000, a service contract termination fee of $42,000 and an increase in consulting fees of $159,000 compared with the same period in 2009. Over all, the percentage of SG&A as a percentage of sales for the fourth quarter of 2010 was 11 per cent, down from 11.2 per cent for the same period in 2009.
The loss in 2010 was $3,426,000, compared with a loss of $3,871,000 in 2009. Although the company had higher sales, margins and foreign currency gains during the year 2010, these were partially offset by goodwill impairment, severance and termination benefits, and other increases in SG&A expenses. Net loss for the fourth quarter of 2010 was $345,000, compared with a net loss of $1,451,000 for the same period of 2009. The improved results in the fourth quarter of 2010 related to higher sales, improved margins and reduced costs compared with the same period of 2009.
EBITDA increased by $1,015,000 to $105,000 during the fourth quarter of 2010 compared with the same period last year. EBITDA increased by $1,654,000 to $408,000 in 2010, compared with negative $1,246,000 in 2009. The improved results in 2010 related to higher sales, improved margins and reduced costs compared with the same period of 2009.
2010 -- financial summary
Selected comparative financial information for the three-month and 12-month periods ended Dec. 31, 2010, and Dec. 31, 2009, is shown in the attached table.
INCOME STATEMENT (in thousands of U.S. dollars, except where noted) Three-month period ended Dec. 31, 12-month period ended Dec. 31, 2010 2009 2010 2009Sales $ 12,219 $ 8,632 $ 47,165 $ 37,937Gross profit 1,093 (178) 3,352 2,005Gross profit (%) 8.9% (2.1%) 7.1% 5.3%Net income (loss) (345) (1,451) (3,426) (3,871)Adjusted EBITDA 105 (910) 408 (1,245)Net income (loss) per share -- basic & diluted ($) (
.01) (
.02) (
.04) (
.04)
Adeptron's audited 2010 financial statements and management's discussion and analysis will be available on Adeptron's website on March 28, 2010, and on SEDAR.
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