Veri-Tek International, Corp. Announces Third Quarter Results and Fourth Quarter Guidance
WIXOM, Mich., Oct. 19, 2005 -- Veri-Tek International, Corp. (AMEX:VCC) ("Veri-Tek" or the "Company") posted a loss of $0.1 million or $0.01 per share for the three months ended September 30, 2005. However, the Company posted a profit of $0.1 million or $0.02 per share during the last two months of the quarter. For the comparable period in 2004, the Company posted a loss of $0.9 million or $1.12 per share. For the nine months ended September 30, 2005 the Company posted a loss of $1.4 million or $0.32 per share as compared to a loss of $1.6 million or $2.01 per share for the same period in 2004. Specialty machine backlog was approximately $6.3 million at September 30, 2005 as compared to $2.6 million in 2004.
Fourth Quarter Guidance
Based on its current outlook for the fourth quarter of 2005, management expects net income in the range of $0.6 million to $1.0 million or $0.12 to $0.21 per share. Revenue is expected to be in the $4.3 million to $5.0 million range. The Company will announce guidance for 2006 late in the fourth quarter.
Third Quarter Results
Revenue for the third quarter was $3.5 million, an increase of 113% from $1.7 million in the third quarter of 2004. The increase in revenue is primarily the result of increased production of specialty machine orders and increased service revenue. Gross margin for the third quarter increased to $0.7 million as compared to a gross margin loss of $0.3 million in the 2004 quarter. This increase in gross margin is the direct result of increased revenue as well as improved efficiencies in our specialty equipment manufacturing. Research and development expenditures declined 60% to $0.1 million from $0.2 million in the 2004 period. This decline is due to the Company's leveraging of past developments in current projects. Selling, general and administrative expenses (SGA) increased to $0.8 million from $0.5 million for the same period in 2004. This increase is primarily the result of increased personnel expenses due to the addition of executives and sales personnel in order to upgrade the Company's staffing to execute its strategy and increased costs associated with the Company's expanded customer base.
Net loss for the quarter was $0.1 million as compared to a loss of $0.9 million in the 2004 period. On a per share basis, fully diluted loss was $0.01 per share as compared to a loss of $1.12 per share in 2004. These earnings per share figures were impacted by the number of shares outstanding. The diluted weighted average number of shares outstanding in the third quarter of 2005 was 4,875,000 as compared to 804,100 in 2004.
Year to Date Results
Revenue for the nine months ended September 30, 2005 was $5.7 million, a decline of 12% as compared to $6.5 million in the same period of 2004. The decline in revenue is principally due to the timing of orders for the Company's specialty machines. Gross margin for the 2005 period was of $0.6 million as compared to a gross margin of $1.5 million in the 2004 quarter. This reduction in gross margin is a direct result of the lower realized revenue in the Company's specialty machine business as well as a change in the mix of machines sold. Research and development expenditures declined 63% to $0.4 million from $1.2 million in the 2004 period. This decline is due to the Company's decision to leverage its past developments in current and future projects. Selling, general and administrative expenses (SGA) increased to $2.2 million from $1.6 million for the same period in 2004. This increase is primarily the result of increased and upgraded staffing as well as increased travel costs related to the booking of new international orders.
Net loss for the first nine months of 2005 was $1.4 million as compared to a loss of $1.6 million in the 2004 period. On a per share basis, the loss was $0.32 per share as compared to a loss of $2.01 per share in 2004. These earnings per share figures were impacted by the number of shares outstanding. The weighted average number of shares outstanding for the first nine months of 2005 was 4,168,456 as compared to 804,100 in 2004.
Management Commentary
Commenting on the Company's results, Todd Antenucci, President and COO of Veri-Tek stated, "We are pleased with our third quarter results. Our third quarter loss was a fraction of the loss in the second quarter of 2005 and the third quarter of 2004. Our financial performance has improved each quarter of 2005. We believe this trend will continue in the fourth quarter. Our specialty machine business currently has over 20 machines in various stages of production, including our own driveshaft manufacturing line. The machines currently under production will begin to ship in the fourth quarter through the end of the first quarter of 2006."
Mr. Antenucci continued, "We continue to pursue additional contract testing business as well as driveshaft production business. As these efforts progress, and the realization of additional specialty machines orders occur, we will announce our expectations for 2006. We anticipate making this announcement in the latter part of the fourth quarter."
ABOUT VERI-TEK INTERNATIONAL
Founded in 1993, Veri-Tek designs, develops and builds specialty equipment for the automotive and heavy equipment industries utilizing patented and patent pending technology that identifies product defects and production problems early in our customers' manufacturing process. The company also provides testing services for automotive driveline products and can manufacture certain products for the automotive industry via proprietary manufacturing methods.
SAFE HARBOR STATEMENT
Certain statements made by Veri-Tek International, Corp. in this presentation and other periodic oral and written statements, including filings with the Securities and Exchange Commission, are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, as well as statements which address operating performance, events or developments that we believe or expect to occur in the future, including those that discuss strategies, goals, outlook or other non- historical matters, or which relate to future sales or earnings expectations, cost savings, awarded sales, volume growth, earnings or a general belief in our expectations of future operating results, are forward- looking statements. The forward-looking statements are made on the basis of management's assumptions and estimations. As a result, there can be no guarantee or assurance that these assumptions and expectations will in fact occur. The forward-looking statements are subject to risks and uncertainties that may cause actual results to materially differ from those contained in the statements. Some, but not all of the risks, include our ability to obtain future sales; our ability to successfully integrate acquisitions; changes in worldwide economic and political conditions, including adverse effects from terrorism or related hostilities including increased costs, reduced production or other factors; costs related to legal and administrative matters; our ability to realize cost savings expected to offset price concessions; inefficiencies related to production and product launches that are greater than anticipated; changes in technology and technological risks; increased fuel costs; work stoppages and strikes at our facilities and that of our customers; the presence of downturns in customer markets where the Company's goods and services are sold; financial and business downturns of our customers or vendors; and other factors, uncertainties, challenges, and risks detailed in Veri-Tek's public filings with the Securities and Exchange Commission. Veri-Tek does not intend or undertake any obligation to update any forward- looking statements.
VERI-TEK INTERNATIONAL, CORP.
STATEMENTS OF INCOME
(Unaudited, in thousands, except for per share amounts)
Three Months Ended Nine Months Ended
September 30, 2005 September 30, 2005
2004 2005 2004 2005
Net Sales $1,650 $3,521 $6,517 $5,722
Cost of Sales 1,916 2,797 5,053 5,138
Gross margin (267) 724 1,464 584
Research and Development
Expenses 171 68 1,166 430
Selling, general and
administrative expenses 505 785 1,608 2,198
Operating income (loss) (942) (129) (1,309) (2,044)
Other Income (expense)
Interest Income - 49 - 99
Interest Expense (415) - (1,137) (54)
(415) 49 (1,137) 45
(Loss) from operations before
income taxes (1,357) (80) (2,446) (1,999)
Income tax expense (benefit) (460) (17) (828) (651)
(Loss) on common shares (898) (63) (1,618) (1,348)
Basic (loss) per common share: $(1.12) $(0.01) $(2.01) $(0.32)
Diluted (loss) per
common share: $(1.12) $(0.01) $(2.01) $(0.31)
Basic weighted average common
shares outstanding 804,100 4,875,000 804,100 4,168,456
Diluted weighted average
common shares outstanding 804,100 4,875,000 804,100 4,369,963
VERI-TEK INTERNATIONAL, CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
December 31, September 30,
ASSETS 2004 2005
Current assets
Cash and cash equivalents $6 $5,294
Accounts receivable, trade 1,743 832
Accounts receivable, other 4 -
Inventories 756 1,095
Cost and Estimated Earnings in
Excess of Billings, net 2,097 2,812
Prepaid expenses and other assets 582 167
Total Current Assets 5,188 10,200
Property, plant and equipment, net 165 1,250
Other assets
Patents - net 4,476 4,303
Deferred tax asset 2,013 2,670
Other 44 86
Total Other Assets 6,533 7,059
Total Assets $11,885 $18,509
LIABILITIES AND EQUITY
Current liabilities
Revolving credit facility 6,960 -
Accounts payable $937 $1,220
Accrued liabilities 407 143
Deferred revenue 203 49
Total Current Liabilities 8,508 1,412
Long Term Liabilities
Deferred tax liability 10 17
Subordinated Debt 7,175 -
Total Long Term Liabilities 7,185 17
Total Liabilities 15,694 1,429
Shareholders' equity
Common stock, no par value,
authorized 20,000,000 shares,
issued 804,100 and 4,875,000
shares in 2004 and 2005, respectively 100 22,337
Retained earnings (3,909) (5,257)
Shareholders' Equity (3,809) 17,080
Liabilities and Shareholders' Equity $11,885 $18,509