Toronto operations

Coretec reported sales of $22.8 million in the quarter ended December 31, 2008, a 20.6% increase over the prior year period revenue of $18.9 million and an increase of 12.3% from the third quarter of 2008 where revenues were $20.3 million. Gross profit in the quarter was 14.2% of sales compared to 9.2% in the prior year period and 12.0% in the third quarter of 2008. Net loss for the quarter was $0.5 million or $0.03 per share compared to a net loss of $1.4 million or $0.07 per share for the same period in 2007 and sequentially, flat from a net loss of $0.5 million or $0.03 per share in the third quarter of 2008. Earnings before interest, taxes, depreciation and amortization ("EBITDA") were $1.3 million, a $1.1 million increase from the same period in 2007 and sequentially an increase of $0.6 million from the third quarter of 2008.

During the fourth quarter of 2008 the company recorded net foreign exchange losses of $0.1 million primarily as relates to its currency hedging program. Additionally the company recorded a tax provision of $0.3 million in the quarter.

For the twelve-month period ended December 31, 2008, the company reported sales of $81.0 million, a 5.2% decrease from sales of $85.4 million in 2007. Gross profit decreased to $10.0 million or 12.3% of sales compared to $10.6 million or 12.4% of sales in 2007. The net loss for the year was $2.3 million or $0.12 per share compared to a net loss of $3.2 million or $0.17 per share in 2007. Foreign exchange losses for 2008 were $0.2 million as compared with $0.5 million in 2007. The tax provision for 2008 was $0.3 million as compared to $0.1 million in 2007. EBITDA was $3.3 million for 2008 as compared to $2.8 million in 2007.

"The U.S. dollar/Canadian dollar exchange rate played havoc with our revenues and costs during 2008. For much of the year our revenues were weighed down by the strong Canadian dollar, excepting in the fourth quarter where they were buoyed by its weakness relative to the U.S. dollar. This volatility made product pricing very challenging throughout the year. It also impacted our hedging strategy, resulting in significant foreign exchange losses on USD forward contracts in Q4 in particular. On a positive note, a number of favourable trends manifested in the second half of 2008 and accelerated towards the end of the year, namely the decline in commodity prices (excepting gold) as well as deflation in other raw materials and indirect costs. The weakness of the Canadian Dollar not only helped our revenues but also our cost structure in the Toronto operations due to the fact that the majority of its costs are denominated in Canadian dollars," said Paul Langston, President and CEO.

"We are obviously concerned about the economic climate and the impact that it will have on PCB demand. According to IPC (the PCB industry association), the industry contracted for the final eight months of 2008 and especially so in the final quarter. The most recent statistics (January '09 versus January '08) indicate a 20-30% reduction in business activity was realized across the PCB industry in North America.

"Although there are pockets of relative strength across the various end markets virtually every major rigid pcb manufacturein North America is experiencing revenue compression as measured on a constant dollar basis. To combat this we are positioning ourselves to aggressively attack new client opportunities, new end markets and new geographies through the expansion and refinement of our sales organization. Additionally we have continued and will continue to differentiate ourselves by achieving accreditations that will allow us to further penetrate key end markets and major consumers," continued Langston.

"In 2008 our Toronto operations experienced challenges as anticipated, with respect to new process installations at our Sheppard facility and process relocations from our Ellesmere site. During the year we augmented and optimized our facility leadership team which has manifested in improved operational performance while minimizing the disruptions associated with the scheduled platform transfers and consolidation initiative. Our Toronto facility is well on its way in terms of being positioned to gain market share especially with respect to advanced technology requirements and rapid response manufacturing needs. With respect to our U.S. sites we experienced strong operating metrics over the course of the year and are now positioned to take additional market share in the key defense and aerospace end markets. Another bright spot for us in 2008 was our Coretec-Asia business unit which continued to build on existing relationships as well as develop new ones with Asian based PCB fabricators. Our offshore business model is resonating with PCB consumers across most end markets and along with our other services is providing current and prospective clients with a unique "cradle-to-grave" procurement opportunity,"

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