SOURCE: PT

November 07, 2013 17:02 ET

PT Announces Third Quarter 2013 Financial Results

"Company Reports GAAP Quarterly Profit and 56% Increase in Revenue in the Third Quarter 2013, Compared to Same Quarter in 2012"

ROCHESTER, NY--(Marketwired - Nov 7, 2013) - PT (NASDAQ: PTIX), a leading global provider of advanced network communications solutions, today announced its unaudited financial results for the third quarter 2013.

Revenue in the third quarter 2013 amounted to $7.3 million, compared to $4.7 million in the third quarter 2012. Revenue for the nine months ended September 30, 2013 amounted to $20.7 million, compared to $18.0 million for the corresponding period in 2012.

On the basis of generally accepted accounting principles (GAAP), net income in the third quarter 2013 amounted to $.5 million, or $.04 per diluted share, including amortization of purchased intangible assets of $.02 per share and stock-based compensation expense of $.01 per share, based on 11.7 million shares outstanding. GAAP net loss in the third quarter 2012 amounted to ($1.7 million), or ($.15) per basic share, based on 11.1 million shares outstanding, including amortization of purchased intangible assets of $.03 per share and stock-based compensation expense of $.01 per share. 

The GAAP net loss for the nine months ended September 30, 2013 amounted to ($.2 million), or ($.02) per basic share, including amortization of purchased intangible assets of $.06 per share; a restructuring charge of $.02 per share; a charge for impairment of software development costs of $.01 per share; and stock-based compensation expense of $.02 per share, based on 11.1 million shares outstanding. The GAAP net loss for the nine months ended September 30, 2012 amounted to ($3.1 million), or ($.28) per basic share, including amortization of purchased intangible assets of $.08 per share and stock-based compensation expense of $.02 per share, based on 11.1 million shares outstanding. 

The non-GAAP net income in the third quarter 2013 amounted to $.8 million, or $.07 per diluted share, compared to a non-GAAP net loss in the third quarter 2012 of ($1.3 million), or ($.12) per basic share. The non-GAAP net income for the nine months ended September 30, 2013 amounted to $1.1 million, or $.10 per diluted share, compared to a net loss for the nine months ended September 30, 2012 of ($2.1 million), or ($.19) per basic share. Please refer to the reconciliations between GAAP and non-GAAP financial measures contained in this release.

On September 30, 2013, the Company had cash and investments amounting to $13.9 million, working capital of $16.3 million, and no long-term debt.

"We are pleased with the progress the Company is making this year in its financial performance and on its strategic plan," said John Slusser, president and chief executive officer. "Revenue has increased on a sequential and year-over-year basis and the Company has reported two sequential quarters of GAAP profitability. We are seeing important market dynamics in the telecommunications signaling space. Many service providers will need to provision next-generation Diameter signaling network architectures as well as ensure the ongoing reliability and cost effectiveness of existing SS7 signaling networks that are built upon an ever-growing list of discontinued, unsupported equipment. The unique ability of our SEGway® Signaling product portfolio to provide a state-of-the-art, unified end solution set encompassing both Diameter and SS7 signaling solidly positions PT to address these market dynamics. Our energies are squarely focused on pursuing this exciting market opportunity."

As part of its strategic realignment, which was initiated during the fourth quarter 2012, PT is well along in transitioning out of the general OEM platform business through a last-time buy and build program which ends for most customers at the end of 2013 and continues through 2014 for select customers. As of September 30, 2013, 85% of the last-time buy and build orders have been shipped, which amounted to approximately $5.9 million in revenue year-to-date.

About PT (www.pt.com)

PT (NASDAQ: PTIX) is a global supplier of advanced, high availability network communications solutions. Its SEGway® Diameter and SS7 Signaling Systems provide tightly integrated signaling and advanced routing capabilities and applications that uniquely span the mission critical demands of both existing and next-generation 4G LTE and IMS telecommunications networks. The Company's IPnexus® Multi-Protocol Gateways and Servers enable a broad range of IP-interworking in data acquisition, sensor, radar, and control applications for aviation, weather and other infrastructure networks. Established in 1981, PT is headquartered in Rochester, NY and markets and sells its products worldwide through its direct sales organization as well as through channel partners that include major telecommunications equipment vendors, government prime contractors and value-added resellers.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. This press release contains forward-looking statements which reflect the Company's current views with respect to future events and financial performance, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and is subject to the safe harbor provisions of those Sections. The Company's future operating results are subject to various risks and uncertainties and could differ materially from those discussed in the forward-looking statements and may be affected by various trends and factors which are beyond the Company's control. These risks and uncertainties include, among other factors, business and economic conditions, rapid technological changes accompanied by frequent new product introductions, competitive pressures, dependence on key customers and the potential loss of key customers, inability to gauge order flows from customers, fluctuations in quarterly and annual results, the reliance on a limited number of third party suppliers, limitations of PT's manufacturing capacity and arrangements, the protection of PT's proprietary technology, errors or defects in our products, the effects of pending or threatened litigation, the dependence on key personnel, changes in critical accounting estimates, potential impairments related to investments, foreign regulations, possible loss or significant curtailment of significant government contracts or subcontracts, possible effects related to compliance with new conflict-free mineral regulations, and potential material weaknesses in internal control over financial reporting. In addition, during weak or uncertain economic periods, customers' visibility deteriorates causing delays in the placement of their orders. These factors often result in a substantial portion of PT's revenue being derived from orders placed within a quarter and shipped in the final month of the same quarter. Forward-looking statements should be read in conjunction with the most recent audited Consolidated Financial Statements, the Notes thereto, Risk Factors, and Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company, as contained in the Company's Annual Report on Form 10-K, and other documents filed with the Securities and Exchange Commission.

Non-GAAP Financial Measures

As a supplement to the GAAP-based consolidated financial statements contained in this press release, the Company is providing a presentation of non-GAAP financial measures which can be useful to investors to gain an overall understanding of the Company's current financial performance. Specifically, the Company believes the non-GAAP financial measures provide useful information to investors by excluding certain expenses the Company believes are not indicative of its core operating results. The non-GAAP financial measures exclude certain expenses such as the effects of (a) amortization of purchased intangible assets, (b) impairment charge - capitalized software, (c) stock-based compensation costs, and (d) restructuring costs.

Management utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions and forecasting and planning for future periods. We also consider the use of the non-GAAP financial measures to be helpful in assessing various aspects of our business operations.

Non-GAAP financial measures are not meant to be considered a substitute for the corresponding GAAP financial information and should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP financial information.

A reconciliation of non-GAAP measures to GAAP measures is included herein.

A conference call will be held on Friday, November 8, at 10:00 a.m., New York time, to discuss the results. All institutional investors can participate in the conference by dialing (866) 494-3746 or (416) 915-1196. The call will be available simultaneously for all other investors at (866) 494-3387 or (416) 915-1198. A digital recording of this conference call may be accessed immediately after its completion from November 8 through November 12, 2013. To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using passcode 439019. A live webcast of the conference call will be available for two weeks on the PT website at www.pt.com and will be archived to the site within two hours after the completion of the call.

PT is a trademark of Performance Technologies, Inc. The names of actual companies, products, or services may be the trademarks, registered trademarks, or service marks of their respective owners in the United States and/or other countries.

 
 
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
 
ASSETS
 
    September 30,
2013
  December 31,
2012
             
Current assets:            
  Cash and cash equivalents   $ 10,394,000   $ 7,546,000
  Investments     1,457,000     4,794,000
  Accounts receivable     5,862,000     3,775,000
  Inventories     2,324,000     3,615,000
  Prepaid expenses and other assets     829,000     932,000
  Prepaid income taxes     146,000     206,000
  Deferred income taxes     408,000     445,000
    Total current assets     21,420,000     21,313,000
             
Investments     2,079,000     1,969,000
Property, equipment and improvements, net     1,777,000     1,683,000
Software development costs, net     3,544,000     3,716,000
Purchased intangible assets, net     2,133,000     2,835,000
    Total assets   $ 30,953,000   $ 31,516,000
             
LIABILITIES AND STOCKHOLDERS' EQUITY  
   
Current liabilities:            
  Accounts payable   $ 1,332,000     $ 1,134,000  
  Accrued expenses     1,498,000       1,664,000  
  Deferred revenue     2,423,000       3,002,000  
  Fair value of foreign currency hedges     4,000          
    Total current liabilities     5,257,000       5,800,000  
Deferred income taxes     663,000       696,000  
    Total liabilities     5,920,000       6,496,000  
                 
Stockholders' equity:                
  Preferred stock                
  Common stock     133,000       133,000  
  Additional paid-in capital     17,776,000       17,591,000  
  Retained earnings     16,756,000       17,099,000  
  Accumulated other comprehensive income     (7,000 )     15,000  
  Treasury stock     (9,625,000 )     (9,818,000 )
    Total stockholders' equity     25,033,000       25,020,000  
    Total liabilities and stockholders' equity   $ 30,953,000     $ 31,516,000  
                 
                 
                 
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012  
(unaudited)  
   
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2013     2012     2013     2012  
                                 
Sales   $ 7,287,000     $ 4,671,000     $ 20,679,000     $ 18,045,000  
Cost of goods sold     3,709,000       2,870,000       10,762,000       9,611,000  
Impairment of software development costs                     137,000          
Gross profit     3,578,000       1,801,000       9,780,000       8,434,000  
                                 
Operating expenses:                                
  Selling and marketing     1,264,000       1,322,000       3,999,000       4,410,000  
  Research and development     1,070,000       1,286,000       3,279,000       4,559,000  
  General and administrative     788,000       828,000       2,441,000       2,632,000  
  Restructuring charges                     243,000          
    Total operating expenses     3,122,000       3,436,000       9,962,000       11,601,000  
Income (loss) from operations     456,000       (1,635,000 )     (182,000 )     (3,167,000 )
                                 
Other income (expense), net     28,000       42,000       9,000       41,000  
Income (loss) before income taxes     484,000       (1,593,000 )     (173,000 )     (3,126,000 )
                                 
Income tax (benefit) provision     (4,000 )     80,000       12,000       12,000  
    Net income (loss)   $ 488,000     $ (1,673,000 )   $ (185,000 )   $ (3,138,000 )
                                 
                                 
Basic income (loss) per share   $ .04     $ (.15 )   $ (.02 )   $ (.28 )
Diluted income per share   $ .04                          
                                 
Weighted average common shares used in basic net income (loss) per share     11,148,000       11,116,000       11,127,000       11,116,000  
                                 
Weighted average common shares used in diluted net income per share     11,746,000                          
                                 
                                 
                                 
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES  
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES  
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012  
(unaudited)  
   
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2013     2012     2013     2012  
                                 
Gross Profit Reconciliation                                
  GAAP gross profit   $ 3,578,000     $ 1,801,000     $ 9,780,000     $ 8,434,000  
    Amortization of purchased intangible assets(a)     234,000       302,000       702,000       891,000  
    Impairment charge - capitalized software(b)                     137,000          
    Stock-based compensation(c)     5,000       4,000       16,000       10,000  
      Non-GAAP gross profit     3,817,000       2,107,000       10,635,000       9,335,000  
      Non-GAAP gross profit percentage of sales     52.4 %     45.1 %     51.4 %     51.7 %
                                 
Operating Expense Reconciliation                                
  GAAP operating expenses     3,122,000       3,436,000       9,962,000       11,601,000  
    Stock-based compensation (c)     (57,000 )     (57,000 )     (169,000 )     (176,000 )
    Restructuring costs(d)                     (243,000 )        
      Non-GAAP operating expenses     3,065,000       3,379,000       9,550,000       11,425,000  
                                 
Net Loss Reconciliation                                
  GAAP net income (loss)     488,000       (1,673,000 )     (185,000 )     (3,138,000 )
    Amortization of purchased intangible assets(a)     234,000       302,000       702,000       891,000  
    Impairment charge - capitalized software(b)                     137,000          
    Stock-based compensation(c)     62,000       61,000       185,000       186,000  
    Restructuring costs(d)                     243,000          
      Non-GAAP net income (loss)   $ 784,000     $ (1,310,000 )   $ 1,082,000     $ (2,061,000 )
                                 
Income (loss) per Common Share                                
  GAAP basic net income (loss) per common share   $ .04     $ (.15 )   $ (.02 )   $ (.28 )
  Non-GAAP basic net income (loss) per common share   $ .07     $ (.12 )   $ .10     $ (.19 )
  Non-GAAP diluted net income per common share   $ .07             $ .09          
                                 

The Non-GAAP financial measures above, and the reconciliation to our GAAP results for the periods presented, reflect adjustments relating to the following items:

(a) Amortization of purchased intangible assets: a non-cash expense arising from the acquisition of intangible assets that the Company is required to amortize over their expected useful life.

(b) Impairment charge - capitalized software: a non-cash charge incurred to write down the recorded balance of capitalized software development projects to their estimated net realizable value.

(c) Stock-based compensation costs: a non-cash expense incurred in accordance with share-based compensation accounting guidance.

(d) Restructuring costs: costs incurred as a result of restructuring activities taken to bring operating expenses more in line with expected revenues. 

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