PT Announces Third Quarter 2012 Financial Results

              PT Announces Third Quarter 2012 Financial Results

PR Newswire

ROCHESTER, N.Y., Nov. 8, 2012

ROCHESTER, N.Y., Nov. 8, 2012 /PRNewswire/ --PT (NASDAQ: PTIX), a leading
global provider of advanced network communications solutions, today announced
its unaudited financial results for the third quarter 2012.

Revenue in the third quarter 2012 amounted to $4.7 million, compared to $9.0
million in the third quarter 2011. Revenue for the nine months ended
September 30, 2012 amounted to $18.0 million, compared to $27.1 million during
the corresponding period in 2011.

On the basis of generally accepted accounting principles (GAAP), the 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 $.01 per share. The GAAP net loss in the third quarter 2011
amounted to ($.1 million), or ($.01) per basic share, including a
restructuring charge of $.01 per share, an impairment charge of $.04 per
share, amortization of purchased intangible assets of $.03 per share and
stock-based compensation expense of $.01 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 GAAP net loss
for the nine months ended September 30, 2011 amounted to ($1.6 million), or
($.15) per basic share, including a restructuring charge of $.02 per share, an
impairment charge of $.04 per share, amortization of purchased intangible
assets of $.07 per share, litigation expenses of $.04 per share, and
stock-based compensation expense of $.02 per share, based on 11.1 million
shares outstanding.

The non-GAAP net loss in the third quarter 2012 amounted to ($1.3 million), or
($.12) per basic share, compared to non-GAAP net income of $.7 million, or
$.07 per share in the third quarter 2011. The non-GAAP net loss for the nine
months ended September 30, 2012 amounted to ($2.1 million), or ($.19) per
basic share, compared to net income of $.5 million, or $.04 per share for the
nine months ended September 30, 2011. Please refer to the reconciliations
between GAAP and non-GAAP financial measures contained in this release.

On September 30, 2012, the Company had cash and investments amounting to $14.7
million, working capital of $17.1 million and no long-term debt.

"We are extremely dissatisfied with our third quarter results," said John
Slusser, president and chief executive officer. "After experiencing a
dramatic slowdown in telecommunications equipment revenue during the second
quarter 2012, we surveyed our customer base to get an updated view of their
going forward product requirements and had mixed results. Our service
provider customers generally expect to make additional investments in their
network infrastructure while our OEM customers were more reluctant to project
requirements because of little or no visibility of demand from their end
customers. Based upon the feedback received and ongoing global economic
climate uncertainty, we have concluded that our quarterly revenue run rates
will likely not return to the first quarter 2012 level in the near term.
Given this circumstance, we implemented a program to bring our operations more
in line with anticipated business opportunities."

On October 31, 2012, PT announced a program to restructure its operations,
reduce its workforce, rationalize its product lines, and refocus its resources
on initiatives that are more closely aligned with the Company's near-term
objectives and market potential. Specifically, the Company is reducing its
personnel by fourteen employees or 10% of its workforce and is recording a
non-cash impairment charge against certain of PT's software development costs
and purchased intangible assets. As a result of this action, the Company
expects to incur fourth quarter 2012 pre-tax restructuring charges of
approximately $.5 million, representing employee-related costs which will
result in cash expenditures, and approximately $.8 million, which will be
recorded as a non-cash impairment charge. The Company currently estimates
that the full annualized cost savings resulting from this restructuring
program will be in the range of $1.3 million to $1.5 million in 2013.

About PT (www.pt.com)

PT (NASDAQ: PTIX) is a global supplier of advanced network communications
solutions for telecommunication service providers, government communications,
and OEM markets. PT's product portfolio includes IP-centric network elements
and applications designed for high availability, scalability, and long life
cycle deployments. PT's SEGway™ SS7 and Diameter Signaling Solutions provide
affordable, high density signaling and advanced routing for next-generation
LTE and IMS networks. These solutions enable IP migration, gateway
capabilities, SIP bridging, and core-to-edge distributed intelligence, as well
as features such as Number Portability and SMS Spam Defense. PT's
Multi-Protocol and Communication Server (MPS) product portfolio enables
LAN/WAN, radar and Smart-Grid networks to acquire, distribute and record
critical data over IP Networks. PT's industry-leading Monterey MicroTCA and
IPnexus^® Platforms anchor a growing portfolio of the Company's own solutions.
Many other OEMs and application developers leverage PT's carrier-grade
platforms and Linux^® development environment (PT's NexusWare^®). PT is
headquartered in Rochester, NY and maintains sales and engineering offices
around the world.

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, 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) stock-based compensation, (c) restructuring
costs, (d) litigation expenses and (e) impairment charges – vendor software.

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 Monday, November 12, 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 12 through November 16, 2012.
To access the recording, participants should dial (866) 245-6755 or (416)
915-1035 using passcode 510179. A live webcast of the conference call will be
available 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,  December 31,

                                          2012           2011
Current assets:
    Cash and cash equivalents             $ 6,881,000    $ 9,641,000
    Investments                           5,830,000      2,798,000
    Accounts receivable                   4,150,000      5,622,000
    Inventories                           4,693,000      5,421,000
    Prepaid expenses and other assets     1,020,000      1,155,000
    Prepaid income taxes                  119,000        67,000
             Total current assets         22,693,000     24,704,000
Investments                               1,974,000      3,362,000
Property, equipment and improvements, net 1,791,000      1,891,000
Software development costs, net           4,451,000      3,932,000
Purchased intangible assets, net          3,756,000      4,390,000
             Total assets                 $34,665,000    $38,279,000



                LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                               $  717,000  $ 1,015,000
 Accrued expenses                               1,674,000    1,547,000
 Deferred revenue                               3,220,000    2,808,000
 Fair value of foreign currency hedges                       46,000
 Other payable                                               999,000
Total current liabilities              5,611,000    6,415,000
Deferred income taxes                                 89,000       83,000
Total liabilities                      5,700,000    6,498,000
Stockholders' equity:
 Preferred stock
 Common stock                                   133,000      133,000
 Additional paid-in capital                     17,533,000   17,347,000
 Retained earnings                              21,099,000   24,237,000
 Accumulated other comprehensive income         18,000       (118,000)
 Treasury stock                                 (9,818,000)  (9,818,000)
Total stockholders' equity              28,965,000   31,781,000
Total liabilities and stockholders'       $34,665,000  $38,279,000
equity



PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(unaudited)
                     Three Months Ended         Nine Months Ended
                                                September 30,
                     September 30,
                     2012          2011         2012          2011
Sales                $ 4,671,000   $ 9,000,000  $18,045,000   $27,125,000
Cost of goods sold   2,870,000     4,454,000    9,611,000     14,419,000
Gross profit         1,801,000     4,546,000    8,434,000     12,706,000
Operating expenses:
  Selling and        1,232,000     1,585,000    4,127,000     4,966,000
  marketing
  Research and       1,221,000     1,593,000    4,349,000     5,342,000
  development
  General and        983,000       981,000      3,125,000     3,590,000
  administrative
  Impairment
  charge-vendor                    400,000                    400,000
  software
  Restructuring                    71,000                     253,000
  charges
        Total
        operating    3,436,000     4,630,000    11,601,000    14,551,000
        expenses
Loss from operations (1,635,000)   (84,000)     (3,167,000)   (1,845,000)
Other income, net    42,000        (4,000)      41,000        86,000
Loss before income   (1,593,000)   (88,000)     (3,126,000)   (1,759,000)
taxes
Income tax provision 80,000        (2,000)      12,000        (123,000)
(benefit)
        Net loss     $(1,673,000)  $ (86,000)   $(3,138,000)  $(1,636,000)
Basic loss per share $         $        $        $     
                     (.15)         (.01)        (.28)         (.15)
Weighted average     11,116,000    11,116,000   11,116,000    11,116,000
common shares

PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(unaudited)
                        Three Months Ended           Nine Months Ended
                                                     September 30,
                        September 30,
                        2012            2011         2012          2011
Gross Profit
Reconciliation
 GAAP gross profit    $ 1,801,000     $4,546,000   $ 8,434,000   $12,706,000
 Amortization of
purchased intangible    302,000         280,000      891,000       812,000
assets^(a)
 Stock-based       4,000           3,000        10,000        9,000
compensation^(b)
  Non-GAAP gross 2,107,000       4,829,000    9,335,000     13,527,000
profit
 Non-GAAP gross
profit percentage of    45.1%           53.7%        51.7%         49.9%
sales
Operating Expense
Reconciliation
GAAP operating       3,436,000       4,630,000    11,601,000    14,551,000
expenses
Stock-based       (57,000)        (63,000)     (176,000)     (225,000)
compensation ^(b)
Restructuring                     (71,000)                   (253,000)
costs^(c)
Litigation                                                   (414,000)
expenses^(d)
Impairment
charge-vendor                           (400,000)                  (400,000)
software^(e)
 Non-GAAP      3,379,000       4,096,000    11,425,000    13,259,000
operating expenses
Net Loss Reconciliation
 GAAP net loss        (1,673,000)     (86,000)     (3,138,000)   (1,636,000)
 Amortization of
purchased intangible    302,000         280,000      891,000       812,000
assets^(a)
 Stock-based       61,000          66,000       186,000       234,000
compensation^(b)
 Restructuring                     71,000                     253,000
costs^(c)
 Litigation                                                   414,000
expenses^(d)
 Impairment
charge-vendor                           400,000                    400,000
software^(e)
 Non-GAAP net  $(1,310,000)    $ 731,000   $             $ 477,000
(loss) income                                        (2,061,000)
Loss per Common Share
 GAAP basic net loss  $          $        $         $    
per common share        (.15)           (.01)        (.28)        (.15)
 Non-GAAP basic^(f)   $          $       $         $     
net (loss) income per   (.12)           .07          (.19)        .04
common share

The Non-GAAP financial measures above, and their 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 lives. The value of purchased
intangible assets increased significantly as a result of the acquisition of
the USP and SP2000 signaling technologies from GENBAND in January 2011.

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

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

^(d) Litigation expenses: legal expenses not indicative of core operating
activities.

^(e) Impairment charge - vendor software - One-time impairment charge
recorded in connection with the termination of a marketing reseller agreement
with a vendor, not indicative of core operating activities.

^(f) Basic and diluted net income per common share are identical for the
three and nine months ended September 30, 2011.

SOURCE PT

Website: http://www.pt.com
Contact: Dorrance W. Lamb, SVP and Chief Financial Officer, PT,
+1-585-256-0200 ext. 7276, http://www.pt.com, finance@pt.com
 
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