PT Announces Fourth Quarter 2012 Financial Results

PT Announces Fourth Quarter 2012 Financial Results 
ROCHESTER, NY -- (Marketwire) -- 02/21/13 --  PT (NASDAQ: PTIX), a
leading global provider of advanced network communications solutions,
today announced its unaudited financial results for the fourth
quarter 2012. 
Revenue in the fourth quarter 2012 amounted to $5.3 million, compared
to $9.1 million in the fourth quarter 2011. Revenue for 2012 amounted
to $23.3 million, compared to $36.2 million for 2011. 
On the basis of generally accepted accounting principles (GAAP), the
net loss in the fourth quarter 2012 amounted to ($4.0 million), or
($.36) per basic share, based on 11.1 million shares outstanding,
including charges for the impairment of software capitalization costs
and purchased intangible assets totaling $.14 per share, a charge for
excess OEM inventories of $.12 per share, restructuring costs of $.04
per share, amortization of purchased intangible assets of $.02 per
share, a discrete income tax charge of $.01 per share, and
stock-based compensation expense of $.01 per share. GAAP net income
in the fourth quarter 2011 amounted to $.5 million, or $.04 per
diluted share, based on 11.1 million shares outstanding, including
stock compensation expense of $.01 per share, amortization of
purchased intangible assets of $.03 per share and write-off of
software development costs of $.02 per share.  
The GAAP net loss for 2012 amounted to ($7.1 million), or ($.64) per
basic share, including charges for the impairment of software
capitalization costs and purchased intangible assets totaling $.14
per share, a charge for excess OEM inventories of $.12 per share,
restructuring costs of $.04 per share, amortization of purchased
intangible assets of $.10 per share, a discrete income tax charge of
$.01 per share, and stock-based compensation expense of $.02 per
share. The GAAP net loss for 2011 amounted to ($1.2 million), or
($.10) per basic share, based on 11.1 million shares outstanding.
This loss includes restructuring expense of $.02 per share, stock
compensation expense of $.03 per share, an impairment charge against
vendor software of $.04 per share, write-off of software development
costs of $.02 per share, amortization of purchased intangible assets
of $.10 per share and litigation expenses of $.04 per share.  
The non-GAAP net loss in the fourth quarter 2012 amounted to ($.3
million), or ($.03) per basic share, compared to non-GAAP net income
of $1.0 million, or $.09 per diluted share in the fourth quarter
2011. The non-GAAP net loss for 2012 amounted to ($2.4 million), or
($.22) per basic share, compared to net income of $1.5 million, or
$.13 per diluted share for 2011. Please refer to the reconciliations
between GAAP and non-GAAP financial measures contained in this
release.  
On December 31, 2012, the Company had cash and investments amounting
to $14.3 million, working capital of $15.5 million and no long-term
debt. 
On January 10, 2013, PT announced its decision to sharpen its
strategic business focus, concentrate on its high value-add
communications product families, transition away from other product
portfolio elements, and implement operational expense reductions. In
conjunction with this decision, the Company reduced its personnel by
ten employees, or 8% of its workforce as of January 10, 2013. As a
result of this action, the Company expects to incur first quarter
2013 pre-tax restructuring charges of approximately $.3 million,
representing employee-related costs, which will result in cash
expenditures. This action reduced operating expenses by approximately
$.7 million per year. When combined with the savings from the
restructuring PT announced in October 2012, the Company has reduced
its break-even expense level by more than $2 million per year. During
the first half of 2013, we expect to increase our sales and marketing
investments in our Diameter signaling product to accelerate its
penetration in this growing market.  
"While our fourth quarter revenues and net loss are disappointing, we
are confident that we have taken the necessary measures, both in the
fourth quarter and since, to stabilize the Company's operations and
place us firmly on the path to profitability," said John Slusser,
president and chief executive officer. "These measures were based
upon focusing our efforts on high-value add, strong-margin products
that provide the best prospects for revenue growth as global economic
conditions improve. We enter 2013 with a lean, focused and dedicated
group of employees and an exciting new Diameter signaling product,
our Universal Diameter Router (UDR). Our ability to provision a
complete signaling evolution path in a single, highly-integrated,
carrier-grade end solution set -- spanning from today's legacy
network upgrades to next-generation 4G LTE architectures -- positions
us very well in the network signaling marketplace going forward." 
About PT (www.pt.com)  
PT (NASDAQ: PTIX) is a global supplier of advanced, high availability
network communications solutions. Its SEGway(TM) 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(R) 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, 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) write-offs of software
capitalization and purchased intangible assets, (c) OEM excess
inventory charges, (d) stock-based compensation costs, (e)
restructuring costs, (f) litigation expenses, and (g) 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 Friday, February 22, 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 February 22 through February 26, 2013. To access the recording,
participants should dial (866) 245-6755 or (416) 915-1035 using
passcode 62275. 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                                   
                                                                            
                                                December 31,   December 31, 
                                                    2012           2011     
                                               -------------  ------------- 
                                                                            
Current assets:                                                             
  Cash and cash equivalents                    $   7,546,000  $   9,641,000 
  Investments                                      4,794,000      2,798,000 
  Accounts receivable                              3,775,000      5,622,000 
  Inventories                                      3,615,000      5,421,000 
  Prepaid expenses and other assets                  932,000      1,155,000 
  Prepaid income taxes                               206,000         67,000 
  Deferred income taxes                              445,000        368,000 
                                               -------------  ------------- 
    Total current assets                          21,313,000     25,072,000 
                                                                            
Investments                                        1,969,000      3,362,000 
Property, equipment and improvements, net          1,683,000      1,891,000 
Software development costs, net                    3,716,000      3,932,000 
Purchased intangible assets, net                   2,835,000      4,390,000 
Deferred income taxes                                               102,000 
                                               -------------  ------------- 
    Total assets                               $  31,516,000  $  38,749,000 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                    LIABILITIES AND STOCKHOLDERS' EQUITY                    
                                                                            
Current liabilities:                                                        
  Accounts payable                             $   1,134,000  $   1,015,000 
  Accrued expenses                                 1,664,000      1,547,000 
  Deferred revenue                                 3,002,000      2,808,000 
  Fair value of foreign currency hedges                              46,000 
  Other payable                                                     999,000 
                                               -------------  ------------- 
    Total current liabilities                      5,800,000      6,415,000 
Deferred income taxes                                696,000        553,000 
                                               -------------  ------------- 
    Total liabilities                              6,496,000      6,968,000 
                                               -------------  ------------- 
                                                                            
Stockholders' equity:                                                       
  Preferred stock                                                           
  Common stock                                       133,000        133,000 
  Additional paid-in capital                      17,591,000     17,347,000 
  Retained earnings                               17,099,000     24,237,000 
  Accumulated other comprehensive income              15,000       (118,000)
  Treasury stock                                  (9,818,000)    (9,818,000)
                                               -------------  ------------- 
    Total stockholders' equity                    25,020,000     31,781,000 
                                               -------------  ------------- 
    Total liabilities and stockholders' equity $  31,516,000  $  38,749,000 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
          PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES           
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
       FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2012 AND 2011       
                                (unaudited)                                 
                                                                            
                             Three Months Ended           Year Ended        
                                December 31,             December 31,       
                              2012         2011        2012         2011    
                          -----------  ----------- -----------  ----------- 
                                                                            
Sales                     $ 5,275,000  $ 9,051,000 $23,320,000  $36,176,000 
Cost of goods sold          2,805,000    4,166,000  12,416,000   18,585,000 
Software capitalization                                                     
 and purchased intangible                                                   
 asset write-off            1,600,000      175,000   1,600,000      175,000 
OEM excess inventory                                                        
 charge                     1,351,000                1,351,000              
                          -----------  ----------- -----------  ----------- 
Gross profit (loss)          (481,000)   4,710,000   7,953,000   17,416,000 
                          -----------  ----------- -----------  ----------- 
                                                                            
Operating expenses:                                                         
  Selling and marketing       808,000    1,444,000   4,935,000    6,410,000 
  Research and                                                              
   development              1,234,000    1,782,000   5,583,000    7,124,000 
  General and                                                               
   administrative             872,000      978,000   3,997,000    4,568,000 
  Restructuring charges       434,000                  434,000      253,000 
  Impairment charge-                                                        
   vendor software                                                  400,000 
                          -----------  ----------- -----------  ----------- 
    Total operating                                                         
     expenses               3,348,000    4,204,000  14,949,000   18,755,000 
                          -----------  ----------- -----------  ----------- 
(Loss) income from                                                          
 operations                (3,829,000)     506,000  (6,996,000)  (1,339,000)
                                                                            
Other income, net              11,000       68,000      52,000      154,000 
                          -----------  ----------- -----------  ----------- 
(Loss) income before                                                        
 income taxes              (3,818,000)     574,000  (6,944,000)  (1,185,000)
                                                                            
Income tax provision                                                        
 (benefit)                    182,000      101,000     194,000      (22,000)
                          -----------  ----------- -----------  ----------- 
    Net (loss) income     $(4,000,000) $   473,000 $(7,138,000) $(1,163,000)
                          ===========  =========== ===========  =========== 
                                                                            
                                                                            
Basic (loss) earnings per                                                   
 share                    $      (.36) $       .04 $      (.64) $      (.10)
                          ===========  =========== ===========  =========== 
                                                                            
Diluted earnings per                                                        
 share                                 $       .04                          
                                       ===========                          
                                                                            
Weighted average common                                                     
 shares(1)                 11,116,000   11,116,000  11,116,000   11,116,000 
                          ===========  =========== ===========  =========== 
                                                                            
                                                                            
(1) Shares used in both basic (loss) earnings per share and diluted earnings
per share                                                                   
                                                                            
                                                                            
                                                                            
          PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES           
           RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES            
                                (unaudited)                                 
                                                                            
                            Three Months Ended            Year Ended        
                               December 31,              December 31,       
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
                                                                            
Gross Profit                                                                
 Reconciliation                                                             
  GAAP gross profit                                                         
   (loss)                $  (481,000) $ 4,710,000  $ 7,953,000  $17,416,000 
    Amortization of                                                         
     purchased                                                              
     intangible                                                             
     assets(a)               265,000      279,000    1,156,000    1,091,000 
    Software                                                                
     capitalization and                                                     
     purchased                                                              
     intangible asset                                                       
     write-off(b)          1,600,000      175,000    1,600,000      175,000 
    OEM excess inventory                                                    
     charge(c)             1,351,000                 1,351,000              
    Stock-based                                                             
     compensation(d)           4,000        2,000       14,000       11,000 
                         -----------  -----------  -----------  ----------- 
      Non-GAAP gross                                                        
       profit              2,739,000    5,166,000   12,074,000   18,693,000 
                         -----------  -----------  -----------  ----------- 
      Non-GAAP gross                                                        
       profit percentage                                                    
       of sales                 51.9%        57.1%        51.8%        51.7%
                                                                            
Operating Expense                                                           
 Reconciliation                                                             
  GAAP operating                                                            
   expenses                3,348,000    4,204,000   14,949,000   18,755,000 
    Stock-based                                                             
     compensation(d)         (53,000)     (69,000)    (229,000)    (294,000)
    Restructuring                                                           
     costs(e)               (434,000)                 (434,000)    (253,000)
    Litigation                                                              
     expenses(f)                                                   (428,000)
    Impairment charge -                                                     
     vendor software(g)                                            (400,000)
                         -----------  -----------  -----------  ----------- 
      Non-GAAP operating                                                    
       expenses            2,861,000    4,135,000   14,286,000   17,380,000 
                         -----------  -----------  -----------  ----------- 
                                                                            
Net Income (loss)                                                           
 Reconciliation                                                             
  GAAP net (loss) income  (4,000,000)     473,000   (7,138,000)  (1,163,000)
    Amortization of                                                         
     purchased                                                              
     intangible                                                             
     assets(a)               265,000      279,000    1,156,000    1,091,000 
    Software                                                                
     capitalization and                                                     
     purchased                                                              
     intangible asset                                                       
     write-off(b)          1,600,000      175,000    1,600,000      175,000 
    OEM excess inventory                                                    
     charge(c)             1,351,000                 1,351,000              
    Stock-based                                                             
     compensation(d)          57,000       71,000      243,000      305,000 
    Restructuring                                                           
     costs(e)                434,000                   434,000      253,000 
    Litigation                                                              
     expenses(f)                                                    428,000 
    Impairment charge -                                                     
     vendor software(g)                                             400,000 
                         -----------  -----------  -----------  ----------- 
      Non-GAAP net                                                          
       (loss) income     $  (293,000) $   998,000  $(2,354,000) $ 1,489,000 
                         -----------  -----------  -----------  ----------- 
                                                                            
Loss per Common Share                                                       
  GAAP basic and                                                            
   diluted(h) net (loss)                                                    
   income per share      $      (.36) $       .04  $      (.64) $      (.10)
                         -----------  -----------  -----------  ----------- 
  Non-GAAP basic and                                                        
   diluted(h) net (loss)                                                    
   income per share      $      (.03) $       .09  $      (.21) $       .13 
                         -----------  -----------  -----------  ----------- 
                                                                            
                                                                            
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. The amount of purchased intangible
assets increased significantly as a result of the acquisition of the USP and
SP2000 signaling technologies acquired from GENBAND.                        
                                                                            
(b) Software capitalization and purchased intangible asset write-off - a    
non-cash charge incurred to write down the recorded balance of capitalized  
software development projects and purchased intangible assets to their      
estimated net realizable value.                                             
                                                                            
(c) OEM excess inventory charge - a non-cash charge to increase the reserve 
for excess and obsolete inventories due to the Company's decision to        
transition away from its OEM product line.                                  
                                                                            
(d) Stock-based compensation costs - a non-cash expense incurred in         
accordance with share-based compensation accounting guidance.               
                                                                            
(e) Restructuring costs - costs incurred as a result of restructuring       
activities taken to bring operating expenses more in line with expected     
revenues.                                                                   
                                                                            
(f) Litigation expenses - legal expenses not indicative of core operating   
activities.                                                                 
                                                                            
(g) 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.       
                                                                            
(h) Basic and diluted net income per common share are identical for the     
three months and year ended December 31, 2011.                              

  
For more information contact: 
Dorrance W. Lamb
SVP and Chief Financial Officer 
PT 
585-256-0200 ext. 7276
http://www.pt.com
finance@pt.com 
 
 
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