UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 5, 2004
PERFORMANCE TECHNOLOGIES, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-27460 16-1158413
(Commission File Number) (I.R.S. Employer Identification No.)
205 Indigo Creek Drive, Rochester, New York 14626
(Address of principal executive offices) (Zip Code)
(585) 256-0200
(Company's telephone number, including area code)
(Not Applicable)
(Former name or former address, if changed since last report)
Item 12: Results of Operations and Financial Condition
Performance Technologies Announces
Fourth Quarter and 2003 Financial Results
"Record 2003 Revenue and Nine-Fold Increase in Year-Over-Year Profit"
ROCHESTER, NY -- February 5, 2004 -- Performance Technologies, Inc. (Nasdaq NM:
PTIX), a leading developer of embedded computing products and system-level
solutions for the communications, military and commercial markets, today
announced financial results for the fourth quarter and 2003.
Revenue in the fourth quarter 2003 amounted to $13.3 million, compared to $10.0
million in the corresponding quarter a year earlier. Revenue for 2003 amounted
to $50.0 million, compared to $27.0 million in 2002. The Computing Products
Group, acquired in October 2002, contributed $18.3 million and $5.0 million to
revenue in 2003 and 2002, respectively.
GAAP Earnings Basis:
Net income for the fourth quarter 2003 amounted to $1.1 million, or $.09 per
diluted share including non-recurring expenses, based on 13.2 million shares
outstanding. Net income for the fourth quarter 2002 amounted to $.7 million, or
$.06 per diluted share including non-recurring expense, based on 12.3 million
shares outstanding.
Net income for 2003 amounted to $3.0 million, or $.24 per diluted share
including non-recurring expenses, based on 12.7 million shares outstanding. Net
income for 2002 amounted to $.3 million, or $.03 per diluted share including
non-recurring expenses, based on 12.4 million shares outstanding.
Non-GAAP Information:
Net income for the fourth quarter 2003 amounted to $1.6 million, or $.12 per
share excluding non-recurring expenses, based on 13.2 million shares
outstanding. During the fourth quarter 2003, the Company recorded an incremental
restructuring charge amounting to $.1 million (pre-tax), or $.01 per share, for
a facility closed during 2002. In addition, the Company recorded an impairment
charge on an equity investment in the amount of $.4 million (after-tax), or $.03
per share. Net income for the fourth quarter 2002 amounted to $1.1 million, or
$.09 per share excluding non-recurring expense, based on 12.3 million shares
outstanding. During the fourth quarter 2002, the Company recorded a
non-recurring expense for in-process research and development costs associated
with an acquisition amounting to $.4 million (after-tax), or $.03 per share.
Net income for 2003 amounted to $3.5 million, or $.28 per share excluding
non-recurring expenses, based on 12.7 million shares outstanding. For 2003,
using an effective income tax rate of 26%, non-recurring expenses were recorded
for an incremental restructuring charge amounting to $.1 million (pre-tax), or
$.01 per share and for an impairment charge amounting to $.4 million
(after-tax), or $.03 per share.
Performance Technologies Announces Fourth Quarter and 2003 Financial Results
Page 2
Net income for 2002 amounted to $1.2 million, or $.10 per share excluding
non-recurring expenses, based on 12.4 million shares outstanding. For 2002,
using an effective income tax rate of 31%, non-recurring expenses were recorded
for restructuring charges amounting to $.6 million (pre-tax), or $.03 per share;
class action settlement costs amounting to $.1 million (pre-tax), or $.01 per
share; and in-process research and development costs amounting to $.4 million
(after-tax), or $.03 per share. The income tax benefit during 2002 reflects tax
credits due the Company relating to its international operations, as well as
benefit derived from research activities, foreign sales and tax-exempt interest.
Cash and marketable securities amounted to $29.6 million and $24.1 million at
December 31, 2003 and 2002, respectively, and no long-term debt existed at
either date.
The following contains forward-looking statements within the meaning of the
Securities Act of 1933 and Securities Exchange Act of 1934 and are subject to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995.
Early in 2003, a new corporate strategy was defined that emphasized the
Company's combination of technological innovation and product breadth. The
thrust of this strategy was to deliver fully-managed, system-level platform
solutions to the embedded systems marketplace and to heighten the awareness of
the Company's expanded capabilities. In spite of negative economic conditions at
the beginning of the year, the Company initiated important investments in sales,
marketing and engineering to launch the Company's new strategy.
"There are positive signs that the Company's strategic investments, initiated
early in 2003, are gaining market traction," said Donald Turrell, president and
chief executive officer. "Based on an improving market position and our fourth
quarter financial performance, we feel the Company is starting to see an early
payback from these initiatives. In addition, we have confidence that the
organization is well positioned to benefit further as we enter what appears to
be the beginning of the next positive business cycle."
Based on discussions with customers, management expects a number of "design
wins," especially for the Company's IPnexus(TM) system level platforms, will
reach the production stage during 2004. If these customers achieve their
expected production level volumes, they will contribute meaningfully to the
Company's continued growth as the general marketplace improves.
During January 2004, the Company completed the purchase of Mapletree Networks,
Inc., located in Norwood, Massachusetts. Management expects that the addition of
the Mapletree Networks voice, data and fax access technology solutions will
allow Performance Technologies to better participate in the VoIP market, a
resurging segment fueled by the growth of affordable broadband, and the ongoing
expansion in the wireless market. During 2004, the new Voice Technology Group is
expected to increase the Company`s revenue by approximately $6.5 million to $7
million and operations are planned to be breakeven to slightly accretive from an
earnings per share perspective.
The Company holds a minority equity investment in a developer of specialized
single board computer solutions. While results from operations improved, the
organization was still not profitable during 2003. During the fourth quarter
2003, the Company was able to reduce its investment in this firm from 47 percent
to 30 percent and recorded an impairment write down.
Performance Technologies Announces Fourth Quarter and 2003 Financial Results
Page 3
Guidance
The Company's integrated platform and component products are incorporated into
current and next-generation embedded systems infrastructure. Traditionally,
design wins have been an important metric for management to judge the Company's
product acceptance in its marketplace. Design wins, if implemented, reach
production volumes at varying rates, generally beginning twelve to eighteen
months after the design win occurs. A variety of risks such as schedule delays,
cancellations, changes in customer markets and economic conditions can adversely
affect a design win before production is reached, or during deployment. In
addition, during difficult economic periods, a substantial portion of the
Company's revenue is frequently derived from orders placed within the quarter
and shipped in the final month of the quarter. Unfortunately, forward-looking
visibility on customer orders continues to be very limited.
During 2003, while very few companies in the Company's target markets were
experiencing revenue growth, certain of the Company's customers began moving
projects toward production. In addition, since mid-year, the Company's sales
organization has seen a broad acceleration in design activity. During the fourth
quarter 2003, the Company realized five design wins for its IPnexus and SEGwayTM
product families.
The Company's fourth quarter revenue guidance did not reflect orders from a
customer that had contributed greater than 10% of the Company's revenue in each
of the first three quarters of the year. This customer typically provides very
little visibility on future orders but has placed orders for delivery during the
first quarter 2004.
Based upon the current business mix, the current backlog and review of sales
forecasts, management expects revenue to be $14.5 million to $15.5 million in
the first quarter 2004. Gross margin is expected to be approximately 50.5% to
52.5%, and diluted earnings per share for the first quarter is expected to be
between $.11 and $.13. The effective income tax rate for the first quarter is
assumed to be 31%.
More in-depth discussions of the Company's strategy and financial performance
can be found in the Company's recent Annual and Quarterly Reports, on Form 10-K
and Form 10-Q, as filed with the Securities and Exchange Commission.
About Performance Technologies
Performance Technologies (Nasdaq NM: PTIX) is a leading developer of unified
embedded computing products and system-level solutions for the communications,
military and commercial markets. Serving the industry for over 20 years, our
packet-based products enable equipment manufacturers and carriers to provide
highly available and fully-managed systems with time-to-market, performance and
cost advantages.
Performance Technologies is headquartered in Rochester, New York. Additional
operational and engineering facilities are located in San Diego and San Luis
Obispo, California; Norwood, Massachusetts and Ottawa, Canada. For more
information, visit www.pt.com.
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.
Performance Technologies Announces Fourth Quarter and 2003 Financial Results
Page 4
These forward-looking statements are subject to certain risks and uncertainties,
and the Company's actual results could differ materially from those discussed in
the forward-looking statements. These risks and uncertainties include, among
other factors, general business and economic conditions, rapid or unexpected
changes in technologies, cancellation or delay of customer orders including
those relating to design wins, changes in the product or customer mix of sales,
delays in new product development, customer acceptance of new products and
customer delays in qualification of products. These statements should be read in
conjunction with the audited Consolidated Financial Statements, the Notes
thereto, and Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company as of December 31, 2002, as reported in its
Annual Report on Form 10-K, and other documents as filed with the Securities and
Exchange Commission.
A conference call will be held on Friday, February 6, 2004 at 10:00 a.m. EST to
discuss the Company's financial performance for the fourth quarter. All
interested institutional investors can participate in the conference call by
dialing (888) 423-7081. The conference call will also be available
simultaneously for all other investors at (888) 701-8678. The conference ID
number is 5293370. A digital recording will be available two hours after the
completion of the conference from February 6 through February 9, 2004. To access
Encore, US/Canada participants should dial (800) 642-1687 or for
International/Local participants, dial (706) 645-9291 and enter the conference
ID 5293370. A live Webcast of the conference call will also be available on the
Performance Technologies Web site at www.pt.com. The Webcast will be archived to
the Web site within two hours after the completion of the call.
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, December 31,
2003 2002
----------------------- -----------------------
Current assets:
Cash and cash equivalents $ 29,589,000 $22,077,000
Marketable securities 2,006,000
Accounts receivable 7,857,000 6,622,000
Inventories 5,443,000 4,550,000
Prepaid expenses and other assets 626,000 942,000
Deferred taxes 1,714,000 1,574,000
----------------------- -----------------------
Total current assets 45,229,000 37,771,000
Property, equipment and improvements 2,432,000 3,012,000
Software development costs 2,597,000 2,068,000
Note receivable from unconsolidated company 1,000,000 1,000,000
Investment in unconsolidated company 402,000 1,353,000
----------------------- -----------------------
Total assets $ 51,660,000 $45,204,000
======================= =======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,231,000 $ 1,926,000
Income taxes payable 1,760,000 502,000
Accrued expenses 4,019,000 3,213,000
----------------------- -----------------------
Total current liabilities 7,010,000 5,641,000
Deferred taxes 698,000 754,000
----------------------- -----------------------
Total liabilities 7,708,000 6,395,000
----------------------- -----------------------
Stockholders' equity:
Preferred stock
Common stock 133,000 133,000
Additional paid-in capital 9,780,000 10,961,000
Retained earnings 43,615,000 40,565,000
Treasury stock (9,536,000) (12,782,000)
Accumulated other comprehensive loss (40,000) (68,000)
----------------------- -----------------------
Total stockholders' equity 43,952,000 38,809,000
----------------------- -----------------------
Total liabilities and stockholders' equity $ 51,660,000 $45,204,000
======================= =======================
PERFORMANCE TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2003 AND 2002
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
---------------- ---------------- --------------- ----------------
Sales $13,257,000 $10,033,000 $49,992,000 $27,014,000
Cost of goods sold 6,231,000 5,302,000 25,293,000 12,846,000
---------------- ---------------- --------------- ----------------
Gross profit 7,026,000 4,731,000 24,699,000 14,168,000
---------------- ---------------- --------------- ----------------
Operating expenses:
Selling and marketing 1,559,000 1,257,000 5,881,000 4,385,000
Research and development 2,202,000 2,157,000 9,493,000 6,914,000
General and administrative 1,209,000 1,018,000 4,639,000 2,735,000
Restructuring charge 118,000 118,000 573,000
In-process research and development 366,000 366,000
Class action legal settlement 143,000
--------------- ---------------- --------------- ---------------
Total operating expenses 5,088,000 4,798,000 20,131,000 15,116,000
--------------- ---------------- --------------- ---------------
Income (loss) from operations 1,938,000 (67,000) 4,568,000 (948,000)
Other income, net 118,000 218,000 522,000 550,000
---------------- ---------------- --------------- ----------------
Income (loss) before income taxes and
equity loss in unconsolidated company 2,056,000 151,000 5,090,000 (398,000)
Income tax provision (benefit) 493,000 (649,000) 1,339,000 (819,000)
---------------- ---------------- --------------- ----------------
Income before equity in loss of
unconsolidated company 1,563,000 800,000 3,751,000 421,000
Equity in loss of unconsolidated
company (37,000) (83,000) (309,000) (95,000)
Impairment of minority interest
investment (392,000) (392,000)
---------------- ---------------- --------------- ----------------
Net income $ 1,134,000 $ 717,000 $ 3,050,000 $ 326,000
=============== ================ =============== ===============
Basic earnings per share $ .09 $ .06 $ .25 $ .03
================ ================ =============== ================
Weighted average common shares 12,374,000 12,274,000 12,259,000 12,263,000
================ ================ =============== ================
Diluted earnings per share $ .09 $ .06 $ .24 $ .03
================ ================ =============== ================
Weighted average common and
common equivalent shares 13,183,000 12,274,000 12,692,000 12,373,000
=============== ================ =============== ================