Performance Technologies Announces Third Quarter Financial Results

Business Wire, Oct 24, 2002

Business/Technology Editors

ROCHESTER, N.Y.--(BUSINESS WIRE)--Oct. 24, 2002

"Company Substantially Expands Its Market Presence

Despite Challenging Economic Conditions"

Performance Technologies, Inc. (Nasdaq NM: PTIX), a leading supplier of innovative communications, networking and platform products, today announced financial results for the third quarter 2002.

Revenue in the third quarter 2002 was $4.0 million, compared to $9.9 million in the corresponding quarter a year earlier. Net loss for the third quarter 2002 amounted to $1.2 million, or $(.10) per share including expenses associated with restructuring and class action settlement costs. The continuing decline in capital spending in the Company's target markets resulted in lower than anticipated Company revenue and prompted management to take action in September 2002 to improve its cost structure by approximately $1.2 million. Beginning in the fourth quarter, management expects the Company to be profitable at annual revenue of approximately $24 million (excluding the acquisition of the Ziatech operation). During the third quarter, the Company also signed a Memorandum of Understanding for settlement of the class action litigation outstanding since May 2000. A restructuring charge amounting to $.4 million (pre-tax), or $.02 per share and the class action settlement cost amounting to $.1 million (pre-tax), or $.01 per share were recorded in the third quarter 2002. Excluding the restructuring and class action settlement charges, net loss for the third quarter 2002 was $.8 million, or $(.07) per share, based on 12.3 million shares outstanding. Net income amounted to $1.8 million, or $.14 per share for the third quarter 2001, based on 12.7 million shares outstanding.

Revenue for the nine months ended September 30, 2002 was $17.0 million, compared to $29.0 million in the corresponding period a year earlier. Net loss for the first nine months 2002 amounted to $0.4 million, or $(.03) per share including expenses associated with restructuring and class action settlement costs. For the first nine months 2002, restructuring charges amounting to $.6 million (pre-tax), or $.03 per share and the class action settlement cost amounting to $.1 million (pre-tax), or $.01 per share were recorded. Excluding the restructuring charge and the class action settlement cost, net income for the first nine months 2002 amounted to $0.1 million, or $.01 per share on 12.4 million shares outstanding. Net income amounted to $4.2 million, or $.33 per share for the comparable period in 2001, based on 12.7 million shares outstanding.

Cash and marketable securities amounted to $27.8 million at September 30, 2002, compared to $26.9 million at the end of 2001 and no long-term debt existed at either date. During the first nine months 2002, the Company generated $4.8 million cash from operating activities.

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.

"Certainly the continuing constriction in the communications markets directly impacted the Company's financial performance during the third quarter," said Donald Turrell, president and chief executive officer. "To strengthen the Company's position in the current economic climate, we initiated a number of definitive actions. First, management improved the Company's cost structure by reducing staffing levels and consolidating the functions previously performed in a remote engineering office. Secondly, management moved decisively toward establishing the Company as a broader based, embedded systems platform supplier by purchasing a portion of Intel Corporation's platform division and investing in Momentum Computer, a developer of specialized single board computers used in embedded platforms. We believe these actions will improve the Company's financial structure, expand the Company's product offerings with existing customers, substantially expand the Company's potential markets and provide a foundation for solid growth when general economic conditions improve."

Traditionally, the Company has focused on providing "Best-of-Breed" products that are integrated into embedded platforms. The Company's development of the PICMG 2.16 embedded systems standard and the success of the Company's IPnexus(TM) switch product family over the past two years led management to seek expansion of its product lines to include more elements typically found in embedded systems platforms. During the quarter, the Company commenced specific activities toward building this expanded capability.

In early October 2002, the Company completed the purchase of a portion of Intel Corporation's Communications Platform Division (formerly Ziatech Corporation) located in San Luis Obispo, California for $3.0 million in cash. The Ziatech line of single board computer processor modules and system platforms will be important elements in enabling Performance Technologies to become a leading supplier of CompactPCI and PICMG 2.16 platforms. Management expects its new single board computer and platform business to generate $20 million in revenue and to be profitable for 2003. In addition, this acquisition is expected to provide synergistic opportunities for revenue growth for the Company's access, signaling and switching products.