Advanced Power Technology Reports Strong Second Quarter Results, Sees Increasing Revenue and Profit in the Third Quarter.BEND, Ore. -- Advanced Power Technology, Inc. (Nasdaq:APTI APTI Association for Preservation Technology International APTI Air Pollution Training Institute ): Conference Call at 2:00 p.m. PT, July July: see month. 22, 2004 -- Advanced Power Technology will conduct a conference call at 2:00 p.m. PT, Thursday Thursday: see week. , July 22, 2004 webcast simultaneously for interested investors via the Company's corporate web site at www.advancedpower.com. The call can be accessed live by dialing 800-915-4836. International callers please dial 973-317-5319. The content of the call will remain available for replay on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the for 30 days. In addition, a telephone replay of the conference call will be available for 30 days and can be accessed at 800-428-6051 and from international locations at 973-709-2089; pass code 364263. Advanced Power Technology, Inc. (Nasdaq:APTI), a leading supplier of high performance power semiconductors used in the conditioning and control of electrical power for both switching and RF applications, today reported financial results for the second quarter of 2004 and provided its outlook for the third quarter of 2004. Highlights --Record revenue of $18.1 million in 2Q04, a sequential increase of 20% --GAAP earnings in 2Q04 of $0.08 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share --Pro forma forma, adj/n minor elements between the members of a botanical species. earnings in 2Q04 of $0.11 per diluted share --Increasing revenue and profit anticipated in 3Q04, with pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. estimated at $0.19 to $0.21 per diluted share For the second quarter of 2004, revenues were a record $18.1 million, up 45 percent from $12.5 million in the same period in fiscal 2003 and up sequentially 20 percent from $15.1 million in the first quarter of 2004. Net income in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") was $869,000, or $0.08 per diluted share. This compares to the net loss of $119,000, in the same period in fiscal 2003, or $(0.01) per share, and to a net income in the first quarter of 2004 of $283,000 or $0.03 per diluted share. On a GAAP basis, gross margin for the second quarter of 2004 was 38.0 percent of revenue compared to 35.5 percent in the same period in fiscal 2003 and 36.1 percent in the prior quarter. Selling, general and administrative ("SG&A") expenses in the second quarter of 2004 were $5.1 million and included $1.3 million of legal fees related to a patent litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. matter active during the quarter. Summary judgment in favor of upon the side of; favorable to; for the advantage of. See also: favor the Company, dismissing IXYS Corporation's claims of patent infringement patent infringement n. the manufacture and/or use of an invention or improvement for which someone else owns a patent issued by the government, without obtaining permission of the owner of the patent by contract, license or waiver. against the Company, was granted by the U.S. District Court on June June: see month. 16, 2004. The Court held that IXYS' United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Patent Nos. 5,486,715 and 5,801,419 are not infringed by APT's power MOSFET A Power MOSFET is a specific type of Metal Oxide Semiconductor Field-Effect Transistor (MOSFET) designed to handle large powers. Compared to the other power semiconductor devices (IGBT, Thyristor... products, and further held that "IXYS's patents are invalid Null; void; without force or effect; lacking in authority. For example, a will that has not been properly witnessed is invalid and unenforceable. INVALID. In a physical sense, it is that which is wanting force; in a figurative sense, it signifies that which has no effect. because obvious." Excluding non-cash purchase accounting charges related to acquisitions and certain previously announced restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income for the second quarter ended June 30, 2004 was $1.3 million, or $0.11 per diluted share, compared to a pro forma net income of $72,000, or $0.01 per diluted share in the comparable period in fiscal 2003 and a pro forma net income of $769,000, or $0.07 per diluted share, in the first quarter of 2004. Pro forma gross margin for the second quarter of 2004 was 39.6 percent of revenue, compared to 37.7 percent in the comparable period in fiscal 2003 and 37.9 percent in the prior quarter. Pro forma net income (loss) and pro forma gross margin, which differ from net income (loss) and gross margin in accordance with GAAP, exclude the non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. related to acquisitions and certain restructuring charges. A reconciliation of pro forma and GAAP net income (loss) is included with the attached financial statements. The financial results that exclude certain charges are not in accordance with GAAP. APT (Automatic Programmed Tools) A high-level programming language used to generate instructions for numerical control machines. 1. (language) APT - Automatically Programmed Tools. 2. (company) APT - Audio Processing Technology. management uses these non-GAAP measures internally to evaluate the Company's performance and manage its operations, and believes that these measures provide useful information for understanding the Company's operating results and comparing prior periods. Patrick Sireta, Chief Executive Officer, commented, "Our second quarter revenue growth was driven by broad-based broad-based Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased demand across our communications and data processing data processing or information processing, operations (e.g., handling, merging, sorting, and computing) performed upon data in accordance with strictly defined procedures, such as recording and summarizing the financial transactions of a , semiconductor capital equipment and industrial and medical markets, all of which grew sequentially at double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" rates. Our revenues from the military and aerospace market grew sequentially at a slower single digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. pace, but based on the orders already received we expect that this market will contribute significantly towards our anticipated revenue growth in the second half of this year." "Our order backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. at the end of the second quarter increased to $27.8 million from $26.3 million at the end of the first quarter. The short term portion of our backlog, shippable in the next three months, increased from $15.1 million at the end of the first quarter to $17.1 million at the end of the second quarter." "I am pleased that we were able to compensate for substantially higher than planned second quarter 2004 legal expenses related to a patent litigation matter, which were $1.3 million, by delivering higher than anticipated revenues and achieving a continued improvement of our gross margin, thus allowing us to perform at the high end of our EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. guidance of $0.11 per diluted share. We expect our legal fees related to this patent litigation matter to be substantially reduced in the second half of this year which will contribute significantly to our increase in expected profitability," said Mr. Sireta. Business Outlook The following statements are based on current expectations. These statements are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. , subject to risks and uncertainties, and actual results may differ materially. These statements do not include the potential impact of any investments outside the ordinary course of business, or mergers or acquisitions that may be completed after July 22, 2004. Readers are cautioned not to place undue reliance on these forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which apply only as of the date of this press release. The inclusion of any statement in this release does not constitute a suggestion by the Company or any other person that the events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or described in such statements are material. The Company does not undertake to publicly update or revise these forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied in this release will not be realized. Revenues for the third quarter ending September September: see month. 30, 2004 are expected to be in the range of $18.4 million to $19.2 million, a sequential increase of approximately 2 to 6 percent and an increase of approximately 45 to 51 percent over the third quarter of 2003. At the anticipated revenue levels indicated above, gross margin for the third quarter of 2004, exclusive of non-cash purchase accounting charges associated with acquisitions, is expected to be in the 40.0 percent to 42.0 percent range, a sequential increase of 40 to 240 basis points (or 0.4 to 2.4 percent). Research and Development ("R&D") expenses in the third quarter of 2004 are expected to increase to 6 percent to 7 percent of revenues as we add resources to further expand our technology and product development capability. SG&A expenses in the third quarter of 2004 are expected to be 21.5 percent to 22.5 percent of revenues. These R&D and SG&A expense estimates are exclusive of non-cash purchase accounting charges associated with acquisitions. Interest income in the third quarter of 2004 is expected to be approximately $50,000. For the third quarter of 2004 and on a before tax basis, the non-cash purchase accounting charges associated with acquisitions are expected to be $272,000, and will be included in cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold . The tax effect of these charges is expected to be approximately $5,000. Overall, the pro forma net earnings per share for the third quarter of 2004 are expected to be approximately $0.19 to $0.21 per diluted share. Although the Company has fully reserved for its net deferred tax assets, alternative minimum tax rules limit the utilization of net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. that can be used to offset taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . Therefore, the Company expects an effective tax rate of 2 percent in the third quarter of 2004. Patrick Sireta, Chief Executive Officer, commented, "While the communications and data processing and the semiconductor capital equipment markets were the primary drivers for revenue growth in the first half of 2004, we expect that the increase in our sales to the military and aerospace market will contribute substantially to our revenue growth in the third quarter of 2004." "I believe that our second quarter 2004 results and third quarter 2004 guidance demonstrate our momentum on revenue growth and profitability improvement. Our pro forma gross margin has improved from 34 percent for the total year 2003 to 37.9 percent and 39.6 percent for the first and second quarter of 2004 respectively. We expect our pro forma gross margin to continue to improve to a range of 40 to 42 percent in the third quarter of 2004," concluded Mr. Sireta. About Advanced Power Technology With operations in Bend, Oregon Bend is a city in Deschutes County, Oregon, United States. The name Bend was derived from "Farewell Bend," the designation used by early pioneers to refer to the location along the Deschutes River where the town eventually was platted, one of the few fordable points along the , Santa Clara, California Santa Clara, California (IPA: /ˌsæntəˈklærə/) , founded in 1777 and incorporated in 1852, is a city in Santa Clara County, in the U.S. state of California. , Montgomeryville, Pennsylvania Montgomeryville is a census-designated place (CDP) in Montgomery County, Pennsylvania, United States. The population was 12,031 at the 2000 census. Geography Montgomeryville is located at (40.250388, -75. and Bordeaux France, APT is a leading supplier of power semiconductors for RF, Microwave, Linear, and Switchmode Applications. For additional information on Advanced Power Technology, visit its website at www.advancedpower.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Except for historical information contained herein, the matters discussed in this press release are forward-looking statements made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. APT cautions that such statements, including those related to the Company's third quarter financial projections, are subject to a number of uncertainties, and actual results may differ materially. Factors that could affect the Company's actual results include the ability of subcontractors to meet their delivery commitments; unfavorable changes in industry and competitive conditions; the Company's mix of product shipments; the accuracy of customers forecasts; the effectiveness of the Company's efforts to control and reduce costs; and other uncertainties disclosed in the Company's filings with the Securities and Exchange Commission including Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed on March 10, 2004. The Company assumes no obligation to update the information in this release.
ADVANCED POWER TECHNOLOGY, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
------- ------- ------- -------
Revenues, net $18,061 $12,487 $33,154 $23,646
Cost of goods sold 10,915 7,777 20,282 15,529
Amortization of technology rights
& other 274 280 548 564
------- ------- ------- -------
Total cost of goods sold 11,189 8,057 20,830 16,093
------- ------- ------- -------
Gross profit 6,872 4,430 12,324 7,553
------- ------- ------- -------
Operating expenses:
Research and development 783 668 1,670 1,501
Selling, general and
administrative 5,130 3,703 9,240 7,394
Restructuring charges 115 - 321 240
------- ------- ------- -------
Total operating expenses 6,028 4,371 11,231 9,135
------- ------- ------- -------
Income (loss) from operations 844 59 1,093 (1,582)
Other income (expense), net:
Interest, net 41 52 81 108
Other, net 12 (145) 6 (134)
------- ------- ------- -------
Income (loss) before income taxes 897 (34) 1,180 (1,608)
Provision (benefit) for income taxes 28 85 28 (480)
------- ------- ------- -------
Net Income (loss) $ 869 $ (119) $ 1,152 $(1,128)
======= ======= ======= =======
Net Income (loss) per share:
Basic $ 0.08 ($0.01) $ 0.11 ($0.11)
Diluted $ 0.08 ($0.01) $ 0.10 ($0.11)
Weighted average number of shares
used in the computation of net
income (loss) per share:
Basic 10,605 10,404 10,556 10,402
Diluted 11,261 10,404 11,212 10,402
ADVANCED POWER TECHNOLOGY, INC
SUPPLEMENTAL PRO FORMA DISCLOSURES (1)
RECONCILIATION OF GAAP TO PRO FORMA NET INCOME (LOSS)
(In thousands except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
------- ------- ------- -------
Reported GAAP net income (loss) $ 869 $ (119) $ 1,152 $(1,128)
Purchase accounting adjustments
related to acquisitions:
Cost of sales:
Intangible asset amortization 269 269 538 539
Deferred compensation
amortization 5 11 10 25
Selling, general and administrative:
Deferred compensation
amortization 6 14 12 31
Restructuring charges 115 - 321 240
Tax effect of pro forma adjustments - (103) - (298)
------- ------- ------- -------
Pro forma net income (loss) $ 1,264 $ 72 $ 2,033 $ (591)
======= ======= ======= =======
Pro forma net income (loss) per
share:
Basic $ 0.12 $ 0.01 $ 0.19 ($0.06)
Diluted $ 0.11 $ 0.01 $ 0.18 ($0.06)
Weighted average number of shares
used in the computation of pro
forma net income (loss) per share:
Basic 10,605 10,404 10,556 10,402
Diluted 11,261 10,842 11,212 10,402
(1) Supplemental pro forma disclosures are not based on generally
accepted accounting principles (GAAP), but are provided to explain
the impact of certain significant items. In accordance with new
SEC regulation G, the Company believes that this disclosure is
useful to investors and creditors of the Company as it is a way to
explain the impact of certain accounting charges included in the
Company's operating results due to our previously announced
acquisitions and restructuring activities.
ADVANCED POWER TECHNOLOGY, INC
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, 2004 Dec. 31, 2003
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 10,168 $ 11,564
Short term investments in available-for-
sale securities 3,800 4,000
Accounts receivable, net 10,895 7,564
Inventories, net 12,944 12,382
Prepaid and other current assets 2,414 2,436
--------- --------
Total current assets 40,221 37,946
Property and equipment, net 11,174 11,002
Long term investments in available-for-
sale securities 2,005 1,000
Other assets 53 174
Intangible assets, net 8,272 8,811
Goodwill 15,570 15,570
--------- --------
Total assets $ 77,295 $ 74,503
========= ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,771 $ 3,471
Accrued expenses 2,423 2,695
--------- --------
Total current liabilities 7,194 6,166
Other long term liabilities 117 127
--------- --------
Total liabilities 7,311 6,293
Stockholders' equity:
Common stock 108 106
Additional paid in capital 89,116 88,625
Treasury stock (1,761) (1,761)
Deferred stock compensation - (21)
Accumulated other comprehensive income 417 309
Accumulated deficit (17,896) (19,048)
--------- --------
Total stockholders' equity 69,984 68,210
--------- --------
Total liabilities and stockholders'
equity $ 77,295 $ 74,503
========= ========
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