Advanced Power Technology Reports Third Quarter 2005 Results and Provides Outlook for Fourth Quarter 2005.BEND Bend, city (1990 pop. 20,469), seat of Deschutes co., W central Oregon, on the Deschutes River, at the eastern foot of the Cascade Range; inc. 1904. Lumbering is the primary industry, and tourism is also important. , 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, October October: see month. 20, 2005 -- Advanced Power Technology will conduct a conference call at 2:00 p.m. PT, Thursday Thursday: see week. , October 20, 2005, webcast simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics for interested investors via the Company's corporate web site at www.advancedpower.com. The call can be accessed live by dialing 800-967-7144. International callers please dial 719-457-2632. 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 888-203-1112 and from international locations at 719-457-0820; pass code 2229416. 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 third quarter ended September September: see month. 30, 2005. For the third quarter of 2005, revenues were $16.8 million which was down 9.7 percent from $18.7 million for the third quarter of 2004, and up sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen 11.0 percent from $15.2 million for the second quarter of 2005. The net income for the third quarter of 2005 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 $828,000, or $0.07 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, and included $326,000 of charges primarily related to non-cash intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. amortization due to acquisitions. This compares to a third quarter of 2004 GAAP net income of $1.2 million or $0.11 per diluted share and to a second quarter of 2005 GAAP net loss of $237,000 or $(0.02) per share. On a GAAP basis, gross margin for the third quarter of 2005 was 34.2 percent of revenue compared to 33.8 percent in the year-ago quarter and 31.1 percent in the prior quarter. On a non-GAAP basis excluding non-cash purchase accounting charges related to acquisitions and other charges, net income for the third quarter ended September 30, 2005 was $1.2 million or $0.10 per diluted share, compared to net income of $1.9 million or $0.17 per diluted share in the year-ago quarter and net income of $185,000 or $0.02 per diluted share in the second quarter of 2005. Non-GAAP gross margin for the third quarter of 2005 was 35.8 percent of revenue compared to 35.3 percent in the year-ago quarter and 32.9 percent in the prior quarter. Non-GAAP net income (loss) and non-GAAP gross margin, which differ from net income (loss) and gross margin in accordance with GAAP, exclude purchase accounting charges related to acquisitions and certain restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other charges. A reconciliation of non-GAAP and GAAP measures 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 operating results and comparing prior periods. Patrick Sireta, Chief Executive Officer commented, "I am pleased with the improvement in our third quarter financial results over the prior quarter. Our third quarter non-GAAP gross margin of 35.8 percent, consistent with expected gross margin expansion, was at the high end of our previous guidance and improved by 290 basis points over the prior quarter. Tight control of our operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. in the third quarter allowed us to exceed our recently upwardly revised 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. projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. ." "Demand for our product was strong in the third quarter allowing us to exceed the high end of our original revenue guidance and to increase our short term 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. by about $2.0 million. At the end of the third quarter 2005 the portion of our backlog shippable in the fourth quarter based upon customer request date was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $15.3 million dollars. This compares to $13.3 million dollars of backlog at the end of the second quarter of 2005 which was shippable in the third quarter. This increase in short term backlog provides us with a solid foundation for continued sequential One after the other in some consecutive order such as by name or number. revenue growth in the fourth quarter of 2005. The Company's balance sheet remains strong. We continue to have no debt and our cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has balance at the end of the third quarter increased to $15.5 million compared to $12.5 million at the end of the prior quarter," concluded 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 October 20, 2005. 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 speak 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. in this release will not be realized. Revenues for the fourth quarter ending December December: see month. 31, 2005, are expected to be in the range of $17.5 million to $18.0 million, a sequential increase of approximately 4 to 7 percent over the prior quarter. At the anticipated revenue levels indicated above, non-GAAP gross margin for the fourth quarter of 2005, exclusive of non-cash purchase accounting charges associated with acquisitions and certain 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. , is expected to be in the 37.5 to 38.5 percent range an improvement of 170 to 270 basis points over the third quarter of 2005. R&D expenses in the fourth quarter of 2005 are expected to be approximately 8.0 to 9.0 percent of revenues and SG&A expenses are expected to be 21.5 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 and certain restructuring charges. Interest income in the fourth quarter of 2005 is expected to be approximately $85,000. Overall, the non-GAAP net earnings per diluted share for the fourth quarter of 2005 are expected to be to be in the range of $0.12 to $0.14. The Company expects to record essentially no tax expense in the fourth quarter of 2005. The Company's effective tax rate deviates from the expected statutory tax rate because it has fully reserved for its net deferred tax assets. However, if at such time the Company is able to determine it is more likely than not that it will be able to utilize its net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. , the reserve against net deferred tax assets will be reversed. The Company also stated that it continues to move forward with its previously announced restructuring actions which include consolidating certain manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. and moving additional production activities offshore along with disengaging dis·en·gage v. dis·en·gaged, dis·en·gag·ing, dis·en·gag·es v.tr. 1. To release from something that holds fast, connects, or entangles. See Synonyms at extricate. 2. from a small, low growth product line currently with onshore on·shore adj. 1. Moving or directed toward the shore: an onshore wind. 2. Located on the shore: an onshore beacon; an onshore patrol. adv. production. These actions are expected to contribute to the Company's ability to achieve its financial model of a non-GAAP gross margin of approximately 43 percent at an annual sales level of $90 million, targeted at a 3 to 5 quarter horizon. About Advanced Power Technology APT is a leading supplier of power semiconductors for RF, Microwave microwave, electromagnetic wave having a frequency range from 1,000 megahertz (MHz) to 300,000 MHz, corresponding to a wavelength range from 300 mm (about 12 in.) to 1 mm (about 0.04 in.). Like light waves, microwaves travel essentially in straight lines. , Linear, and Switchmode Applications. APT is headquartered 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 and has operations and offices in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , France, and China. For additional information on Advanced Power Technology, visit its Web site 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 news 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 the metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. discussed under "Business Outlook" above, 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; the ability of the Company to integrate newly-acquired operations efficiently and to commercialize newly-acquired technology; and other uncertainties disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in the Company's filings with the Securities and Exchange Commission including our 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 8, 2005. 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 Nine Months Ended
Sept. 30, Sept. 30,
2005 2004 2005 2004
------- ------- ------- -------
Revenues, net $16,843 $18,660 $46,151 $51,814
Cost of goods sold 10,821 12,079 31,113 32,361
Amortization of technology rights
and other charges 269 269 807 817
------- ------- ------- -------
Total cost of goods sold 11,090 12,348 31,920 33,178
------- ------- ------- -------
Gross profit 5,753 6,312 14,231 18,636
------- ------- ------- -------
Operating expenses:
Research and development 1,308 903 3,680 2,573
Selling, general and
administrative 3,703 3,857 11,327 13,097
Restructuring charges - 38 169 359
In-process research and
development charges - 170 4,868 170
------- ------- ------- -------
Total operating expenses 5,011 4,968 20,044 16,199
------- ------- ------- -------
Income (loss) from operations 742 1,344 (5,813) 2,437
Other income (expense), net:
Interest, net 81 66 209 147
Other, net 5 (153) (115) (147)
------- ------- ------- -------
Income (loss) before income taxes 828 1,257 (5,719) 2,437
Provision for income taxes - 29 30 57
------- ------- ------- -------
Net income (loss) $ 828 $ 1,228 $(5,749) $ 2,380
======= ======= ======= =======
Net income (loss) per share:
Basic $ 0.08 $ 0.11 ($0.54) $ 0.22
Diluted $ 0.07 $ 0.11 ($0.54) $ 0.21
Weighted average number of shares
used in the
computation of net income
(loss) per share:
Basic 10,793 10,682 10,735 10,598
Diluted 11,189 11,170 10,735 11,215
ADVANCED POWER TECHNOLOGY, INC
SUPPLEMENTAL NON-GAAP DISCLOSURES
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS) AND NON-GAAP
EARNINGS PER SHARE (a)
(In thousands, except per share amounts)
(Unaudited)
($ per diluted
share)
Business
Outlook
Three Months Ended Nine Months Ended Three Months
September 30, September 30, Ended
2005 2004 2005 2004 Dec 31, 2005
------- ------- ------- ----------------------
Reported GAAP net
income (loss) $ 828 $ 1,228 $(5,749) $ 2,380 $0.09 - $0.11
Purchase accounting
adjustments
related to
acquisitions:
Cost of sales:
Intangible
asset
amortization 269 269 807 807 $ 0.024
Deferred
compensation
amortization - - - 10
Selling, general
and
administrative:
Intangible
asset
amortization 47 - 140 - $ 0.004
Deferred
compensation
amortization 10 - 30 12 $ 0.001
In-process
research and
development
charges - 170 4,868 170
Restructuring
charges - 38 169 359
Expenses associated
with the filing
and subsequent
withdrawal of our
registration
statement,
included in Other,
net - 181 - 181
Tax effect of non-
GAAP adjustments - (13) (7) (13)
------- ------- ------- ----------------------
Non-GAAP net income
(loss) $ 1,154 $ 1,873 $ 258 $ 3,906 $0.12 - $0.14
======= ======= ======= ======= =============
Non-GAAP net income
(loss) per share(a):
Basic $ 0.11 $ 0.18 $ 0.02 $ 0.37
Diluted $ 0.10 $ 0.17 $ 0.02 $ 0.35
Weighted average
number of shares
used in the
computation of
non-GAAP net
income (loss) per
share:
Basic 10,793 10,682 10,735 10,598
Diluted 11,198 11,170 11,166 11,215
RECONCILIATION OF GAAP TO NON-GAAP GROSS PROFIT(a)
(In thousands except per share amounts)
(unaudited)
(% of
revenue)
Business
Outlook
Three Months Ended Nine Months Ended Three Months
September 30, September 30, Ended
2005 2004 2005 2004 Dec 31, 2005
-------- ------- -------- -------- -------------
Reported GAAP gross
profit $5,753 $6,312 $14,231 $18,636 36.0% - 37.0%
Purchase accounting
adjustments related
to acquisitions:
Cost of sales:
Intangible asset
amortization 269 269 807 807 1.5%
Deferred
compensation
amortization - - - 10
---------- ------- -------- -------- -------------
Non-GAAP gross
profit $6,022 $6,581 $15,038 $19,453 37.5% - 38.5%
========== ======= ======== ======== =============
Non-GAAP gross
profit % of revenue 35.8% 35.3% 32.6% 37.5%
(a) Supplemental non-GAAP financial measures are not based on
generally accepted accounting principles (GAAP), but are provided
to explain the impact of certain significant items. The Company
believes that the disclosure of non-GAAP gross margin, net income,
and earnings per share 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
acquisitions, restructuring activities, valuation of deferred
taxes, and other charges in a way that allows for comparison to
prior periods and expectations about the ongoing financial
condition and results of operations exclusive of historical or
contemplated acquisitions or other transactions. In addition,
management uses each of these measures in evaluating the ongoing
operational performance of its business. Management bonus
calculations are based on each of these same measures, in order to
isolate the controllable performance of the operations from the
impact of negotiated acquisition costs, restructuring measures, or
tax consequences.
ADVANCED POWER TECHNOLOGY, INC
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Sep. 30, Dec. 31,
2005 2004
---------- ----------
Assets
Current assets:
Cash and cash equivalents $3,653 $4,149
Short term investments in available-for-
sale securities 11,800 11,675
Accounts receivable, net 9,836 10,044
Inventories, net 13,467 14,647
Prepaid and other current assets 1,094 2,196
---------- ----------
Total current assets 39,850 42,711
Property and equipment, net 11,177 11,357
Long term investments in available-for-
sale securities - 1,000
Other assets 58 110
Intangible assets, net 7,122 7,734
Goodwill 15,570 15,570
---------- ----------
Total assets $73,777 $78,482
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $3,723 $4,143
Accrued expenses 2,727 2,193
---------- ----------
Total current liabilities 6,450 6,336
Other long term liabilities 232 108
---------- ----------
Total liabilities 6,682 6,444
Stockholders' equity:
Common stock 109 108
Additional paid in capital 89,877 89,138
Treasury stock (1,761) (1,761)
Deferred stock compensation (36) -
Accumulated other comprehensive income 647 545
Accumulated deficit (21,741) (15,992)
---------- ----------
Total stockholders' equity 67,095 72,038
---------- ----------
Total liabilities and stockholders'
equity $73,777 $78,482
========== ==========
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