Revenue in the second quarter 2009 amounted to $6.4 million, compared to $11.2 million in the second quarter 2008. Revenue for the six months ended June 30, 2009 amounted to $13.3 million, compared to $22.2 million during the corresponding period in 2008.
The Company incurred a net loss in the second quarter 2009 amounting to ($4.7 million), or ($.43) per basic share, based on 11.1 million shares outstanding. This loss includes a non-cash income tax charge amounting to $.30 per share for an income tax valuation allowance recorded against the Company’s United States deferred tax assets. This non-cash income tax charge, required by generally accepted accounting principles, has no impact on the Company’s business operations or liquidity. The second quarter loss also includes a discrete income tax benefit of $.01 per share and stock compensation expense of $.01 per share. Net income in the second quarter 2008 amounted to $.6 million, or $.05 per diluted share including stock-based compensation expense of $.01 per share, based on 11.7 million shares outstanding.
The Company incurred a net loss for the six months ended June 30, 2009 amounting to ($6.2 million), or ($.55) per basic share, based on 11.1 million shares outstanding. This loss includes a non-cash income tax charge amounting to $.30 per share for an income tax valuation allowance recorded against the Company’s United States deferred tax assets. This non-cash income tax charge, required by generally accepted accounting principles, has no impact on the Company’s business operations or liquidity. The loss also includes a restructuring charge of $.04 per share, a discrete income tax benefit of $.01 per share and stock-based compensation expense of $.03 per share. Net income for the six months ended June 30, 2008 amounted to $1.2 million, or $.10 per diluted share including stock-based compensation expense of $.02 per share, based on 11.7 million shares outstanding.
The Company had 11.1 million common shares outstanding at June 30, 2009. Under the Company’s stock repurchase programs, approximately .5 million shares of its common stock were repurchased for an aggregate purchase price of $1.6 million during the twelve months ended June 30, 2009.
Cash and investments amounted to $31.8 million, or $2.86 per share, and the Company had no long-term debt at June 30, 2009.
“We are certainly disappointed in the Company’s second quarter financial results,” said John Slusser, president and chief executive officer. “From a business perspective, several orders and related revenues did not occur as anticipated in the quarter as we continue to be affected by the global economic climate. However, during the quarter we made substantial progress driving further ahead on our development roadmap and the ever increasing value proposition of our network communications solutions portfolio. We were also gratified to demonstrate further tangible market traction of our Signaling products initiative by the announcement of two significant customer wins at Cricket Communications and Hawaiian Telcom.”
Business Overview and Guidance
The Company globally targets two primary vertical markets for its communications products, namely telecommunications and aerospace and defense. The telecommunications market, historically our largest vertical market, is fundamentally driven by investments in network infrastructure by carriers and service providers. Telecommunications market revenues derived from our OEM and application-ready systems products depend primarily on broad, multi-year deployments of next-generation telecommunications infrastructure. Telecommunications market revenues generated from end solutions, such as our signaling products, are governed by investments necessary to support existing and evolving service demands such as the ongoing worldwide explosive growth in text messaging. Sales into the aerospace and defense market are typically to prime contractors and system integrators that reflect investment levels by various government agencies and military branches in specific programs and projects requiring enhanced communications capabilities.
“The ongoing global economic uncertainty forces our OEM customers to very tightly manage their inventories while our end solutions customers juggle critical network deployment timing demands versus the dynamics of their cash flow planning,” Mr. Slusser further remarked. “As a result, substantive forward business predictability remains very elusive and our guidance is offered accordingly. Even given these challenging times, we are encouraged by growth in our product opportunity funnel. Moving forward, as we have demonstrated in the past, we will continue to cautiously balance expense management with investments to position us for growth when economic conditions normalize.”
The Company provides guidance only on earnings per share expected in the next quarter. The following statements reflect the Company's current views with respect to future events and financial performance and are forward-looking statements covered within the “safe harbor” provisions described in the Private Securities Litigation Reform Act. Actual results may differ materially from these forward-looking statements. Given the current global economic environment, the Company’s estimates are subject to a higher level of uncertainty than is customary. Furthermore, a substantial portion of the Company’s revenue is derived from orders placed within a quarter and shipped in the final month of the same quarter. Management anticipates third quarter 2009 financial results to be in the range of $.00 per share to a loss of ($.07) per share. These per share estimates include a discrete income tax benefit of $.01 per share and exclude stock-based compensation expense and restructuring charges (if any). In the third quarter 2009, stock-based compensation expense is expected to be approximately $.01 per share, excluding any stock options that may be granted during the quarter.
Generally accepted accounting principles require the Company to establish a valuation allowance for deferred tax assets and record a charge to income if it is determined, based on available evidence, that it is “more likely than not” that some portion of the deferred tax assets will not be realized. In accordance with SFAS No. 109, a full valuation allowance was established in the second quarter 2009 for the Company’s U.S. based deferred tax assets. This valuation allowance was triggered by a three year cumulative jurisdictional pre-tax book loss projected for the years 2007, 2008 and 2009 based on the “more likely than not” standard.
More in-depth discussions of the Company's strategy and financial performance can be found in the Company's periodic reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission.
About Performance Technologies
Performance Technologies (pt.com) is a global supplier of advanced network communications and control solutions to end users, application developers and original equipment manufacturers that serve mission critical telecommunications, aerospace and defense markets. The Company provides remotely manageable, IP-centric network elements specifically engineered for high availability, scalability, and long life cycle deployments. Its products are built upon its own U.S. manufactured hardware combined with the Company’s NexusWare® Carrier Grade Linux® operating system and software development environment plus a broad suite of communications protocols and high availability middleware. Performance Technologies’ product portfolio includes the SEGway™ suite of Signaling (SS7/SIP) Transfer Points, Signaling Gateways and Bridges, and its IPnexus® family of COTS-based application ready systems, WAN gateways, and multi-protocol communications servers.
Performance Technologies maximizes the value proposition of its products by leveraging its field proven systems, software and hardware technologies developed over a twenty-eight year record of demonstrated innovation. A tightly integrated combination of these technologies results in measurable benefits to its customers through compelling return-on-investment and substantially accelerated time to market metrics. The Company is headquartered in Rochester, New York and maintains centers of engineering excellence in San Diego and San Luis Obispo, California, and Kanata, Ontario, Canada. It has sales and marketing offices in the U.S. in Raleigh, Chicago, Dallas, and San Jose and international offices in London, England and Shanghai, China.
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, 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 the Company’s manufacturing capacity and arrangements, the protection of the Company’s proprietary technology, the dependence on key personnel, changes in critical accounting estimates, potential impairments related to goodwill and investments, foreign regulations, 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 the Company’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 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 of December 31, 2008, as contained in the Company’s Annual Report on Form 10-K, and other documents filed with the Securities and Exchange Commission.
A conference call will be held on Friday, July 24, at 10:00 am, New York time, to discuss the results. All institutional investors can participate in the conference by dialing (866) 250-5144 or (416) 849-6163. 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 July 24 through July 28, 2009. To access the recording, participants should dial (866) 245-6755 or (416) 915-1035 using passcode 690668. A live webcast of the conference call will be available on the Performance Technologies website and will be archived to the site within two hours after the completion of the call.
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