Performance Technologies Inc. Reports Operating Results (10-Q)

Author's Avatar
May 09, 2009
Performance Technologies Inc. (PTIX, Financial) filed Quarterly Report for the period ended 2009-03-31.

Performance Technologies is a global supplier of integrated IP-based platforms and solutions for advanced communications networks and innovative computer system architectures. Company's Embedded Systems Group offers robust application-ready platforms that incorporate open-standards based software and hardware providing significantly accelerated end product deployment benefits for equipment manufacturers. Its Signaling Systems Group offers the SEGway product suite which includes IP STPs SS7 over IP transport solutions and signaling gateways that enable lower operating costs through utilization of IP networks thereby creating competitive advantages for carriers in existing and emerging markets. Performance Technologies Inc. has a market cap of $29.9 million; its shares were traded at around $2.7 with and P/S ratio of 0.7.

Highlight of Business Operations:

At December 31, 2008, the Company held one auction rate municipal security with an original cost of $2,450,000, after having received a partial redemption of $50,000 at par in the first quarter 2008. This security was involved in a successful auction in January 2008, but subsequent 2008 auctions failed, and the Company was not able to sell this security. In November 2008, the Company entered into an agreement with the investment brokerage company which had sold this security to the Company, whereby the Company acquired an option to put the security to the brokerage company at any time during 2009 or 2010 at its full par value. In January 2009, the Company exercised its option and sold the security to the brokerage firm, receiving full par value of $2,450,000 as consideration.

In October 2008, the Board of Directors authorized a new stock repurchase program, whereby the Company may repurchase shares of its Common Stock for an aggregate amount not to exceed $10,000,000. Under this program, shares of the Company's Common Stock may be repurchased through open market or private transactions, including block purchases. This program expires on October 23, 2009. Repurchased shares can be used for the Company's stock option plans, potential acquisition initiatives and general corporate purposes. Under this program, the Company repurchased 100,000 shares during the first quarter 2009 for an aggregate purchase price of $318,000. For the program-to-date through March 31, 2009, the Company has repurchased 497,000 shares for an aggregate purchase price of $1,597,000.

The Company had unrecognized tax benefits of $401,000 and $400,000 at March 31, 2009 and December 31, 2008, respectively. Included in the balance of unrecognized tax benefits as of March 31, 2009 and December 31, 2008 are accrued interest and penalties in the amount of $95,000 and $91,000, respectively.

The Company files U.S. federal, U.S. state, and foreign tax returns. For federal tax returns, the Company is generally no longer subject to tax examinations for years prior to 2005. For state and foreign tax returns, the Company is generally no longer subject to tax examinations for years prior to 2004. It is reasonably possible that the liability associated with the Companys unrecognized tax benefits will increase or decrease within the next twelve months. These changes may be the result of new examinations by taxing authorities, ongoing examinations, or the expiration of statutes of limitations. Based upon the closing of the tax years in these various jurisdictions, as well as the conclusion of ongoing examinations by taxing authorities, the Company may adjust its liability for unrecognized tax benefits. Certain of the Companys unrecognized tax benefits are related to tax years that are expected to close in the next twelve months, or related to ongoing examinations which the Company expects to successfully conclude in that time period. The closure of these unrecognized tax benefits could increase earnings in an amount ranging from $0 to approximately $220,000, including interest and penalties.

At March 31, 2009, the Company is party to foreign currency forward contracts with JPMorgan Chase Bank, N.A. (the Bank) designed to fix in U.S. dollars a portion of the future cost of the Companys Canadian and United Kingdom operations, which are denominated in Canadian dollars and U.K. pounds sterling, respectively. The Company is party to monthly forward contracts for both Canadian dollars and U.K. pounds sterling through March 2010. The Canadian dollar contracts effectively fix the exchange rate on the first $360,000CDN ($350,000CDN for January 2010 through March 2010) of monthly expenses at rates ranging from .785 to .787. The U.K. pounds sterling contracts effectively fix the exchange rate on the first £105,000 of quarterly expenses during 2009 and the first £100,000 of expenses in the first quarter 2010 at rates ranging from 1.3900 to 1.5005.

Read the The complete Report