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

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Nov 05, 2010
Performance Technologies Inc. (PTIX, Financial) filed Quarterly Report for the period ended 2010-09-30.

Performance Technologies Inc. has a market cap of $23.5 million; its shares were traded at around $2.12 with and P/S ratio of 0.8. PTIX is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

PT incurred a net loss in the third quarter 2010 in the amount of ($2.9 million), or ($.26) per basic share, including a restructuring charge of $.01 per share and stock-based compensation expense of $.01 per share, based on 11.1 million shares outstanding. The Company incurred a net loss in the third quarter 2009 amounting to ($.3 million), or ($.03) per basic share, including a discrete income tax benefit of $.01 per share, a restructuring charge of $.02 per share and stock compensation expense of $.01 per share, based on 11.1 million shares outstanding.

The Company incurred a net loss for the nine months ended September 30, 2010 amounting to ($6.8 million), or ($.61) per basic share, including a restructuring charge of $.02 per share; stock-based compensation of $.03 per share; and a discrete income tax provision of $.01 per share, based on 11.1 million shares outstanding. The Company incurred a net loss for the nine months ended September 30, 2009 amounting to ($6.5 million), or ($.58) per basic share, based on 11.1 million shares outstanding. This loss included a non-cash income tax charge amounting to $.30 per share for an income tax valuation allowance recorded against the Companys U.S. deferred tax assets. The loss also included a restructuring charge of $.06 per share, discrete income tax benefits of $.02 per share and stock-based compensation expense of $.04 per share.

Military, aerospace and government systems products revenue amounted to $4.2 million and $4.0 million in the nine months ended September 30, 2010 and 2009, respectively. This increase of $.2 million, or 5%, was primarily attributable to a $.5 million increase in shipments to a new PT customer and increased shipments to various other military, aerospace and government systems customers, offset by the non-recurrence in the third quarter 2010 of a $1.1 million sale to another customer.

Selling and marketing expenses were $2.0 million and $1.6 million for the third quarter 2010 and 2009, respectively. For the nine months ended September 30, 2010 and 2009, selling and marketing expenses were $6.4 million and $5.3 million, respectively. The expense increases in 2010 over the comparable 2009 periods primarily relate to PTs initiative to add to its sales and marketing team to enable the Company to reach more potential customers and an increase in trade show expenditures.

Research and development expenses were $1.8 million in the third quarter of both 2010 and 2009; The Company capitalizes certain software development costs, which reduces the amount of software development charged to operating expenses. Amounts capitalized were $.6 million during the third quarter of both 2010 and 2009. Research and development expenses were $5.7 million and $5.9 million for the nine months ended September 30, 2010 and 2009, respectively. Nine month amounts capitalized to software development costs amounted to $1.9 million and $1.7 million in 2010 and 2009, respectively. Total research and development, including amounts capitalized, totaled $7.6 million for the nine months ended September 30 of both 2010 and 2009.

Restructuring expenses were $.1 million and $.2 million in the third quarter 2010 and 2009, respectively, and $.2 million and $.6 million in the nine months ended September 30, 2010 and 2009, respectively. In December 2009, PT announced its decision to outsource the manufacturing of the printed circuit board assembly for the hardware elements of PTs products. In connection with this decision, the Company expected to gradually reduce its Rochester manufacturing workforce by approximately twenty employees. Total restructuring charges associated with this action are estimated to be approximately $.2 million, of which approximately 30% was recorded in each of the first three quarters of 2010, and consist primarily of severance charges which are only payable if the employees stay with the Company during the transition. This action is expected to be completed and substantially all of the related charges are expected to be paid out by December 31, 2010. Payments under this action were immaterial in the third quarter and first nine months of 2010. This action was initiated with the goals of making product costs more predictable, reducing future capital expenditure requirements, and enhancing PTs ability to offer cutting-edge technologies in our prod

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