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API Technologies Reports Results for the Fiscal Second Quarter Ended May 31, 2014

Companies mentioned in this article: API Technologies Corp.

ORLANDO, Fla., July 9, 2014 /PRNewswire/ -- API Technologies Corp. (NASDAQ: ATNY) ("API" or the "Company"), a leading provider of high performance RF/microwave, power, and security solutions for critical and high-reliability applications, today announced results for the fiscal second quarter ended May 31, 2014.

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Results for the Quarter Ended May 31, 2014

API Technologies reported fiscal second quarter revenue of $53.2 million.

For the fiscal second quarter of 2014, GAAP gross margin as a percentage of sales was 19.6%; non-GAAP gross margin was 22.2%.

API Technologies posted a net loss of $15.0 million for the fiscal second quarter, primarily due to the write-off of note discounts and deferred financing charges from debt extinguishment, which were $10.2 million. Adjusted EBITDA for the fiscal second quarter was $4.3 million. Restructuring costs recorded in the three months ended May 31, 2014 were approximately $1.0 million.

Results for the Six Months Ended May 31, 2014

API Technologies reported revenue of $112.1 million for the six months ended May 31, 2014. GAAP gross margin was 21.2% for the six-month period ended May 31, 2014. Non-GAAP gross margin was 23.0% for the same period.

The Company posted a net loss of $17.1 million for the six months ended May 31, 2014, primarily due to the amortization of note discounts and deferred financing charges, which were $10.9 million. Adjusted EBITDA for the six months ended May 31, 2014 was $10.8 million. Restructuring costs recorded in the six months ended May 31, 2014 were approximately $1.4 million.

"While our EMS business was weaker than expected in Q2, we enter Q3 with a company-wide, fully funded $123.7 million backlog and positive book-to-bill, highlighted by strong demand for our Systems, Subsystems, and Components (SSC) segment products. The strength of our differentiated technology portfolio continues to generate key customer design-ins that will drive shareholder return in the quarters ahead," said Bel Lazar, president and chief executive officer of API Technologies.

Conference Call

API Technologies will host a conference call to review the Company's fiscal second quarter results tomorrow, July 10, at 10:00 a.m. Eastern Time. Bel Lazar, President and Chief Executive Officer, and Claudio Mannarino, Senior Vice President and Chief Financial Officer, will host the call.

The call will be available by dialing 1-877-317-6789 or 1-412-317-6789 and accessible by webcast at http://www.apitech.com/investor-relations. Recorded replays of the webcast will be available on the Company's Investor Relations App, and for 30 days on the Company's website, and by telephone at 1-877-344-7529 or 1-412-317-0088, replay passcode #10048296, beginning noon Eastern Time on July 10, 2014.

The API Technologies Investor Relations App is available for iPhone® and iPad® via the Apple iTunes store and for Android(TM) devices via Google Play. For more information, visit http://www.apitech.com/investor-relations.

About API Technologies Corp.

API Technologies (NASDAQ: ATNY) is an innovative designer and manufacturer of high performance systems, subsystems, modules, and components for technically demanding RF, microwave, millimeter wave, electromagnetic, power, and security applications. A high-reliability technology pioneer with over 70 years of heritage, API Technologies products are used by global defense, industrial, and commercial customers in the areas of commercial aerospace, wireless communications, medical, oil and gas, electronic warfare, unmanned systems, C4ISR, missile defense, harsh environments, satellites, and space. Learn more about API Technologies and our products at www.apitech.com.

Non-GAAP Financial Information

In this press release, API has provided the non-GAAP financial measures for Adjusted EBITDA from continuing operations and non-GAAP gross margin. Non-GAAP gross margin excludes restructuring charges and certain other adjustments described in the reconciliation table and Non-GAAP Adjusted EBITDA from continuing operations (Earnings from continuing operations before interest, taxes, depreciation and amortization) excludes restructuring charges, acquisition and divestiture-related charges, foreign exchange losses, stock-based compensation expenses, amortization of note discounts and deferred financing costs, and certain other adjustments described in the reconciliation table. Management believes the supplemental non-GAAP presentations provide investors an additional analytical tool for understanding the Company's financial performance by excluding from operating results the impact of items that management believes do not reflect the Company's core operating performance. These are not recognized measures under US GAAP, do not have a standardized meaning, and are unlikely to be comparable to similar measures used by other companies. Accordingly, investors are cautioned that these non-GAAP measures should not be construed as an alternative to net earnings or loss or gross margin determined in accordance with GAAP as an indicator of the financial performance of the Company or as a measure of the Company's liquidity and cash flows. We expect our financial statements to continue to be affected by items similar to those excluded in the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that all such costs are unusual or infrequent.

Safe Harbor for Forward-Looking Statements

Except for statements of historical fact, the information presented herein constitutes forward-looking statements. All forward-looking statements are subject to certain risks, uncertainties and assumptions which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include but are not limited to, general economic and business conditions, including without limitation, reductions in government defense spending; government regulations; our ability to integrate and consolidate our operations; our ability to expand our operations in both new and existing markets; the ability of our review of strategic alternatives to maximize stockholder value; and the effect of growth on our infrastructure. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated. The forward-looking statements in this news release should be read in conjunction with the more detailed descriptions of the above factors located in our Annual Report on Form 10-K under Part I, Item 1A "Risk Factors" as well as those additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. All information in this release is as of the date hereof. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations. Except as required by law, the Company assumes no obligation to update or revise any forward-looking statements in this press release, whether as a result of new information, future events, or otherwise.

Contact:

Claudio Mannarino
Senior Vice President and Chief Financial Officer
+1 855-294-3800
investors@apitech.com

Tara Flynn Condon
Vice President, Corporate Development & Marketing
+1 908-546-3903
media@apitech.com


    API Technologies Corp.
    Financial Results
    For the Three and Six Months Ended May 31, 2014 and 2013





    Consolidated Statements of Operations (unaudited)
    in thousands USD


                                                             For the Three            For the Three            For the Six               For the Six
                                                              Months Ended             Months Ended            Months Ended             Months Ended
                                                                May 31,                  May 31,                 May 31,                   May 31,
                                                                                 2014                     2013                     2014                      2013
                                                                                 ----                     ----                     ----                      ----

    Revenue, net                                                              $53,169                  $64,229                 $112,086                  $122,533

    Cost of revenues

    Cost of revenues                                                           42,478                   49,549                   87,751                    95,697

    Restructuring charges                                                         281                       63                      580                       166
                                                                                  ---                      ---                      ---                       ---


    Total cost of revenues                                                     42,759                   49,612                   88,331                    95,863
                                                                               ------                   ------                   ------                    ------


    Gross profit                                                               10,410                   14,617                   23,755                    26,670
                                                                               ------                   ------                   ------                    ------


    Operating expenses

    General and administrative                                                  5,820                    6,168                   11,539                    12,804

    Selling expenses                                                            3,536                    4,074                    7,294                     7,758

    Research and development                                                    2,161                    2,337                    4,234                     4,641

    Business acquisition and related charges                                       75                      620                      185                     1,088

    Restructuring charges                                                         748                      322                      866                       563
                                                                                  ---                      ---                      ---                       ---


                                                                               12,340                   13,521                   24,118                    26,854
                                                                               ------                   ------                   ------                    ------


    Operating income (loss)                                                   (1,930)                   1,096                    (363)                   (184 )

    Other expenses (income), net

    Interest expense, net                                                       2,887                    4,478                    5,297                     8,822

    Amortization of note discounts and deferred                                10,228                      521                   10,893                    11,275
       financing costs

    Other expenses (income), net                                                (223)                     421                    (113)                   (376 )
                                                                                 ----                      ---                     ----                     -----


                                                                               12,892                    5,420                   16,077                    19,721
                                                                               ------                    -----                   ------                    ------


    Loss from continuing operations before income                           (14,822 )                 (4,324)               (16,440 )                (19,905 )
       taxes

    Expense (benefit) for income taxes                                            162                    (350)                     668                    (172 )
                                                                                  ---                     ----                      ---                     -----


    Loss from continuing operations, net of income                           (14,984)                 (3,974)               (17,108 )                (19,733 )
       taxes

    Income from discontinued operations, net of                                     -                  11,446                        -                   12,779
       income taxes
                                                                                                                                                           ---


    Net income (loss)                                                       $(14,894)                  $7,472                $(17,108)                $(6,954 )

    Accretion on preferred stock                                                    -                   (290)                   (393)                    (290)
                                                                                  ---                    ----                     ----                      ----


    Net income (loss) attributable to common shareholders                   $(14,984)                  $7,182                $(17,501)                $(7,244 )
                                                                             ========                   ======                 ========                  ========


                                                                              $(0.27)                 $(0.07)                $(0.32 )                 $(0.36 )
    Loss per share from continuing operations-Basic
    and diluted

    Income per share from discontinued operations-                              $0.00                    $0.20                    $0.00                     $0.23
       Basic and diluted
                                                                                                                                                           ---


    Net income (loss) per share-Basic and diluted                             $(0.27)                   $0.13                 $(0.32 )                 $(0.13 )
                                                                               ======                    =====                  =======                   =======


    Weighted average shares outstanding

    Basic                                                                  55,446,463               55,402,595               55,463,440                55,386,031

    Diluted                                                                55,446,463               55,402,595               55,463,440                55,386,031


    Consolidated Balance Sheets (unaudited)
    in thousands USD


                                                                           May 31,           November 30,
                                                                              2014                    2013
                                                                              ----                    ----

    Assets

    Current

    Cash and cash equivalents                                                        $10,632                  $6,351

    Restricted cash                                                                        -                  1,500

    Accounts receivable, net                                                          36,779                  39,751

    Inventories, net                                                                  52,726                  58,218

    Deferred income taxes                                                              2,303                   2,426

    Prepaid expenses and other current assets                                          1,426                   2,445

                                                                                     103,866                 110,691

    Fixed assets, net                                                                 31,689                  35,231

    Fixed assets held for sale                                                           150                     150

    Goodwill                                                                         116,770                 116,770

    Intangible assets, net                                                            34,169                  38,780

    Other non-current assets                                                           1,714                   2,956

     Total assets                                                                   $288,358                $304,578
                                                                                    ========                ========


    Liabilities, Redeemable Preferred Stock and Shareholders' Equity

    Current

    Accounts payable and accrued expenses                                            $23,806                 $32,217

    Deferred revenue                                                                   3,723                   3,519

    Current portion of long-term debt                                                  8,451                   8,155

                                                                                      35,980                  43,891

    Deferred income taxes                                                              5,945                   5,517

    Other long-term liabilities                                                        1,133                   1,135

    Long-term debt, net of current portion and discount                              123,298                  96,606

    Deferred gain                                                                      8,085                       -
                                                                                       -----                     ---

                                                                                     174,441                 147,149
                                                                                     -------                 -------


    Redeemable Preferred Stock                                                             -                 26,326


    Shareholders' equity

    Common stock                                                                          55                      55

    Special voting stock                                                                   -                      -

    Additional paid-in capital                                                       327,794                 327,901

    Common stock subscribed but not issued                                             2,373                   2,373

    Accumulated deficit                                                            (218,299)               (200,798)

               Accumulated other comprehensive income                                  1,994                   1,572

                                                                                     113,917                 131,103
                                                                                     -------                 -------

    Total Liabilities, Redeemable Preferred Stock and Shareholders' Equity          $288,358                $304,578
                                                                                    ========                ========


    Consolidated Adjusted EBITDA
    in thousands USD


    The following table reconciles three and six months GAAP income (loss) from operations to non-GAAP Adjusted EBITDA.



                                                                                                                        Three months ended Six Months ended
                                                                                                                              May 31, 2014     May 31, 2014
                                                                                                                              ------------     ------------

                                                                                                                                 $(14,984)        $(17,108)
    Loss from operations

    Adjustments

        Interest expense, net                                                                                                        2,887             5,297

    Amortization of note discounts and deferred financing costs                                                                     10,228            10,893

        Depreciation and amortization                                                                                                4,111             8,242

        Income and franchise taxes                                                                                                     162               668

        Restructuring charges                                                                                                        1,029             1,446

        Acquisition related charges                                                                                                     75               185

        Other adjustments (A)                                                                                                          775             1,154




                                                                                                                                    $4,283           $10,777
    Total Adjusted EBITDA

(A) Other adjustments primarily include inventory provisions ($824 - 3 months; $1,168 - 6 months), stock based compensation ($(21) - 3 months; $(69) - 6 months), franchise taxes ($44 - 3 months; $85 - 6 months), financing & other adjustments ($156 - 3 months; $283 - 6 months), lease payments for the State College, Pennsylvania facility ($(322) - 3 months; $(539) - 6 months) and foreign exchange loss ($94 - 3 months; $226 - 6 months).

    Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin
                                                                                                 $ amounts in thousands USD


                                                                 Three Months Ended               Six Months Ended

                                                                                    May 31, 2014                May 31, 2014
                                                                                    ------------                ------------


                        Revenue                                                          $53,169                     $112,086

                        Gross Profit                                                      10,410                       23,755

    GAAP Gross Margin %                                                                  19.6%                       21.2%

                        Restructuring and other adjustments (A)                            1,376                        2,044

                        Adjusted Gross profit                                             11,786                       25,799

    Adjusted Gross margin %                                                              22.2%                       23.0%

(A) Other adjustments primarily include inventory provisions.

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SOURCE API Technologies Corp.