Exhibit 99.1
| | |
 | | News Release |
For Immediate Release
Contact:
Kevin Borders
Vice President of Marketing and Product Development and Secretary
Tel: 419-468-7600
PECO II REPORTS FIRST-QUARTER 2008 RESULTS
GALION, Ohio, May 2, 2008 – PECO II, Inc. (Nasdaq:PIII), a manufacturer of communications power systems and full-service provider of engineering and installation on-site services to the communications industry, today reported results for the first quarter ended March 31, 2008.
PECO II reported net sales of $9.0 million in the first quarter of 2008, compared with $8.1 million in the first quarter of 2007, an 11 percent increase. The Company reported a net loss of $1.4 million, or $0.05 per diluted share, for the first quarter of 2008, compared with a net loss of $2.4 million, or $0.09 per diluted share, for the first quarter of 2007.
EBITDA was a loss of $0.9 million in the first quarter of 2008, compared with an EBITDA loss of $1.8 million for the first quarter of 2007. An explanation and reconciliation of GAAP net loss to EBITDA is included as Attachment A.
The $1.0 million reduction in net loss for the first quarter of 2008 compared with the first quarter of 2007 was driven by strong product revenue growth of $1.4 million resulting in strong product gross margin improvements of $0.4 million, combined with significant operating cost reductions of $0.7 million realized from the Company’s 2007 restructuring efforts.
Cash used by operating activities in the first quarter of 2008 was $968,000. While this included a net loss and decreases in accounts payable, it was offset by non-cash charges and decreases in accounts receivable and inventory.
Bookings increased during the first quarter of 2008, resulting in an increased sales backlog of $4.8 million. The first quarter backlog was a 9 percent increase from the $4.4 million in the fourth quarter of 2007. The bookings-to-billings ratio reflects customer orders received as compared with the same period’s billings and is an indication of future periods. For the first quarter of 2008, the ratio was 1.03 to 1.
PECO II, Inc. First-quarter 2008 Results / 2
John Heindel, PECO II Chairman and CEO stated, “The first quarter financial performance represents a significant improvement over both first quarter 2007 and fourth quarter 2007 business performance. The Company delivered strong product revenue growth, which when combined with the completion of the strategic restructuring initiatives implemented in 2007, resulted in a significantly reduced operating loss. Year to date, the Company is gaining market share as evidenced by PECO II winning four new geographic markets from its existing customer base.”
Heindel added, “The Company must continue to take market share from the competition in order to return to EBITDA profitability in 2008. To achieve this, we continue to work with our customers to better understand their needs and aggressively work our strategic supplier base to ensure that we have the flexibility to respond to customer requests for products and systems.”
Conference Call on the Web
PECO II will hold a conference call with investors and analysts on Friday, May 2, 2008, at 10 a.m. Eastern time. The call will be available over the Internet atwww.peco2.com. To listen to the call, go to the Web site to register, download and install any necessary audio software. For those unable to listen to the live broadcast, a replay of the webcast will be archived and available shortly after the call.
About PECO II, Inc.
PECO II, headquartered in Galion, Ohio, provides engineering and on-site installation services and designs, manufactures and markets communications power systems and power distribution equipment. As the largest independent full-service provider of telecommunications power systems, the Company provides total power quality/reliability solutions and supports the power infrastructure needs of communications service providers in the local exchange, long-distance, wireless, broadband and Internet markets. Additional information about PECO II can be found atwww.peco2.com.
Forward-Looking Statements
Statements in this release that are not historical fact are forward-looking statements, which involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. Factors that may cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, a general economic recession; a downturn in our principal customers’ businesses; the growth in the communications industry; the ability to develop and market new products and product enhancements; the ability to attract and retain customers; competition and technological change; and successful implementation of the Company’s business strategy. In addition, this release contains time-sensitive information that reflects management’s best analysis only as of the date of this release. PECO II does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in PECO II’s periodic filings with the Securities and Exchange Commission.
PECO II, Inc. First-quarter 2008 Results / 3
PECO II, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
| | | | | | | | |
| | | For the Three Months
Ended March 31, | |
| | | 2008 | | | 2007 | |
Net sales: | | | | | | | | |
Product | | $ | 7,290 | | | $ | 5,895 | |
Services | | | 1,721 | | | | 2,199 | |
| | | | | | | | |
| | | 9,011 | | | | 8,094 | |
Cost of goods sold: | | | | | | | | |
Product | | | 6,378 | | | | 5,441 | |
Services | | | 1,430 | | | | 1,779 | |
| | | | | | | | |
| | | 7,808 | | | | 7,220 | |
Gross margin: | | | | | | | | |
Product | | | 912 | | | | 454 | |
Services | | | 291 | | | | 420 | |
| | | | | | | | |
| | | 1,203 | | | | 874 | |
Operating expenses: | | | | | | | | |
Research, development and engineering | | | 632 | | | | 840 | |
Selling, general and administrative | | | 2,015 | | | | 2,506 | |
| | | | | | | | |
| | | 2,647 | | | | 3,346 | |
| | | | | | | | |
Loss from operations | | | (1,444 | ) | | | (2,472 | ) |
Interest income, net | | | 64 | | | | 102 | |
| | | | | | | | |
Loss before income taxes | | | (1,380 | ) | | | (2,370 | ) |
Income tax expense | | | (9 | ) | | | (14 | ) |
| | | | | | | | |
Net loss | | $ | (1,389 | ) | | $ | (2,384 | ) |
| | | | | | | | |
Net loss per common share: | | | | | | | | |
Basic and diluted | | $ | (0.05 | ) | | $ | (0.09 | ) |
| | | | | | | | |
Weighted average common shares outstanding: | | | | | | | | |
Basic and diluted | | | 27,470 | | | | 27,174 | |
| | | | | | | | |
PECO II, Inc. First-quarter 2008 Results / 4
PECO II, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
| | | | | | | | |
| | | March 31,
2008 | | | December 31,
2007 | |
| | | (unaudited) | | | | |
| ASSETS | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 6,978 | | | $ | 7,935 | |
Accounts receivable, net of allowance of $55 at March 31, 2008 and $90 at December 31, 2007 | | | 2,835 | | | | 3,685 | |
Inventories, net of allowance of $1,573 at March 31, 2008 and $1,906 at December 31, 2007 | | | 10,258 | | | | 11,433 | |
Cost and earnings in excess of billings on uncompleted contracts | | | 305 | | | | 514 | |
Prepaid expenses and other current assets | | | 266 | | | | 263 | |
Assets held for sale | | | 190 | | | | 219 | |
| | | | | | | | |
Total current assets | | | 20,832 | | | | 24,049 | |
| | | | | | | | |
Property and equipment, at cost: | | | | | | | | |
Land and land improvements | | | 195 | | | | 195 | |
Buildings and building improvements | | | 7,251 | | | | 7,251 | |
Machinery and equipment | | | 2,888 | | | | 2,869 | |
Furniture and fixtures | | | 5,516 | | | | 5,527 | |
| | | | | | | | |
| | | 15,850 | | | | 15,842 | |
Less-accumulated depreciation: | | | (11,462 | ) | | | (11,360 | ) |
| | | | | | | | |
Property and equipment, net | | | 4,388 | | | | 4,482 | |
Other assets: | | | | | | | | |
Goodwill | | | 1,529 | | | | 1,515 | |
Intangibles, net | | | 3,553 | | | | 3,822 | |
Investment in joint venture | | | 2 | | | | 2 | |
| | | | | | | | |
Total assets | | $ | 30,304 | | | $ | 33,870 | |
| | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 2,608 | | | $ | 4,485 | |
Billings in excess of cost and estimated earnings on uncompleted contracts | | | 25 | | | | 510 | |
Accrued compensation expense | | | 996 | | | | 722 | |
Accrued income taxes | | | 61 | | | | 81 | |
Other accrued expenses | | | 1,645 | | | | 1,800 | |
| | | | | | | | |
Total current liabilities | | | 5,335 | | | | 7,598 | |
| | | | | | | | |
Shareholders’ equity: | | | | | | | | |
Common stock, no par value: 150,000,000 shares authorized; 27,487,297 and 27,391,574 shares issued at March 31, 2008 and December 31, 2007, respectively | | | 3,487 | | | | 3,475 | |
Warrants | | | 5,107 | | | | 5,078 | |
Additional paid-in capital | | | 116,457 | | | | 116,412 | |
Accumulated deficit | | | (100,082 | ) | | | (98,693 | ) |
| | | | | | | | |
Total shareholders’ equity | | | 24,969 | | | | 26,272 | |
| | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 30,304 | | | $ | 33,870 | |
| | | | | | | | |
PECO II, Inc. First-quarter 2008 Results / 5
Attachment A
EBITDA is not a financial measure calculated in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income, operating income or any other financial measure so calculated and presented. We define EBITDA as net income/(loss) before interest expense, taxes, depreciation, amortization, and non-cash stock compensation expense. Other companies may define EBITDA differently. We present EBITDA because we believe it to be an important supplemental measure of our performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management also uses this information internally for forecasting and budgeting. You should not consider EBITDA in isolation, or as a substitute for analysis of our results as reported under GAAP.
Reconciliation of GAAP Net Loss to EBITDA
(unaudited)
| | | | | | | | |
| | | For the Three Months
Ended March 31, | |
(In thousands) | | 2008 | | | 2007 | |
2008 and 2007 EBITDA Breakdown | | | | | | | | |
Net Loss per GAAP | | $ | (1,389 | ) | | $ | (2,384 | ) |
Interest expense | | $ | 6 | | | $ | 8 | |
Taxes | | $ | 9 | | | $ | 14 | |
Depreciation/ amortization | | $ | 381 | | | $ | 424 | |
Non-cash stock-based compensation | | $ | 63 | | | $ | 119 | |
| | | | | | | | |
EBITDA | | $ | (930 | ) | | $ | (1,819 | ) |
