API Technologies Reports Results for the Fiscal First Quarter Ended February 28, 2013

API Technologies Reports Results for the Fiscal First Quarter Ended February 28, 2013

ORLANDO, Fla.--(BUSINESS WIRE)-- API Technologies Corp. (NAS: ATNY) ("API", "API Technologies", or the "Company"), a trusted provider of RF/microwave, microelectronics, and security solutions for critical and high-reliability applications, today announced results for the fiscal first quarter ended February 28, 2013.

  • Revenue of $67.2 million, up 7.0% sequentially over prior fiscal quarter

  • GAAP Gross Margin of 22.4%

  • Quarterly gross margin improvement across all three business segments


"Our quarter-over-quarter revenue growth and the gross margin improvement across all of our segments is a reflection of our differentiated product portfolio and the team's demonstrated commitment to operational efficiency," said Bel Lazar, President and Chief Executive Officer of API Technologies Corp. "The development and launch of new products has positively contributed to our strong backlog and sales funnel, which positions us well for top line growth in fiscal year 2013."

Results for the Quarter Ended February 28, 2013

API Technologies reported revenue of $67.2 million for the quarter ended February 28, 2013, compared to $62.7 million in the quarter ended November 30, 2012 and $70.7 million in the quarter ended February 29, 2012.

Gross profit, as a percent of sales, was 22.4% for the quarter ended February 28, 2013, versus 20.2% for the quarter ended November 30, 2012, and 24.9% for quarter ended February 29, 2012. Excluding restructuring costs, gross margin was 22.5% in the quarter ended February 28, 2013, compared to 21.4% in the quarter ended November 30, 2012, versus 25.4% for the quarter ended February 29, 2012. Adjusted EBITDA for the quarter ended February 28, 2013 was $7.6 million (11.4% margin), versus $8.3 million (13.2% margin) for the quarter ended November 30, 2012, compared to $10.8 million (15.3% margin) for the quarter ended February 29, 2012.

API Technologies posted a net loss of $14.4 million for the quarter ended February 28, 2013, compared to $12.3 million net loss for the quarter ended November 30, 2012, versus net income of $0.8 million for the quarter ended February 29, 2012. Restructuring costs recorded in the quarter ended February 28, 2013 were approximately $0.3 million, compared to $3.3 million in the quarter ended November 30, 2012, versus $0.6 million in the comparable period in 2012. At the end of the quarter, the Company had $10.1 million in cash and cash equivalents and $186.0 million in debt obligations, net of discounts.

Conference Call

API Technologies will host a conference call to review the Company's fiscal first quarter results tomorrow, April 10, at 10:00 a.m. Eastern Time. Bel Lazar, President and Chief Executive Officer, and Phil Rehkemper, Executive Vice President and Chief Financial Officer, will host the call.

The call will be available by dialing 866-605-3852 or 412-317-6789 and will be accessible by webcast at www.apitech.com. Recorded replays of the webcast will be available for 30 days on the Company's website and by telephone for 30 days at 877-344-7529, replay passcode #10026550, beginning 2:00 p.m. Eastern Time on April 10, 2013.

About API Technologies Corp.

API Technologies designs, develops and manufactures electronic systems, subsystems, RF and secure solutions for technically demanding defense, aerospace and commercial applications. API Technologies' customers include many leading Fortune 500 companies. API Technologies trades on the NASDAQ under the symbol ATNY. For further information, please visit the Company website at www.apitech.com.

Non-GAAP Financial Information

In this press release, API has provided a non-GAAP financial measure for Gross Margin and Adjusted EBITDA. Non-GAAP Gross Margin excludes restructuring charges and Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization), excludes discontinued operations, restructuring charges, acquisition and divestiture related charges, a C-MAC pro forma adjustments, foreign exchange gains and losses, stock-based compensation expenses, amortization of note discounts and deferred financing costs, and certain other adjustments. Management believes the supplemental non-GAAP presentations provide investors an additional analytical tool for understanding the Company's financial performance by excluding the impact of items which may obscure trends in the core operating performance of the business. 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, 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.

API Technologies Corp.

Financial Results

For the Three and Twelve Months Ended February 28, 2013

Consolidated Statements of Operations and Comprehensive Income (Loss)(unaudited)

in Thousands USD (except per share data)

For the Three
Months Ended
Feb. 28,
2013

For the Three
Months Ended
Feb. 29,
2012

Revenue, net

$

67,158

$

70,717

Cost of revenues

Cost of revenues

52,031

52,771

Restructuring charges

103

305

Total cost of revenues

52,134

53,076

Gross profit

15,024

17,641

Operating expenses

General and administrative

6,992

6,500

Selling expenses

4,019

3,766

Research and development

2,428

2,488

Business acquisition and related charges

468

290

Restructuring charges

242

339

14,149

13,383

Operating income

875

4,258

Other expenses (income), net

Interest expense, net

4,343

3,370

Amortization of note discounts and deferred financing costs

10,753

595

Other expense (income), net

(798

)

26

14,298

3,991

Income (loss) from continuing operations before income taxes

(13,423

)

267

Expense (benefit) for income taxes

1,001

(506

)

Net income (loss)

$

(14,424

)

$

773

Unrealized foreign currency translation adjustment

(1,418

)

62

Other comprehensive income (loss)

(1,418

)

62

Comprehensive income (loss)

$

(15,842

)

$

835

Net income (loss) per share—Basic and diluted

$

(0.26

)

$

0.01

Weighted average shares outstanding

Basic

55,369,100

55,192,697

Diluted

55,369,100

55,395,557

Consolidated Balance Sheets (unaudited)

in thousands USD

February 28,

2013

November 30,

2012

Assets

Current

Cash and cash equivalents

$

10,064

$

20,535

Restricted cash

700

Accounts receivable

49,202

45,229

Inventories, net

71,012

67,962

Deferred income taxes

1,039

1,101

Prepaid expenses and other current assets

2,737

2,644

134,054

138,171

Fixed assets, net

39,647

41,792

Fixed assets held for sale

900

900

Goodwill

156,002

156,002

Intangible assets, net

47,646

50,090

Other non-current assets

3,451

5,760

Total assets

$

381,700

$

392,715

Liabilities, Redeemable Preferred Stock and Shareholders' Equity

Current

Accounts payable and accrued expenses

$

41,421

$

41,487

Deferred revenue

492

385

Current portion of long-term debt

9,585

2,328

51,498

44,200

Deferred income taxes

4,074

3,410

Other long-term liabilities

998

1,048

Long-term debt, net of current portion and discount

176,375

179,503

232,945

228,161

Redeemable Preferred Stock

25,234

25,581

Shareholders' equity

Common stock

55

55

Special voting stock

Additional paid-in capital

327,363

326,973

Common stock subscribed but not issued

2,373

2,373

Accumulated deficit

(206,937

)

(192,513

)

Accumulated other comprehensive income

667

2,085

123,521

138,973

Total Liabilities, Redeemable Preferred Stock and Shareholders' Equity

$

381,700

$

392,715

Consolidated Adjusted EBITDA

in thousands USD

The following table reconciles three months GAAP net income to non-GAAP Adjusted EBITDA from continuing operations.

Three Months Ended

February 28, 2013

February 29, 2012

Net Income (loss)

$

(14,424

)

$

773

Adjustments

Interest expense, net

4,343

3,370

Amortization of note discounts and deferred financing costs

10,753

595

Depreciation and amortization

4,622

4,196

Income taxes

1,001

(506

)

Stock based compensation

390

858

Restructuring

345

644

Acquisition related charges

468

290

Other adjustments (A)

131

673

Foreign exchange gain

(65

)

Adjusted EBITDA

$

7,629

$

10,828

(A) Charges in 2013 were related to inventory obsolescence provisions, partially offset by the reduction of the contingency accrual. 2012 primarily related to non-cash inventory provisions and a loss on the sale of real estate held for sale.

Additional Adjusted EBITDA Reconciliations

in thousands USD

The following table reconciles three months GAAP net loss to non-GAAP Adjusted EBITDA for our
reportable segments for the quarter ended February 28, 2013.

Q1 2013

SSC

SSIA

Sub-total
SSC &
SSIA

EMS

Corporate

Total

Q1

Q1

Q1

Q1

Q1

Q1

Revenue

$