GALION, Ohio, March 11 /PRNewswire-FirstCall/ -- PECO II, Inc.
(NASDAQ: PIII), a communications industry power systems and
services provider, today reported results for the fourth quarter
and year ended December 31, 2008. PECO II reported net sales of
$9.7 million in the fourth quarter, a 20 percent increase from the
$8.1 million reported in the fourth quarter of 2007 and a 19
percent decrease from reported third-quarter 2008 net sales of
$12.0 million. The Company also reported a net loss of $3.9
million, or $1.37 per basic and diluted share (on a post-split
basis), for the fourth quarter, compared with a net loss of $5.6
million, or $2.05 per basic and diluted share (on a post-split
basis), for the fourth quarter of 2007. Net sales for the year
ended December 31, 2008, totaled $41.7 million, compared with $37.5
million in 2007, an 11 percent increase. Net loss for the year was
$7.7 million, or $2.77 per basic and diluted share (on a post-split
basis), compared with a net loss of $9.2 million, or $3.39 per
basic and diluted share (on a post-split basis), for 2007. EBITDA
was a loss of $3.3 million in the fourth quarter of 2008, compared
with an EBITDA loss of $5.1 million for the fourth quarter of 2007.
For the year ended December 31, 2008, EBITDA was a loss of $5.7
million, compared with an EBITDA loss of $7.1 million for the year
ended December 31, 2007. Excluding a $1.5 million non-cash goodwill
impairment charge, EBITDA was a loss of $1.9 million in the fourth
quarter of 2008 and $4.2 million for the year ended December 31,
2008. Excluding a $4.4 million non-cash goodwill impairment charge,
EBITDA was a loss of $0.7 million in fourth quarter of 2007 and
$2.6 million for the year ended December 31, 2007. A reconciliation
of GAAP net loss to EBITDA and EBITDA excluding the non-cash
goodwill impairment charges is included as Attachment A. Primarily
driven by the economic downturn, bookings decreased 42 percent
during the fourth quarter of 2008, resulting in a sales backlog of
$2.5 million as of December 31, 2008, compared with $5.7 million at
the end of the third quarter of 2008. The bookings-to-billings
ratio reflects customer orders received compared with the same
period's billings and is an indication of future periods. For the
fourth quarter of 2008, the ratio was 0.7 to 1. PECO II CEO John
Heindel stated, "The 2008 business year was one where PECO II
recorded strong revenue growth, reduced operating losses and
maintained a strong balance sheet to ensure the Company is
positioned to serve its customers going forward." Year-over-year
revenue growth of 11 percent was driven by strong product sales.
Product sales grew 18 percent, driven primarily by the Company
taking market share in the wireless cell site market. Additionally,
the Company was awarded new services work with a major service
provider during the fourth quarter, which positions the services
business for growth in 2009. Gross margins of $4.7 million for 2008
include a charge of $2.1 million for obsolete and slow-moving
inventory. This charge resulted from the completion of the
Company's strategic outsourcing initiative combined with product
rationalization of the Company's legacy product lines. The net loss
of $7.7 million for 2008 includes the inventory write-down of $2.1
million noted above, a non-cash goodwill impairment charge of $1.5
million and a non-cash idle facility impairment charge of $0.2
million. In 2008, the Company introduced its new small power
platform. The Quantum(TM) power system positions PECO II as a
player in the shelf power market segment and the fast-growing
outside plant broadband market. During the fourth quarter, the
Company continued to roll out feature enhancements to the Quantum.
A new, 19-inch Integrated Shelf was developed to broaden the system
deployment utilizing existing building block components developed
in the 23-inch version. The Company also introduced two new Quantum
Distribution Modules, doubling the amount of GMT fuses contained in
each. Independent lab testing has concluded, resulting in NEBS
Level 3 Certification for the system. The market introduction
continued with trials and deployments scheduled with several new
customers during the period. The Company also introduced the MPS10
Micro Power System, a small power system designed for the network
edge. The low profile system supplies up to 18 Amps of current at
48Vdc in a 1RU-by-19-inch-wide shelf. The system contains up to
three 6 Amp rectifiers, integrated distribution and a system
controller. The controller provides standard DC power system
management along with battery management, as well as an optional
SNMP interface. Integrated distribution, equipped with eight GMT
fuses and a battery disconnect fuse, minimizes the size of the
overall system, making it ideal for use in space-constrained remote
cabinet applications. A primary application for the MPS10 is
powering triple play solutions for multiple dwelling unit
applications. In addition to the small power solutions, the Company
formally launched its outside plant cabinet product line at the OSP
Expo 2008 trade show. The SC Series of wireless power cabinets
includes eight environmental controller OSP enclosures configured
with DC power systems and/or batteries to provide battery backup
and site support for wireless cell site applications. Ranging in
height from 47 inches to 86 inches, the SC cabinets are designed to
align with existing OEM radio cabinet systems. The cabinets can be
configured with an assortment of PECO II power systems and
batteries to provide backup for either +24V or -48V installations.
Several customers have already successfully deployed SC cabinets in
a variety of applications throughout the country. Heindel added,
"Given the market uncertainty, the Company has implemented
aggressive actions since the beginning of 2009. Our sales
representatives are engaging our customers across the country. This
interaction, combined with PECO II's industry-leading
responsiveness capability, has resulted in $6.2 million of new
orders booked as of February 27, slightly ahead of our pace in
2008. On the cost front, the Company reduced its work force by 25
employees in 2009, resulting in an annualized cost savings of $1.2
million. These actions will help to mitigate the economic downturn
the market is forecasted to experience in 2009." 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 at http://www.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. CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except for per share data) For the Three
For the Twelve Months Months ------ ------ Ended December 31, Ended
December 31, ------------------ ------------------ 2008 2007 2008
2007 ---- ---- ---- ---- Net sales: Product $6,925 $5,661 $31,554
$26,683 Services 2,787 2,434 10,189 10,774 ----- ----- ------
------ 9,712 8,095 41,743 37,457 Cost of goods sold: Product 5,798
5,118 26,552 23,113 Services 2,230 1,945 8,307 8,556 Asset
impairments - (453) - (453) Obsolete inventory write-off 1,216 112
2,146 399 ----- --- ----- --- 9,244 6,722 37,005 31,615 ----- -----
------ ------ Gross margin 468 1,373 4,738 5,842 --- ----- -----
----- Operating expenses: Research, development and engineering 421
476 2,353 2,296 Selling, general and administrative 2,215 1,958
8,512 8,506 Impairment of goodwill 1,503 4,426 1,503 4,426
Impairment of idle facility 200 220 200 220 --- --- --- --- 4,339
7,080 12,568 15,448 ----- ----- ------ ------ Loss from operations
(3,871) (5,707) (7,830) (9,606) Interest income, net 29 109 171 416
-- --- --- --- Loss before income taxes (3,842) (5,598) (7,659)
(9,190) Income tax benefit (expense) (26) 1 (45) (43) ---- - ----
---- Net loss $(3,868) $(5,597) $(7,704) $(9,233) ======== ========
======== ======== Net loss per common share: Basic and diluted
$(1.37) $(2.05) $(2.77) $(3.39) ======= ======= ======= =======
Weighted average common shares outstanding: Basic and diluted 2,816
2,732 2,775 2,723 ===== ===== ===== ===== PECO II, INC.
CONSOLIDATED BALANCE SHEETS (In thousands, except for share data)
December 31, ------------ 2008 2007 ---- ---- ASSETS Current
assets: Cash and cash equivalents $5,814 $7,935 Accounts
receivable, net 4,366 3,685 Inventories, net 8,533 11,433 Cost and
earnings in excess of billings on uncompleted contracts 622 514
Prepaid expenses and other current assets 265 263 Assets held for
sale 28 219 Restricted cash 834 - --- --- Total current assets
20,462 24,049 ------ ------ Property and equipment, at cost: Land
and land improvements 195 195 Buildings and building improvements
4,628 4,628 Machinery and equipment 2,895 2,869 Furniture and
fixtures 5,518 5,527 ----- ----- 13,236 13,219 Less-accumulated
depreciation (10,109) (9,737) ------- ------ Property and
equipment, net 3,127 3,482 Other assets: Idle facility 800 1,000
Goodwill - 1,515 Intangibles, net 2,748 3,822 Investment in joint
venture 1 2 - - Total assets $27,138 $33,870 ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Borrowings under line of credit $834 $- Accounts payable 4,381
4,485 Billings in excess of cost and estimated earnings on
uncompleted contracts 235 510 Accrued compensation expense 923 722
Accrued income taxes 56 81 Other accrued expenses 1,633 1,800 -----
----- Total current liabilities 8,062 7,598 ----- -----
Shareholders' equity: Common stock, no par value: authorized
150,000,000 shares; 2,816,527 and 2,739,157 shares issued at
December 31, 2008 and 2007, respectively 3,573 3,475 Warrants -
5,078 Additional paid-in capital 121,901 116,412 Accumulated
deficit (106,398) (98,693) -------- ------- Total shareholders'
equity 19,076 26,272 ------ ------ Total liabilities and
shareholders' equity $27,138 $33,870 ======= ======= 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. We recognized an impairment charge in the
fourth quarter of each of 2007 and 2008 as a result of our required
annual goodwill impairment testing. We have presented EBITDA
excluding these goodwill impairment charges because we believe that
such charges are of a non-recurring, one-time nature and that their
exclusion will be useful to our investors to compare our
period-over-period and year-over-year performance. Reconciliation
of GAAP Net Loss to EBITDA and EBITDA Excluding Goodwill Impairment
(unaudited) For the Three Months For the Twelve Months Ended Ended
December 31, December 31, (In thousands) 2008 2007 2008 2007 2008
and 2007 EBITDA Breakdown Net Loss per GAAP $(3,868) $(5,597)
$(7,704) $(9,233) Interest expense $4 $2 $15 $22 Taxes $27 $(1) $45
$43 Depreciation/ amortization $352 $405 $1,494 $1,658 Non-cash
stock-based compensation $127 $76 $456 $440 EBITDA $(3,358)
$(5,115) $(5,694) $(7,070) Goodwill impairment $1,503 $4,426 $1,503
$4,426 EBITDA excluding goodwill impairment $(1,855) $(689)
$(4,191) $(2,644) DATASOURCE: PECO II, Inc. CONTACT: John G.
Heindel, President, Chief Executive Officer, Chief Financial
Officer and Treasurer of PECO II, Inc., +1-419-468-7600 Web Site:
http://www.peco2.com/
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