For the three months ended July 25, 2004, revenue increased 25% to $14,548,000 from $11,658,000 for the third quarter of fiscal 2003. Operating income increased to $230,000. This compares to an operating loss for last year's third quarter of $13,716,000, which included non-cash charges for the impairment of goodwill and other intangible assets that totaled $13,303,000. The Company reported a loss of $213,000, or $0.03 per share, for this year's third quarter, compared to a loss of $13,871,000, or $1.95 per share, for the same quarter last year.
For the nine months ended July 25, 2004, revenue increased 16% to $40,983,000 from $35,288,000 for the same period of fiscal 2003. Operating income was $337,000 for the first nine months of fiscal 2004. This compares to an operating loss of $14,058,000 for the same period a year ago, which included the non-cash impairment charges mentioned above. The loss for this year's first nine months was $1,040,000, or $0.15 per share. This compares to a loss of $14,692,000, or $2.07 per share, for the first nine months of fiscal 2003.
CEO Larry Butler said, "Revenue and operating income have now increased for three consecutive quarters. Also encouraging is that gross margin for this year's third quarter improved to 13% from 10% for the same period last year. New orders booked during the third quarter were ahead of prior year and comparable to second quarter bookings. We remain focused on keeping our costs under control and paying down our debt as rapidly as possible."
Butler noted that Alpha had an excess cash flow payment of $895,000 due to its lenders on September 22, 2004. As a result of the tightening of credit terms from its aluminum suppliers, Alpha does not have cash available to make such payment. It has requested that the lenders waive such payment. To date, the lenders have agreed to forebear for the balance of the calendar year from enforcing any rights or remedies arising from such non-payment. Consequently, all of the Company's debt has been classified as current in the fiscal 2004 third quarter financial statements. Butler said that the Company is in discussions with its lenders regarding a restructuring of its loan agreement, and expects that an amended loan agreement will be reached on a timely basis.
Non-GAAP Financial Measures
EBITDA (earnings before interest, taxes, depreciation and amortization) for the third quarter of fiscal 2004 was approximately $903,000. For the first nine months of fiscal 2004, EBITDA was approximately $2,443,000.
The following table reconciles GAAP to non-GAAP financial measures:
RECONCILIATION FROM GAAP TO NON-GAAP FINANCIAL MEASURES (In Thousands) Three Months Nine Months Ended Ended July 25, July 27, July 25, July 27, 2004 2003 2004 2003 Net Loss $(213) $(13,871) $(1,040) $(14,692) Add (deduct): Depreciation and amortization 673 811 2,103 2,508 Interest expense 443 494 1,380 1,525 Credit for income taxes -- (336) -- (883) EBITDA $903 $(12,902) $2,443 $(11,542)
We have included the discussion of EBITDA in this press release as a "non-GAAP financial measure," which is a measure of our historical performance that is different from measures calculated and presented in accordance with GAAP. Management and the Company's lenders use EBITDA to determine compliance with its debt covenants, and Management uses it as an important measure in evaluating and forecasting the Company's performance.
Alpha has scheduled a conference call today at 11:00 a.m. ET. A simultaneous webcast may be accessed from the News link at www.ALPHAtgi.com. A replay will be available after 1:00 p.m. ET at this same internet address. For a telephone replay, dial (800) 633-8284, reservation #21206738 after 1:00 p.m. ET.
About Alpha Technologies Group
Alpha Technologies Group ( www.ALPHAtgi.com), Inc. is engaged in the manufacture, fabrication and sale of thermal management and non-thermal fabricated products and aluminum extrusions. The Company is one of the leading manufacturers of thermal management products in the United States. Thermal management products, principally heat sinks, dissipate unwanted heat generated by electronic components. The Company's thermal management products serve the automotive, telecommunication, industrial controls, transportation, power supply, factory automation, consumer electronics, aerospace, defense, microprocessor, and computer industries. The Company also sells non-thermal fabricated products and aluminum extrusions to various industries including the construction, sporting goods and other leisure activity markets.
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including the following: changes in demand for the Company's products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, excess or shortage of production capacity, compliance with covenants in the Company's loan documents, ability to meet principal payments under those loan documents and other risks discussed from time to time in the Company's Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances which may take place after the date of this release.
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) Three Months Nine Months Ended Ended July 25, July 27, July 25, July 27, 2004 2003 2004 2003 SALES Fabricated products $10,531 $9,106 $30,746 $27,885 Extruded products 4,017 2,552 10,237 7,403 Total sales 14,548 11,658 40,983 35,288 COST OF SALES 12,678 10,465 35,933 31,425 Gross profit 1,870 1,193 5,050 3,863 OPERATING EXPENSES Research and development 108 97 334 292 Selling, general and administrative 1,532 1,509 4,379 4,326 Impairment of goodwill -- 12,980 -- 12,980 Impairment of other intangible asset -- 323 -- 323 Total operating expenses 1,640 14,909 4,713 17,921 OPERATING (LOSS) INCOME 230 (13,716) 337 (14,058) INTEREST EXPENSE (443) (494) (1,380) (1,525) OTHER INCOME, net -- 3 3 8 LOSS BEFORE BENEFIT FOR INCOME TAXES (213) (14,207) (1,040) (15,575) BENEFIT FOR INCOME TAXES -- (336) -- (883) NET LOSS $(213) $(13,871) $(1,040) $(14,692) LOSS PER COMMON SHARE: BASIC AND DILUTED $(0.03) $(1.95) $(0.15) $(2.07) WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: BASIC AND DILUTED 7,110 7,110 7,110 7,110 ALPHA TECHNOLOGIES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share-Related Data) July 25, October 26, ASSETS 2004 2003 CURRENT ASSETS: Cash and cash equivalents $775 $1,677 Accounts receivable, net 6,948 5,745 Inventories, net 6,554 6,553 Prepaid expenses 1,623 1,364 Total current assets 15,900 15,339 PROPERTY AND EQUIPMENT, net 10,250 12,103 DEFERRED INCOME TAXES 9,995 10,046 OTHER ASSETS, net 429 807 TOTAL ASSETS $36,574 $38,295 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $3,610 $3,486 Accrued compensation and related benefits 829 612 Other accrued expenses 373 716 Current portion of long-term debt 21,600 1,000 Total current liabilities 26,412 5,814 REVOLVING CREDIT FACILITY -- 3,200 LONG-TERM DEBT, Net of current portion -- 18,150 OTHER LONG-TERM LIABILITIES 464 470 TOTAL LIABILITIES 26,876 27,634 STOCKHOLDERS' EQUITY: Preferred stock, $100 par value; 180,000 shares authorized; no shares issued or outstanding -- -- Common stock, $.03 par value; 17,000,000 shares authorized; 8,529,826 shares issued at July 25, 2004 and October 26, 2003 256 256 Additional paid-in capital 47,504 47,504 Accumulated deficit (32,168) (31,128) Accumulated other comprehensive (loss) -- (77) Treasury stock, at cost (1,419,490 common shares at July 25, 2004 and October 26, 2003) (5,894) (5,894) TOTAL STOCKHOLDERS' EQUITY 9,698 10,661 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $36,574 $38,295