Xantrex(TM) Technology Inc. Reports 2008 Second Quarter

VANCOUVER, BRITISH COLUMBIA -- (MARKET WIRE) -- Jul 29, 2008 -- Xantrex Technology Inc. (TSX: XTX) reported financial results for the second quarter ended June 30, 2008.

On July 27, 2008, Xantrex announced that it has entered into a definitive agreement to be acquired by Schneider Electric for a purchase price of $15.00 per share. The all-cash transaction has an equity value of approximately $500 million. As a condition to the sale of Xantrex to Schneider Electric, Xantrex also entered into a definitive agreement for the sale of its Programmable Power business to AMETEK, Inc.

Revenue for the second quarter rose 42.5 percent to $84.4 million from $59.2 million a year ago. Renewable Power revenue rose 151 percent, which, together with a modest increase in Mobile revenues, more than offset lower Programmable revenue.

Gross margin increased to 33.1 percent from 31.5 percent a year ago. The improvement was a result of higher margins on Renewable products introduced during the past twelve months, and leverage from higher manufacturing volume, which offset a $656,000 charge for the consolidation of manufacturing facilities. We do not expect any further charges for this manufacturing facilities consolidation. Excluding the charge, gross margin would have been 33.8 percent.

Net income was $4.0 million, or $0.13 per share, compared with a loss a year ago of $1.2 million, or $0.04 per share. Adjusted net income was $5.7 million, or $0.19 per share, compared with $843,000, or $0.03 per share, a year ago. Net income and adjusted net income benefited from strong growth in revenue, higher gross margin, and the containment of operating expenses. Adjusted EBITDA was $10.2 million compared with $4.2 million a year ago (Please see table below for a reconciliation of the non-GAAP measures to net income).

Mr. Mossadiq S. Umedaly, Chairman, stated, "We have begun to consistently execute on our growth strategy with Renewable Power showing exceptionally strong growth, and Programmable Power and Mobile Power positioned for improved second half performance with modest growth for the full year. Improved manufacturing and supply chain operations, higher gross margin, and contained operating expenses helped bring the revenue acceleration to the bottom line."

Mr. John Wallace, CEO of Xantrex, commented, "A strong order book in solar and wind products, and a successful step-up in production and deliveries combined to yield record Renewable Power revenue during the second quarter. Programmable revenues were lower compared with a year ago reflecting timing of large orders, deferrals in capital spending by semiconductor manufacturers, and long product lead times from our recently integrated manufacturing facility in San Diego, California. Within Mobile Power, growth in commercial products offset reduced revenue in recreational products. With regard to improved profitability, our overall gross margin benefited from redesigned Renewable Power products that carry higher margins, while cost of goods and operating expenses benefited from operating leverage."

Mr. Wallace concluded, "For the second half of 2008, we expect revenue from Renewable Power products to remain strong but somewhat below the run rate achieved in the second quarter. This is due to recent changes in Spanish renewable energy incentives which may have the effect of reducing sales in Spain, offset to some extent by increasing sales in other markets. We expect Programmable Power product revenues to increase from the second half of 2007, and to increase over the first half of this year, as a result of stronger bookings outlook and improved product delivery lead times to our customers. Within Mobile Power, our two primary objectives are realizing the full potential from our Duracell® partnership and sustaining our growth in the commercial vehicle market to offset the slowdown in the recreational market. We anticipate that revenue from mobile power applications will increase modestly in the second half of 2008. Overall, we expect higher revenue, improved gross margin, and contained operating expenses to enable us to exceed our stated objective of doubling our 2007 adjusted EBITDA and net income per share."


               Three months ended June 30       Six months ended June 30
           ------------------------------- --------------------------------
                                         %                                %
                  2008        2007  change         2008        2007  change
           ------------------------------- --------------------------------
Revenue    $84,371,000 $59,215,000     42% $146,361,000 $99,121,000     48%
Net income                             n/a                              n/a
 (loss)     $3,964,000 ($1,182,000)          $4,505,000 ($1,290,000)
Adjusted
 net
 income     $5,651,000    $843,000    570%   $8,083,000  $1,370,000    490%
Net income
 (loss)
 per share
 (diluted)       $0.13      ($0.04)    n/a        $0.15      ($0.04)    n/a
Adjusted
 net income
 per share
 (diluted)       $0.19       $0.03    533%        $0.27       $0.05    440%
Fully
 diluted avg.
 shares
 outstand-
 ing        29,910,654  29,441,933      2%   29,465,669  29,234,581      1%

Note: On June 30, 2008, the Bank of Canada's exchange rate for one Canadian dollar was $0.98 compared with $0.94 on June 30, 2007.

Our complete second quarter 2008 Management's Discussion and Analysis and Financial Statements are available on the Xantrex web site at www.xantrex.com.

Cautionary Note on Forward-looking Information

Some of the statements contained in this report are forward-looking statements. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. These forward looking statements can be identified by the use of words such as "expect", "may", "intend", "believe" and similar expressions. Actual results, including Xantrex's growth rate, could differ materially from those currently anticipated in forward looking statements, based on regional and global economic growth, electricity supply and demand, government regulations and incentives, technological advances by Xantrex and others, our ability to execute on our plans, and other factors, including those discussed in our 2007 Annual "Management's Discussion and Analysis". Readers should not place undue reliance on Xantrex's forward-looking statements. No forward-looking statement is a guarantee of future results.

Non-GAAP Financial Measure

For the quarter June 30, 2008 we are disclosing adjusted EBITDA and adjusted net income, non-GAAP financial measures, as supplemental indicators of operating performance. We define adjusted EBITDA as net income before interest, income taxes, depreciation, amortization, stock option compensation expense and manufacturing plant consolidation costs, and we define adjusted net income as net income excluding the after-tax impact of stock option compensation expense, intangible asset amortization and manufacturing plant consolidation costs. We are presenting the non-GAAP financial measures in our filings because we use them internally to make strategic decisions, forecast future results and evaluate our performance and because we believe that our current and potential investors and many analysts use these measures to assess our current and future operating results and to make investment decisions. In addition, management believes that these measures are useful to investors in enabling them to better assess changes in our business across different time periods. Investors should not consider adjusted EBITDA or adjusted net income as alternatives to net income, nor to cash provided by operating activities, nor to any other indicators of performance or liquidity which have been determined under GAAP. Adjusted EBITDA and adjusted net income do not have any standardized meaning prescribed by GAAP and may be different from and therefore not comparable to similar measures presented by other companies. See below for a reconciliation of adjusted EBITDA and adjusted net income to net income.

 

                                                            Three  months  ended                  Six  months  ended  
                                                                        June  30                                      June  30
                                                  -----------------------      -----------------------
                                                              2008                  2007                  2008                  2007
                                                  -----------------------      -----------------------

Net  income  (loss)                $        3,964      $      (1,182)    $        4,505      $      (1,290)
  Interest  income                                (50)                  (47)                  (97)                (650)
  Interest  expense                              885                1,104                2,125                1,323
  Income  taxes                                  2,111                    297                2,440                    787
  Depreciation  and
    amortization                                2,474                3,097                5,032                4,217
  Stock-based        
    compensation                                    327                    470                    736                    836
  Manufacturing  plant
    consolidation  costs  (1)              533                    454                1,254                    454
                                                  -----------------------      -----------------------
Adjusted  EBITDA                    $      10,244      $        4,193      $      15,995      $        5,677
                                                  -----------------------      -----------------------
                                                  -----------------------      -----------------------


                                                            Three  months  ended                  Six  months  ended  
                                                                        June  30                                      June  30
                                                  -----------------------      -----------------------
                                                              2008                  2007                  2008                  2007
                                                  -----------------------      -----------------------

Net  income  (loss)                $        3,964      $      (1,182)    $        4,505      $      (1,290)
Net  income  (loss)
  per  share,  diluted                        0.13                (0.04)                0.15                (0.04)
Adjustments
Add:
  Stock-based
    compensation                                    327                    470                    736                    836
  Intangible  asset
    amortization  (2)                        1,635                2,032                3,269                2,466
  Manufacturing  plant
    consolidation  costs  (1)              533                    454                1,254                    454

Deduct:
  Tax  recovery  for
    intangible  asset
    amortization                                  (621)                (772)            (1,242)                (937)
  Tax  recovery  for
    manufacturing  plant                    (187)                (159)                (439)                (159)

Non-GAAP  net  income                      5,651                    843                8,083                1,370
Non-GAAP  net  income
  per  share,  diluted              $        0.19      $          0.03      $          0.27      $          0.05
Shares  used  to
  calculate  non-GAAP
  net  income  per
  share,  diluted                    29,910,654      29,441,933      29,465,669      29,234,581

(1)  Manufacturing  plant  consolidation  costs  are  the  costs  associated  with  
        the  closure  of  the  Burnaby,  British  Columbia  and  Arlington,  Washington
        manufacturing  facilities  as  we  consolidate  the  manufacture  of  
        programmable  products  in  our  San  Diego  facility,  and  solar  commercial  
        products  in  our  Livermore  facility.  In  the  second  quarter  of  2008  
        these  costs  included  a  $123,000  gain  on  sale  of  manufacturing  assets,
        included  in  other  income.

(2)  Intangible  asset  amortization  is  primarily  for  the  intellectual  
        property  acquired  as  part  of  the  acquisition  of  Elgar  Electronics  
        Corporation.

 
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