Xantrex Technology Inc. Reports Third Quarter 2007 Results



    VANCOUVER, Oct. 30 /CNW/ - Xantrex Technology Inc. (TSX:XTX) reported
financial results for the third quarter and nine months ended September 30,
2007. Revenue rose 54 percent to $62.1 million from $40.3 million for the
year-ago quarter as a result of revenue growth in all four market segments,
Renewable, Programmable, Mobile, and Portable Power. Programmable Power
revenue grew due to the acquisition of Elgar which closed on March 12, 2007.
    Xantrex's net loss for the quarter was $1.1 million, or $0.04 per diluted
share, compared with net income of $1.5 million, or $0.05 per diluted share, a
year ago. Adjusted net income for the 2007 third quarter was $1,038,000, or
$0.04 per diluted share, compared with $2,055,000, or $0.07 per diluted share
a year ago. Adjusted EBITDA was $3.8 million compared with $2.8 million a year
ago, an increase of 36 percent. (Please see table below for a reconciliation
of the non-GAAP measures to net income.)
    The results were affected by, among other things, a charge related to
consolidation of our manufacturing facilities, costs associated with the
introduction of a large number of new products, higher material costs, a
non-cash amortization expense and a higher net interest expense related to the
acquisition of Elgar, and a stronger Canadian dollar.
    Mr. John Wallace, CEO of Xantrex, commented, "During the third quarter,
Xantrex achieved broad-based sales growth, restructured a substantial portion
of its in-house manufacturing, integrated its programmable businesses, and
launched a large number of new products. Despite strong revenue growth, we
incurred a net loss for the third quarter, stemming primarily from temporary
expenses incurred as a consequence of rapid growth and integration,
manufacturing consolidation, amortization of intangible assets and interest
expense, all related to the acquisition of Elgar at the end of the first
quarter this year. Also, the rapid appreciation of the Canadian dollar
impacted earnings. The new product launches in the quarter which improved
revenue also added costs in the form of higher R&D expenses and production
inefficiencies. As a result, the return to profitability will take one more
quarter, but our expectation that significant profit growth will follow this
transitional period has not changed."
    Gross margin for the quarter was 29.4 percent, up from 28.8 percent a
year ago. The increase reflected a higher percentage of sales from
Programmable Power products offset by costs associated with the manufacturing
consolidation, expedited freight charges, production inefficiencies for newly
launched products, and higher commodity material costs.
    Operating expenses increased to $18.2 million, or 29 percent of revenue,
compared with $10.0 million, or 25 percent, a year ago. The increase was
primarily attributable to the inclusion of $5.5 million from the Elgar
acquisition, of which $2.9 million relates to sales. Marketing and
distribution, $1.9 million for research and product development, and $700,000
for general and administrative expenses. Also contributing to higher operating
expenses was the amortization of Elgar acquisition related intangibles, higher
compensation expenses, and a stronger Canadian dollar.
    Mr. Wallace added, "New product activity during the third quarter was
extraordinarily high, following a very active second quarter. In the third
quarter, we launched the 100kW and 250kW commercial grid tie solar inverters
for North America; two Programmable Power products; and eight Duracell-branded
Portable Power products, including pocket inverters, chargers, and small
consumer back-up products."
    Mr. Wallace concluded, "We have revised our outlook for 2007 and now
expect revenue growth for 2007 to be 43% to 45%, slightly below the previously
provided range. Of that increase, we now expect the Elgar acquisition to
contribute $47 million to $50 million, down from our previous estimate of $55
million to $58 million. We expect to be profitable for the last quarter of
2007 and to break even or be modestly profitable for the full year. However,
on an adjusted net income basis we expect to continue to be profitable. We
will comment on the outlook for 2008 when we report the fourth quarter and
full year 2007 results."
    Mr. Mossadiq S. Umedaly, Xantrex's Chairman, said, "The third quarter was
again a strategically productive quarter with key investments made in the last
two years beginning to show results. Revenues grew in all of our business
segments. The focus and introduction of a large number of new products and
upgrading of the entire solar product line has positioned Xantrex as an
industry leader with the most up-to-date solar inverter products, world-wide.
We have begun to invest in sales and distribution in Europe and Asia, which is
starting to add to our North American strength and will contribute
significantly to our growth in future quarters. The acquisition and
integration of Elgar, and the repositioning and new product activity in Mobile
and Portable Power will further enhance growth and profitability. We consider
costs associated with all of these issues of a temporary nature, and look
forward to continued revenue growth and positive net income comparisons in the
quarters ahead."

    
             Three months ended September 30  Nine months ended September 30
            -------------------------------- --------------------------------
                                         %                                %
                2007          2006    change    2007          2006     change
            -------------------------------- --------------------------------
    Revenue  $62,099,000   $40,280,000  54%  $161,220,000  $115,455,000  40%
    Net
     income
     (loss)  ($1,059,000)   $1,472,000  n/a   ($2,349,000)   $4,439,000  n/a
    Adjusted
     net
     income   $1,038,000    $2,055,000 -49%    $2,408,000    $6,145,000 -61%
    Net
     income
     (loss)
     per
     share
     (diluted)    ($0.04)        $0.05  n/a        ($0.08)        $0.15  n/a
    Adjusted
     net
     income
     (loss) per
     share
     (diluted)     $0.04         $0.07 -43%         $0.08         $0.21 -62%
    Fully
     diluted
     avg.
     shares
     outstand-
     ing      28,873,705    29,329,430  -2%    28,813,222    29,660,152  -3%
    

    Note: On September 30, 2007, the Bank of Canada's exchange rate for one
Canadian dollar was $1.01 compared with $0.89 on September 30, 2006.
    Our complete third quarter 2007 Management's Discussion and Analysis and
Financial Statements are available on the Xantrex web site 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. 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 the our 2006 Annual "Management's
Discussion and Analysis". Readers should not place undue reliance on Xantrex's
forward-looking statements.

    Non-GAAP Financial Measure

    For the quarter and nine month periods ended September 30, 2007 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 non-GAAP 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 this quarter 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.
    The following table provides a reconciliation of adjusted EBITDA and
adjusted net income to net income for the periods indicated.

    
                               Three months               Nine months
                            ended September 30         ended September 30
                       --------------------------  --------------------------
                              2007          2006          2007          2006
                       --------------------------  --------------------------

    Net income (loss)  $(1,059,000)  $ 1,472,000   $(2,349,000)  $ 4,439,000
      Interest income      (91,000)     (701,000)     (741,000)   (1,978,000)
      Interest expense   1,253,000         9,000     2,576,000        25,000
      Income taxes        (468,000)      692,000       319,000     2,244,000
      Depreciation and
       amortization      2,978,000       998,000     7,195,000     2,849,000
      Stock-based
       compensation        336,000       329,000     1,172,000       968,000
      Manufacturing
       plant
       consolidation
       costs(1)            870,000             -     1,324,000             -
                       --------------------------  --------------------------
                       --------------------------  --------------------------
    Adjusted EBITDA    $ 3,819,000   $ 2,799,000   $ 9,496,000   $ 8,547,000
                       --------------------------  --------------------------



                               Three months               Nine months
                            ended September 30         ended September 30
                       --------------------------  --------------------------
                              2007          2006          2007          2006
                       --------------------------  --------------------------

    Net income (loss)  $(1,059,000)  $ 1,472,000   $(2,349,000)  $ 4,439,000
    per share, diluted       (0.04)         0.05         (0.08)         0.15

    Adjustments
    Add:
      Stock-based
       compensation        336,000       329,000     1,172,000       968,000
      Intangible asset
       amortization(2)   1,927,000       410,000     4,393,000     1,190,000
      Manufacturing
       plant
       consolidation
       costs(1)            870,000             -     1,324,000             -

    Deduct:
      Tax recovery for
       intangible asset
       amortization       (732,000)     (156,000)   (1,669,000)     (452,000)
      Tax recovery for
       manufacturing
       plant
       consolidation
       costs              (304,000)            -      (463,000)            -

    Adjusted net
     income              1,038,000     2,055,000     2,408,000     6,145,000

    Adjusted net
     income per share,
     diluted           $      0.04   $      0.07   $      0.08   $      0.21
    Shares used to
     calculate adjusted
     net income per
     share, diluted     29,647,600    29,329,430    29,339,905    29,660,152

    (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.

    (2) Intangible asset amortization is primarily for the intellectual
        property acquired as part of the acquisition of Elgar described in
        Note 3(a) of the unaudited interim financial statements.
    

    Conference Call

    Xantrex Technology Inc. has scheduled a conference call for Wednesday,
October 31, 2007 at 6:00 am Pacific Time (9:00 am Eastern Time) to discuss the
third quarter 2007 financial results. To access the conference call by
telephone, please call 416-644-3418 or 604-677-8677. Alternatively, the audio
webcast of the conference call may be accessed through the Xantrex web site at
http://www.xantrex.com/invevents.asp. The audio replay will be available on
the web shortly after the conclusion of the conference call.

    About Xantrex

    Xantrex Technology Inc. (www.xantrex.com) is a world leader in the
development, manufacturing and marketing of advanced power electronic products
and systems for the renewable, programmable, mobile, and portable power
markets. The company's products convert and control raw electrical power from
any central, distributed, renewable, or backup power source into high-quality
power required by electronic and electrical equipment. Headquartered in
Vancouver, British Columbia, the company has facilities in Arlington,
Washington; Livermore and San Diego, California; Elkhart, Indiana; Barcelona,
Spain; and Reading, England. Xantrex is listed on the Toronto Stock Exchange
under the ticker symbol "XTX".





For further information:

For further information: Donna Clark, (604) 422-2601,
donna.clark@xantrex.com

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