Dynex Power Inc. - Third Quarter Results Remain in Line with Expectations

Year to Date Shows Strong Growth in Revenue

Listing: TSX Venture Exchange

Symbol: DNX

LINCOLN, England, Nov. 17 /CNW Telbec/ - Dynex Power Inc., a leading specialist high power semiconductor company, today announced results for the third quarter of 2009.

Summary financial information in Canadian dollars for the three and nine months ended September 30th, 2009 is as follows:

    
    -------------------------------------------------------------------------
                     Sept 30, 2009 Sept 30, 2008      YTD 2009      YTD 2008
                             $'000         $'000         $'000         $'000
    -------------------------------------------------------------------------
    Revenue                  9,347         9,349        30,072        27,206
    Gross Margin             1,894         2,146         7,208         8,628
    Earnings before Tax        823           395         3,035         3,857
    Net Earnings               701           395         2,591         3,857
    No. of Common
     Shares-average     40,195,637    39,748,782    40,195,105    36,147,746
    Earnings per Share
     in Dollars-diluted       0.02          0.01          0.06          0.10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Revenue remained strong in the third quarter matching that reported in the corresponding quarter of last year. Once again, there were particularly good sales of Bipolar Discrete and Power Electronic Assembly products, while revenue from Power Modules and Integrated Circuit products both declined. Overall, revenue remains in line with expectations.

Year to date revenue was 11% ahead of the same nine-month period last year. Here again, the strong performing product groups were Bipolar Discrete and Power Electronic Assemblies. There was a small decrease in Power Modules revenue and a significant decrease in Integrated Circuit revenue. Overall, management remained pleased with the Company's revenue performance in the challenging economic environment.

Dynex's product mix in the quarter was slightly less favourable than in 2008, resulting in a gross profit margin for the third quarter of 20.3% compared to 23.0% in 2008. The year to date gross profit margin was 24.0% compared to 31.7% last year. The Company indicated last year that the gross profit margin in the first half of 2008 was exceptionally high and could not be maintained.

Dynex reported earnings before income tax of $823,000 in the quarter, significantly ahead of the $395,000 reported in the corresponding period of 2008. For the year to date, earnings before income tax was $3.0 million compared to $3.9 million in the corresponding period of last year. Earnings in the first half of last year had been exceptionally high. Brought forward tax losses in the UK will be exhausted during 2009 and the Company is now providing for tax on its earnings. The average tax rate is estimated to be 14% of UK earnings (15% of consolidated earnings) for this year. The Company expects the rate to rise to nearer to the statutory UK rate of 28% in future years.

The book to bill ratio (a measure of whether new orders are being received as fast as existing orders are being completed) fell to 0.9 to 1 during the quarter indicating a weaker marketplace and a more competitive environment. However, to date Dynex has not experienced the revenue contraction described by some semiconductor analysts. In fact, Dynex's order book remains strong with backlog equivalent to approximately eleven months' billings. The strength of the order book gives management some confidence that revenue can be maintained at the current level for at least the next two quarters.

Dr Paul Taylor , President and Chief Executive Officer commented that "The order book remains strong and we still expect revenue overall in 2009 to be well ahead of last year and to continue at this level at least into the early part of next year. The Bipolar Discrete business is performing particularly strongly. Our outlook is for continuing growth in the Bipolar Discrete and Power Electronic Assemblies businesses, but sales in Power Modules and Integrated Circuits will remain depressed for the time being. However, we are working together with CSR Times Electric to qualify our IGBT parts for use in their power converter systems and it is our objective that this will lead to significant sales of IGBT die to them in future. We have announced a major expansion of our IGBT capacity to meet this expected demand and completion of this expansion and qualification of the parts with CSR Times Electric is our major priority at the moment".

Bob Lockwood , Chief Financial Officer, stated that "the third quarter earnings remained strong. Looking forward, revenue is expected to continue at levels similar to those seen in the last two quarters. This should enable the business to continue reporting quarterly profits albeit that the net earnings for the year will be lower than in 2008 as a result of a less favourable product mix and the Company having to provide for tax on its earnings. The expansion of our IGBT facility is a major project and it will limit the growth we can achieve next year, but should lead to exciting new opportunities for the Company thereafter".

Mr Lu, Chairman of Dynex and President and Executive Director of CSR Times Electric, commented again on how well he thought Dynex was performing in the current economic conditions. In addition, he said "I am pleased with the progress that has taken place on the expansion of Dynex's facilities and the qualification of die for use by CSR Times Electric. Mr Lu confirmed that CSR Times Electric was providing every assistance it could to Dynex with these two vital projects".

The Company announced that it had filed a preliminary prospectus for a rights issue on 26th October 2009 to raise the finance required for the expansion of its IGBT fabrication facility. The Company expects to file a final prospectus in the next few days setting out full details of the issue. In the meantime, the Company has borrowed money to finance the initial work on the project. The loan was guaranteed by CSR Times Electric.

In commenting on its expectations, the Company cautioned existing and potential shareholders about relying on the Company's expectations in that the Company's expectations contain forward looking statements and assumptions which are subject to the risks and uncertainties of the markets and the future, which could cause actual results to differ materially from expectations, and which are each difficult and subjective to forecast. Certain of those risks and uncertainties are discussed in the Management's Discussion and Analysis for the quarter ended September 30th, 2009 and include, among other things, risks and uncertainties relating to: the level of worldwide demand for power semiconductors and power semiconductor assemblies; the level of investment in power electronic equipment, electrification of transport systems, alternative power generation and high quality power transmission and distribution; the worldwide demand for and supply of silicon; and fluctuations in exchange rates between Canadian Dollars, Sterling, US dollars and Euros. As a consequence of these and other risks and uncertainties, shareholders and potential investors must make their own independent judgments about the accuracy and reliability of the Company's expectations. Dynex disclaims any intention or obligation to update or revise any forward looking statement whether as a result of new information, future events or otherwise.

About the Company

Dynex designs and manufactures high power bipolar semiconductors, high power insulated gate bipolar transistor (IGBT) modules, high power electronic assemblies and radiation hard silicon-on-sapphire integrated circuits (SOS IC's). The Company's power products are used worldwide in power electronic applications including electric power transmission and distribution, renewable and distributed energy, marine and rail traction motor drives, aerospace, electric vehicles, industrial automation and controls and power supplies. Its IC products are used in demanding applications in the aerospace industry. Dynex Semiconductor Ltd is its only operating business and is based in Lincoln, England in a facility housing the fully integrated silicon fabrication, assembly and test, sales, design and development operations. Dynex is majority owned by Zhuzhou CSR Times Electric Co., Ltd.

Zhuzhou CSR Times Electric Co., Ltd. is based in Hunan Province in the People's Republic of China . It is listed on the Hong Kong stock exchange. CSR Times Electric is mainly engaged in the research, development, manufacture and sales of locomotive train power converters, control systems and other train-borne electrical systems, as well as the development, manufacturing and sales of urban railway train electrical systems. In addition, CSR Times Electric is also engaged in the design, manufacturing and sales of electric components including power semiconductor devices for the railway industry, urban railway industry and non-railway purposes.

Press announcements and other information about Dynex are available at www.dynexsemi.com.

Further information on CSR Times Electric can be found at www.timeselectric.cn/en

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

    
    DYNEX POWER INC.
    Consolidated Statements of Earnings and Deficit (Unaudited)
    Quarters Ended September 30th, 2009 and 2008
    -------------------------------------------------------------------------
                          3 months      3 months           YTD           YTD
                         Sept 30th     Sept 30th     Sept 30th     Sept 30th
                              2009          2008          2009          2008
                      -------------------------------------------------------

    Revenue           $  9,347,401  $  9,348,952  $ 30,072,492  $ 27,206,284
    Cost of sales        7,453,418     7,203,244    22,864,053    18,578,186
    -------------------------------------------------------------------------
    Gross margin         1,893,983     2,145,708     7,208,439     8,628,098
    -------------------------------------------------------------------------

    Expenses
    General and
     administration        702,683     1,261,504     2,352,821     3,230,102
    Sales and marketing    198,541       230,918       717,098       724,061
    Research and
     development           295,727       216,176       786,031       635,152
    Interest expense       119,159       135,587       381,091       499,892
    -------------------------------------------------------------------------
                         1,316,110     1,844,185     4,237,041     5,089,207
    -------------------------------------------------------------------------
    Earnings before
     other income
     (expenses) and
     income taxes          577,873       301,523     2,971,398     3,538,891
    -------------------------------------------------------------------------
    Other income
     (expenses)
    Interest and other
     income                 63,240        86,470       182,627       178,615
    Foreign exchange
     gain (loss)           181,403         7,116      (118,766)      139,080
    -------------------------------------------------------------------------
                           244,643        93,586        63,861       317,695
    -------------------------------------------------------------------------
    Earnings before
     income taxes          822,516       395,109     3,035,259     3,856,586
    Income taxes          (121,858)            -      (444,679)            -
    NET EARNINGS           700,658       395,109     2,590,580     3,856,586
    DEFICIT, BEGINNING
     OF PERIOD          (5,279,222)   (8,269,350)   (7,169,144)  (11,730,827)
    -------------------------------------------------------------------------
    DEFICIT, END OF
     PERIOD           $ (4,578,564) $ (7,874,241) $ (4,578,564) $ (7,874,241)
    -------------------------------------------------------------------------



    DYNEX POWER INC.
    Consolidated Statements of Comprehensive Income (Unaudited)
    Quarters Ended September 30th, 2009 and 2008
    -------------------------------------------------------------------------
                          3 months      3 months           YTD           YTD
                         Sept 30th     Sept 30th     Sept 30th     Sept 30th
                              2009          2008          2009          2008
                      -------------------------------------------------------

    Net earnings      $    700,658  $    395,109  $  2,590,580  $  3,856,586
    -------------------------------------------------------------------------

    Other Comprehensive
     loss, net of tax:
    Unrealized foreign
     exchange on
     translating
     financial
     statements of
     self-sustaining
     foreign operations (1,020,340)     (390,137)     (349,551)     (291,322)
    -------------------------------------------------------------------------

    OTHER COMPREHENSIVE
     LOSS               (1,020,340)     (390,137)     (349,551)     (291,322)
    -------------------------------------------------------------------------

    COMPREHENSIVE
     (LOSS) INCOME    $   (319,682) $      4,972  $  2,241,029  $  3,565,264
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    DYNEX POWER INC.
    Consolidated Statements of Accumulated Other Comprehensive Loss and
     Deficit (Unaudited)
    As at September 30th, 2009 and December 31st, 2008
    -------------------------------------------------------------------------
                                                     Sept 30th      Dec 31st
                                                          2009          2008
                                                  ---------------------------
    Accumulated other comprehensive loss,
     beginning of period                          $ (1,380,101) $   (760,787)
    Other comprehensive loss                          (349,551)     (619,314)
    -------------------------------------------------------------------------
    Accumulated other comprehensive loss            (1,729,652)   (1,380,101)
    Deficit                                         (4,578,564)   (7,169,144)
    -------------------------------------------------------------------------
    TOTAL ACCUMULATED OTHER COMPREHENSIVE LOSS
     AND DEFICIT                                  $ (6,308,216) $ (8,549,245)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    DYNEX POWER INC.
    Consolidated Balance Sheets (Unaudited)
    As At September 30th, 2009 and December 31st, 2008
    -------------------------------------------------------------------------
                                                     Sept 30th      Dec 31st
                                                          2009          2008
                                                  ---------------------------
    CURRENT ASSETS
    Cash                                          $  2,488,658  $    404,638
    Accounts receivable                              6,441,129     6,081,965
    Inventories                                      8,277,217     8,041,747
    Income tax recoverable                                   -         2,838
    Prepaid expenses and deposits                      673,872       696,625
    -------------------------------------------------------------------------
                                                    17,880,876    15,227,813
    PROPERTY, PLANT & EQUIPMENT                     12,230,406     5,433,347
    -------------------------------------------------------------------------
                                                  $ 30,111,282  $ 20,661,160
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CURRENT LIABILITIES
    Accounts payable and accrued liabilities      $  4,417,468  $  5,688,807
    Income tax payable                                 126,889             -
    Amounts owing to parent company                    850,531             -
    Short-term loans                                12,747,012     3,551,495
    Current portion of long-term debt                   33,210        45,610
    Obligation under capital leases                    117,525       114,146
    Current portion of deferred revenue              1,266,449       137,271
    -------------------------------------------------------------------------
                                                    19,559,084     9,537,329
    LONG-TERM DEBT                                       4,531     2,846,811
    LONG-TERM OBLIGATION UNDER CAPITAL LEASES          549,868       642,659
    LONG-TERM DEFERRED REVENUE                         995,714     1,132,483
    FUTURE INCOME TAX                                  259,107             -
    -------------------------------------------------------------------------
                                                    21,368,304    14,159,282

    SHAREHOLDERS' EQUITY
    Share capital                                  15,051,194     15,051,123
    Deficit                                        (4,578,564)    (7,169,144)
    Accumulated other comprehensive loss           (1,729,652)    (1,380,101)
    -------------------------------------------------------------------------
                                                    8,742,978      6,501,878
    -------------------------------------------------------------------------
                                                  $ 30,111,282  $ 20,661,160
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    DYNEX POWER INC.
    Consolidated Statements of Cash Flows (Unaudited)
    Quarters Ended September 30th, 2009 and 2008
    -------------------------------------------------------------------------
                          3 months      3 months           YTD           YTD
                         Sept 30th     Sept 30th     Sept 30th     Sept 30th
                              2009          2008          2009          2008
                      -------------------------------------------------------
    OPERATING
    Net earnings      $    700,658  $    395,109  $  2,590,580  $  3,856,586
    Items not
     affecting cash
      Amortization         177,182        87,832       447,599       207,046
      Gain on disposal
       of property,
       plant and
       equipment           (34,768)      (37,895)     (104,597)     (115,422)
      Shares and
       options issued
       for services              -         6,890             -        20,625
      Non-cash interest      1,407        17,454         5,232        70,984
      Non-cash grant
       income                    -             -             -        (2,355)
      Provision for
       inventory
       obsolescence         31,942       186,287       510,500       463,787
    Changes in non-cash
     operating working
     capital items        (718,403)      909,840    (1,129,074)     (416,922)
    -------------------------------------------------------------------------
                           158,018     1,565,517     2,320,240     4,084,329
    -------------------------------------------------------------------------
    FINANCING
    Shares issued for
     cash                       71             -            71        34,500
    Increase in amounts
     owing to parent
     company                     -             -     2,521,141             -
    Decrease in amounts
     owing to parent
     company            (2,291,448)            -    (3,355,478)            -
    Increase
     (repayment) of
     short-term loans    5,973,584      (259,035)    9,831,134    (1,171,755)
    Payments on
     capital leases        (30,681)            -       (67,415)            -
    Repayment of
     long-term debt        (13,120)     (108,941)   (1,223,365)     (265,473)
    -------------------------------------------------------------------------
                         3,638,406      (367,976)    7,706,088    (1,402,728)
    -------------------------------------------------------------------------
    INVESTING
    Proceeds of disposal
     of property,
     plant and equipment         -             -           263           401
    Purchase of
     property, plant
     and equipment      (4,849,737)   (1,228,181)   (7,780,890)   (2,625,016)
    -------------------------------------------------------------------------
                        (4,849,737)   (1,228,181)   (7,780,627)   (2,624,615)
    -------------------------------------------------------------------------
    NET (DECREASE)
     INCREASE IN CASH   (1,053,313)      (30,640)    2,245,701        56,986
    Effect of foreign
     currency
     translation on
     cash                 (401,819)       30,646      (161,681)        2,122
    Cash, beginning
     of period           3,943,790       199,969       404,638       140,867
    -------------------------------------------------------------------------
    CASH, END OF
     PERIOD           $  2,488,658  $    199,975  $  2,488,658  $    199,975
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

%SEDAR: 00010667E

For further information: Dr. Paul Taylor, President and Chief Executive Officer or Bob Lockwood, Finance Director and Chief Financial Officer, Dynex Power Inc., Tel: [phone], Email: [email protected]