Advanced Photonix, Inc. Reports Third Quarter Fiscal 2010 Results

Gross profit margins resist downward pressure despite recession's revenue drop


ANN ARBOR, Mich., Feb. 8  /PRNewswire-FirstCall/ -- Advanced Photonix, Inc.® (NYSE Amex: API) (the "Company") today reported its third quarter fiscal 2010 results ending December 25, 2009.

  Financial Highlights for the Third Quarter Ended December 25, 2009

  --  Net sales for the quarter were $4.6 million, a decrease of $3 million,
      or 40%, compared to revenues for the third quarter ended December 26,
      2008. The decrease was broad based across four of its five markets.
  --  Gross profit margin for the first nine months was 42% compared to 45%
      for the prior year nine month period, despite a 32% drop in revenue
      when compared to the record revenues in the first nine months of last
      year. Strong gross margins reflect the results of company-wide cost
      reduction initiatives and prior years' facilities consolidation
      activities.
  --  GAAP net loss for the quarter was $1,344,000, or $.05 per diluted
      share, as compared to a GAAP net loss of $359,000, or $.01 per diluted
      share for the quarter ended December 26, 2008. GAAP net loss year to
      date was $2,832,000 or $.12 per diluted share, as compared to a net
      loss of $538,000, or $.02 per diluted share, for the prior year
      period.
  --  The Non-GAAP net loss for the third quarter of fiscal 2010 was
      $921,000, or $0.04 per diluted share, as compared to a Non-GAAP net
      income of $261,000, or $.01 per diluted share, for the comparable
      quarter ended December 26, 2008. The Company reported year to date
      Non-GAAP net loss of $1,058,000, or $0.04 per diluted share, as
      compared to a Non-GAAP income of $1,434,000, or $0.06 per diluted
      share, for the comparable prior year period.
  --  On an EBITDA basis (which is defined as GAAP earnings before interest,
      taxes, depreciation, and amortization), the Company reported EBITDA of
      a negative $646,000 for the third quarter of fiscal 2010 as compared
      to positive EBITDA of $591,000 for the quarter ended December 26,
      2008. For the year to date, the Company reported negative EBITDA of
      $312,000 as compared to positive EBITDA of $2,183,000 for the
      comparable prior year period.




Richard Kurtz, Chairman and Chief Executive Officer, commented, "The first nine months of the year have been negatively impacted by the recessionary environment and this quarter was hit exceptionally hard.  Our proactive actions in making the necessary cost reduction steps and consolidating our facilities have paid off and helped minimize the financial impact. We continue to expect the balance of the year to be challenging, but believe we have hit the bottom of the revenue decline and expect to slowly return to growth driven mainly by our HSOR and Terahertz product platforms.  We do not anticipate top line revenue to meet our 2009 guidance, predominantly due to the continued softness in capital expenditures resulting from the recession. Our new Terahertz contract for the F-35 announced last month will strengthen our application product development in the aerospace and industrial markets and we will continue to develop the next generation 100G HSOR products that will be shipping in the coming quarters. While the recession's impact on our revenues has been severe this year, we expect to resume our organic growth in FY2011 when capital expenditures begin to return to normal levels."

The Company will hold a conference call to discuss the results for the third quarter ended December 25, 2009 on Monday, February 8, 2010 at 4:30 PM EST. Participants can dial into the conference call at 888-713-4218 (617-213-4870 for international) using the pass code 25674092. The call will be webcast live by CCBN and can be accessed at Advanced Photonix's web site at http://investor.advancedphotonix.com/ or at http://www.earnings.com/. An audio replay of the call will be available shortly thereafter the same day and will remain on-line for two weeks. The replay number is 888-286-8010 (617-801-6888 for international) using pass code 24885602.

Forward-looking Statements:

The information contained herein includes forward looking statements that are based on assumptions that management believes to be reasonable but are subject to inherent uncertainties and risks including, but not limited to, risks associated with the move of our wafer fabrication facilities, technological obsolescence of existing product lines and technological obstacles which may prevent or slow the development and/or manufacture of new products, limited (or slower than anticipated) customer acceptance of new products which have been and are being developed by the Company and a decline in the general demand for optoelectronic products.

                        CONSOLIDATED BALANCE SHEETS

                                             December 25,    March 31,
           Assets                                2009          2009
  Current Assets
    Cash and cash equivalents                $2,007,000     $2,072,000
    Restricted cash                             500,000        500,000
    Accounts receivable, net                  2,505,000      3,284,000
    Inventories, net                          3,681,000      3,669,000
    Prepaid expenses and
     other current assets                       338,000        252,000
                                                -------        -------
        Total current assets                  9,031,000      9,777,000
    Equipment & Leasehold
     Improvements, at cost                   11,241,000     11,470,000
    Accumulated depreciation                 (7,673,000)    (7,148,000)
                                             ----------     ----------
    Net Equipment and Leasehold
     Improvements                             3,568,000      4,322,000
    Goodwill                                  4,579,000      4,579,000
    Patents, net                                861,000        705,000
    Intangible assets, net                    6,744,000      8,270,000
    Other assets                                110,000        388,000

                                            -----------    -----------
      Total assets                          $24,893,000    $28,041,000
                                            ===========    ===========

       Liabilities and shareholders' equity
  Current liabilities
    Accounts payable and accrued expenses    $2,394,000     $2,484,000
    Compensation and related withholdings       940,000      1,037,000
    Current portion of long-term debt -
     line of credit                           1,394,000              -
    Current portion of long-term debt -
     related parties                            450,000      1,401,000
    Current portion of long-term debt -
     bank term loan                           1,229,000        434,000
    Current portion of long-term debt -
     MEDC                                     1,014,000        353,000
                                              ---------        -------
        Total current liabilities             7,421,000      5,709,000
  Long term debt, less current portion -
   MEDC                                       1,210,000      1,871,000
  Long term debt, less current portion -
   bank line of credit                                -      1,394,000
  Long term fair value of warrant liability     172,000              -
  Long term debt, less current portion-
   related parties                              951,000      1,121,000
                                                -------      ---------
      Total liabilities                       9,754,000     10,095,000

  Shareholders' equity
  Class A common stock, $.001 par value,
   50,000,000 shares authorized; December
   25, 2009 -24,463,978 shares issued and
   outstanding; March 31, 2009 -24,089,726
   shares issued and outstanding                 24,000         24,000
  Additional paid-in capital                 50,100,000     52,400,000
  Accumulated deficit                       (34,985,000)   (34,478,000)
                                            -----------    -----------
      Total shareholders' equity             15,139,000     17,946,000

                                            -----------    -----------
    Total liabilities and
     shareholders' equity                   $24,893,000    $28,041,000
                                            ===========    ===========



                   CONSOLIDATE STATEMENT OF OPERATIONS (unaudited)
   
                                           
                          Three months ended         Nine months ended
                          ------------------         -----------------
                        December 25, December 26, December 25, December 26,
                            2009         2008         2009         2008

  Net Sales              $4,588,000  $7,606,000   $15,947,000  $23,565,000
  Cost of Sales           3,009,000   4,329,000     9,306,000   12,967,000
                          ---------   ---------     ---------   ----------
  Gross Margin            1,579,000   3,277,000     6,641,000   10,598,000

  Other Operating
   Expenses
    Research &
     Development          1,183,000   1,112,000     3,413,000    3,321,000
    General &
     Administrative         998,000   1,236,000     3,152,000    3,751,000
    Amortization            518,000     516,000     1,552,000    1,561,000
    Wafer Fab
     Consolidation                -      58,000        40,000      266,000
    Sales & Marketing       380,000     605,000     1,249,000    1,935,000
                            -------     -------     ---------    ---------
      Total Other
       Operating
       Expenses           3,079,000   3,527,000     9,406,000   10,834,000

  Net Operating Income
   (Loss)                (1,500,000)   (250,000)   (2,765,000)    (236,000)

  Other (Income) & Expense
    Other (Income)/Expense  (62,000)          -       (54,000)       2,000
    Interest Income          (1,000)      3,000        (4,000)     (25,000)
    Interest Expense-
     Related Parties         15,000      22,000        44,000       77,000
    Change in fair value
     of warrant liability  (174,000)          -      (121,000)           -
    Interest Expense         66,000      84,000       202,000      248,000
                             ------      ------       -------      -------
          Other (Income) 
           & Expense       (156,000)    109,000        67,000      302,000

  Net Income (Loss)     $(1,344,000)  $(359,000)  $(2,832,000)   $(538,000)
  Basic and diluted
   earnings per share        $(0.05)     $(0.01)       $(0.12)      $(0.02)

  Weighted number of
   shares outstanding
   -Basic and diluted    24,483,000  24,109,000    24,323,000   24,057,000


  Non-GAAP Financial Measures


The Company provides Non-GAAP Net Income and EBITDA as supplemental financial information regarding the Company's operational performance. These Non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. Non-GAAP Net Income and EBITDA should not be considered in isolation from or as a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from similar measures used by other companies. Reconciliation of Non-GAAP Net Income and EBITDA to GAAP net income and loss are set forth in the financial schedule section below.

   
          Reconciliation of Non-GAAP Income (loss) to GAAP Income (loss)
                                       
                       Three months ended        Nine months ended
                       ------------------        -----------------
                    December 25, December 26, December 25, December 26,
                        2009         2008         2009         2008

  Net Income (Loss) $(1,344,000)  $(359,000)  $(2,832,000)   $(538,000)

  Add Back:
    Change in warrant
     fair value        (174,000)          -      (121,000)           -
    Amortization -
     intangibles/
     patents            519,000     517,000     1,552,000    1,561,000
    Stock Option
     Compensation
     Expense             78,000      45,000       303,000      145,000
    Other Expense -
     Wafer
     Fabrication              -      58,000        40,000      266,000
                            ---      ------        ------      -------
       Subtotal -
        Add backs       423,000     620,000     1,774,000    1,972,000
                        -------     -------     ---------    ---------
      Non-GAAP Income
        (Loss)        $(921,000)   $261,000   $(1,058,000)  $1,434,000
                      =========    ========   ===========   ==========

  Net earnings loss per
   share                 $(0.04)      $0.01        $(0.04)       $0.06

  Weighted Number of
   shares
   outstanding       24,483,000  24,109,000    24,323,000   24,057,000



                  Reconciliation of EBITDA to GAAP income/(loss)

                       Three months ended        Nine months ended
                       ------------------        -----------------
                    December 25, December 26, December 25, December 26,
                        2009         2008         2009         2008

  Net Income (Loss) $(1,344,000)  $(359,000)  $(2,832,000)   $(538,000)

  Add Back:
    Net Interest
     expense
     (income)            80,000     109,000       242,000      300,000
    Interest expense -
     Warrant (fair
     value)            (174,000)          -      (121,000)           -
    Depreciation
     Expense            273,000     324,000       847,000      860,000
    Amortization        519,000     517,000     1,552,000    1,561,000
                        -------     -------     ---------    ---------
       Subtotal -
        Add backs       698,000     950,000     2,520,000    2,721,000
                        -------     -------     ---------    ---------
         EBITDA       $(646,000)   $591,000     $(312,000)  $2,183,000
                      =========    ========     =========   ==========



  About Advanced Photonix, Inc.


Advanced Photonix, Inc. (R) (NYSE Amex: API) is a leading supplier with a broad offering of optoelectronic products to a global customer base. We provide optoelectronic solutions, high-speed optical receivers and terahertz instrumentation for telecom, homeland security, military, medical and industrial markets. With our patented technology and state-of-the-art manufacturing we offer industry leading performance, exceptional quality, and high value added products to our OEM customer base. For more information visit us on the web at http://www.advancedphotonix.com/.

  Contact:
  Richard Kurtz, Advanced Photonix, Inc. [phone]
  Cameron Donahue, Hayden IR [phone]; 

DATASOURCE: Advanced Photonix, Inc.



CONTACT:  Richard Kurtz of Advanced Photonix, Inc., [phone]; or

Cameron Donahue of Hayden IR, [phone]; , for

Advanced Photonix, Inc.



Web Site:  http://www.advancedphotonix.com/ 

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