Maxwell Technologies Reports Third Quarter Financial Results

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SAN DIEGO, Oct. 28 /PRNewswire-FirstCall/ -- Maxwell Technologies, Inc. (Nasdaq: MXWL) today reported revenue of $31.5 million for its third quarter ended September 30, 2010, up 21 percent over the $26.1 million recorded in the same period in 2009.  BOOSTCAP® ultracapacitor revenue increased by 78 percent, to $18.6 million in Q310, compared with $10.5 million for the same period last year.   Sales of high voltage capacitor and microelectronics products totaled $12.8 million in Q310, down 18 percent from the $15.6 million recorded in Q309.

"Ultracapacitor sales growth continues to be driven by several key target markets, including wind energy, hybrid and electric transit vehicles, micro hybrid automotive systems, backup power and wireless communications," said David Schramm, Maxwell's president and chief executive officer. "Higher ultracapacitor volume and ongoing cost reduction and efficiency improvements were key factors in enabling the company to generate cash from operations for the fifth time in the past six quarters."

On a U.S. generally accepted accounting principles (GAAP) basis, operating loss for the third quarter 2010 was $907,000, compared with an operating loss of $1.7 million in the same period last year. GAAP net loss for Q310 was $2.4 million or $0.09 per share, compared with a GAAP net loss of $4.6 million, or $0.18 per share, in Q309. GAAP operating loss and GAAP net loss comparisons are affected by:

• A $1.7 million operating expense accrual in Q310 to increase the reserve for pending settlement of alleged U.S. Foreign Corrupt Practices Act (FCPA) violations.
• A non-cash loss of $814,000, or $0.03 per share, in Q310 vs. a non-cash loss of $2.8 million, or $0.11 per share, in Q309, based on the quarterly valuation of conversion features and warrants associated with convertible debentures issued in 2005.

On a non-GAAP basis, the company reported an operating profit of $1.6 million, in Q310 compared with an operating loss of $651,000 in the same period last year, and net income of $968,000, or $0.04 per diluted share in Q310, compared with net loss of $816,000, or $0.03 per diluted share in Q309. A reconciliation of GAAP to non-GAAP financial measures is included as an addendum to this release.

GAAP gross margin was 39 percent in Q310, compared with 38 percent in Q309 and 40 percent in Q210.  GAAP operating expenses, totaled approximately $13.2 million, or 42 percent of revenue in Q310, compared with $11.6 million, or 45 percent of revenue in Q309.  Non-GAAP operating expenses totaled approximately $10.9 million, or 35 percent of revenue in Q310, compared with $10.8 million, or 41 percent of revenue in Q309. Cash, cash equivalents and restricted cash totaled $40.1 million as of September 30, 2010, compared with $36.2 million as of June 30, 2010. Complete financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations will be available with the filing of the company's Quarterly Report on Form 10-Q with the Securities & Exchange Commission.

Outlook:  "We expect sequential top line growth of five to seven percent in the fourth quarter," Schramm said. "That growth and ongoing operating performance improvement should enable the company to continue generating cash from operations and be profitable on a non-GAAP basis at the operating income line going forward."

As previously disclosed in its public filings, the company has engaged in settlement discussions with the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) with regard to the ongoing FCPA investigations involving Maxwell's Swiss subsidiary, Maxwell S.A.  As we have also previously disclosed, the company has negotiated an agreement in principle with the SEC to resolve the ongoing FCPA investigation for a payment of approximately $6.35 million, with half to be paid upon signing and the remaining half within 360 days of the Final Judgment, as well as certain other non-financial settlement terms.  The settlement with the SEC remains subject to final approval of the Commission.  Our settlement discussions with the DOJ are ongoing.  As a result of the ongoing discussions with the DOJ, the Company accrued an additional $1.7 million in Q3 of 2010.  We anticipate final resolution of this matter with both the SEC and the DOJ in the near future.  As with all prospective settlements with government entities, final settlement remains subject to final approval of the SEC and DOJ.  Additionally, there can be no assurance that negotiations to-date with the SEC and DOJ will result in final resolution, or that the amount of the loss upon final resolution will not differ significantly from the current estimate.

Non-GAAP Financial Measures: The Company uses non-GAAP financial measures for internal evaluation and to report the results of its business. These non-GAAP financial measures include non-GAAP operating income, non-GAAP net income, and non-GAAP diluted net income per share. These measures are not in accordance with, nor an alternative to, GAAP. These measures are intended to supplement GAAP financial information, and may be computed differently from non-GAAP financial measures used by other companies. The company believes that these measures provide useful information to its management, board of directors and investors about its operating activities and business trends related to its financial condition and results of operations. The company believes that it is useful to provide investors with information to understand how specific line items in the statement of operations are affected by certain non-cash or non-recurring items, such as:

• stock-based compensation expense;
• amortization of intangible assets;
• expenses for matters related to the FCPA investigation, and
• gains or losses on embedded derivative and warrants.

In addition, the company's management and board of directors use these non-GAAP financial measures in developing operating budgets and in reviewing the company's results of operations, since such items have limited impact on current and future operating decisions. Additionally, the company believes that inclusion of non-GAAP financial measures provide consistency and comparability with its past reports of financial results. However, investors should be aware that non-GAAP measures have inherent limitations and should be read in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. Please refer to the accompanying tables for a detailed reconciliation of GAAP to non-GAAP gross profit, operating income, net income and diluted net income per share.

Management will conduct a conference call and simultaneous webcast to discuss third quarter financial results and the future outlook at 5:00 p.m. (EDT) today. The call may be accessed by dialing toll-free, (800) 862-9098 from the U.S. and Canada, or (785) 424-1051 for international callers, and entering the conference ID, 7MAXWELL. The live webcast and subsequent archived replay may be accessed at the company's web site via the following link: http://maxwell.investorroom.com/.

Maxwell is a leading developer and manufacturer of innovative, cost-effective energy storage and power delivery solutions. Our BOOSTCAP® ultracapacitor cells and multi-cell modules provide safe and reliable power solutions for applications in consumer and industrial electronics, transportation and telecommunications. Our CONDIS® high-voltage grading and coupling capacitors help to ensure the safety and reliability of electric utility infrastructure and other applications involving transport, distribution and measurement of high-voltage electrical energy. Our radiation-mitigated microelectronic products include power modules, memory modules and single board computers that incorporate powerful commercial silicon for superior performance and high reliability in aerospace applications.

Forward-looking statements: Statements in this news release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:

• the company's history of losses and uncertainty about its ability to achieve or maintain profitability, or to obtain sufficient capital to finance its operations;
• disruption of global financial markets and reduced availability of credit;
• general economic conditions in the markets served by the company's products;
• development and acceptance of products based on new technologies;
• demand for original equipment manufacturers' products reaching anticipated levels;
• cost-effective manufacturing and the success of outsourced product assembly;
• the impact of competitive products and pricing;
• risks and uncertainties involved in foreign operations, including the impact of currency fluctuations;
• product liability or warranty claims in excess of reserves.

For further information regarding risks and uncertainties associated with Maxwell's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of our SEC filings, including, but not limited to, our annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Maxwell's investor relations department at (858) 503-3434 or at our investor relations website: http://maxwell.investorroom.com/index.php?s=127. All information in this release is as of October 28, 2010. The company undertakes no duty to update any forward-looking statement to reflect actual results or changes in the company's expectations.

SOURCE Maxwell Technologies, Inc.