Maxwell Technologies Reports Second Quarter Financial Results

Initial production-level ultracapacitor shipments for Maxwell's first automotive design-in are augmenting continuing strong demand for energy storage and power delivery systems for hybrid transit buses, wind turbines, backup power and other applications, said David Schramm, Maxwell's president and chief executive officer. Steadily increasing volume and continuing efficiency improvements enabled the company to generate cash from operations in Q2 for the fourth time in the past five quarters.

On a U.S. generally accepted accounting principles (GAAP) basis, operating loss for the second quarter 2010 was $3.3 million, compared with an operating loss of $0.9 million in the same period last year. GAAP net loss for Q210 was $2.6 million or $0.10 per share, compared with a net loss of $5.3 million, or $0.22 per share, in Q209. Operating loss and net loss comparisons are affected by:

* A $3.4 million operating expense accrual in Q210 to increase the reserve for proposed settlement of alleged U.S. Foreign Corrupt Practices Act (FCPA) violations.
* A non-cash gain of $1.2 million, or $0.05 per share, in Q210 vs. a non-cash loss of $3.8 million, or $0.16 per share, in Q209, 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 $933,000 in Q210 compared with $99,000 in the same period last year, and net income of $455,000, or $0.02 per diluted share in Q210, compared with a net loss of $531,000, or $0.02 per diluted share in Q209. A reconciliation of GAAP to non-GAAP financial measures is included as an addendum to this release.

GAAP gross margin was 40 percent in Q210, compared with 36 percent in Q209 and 38 percent in Q110. GAAP operating expenses, including the additional $3.4 million FCPA settlement accrual, totaled approximately $15.2 million, or 51 percent of revenue in Q210, compared with $9.8 million, or 40 percent of revenue in Q209. Non-GAAP operating expenses totaled approximately $11.1 million, or 37 percent of revenue in Q210, compared with $9.0 million, or 36 percent of revenue in Q209. Cash, cash equivalents and restricted cash totaled $36.2 million as of June 30, 2010, compared with $38.1 million as of March 31, 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 ultracapacitor sales to grow five to ten percent sequentially in the third quarter, Schramm said. However, due in part to the three-week summer shutdown of our Swiss operations, we anticipate that combined revenues from high voltage and microelectronics products will be down slightly compared with Q2. Therefore, we anticipate that total third quarter revenue will range from flat to up five percent compared with Q2.

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. 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 on the one year anniversary of signing, as well as certain other non-financial settlement terms. The settlement with the SEC remains subject to final approval of the Commission. Settlement discussions with the DOJ are ongoing, and the company is awaiting a response to its offer to the DOJ to settle the ongoing investigation for $6.35 million. Prior discussions with the DOJ have indicated that they would accept a settlement offer of $8.0 million, but as indicated earlier, we are continuing our discussions with the DOJ and are awaiting a response to our most recent offer. The DOJ has also previously indicated that settlement terms could include a payment plan over a period of up to three years. The company anticipates that it will have to pay interest on any deferred amounts due in both the SEC and DOJ settlement agreements. In Q409, the company accrued $9.3 million for a potential settlement, and has accrued an additional $3.4 million in Q210 to reflect the full amount of its pending settlement offers to the SEC and DOJ. However, there can be no assurance that the settlement with the SEC will be approved or that the company will be able to settle with the DOJ for $6.35 million.