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TMCNet:  API Technologies Reports Results for the Fiscal Fourth Quarter Ended November 30, 2012

[February 12, 2013]

API Technologies Reports Results for the Fiscal Fourth Quarter Ended November 30, 2012

ORLANDO, Fla. --(Business Wire)--

API Technologies Corp. (NASDAQ:ATNY) ("API", "API Technologies", or the "Company"), a trusted provider of RF/microwave, microelectronics, and security solutions for critical and high-reliability applications, today announced results for the fiscal fourth quarter and twelve months ended November 30, 2012.

  • Record bookings of $76.6 million resulting in a book-to-bill ratio of 1.2 to 1 in the fiscal fourth quarter.
  • Revenue of $280.8 million for the twelve months ended November 30, 2012, up from $197.6 for the twelve months ended November 30, 2011.
  • Revenue of $62.7 million for the fiscal fourth quarter compared to $75.1 million in the prior year's comparable quarter.
  • On February 6, 2013, announced the repayment of a term loan facility and entry into new credit agreements.

"Fiscal 2012 was a transformational year for API Technologies, as we successfully integrated three strategic acquisitions and emerged as a leading provider of high-reliability electronics solutions," said Bel Lazar, President and Chief Executive Officer of API Technologies. "In spite of ongoing defense industry headwinds and a challenging macroeconomic environment, we won record orders and achieved a positive book-to-bill ratio of 1.2 to 1 in the fourth quarter, positioning us for future growth."

Results for the Quarter Ended November 30, 2012

API Technologies reported revenue of $62.7 million for the quarter ended November 30, 2012, compared to $68.4 million in the quarter ended August 31, 2012 and $75.1 million in the quarter ended November 30, 2011.

Gross profit, as a percent of sales, was 20.2% for the quarter ended November 30, 2012, versus 22.3% for the quarter ended August 31, 2012 and 23.7% for quarter ended November 30, 2011. Excluding restructuring costs, gross margin was 21.4% in the quarter ended November 30, 2012 compared to 24.9% in the quarter ended August 31, 2012. Adjusted EBITDA for the quarter ended November 30, 2012 was $8.3 million (13.2% margin) versus $9.3 million (13.7% margin) for the quarter ended August 31, 2012, and $11.4 million (15.2% margin) for the quarter ended November 30, 2011.

API Technologies posted a net loss of $12.3 million for the quarter ended November 30, 2012 versus a net loss of $27.7 million for the quarter ended August 31, 2012 and a net loss of $2.5 million for the quarter ended November 30, 2011. Restructuring costs recorded in the quarter ended November 30, 2012 were approximately $3.3 million, versus $2.2 million in the quarter ended August 31, 2012 and $1.7 million in the comparable period of 2011. During the quarter ended August 31, 2012, the Company recorded a Goodwill impairment charge of $24.3 million, which adjusted the estimated write-down taken in the quarter ended May 31, 2012.

Results for the Twelve Months Ended November 30, 2012

API Technologies reported revenue of $280.8 million for the twelve months ended November 30, 2012 compared to $197.6 million for the same period in the prior-year period. The increase in revenue was primarily due to acquisitions completed in the past twelve months. Gross margin was 20.0% for the twelve months ended November 30, 2012 versus 20.8% for the prior-year period. Adjusted EBITDA was $39.6 million for the twelve months ended November 30, 2012 compared to $16.2 million for the twelve months ended November 30, 2011.

API Technologies posted a net loss of $148.7 million for the twelve months ended November 30, 2012 compared to a net loss of $17.3 million for the twelve months ended November 30, 2011. The increase in net loss was driven primarily by $111.3 million of Goodwill impairment charges, $17.7 million of restructuring charges, and $12.6 million of convertible note financing costs recorded in fiscal 2012. Restructuring costs recorded in the twelve months ended November 30, 2012 were approximately $17.7 million compared to approximately $6.0 million for the fiscal year ended November 30, 2011.

At the end of the November 30, 2012 quarter, the Company had $21.2 million of cash and cash equivalents, including $0.7 million of restricted cash, and $185.4 million of debt obligations, net of discounts.

As announced in October, API Technologies' Board of Directors has retained Jefferies & Company, Inc. ("Jefferies") as its financial advisor. Jefferies continues to assist the Board in evaluating the unsolicited interest for one or more of the company's business units, as well as a full range of strategic alternatives. API noted that there can be no assurance that this process will result in any agreement or transaction. API does not intend to discuss or disclose developments with respect to the Board's process unless and until the Board has approved a specific course of action.

Conference Call

API Technologies will host a conference call to review the Company's fiscal fourth quarter results tomorrow, February 13, at 10:00 a.m. Eastern Time. Bel Lazar, President and Chief Executive Officer, and Phil Rehkemper, Executive Vice President and Chief Financial Officer, will host the call.

The call will be available by dialing 866-605-3852 or 412-317-6789 and accessible by webcast at www.apitech.com. Recorded replays of the webcast will be available for 30 days on the Company's website and by telephone for 30 days at 877-344-7529, replay passcode #10023558, beginning 2:00 p.m. Eastern Time on February 13, 2013.

About API Technologies Corp.

API Technologies designs, develops and manufactures electronic systems, subsystems, RF and secure solutions for technically demanding defense, aerospace and commercial applications. API Technologies' customers include many leading Fortune 500 companies. API Technologies trades on the NASDAQ under the symbol ATNY. For further information, please visit the Company website at�www.apitech.com.

Non-GAAP Financial Information

In this press release, API has provided a non-GAAP financial measure for Gross Margin and Adjusted EBITDA. Non-GAAP Gross Margin excludes restructuring charges and Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization), excludes discontinued operations, restructuring charges, acquisition charges, goodwill impairment, earn-out reversals, a C-MAC pro forma adjustment, foreign exchange loss, Spectrum acquisition inventory fair value, stock-based compensation expenses, amortization of note discounts and deferred financing costs, and certain other adjustments. Management believes the supplemental non-GAAP presentations provide investors an additional analytical tool for understanding the Company's financial performance by excluding the impact of items which may obscure trends in the core operating performance of the business. These are not recognized measures under US GAAP, do not have a standardized meaning, and are unlikely to be comparable to similar measures used by other companies. Accordingly, investors are cautioned that these non-GAAP measures should not be construed as an alternative to net earnings or loss or gross margin determined in accordance with GAAP as an indicator of the financial performance of the Company or as a measure of the Company's liquidity and cash flows. We expect our financial statements to continue to be affected by items similar to those excluded in the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that all such costs are unusual or infrequent.

Safe Harbor for Forward-Looking Statements

Except for statements of historical fact, the information presented herein constitutes forward-looking statements. All forward-looking statements are subject to certain risks, uncertainties and assumptions which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include but are not limited to, general economic and business conditions, government regulations, our ability to integrate and consolidate our operations, our ability to expand our operations in both new and existing markets, the ability of our review of strategic alternatives to maximize stockholder value and the effect of growth on our infrastructure. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated. The forward-looking statements in this news release should be read in conjunction with the more detailed descriptions of the above factors located in our Annual Report on Form 10-K under Part I, Item�1A "Risk Factors" as well as those additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. All information in this release is as of the date hereof. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations. Except as required by law, the Company assumes no obligation to update or revise any forward-looking statements in this press release, whether as a result of new information, future events, or otherwise.



API Technologies Corp.
Financial Results
For the Three and Twelve Months Ended November 30, 2012
Consolidated Statement of Operations (unaudited)
in thousands USD
For the Three For the Three For the Twelve For the Twelve
Months Ended Months Ended Months Ended Months Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
2012 2011 2012 2011
Revenue, net $ 62,749 $ 75,082 $ 280,820 $ 197,569
Cost of revenues
Cost of revenues 49,344 57,121 214,460 154,875
Restructuring charges 706 195 10,336 1,514
Total cost of revenues 50,050 57,316 224,796 156,389
Gross profit 12,699 17,766 56,024 41,180
Operating expenses
General and administrative 7,024 5,105 26,825 23,908
Selling expenses 3,940 3,504 15,753 12,057
Research and development 2,406 2,636 10,297 6,176
Business acquisition and related charges 584 638 4,027 13,436
Restructuring charges 2,631 1,453 7,366 4,446
16,585 13,336 64,268 60,023
Operating income (loss) (3,886 ) 4,430 (8,244 ) (18,843 )
Other expenses (income), net
Goodwill impairment - - 111,300 -
Interest expense, net 4,311 3,328 16,209 7,729
Amortization of note discounts and deferred financing costs 727 524 15,684 3,900
Other expense (income), net 3,225 228 898 (329 )
8,263 4,080 144,091 11,300
Loss from continuing operations before income taxes (12,149 ) 350 (152,335 ) (30,143 )
Expense (benefit) for income taxes 154 2,837 (3,632 ) (12,851 )
Income (loss) from continuing operations, net of income taxes (12,303 ) (2,488 ) (148,703 ) (17,292 )
Income (loss) from discontinued operations, net of income taxes - - - (36 )
Net income (loss) $ (12,303 ) $ (2,488 ) $ (148,703 ) $ (17,328 )
Income (loss) per share from continuing operations-Basic and diluted $ (0.22 ) $ (0.05 ) $ (2.69 ) $ (0.40 )
Income (loss) per share from discontinued operations-Basic and diluted $ 0.00 $ 0.00 $ 0.00 $ 0.00
Net income (loss) per share-Basic and diluted $ (0.22 ) $ (0.05 ) $ (2.69 ) $ (0.40 )
Weighted average shares outstanding
Basic 55,368,033 52,404,074 55,314,263 43,177,538
Diluted 55,368,033 52,416,071 55,314,263 43,177,538
Consolidated Balance Sheets (unaudited) in thousands USD � � November 30, November 30, 2012 2011 Assets Current Cash and cash equivalents $ 20,535 $ 15,689 Restricted cash 700 700 Accounts receivable 45,229 52,983 Inventories, net 67,962 72,017 Deferred income taxes 1,101 4,797 Prepaid expenses and other current assets � 2,644 � � 1,705138,171 147,891 Fixed assets, net 41,792 44,149 Fixed assets held for sale 900 3,217 Goodwill 156,002 253,170 Intangible assets, net 50,090 50,001 Other non-current assets9,344 � � 8,019Total assets $ 396,299$ 506,447 � � Liabilities and Shareholders' Equity Current Accounts payable and accrued expenses $ 41,487 $ 46,002 Deferred revenue 385 1,892 Current portion of long-term debt � 2,328 � � 1,91744,200 49,811 Deferred income taxes 3,410 9,905 Other long-term liabilities 1,048 - Long-term debt, net of current portion and discount183,087 � � 165,267 � � 231,745 � � 224,983 � � Preferred Stock, net of discounts 25,581 - � Shareholders' equity Common stock 55 55 Special voting stock - - Additional paid-in capital 326,973 322,675 Common stock subscribed but not issued 2,373 2,373 Accumulated deficit (192,513 ) (43,810 ) Accumulated other comprehensive income � 2,085 � � 171 � � 138,973 � � 281,464Total Liabilities and Shareholders' Equity $ 396,299$ 506,447 � �

Consolidated Adjusted EBITDA

in thousands USD

� The following table reconciles three and twelve months GAAP net loss to non-GAAP Adjusted EBITDA from continuing operations.
Three Months EndedTwelve Months Ended November 30, November 30,2012 � � � 20112012

2011

Net income (loss) $ (12,303 )$ (2,488 ) $ (148,703 ) $ (17,328 ) Adjustments Interest expense, net 4,311 3,328 16,209 7,729 Amortization of note discounts and deferred financing costs 727 524 15,684 3,900 Depreciation and amortization 5,045 4,056 18,230 10,619 Goodwill impairment - - 111,300 - Income taxes 154 2,837 (3,632 ) (12,851 ) Stock based compensation 290 128 2,224 2,900 Restructuring 3,337 1,650 17,702 5,960 Acquisition related charges 584 638 4,027 13,436 Other adjustments (A) 4,884 - 6,283 92 Spectrum acquisition inventory fair value - 732 - 1,704 SenDEC earn-out reversal - - (2,213 ) - C-MAC pro-forma adjustment 924 - 2,100 - Foreign exchange (gain) loss 301 42 425 42 Discontinued operations � - � � - � � - � � 36Adjusted EBITDA $ 8,254$ 11,447$ 39,636$ 16,239Adjusted EBITDA Margin13.2 %15.2 %14.1 %8.2 %

(A)

Charges in 2012 primarily relate to non-cash inventory provisions, a $1.9 million impairment write-down on assets held for sale ($1.8 million in Q4-2012), and a $1.1 million loss contingency accrual in Q4-2012.

Additional Adjusted EBITDA Reconciliations

in thousands USD

� The following table reconciles three months GAAP net loss to non-GAAP Adjusted EBITDA for our reportable segments for the quarter ended November 30, 2012.
SSCSSIASub-total

SSC & SSIA

EMSCorporateTotal Q4 Q4 Q4 Q4 Q4 Q4Revenue $ 48,721 $ 3,370 $ 52,091 $ 10,658 $ - $ 62,749 Net Income (loss) (1,999 ) (246 ) (2,245 ) (2,906 ) (7,152 ) (12,303 ) Adjustments Interest expense, Net 1,850 (2 ) 1,848 86 2,377 4,311 Amortization of note discounts and deferred financing costs - - - - 727 727 Depreciation & amortization 4,011 134 4,145 820 80 5,045 Goodwill impairment - - - - - - Income taxes (119 ) (42 ) (161 ) 10 305 154 Stock based compensation - - - - 290 290 Restructuring 880 634 1,514 1,749 74 3,337 Acquisition related charges 8 - 8 - 576 584 C-MAC pro-forma adjustments 924 - 924 - - 924 Other adjustments (A) 3,313 - 3,313 373 1,198 4,884 Foreign exchange loss - - - - 301 301 Net corporate costs (B) (950 ) (66 ) (1,016 ) (208 ) 1,224 - Add-Back Total 9,917 � � 658 � � 10,575 � � 2,830 � � 7,152 � � 20,557Adjusted EBITDA $ 7,918$ 412$ 8,330$ (76 ) $ -$ 8,254Adjusted EBITDA Margin 16.3 %12.2 %16.0 %-0.7 % � � 13.2 %
(A) � Charges relate to non-cash inventory provisions.

(B)

Net Corporate costs are allocated to the three segments by percentage of total consolidated revenues.

Additional Adjusted EBITDA Reconciliations

in thousands USD

� The following table reconciles three months GAAP net loss to non-GAAP Adjusted EBITDA for our reportable segments for the quarter ended November 30, 2011.
SSCSSIASub-total

SSC & SSIA

EMSCorporateTotal Q4 Q4 Q4 Q4 Q4 Q4Revenue $ 45,651 $ 6,456 $ 52,107 $ 22,975 $ - $ 75,082 Net Income (loss) 1,617 658 2,275 340 (5,103 ) (2,488 ) Adjustments Interest expense, Net - 9 9 - 3,319 3,328 Amortization of note discounts and deferred financing costs - - - - 524 524 Depreciation & amortization 2,832 84 2,916 1,120 20 4,056 Goodwill impairment - - - - - - Income taxes 2,578 225 2,803 3 31 2,837 Stock based compensation - - - - 128 128 Restructuring 554 442 996 564 90 1,650 Acquisition related charges 150 - 150 - 488 638 Spectrum fair value adjustments 732 - 732 - - 732 Foreign exchange loss 32 18 50 - (8 ) 42 Net corporate costs (A) (311 ) (44 ) (355 ) (156 ) 511 - Add-Back Total 6,567 � � 734 � � 7,301 � � 1,531 � � 5,103 � � 13,935Adjusted EBITDA $ 8,184$ 1,392$ 9,576$ 1,871$ -$ 11,447Adjusted EBITDA Margin 17.9 %21.6 %18.4 %8.1 % � � 15.2 %
(A) � Net Corporate costs are allocated to the three segments by percentage of total consolidated revenues. �
� � � Gross Margin without Restructuring Charges $ amounts in thousands USDThree Months Ended Three Months Ended Three Months Ended November 30, 2012 August 31, 2011 November 30, 2011 Revenue $ 62,749 $ 68,448 $ 75,082 Gross Profit $ 12,699 $ 15,285 $ 17,766 Restructuring $ 706 $ 1,738 $ 195 Gross profit without restructuring $ 13,405 $ 17,023 $ 17,961 Gross margin % without restructuring 21.4 % 24.9 % 23.9 %


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