Sbs Technologies (NASDAQ:SBSE)
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SBS Technologies(R) (Nasdaq: SBSE), a leading designer
and manufacturer of embedded computer solutions for the government,
commercial, and communications infrastructure markets, today announced
the results of its first quarter of fiscal year 2006 ended September
30, 2005. Highlights for the quarter include:
-- Sales were $34.4 million.
-- Bookings were $40.1 million, and book-to-bill ratio was 1.17
to 1.
-- A net loss of ($430,000) was incurred.
-- EPS was ($0.03).
-- Gross profit as a percentage of sales was 41.9%.
-- Backlog at the end of the quarter was $50.2 million compared
with $44.4 million at the end of the prior quarter.
-- Cash at the end of the quarter was $55.9 million compared to
$55.2 million at the end of the prior fiscal year.
-- Eleven design wins were reported.
"The September quarter was an excellent bookings quarter with
orders at $40.1 million, increasing our backlog to $50.2 million from
$44.4 million at the end of the prior quarter. As we discussed in our
press release dated September 27, 2005, sales were below our original
guidance of $35 million to $37 million due to a combination of
supplier problems and customer delays that unfortunately were not
resolved in time to allow the affected shipments to occur before the
end of September," said Clarence W. Peckham, CEO of SBS Technologies,
Inc. "Although our first quarter financial results were not as strong
as our original expectations, our solid bookings and increased backlog
give us confidence we will achieve our sales projections for the
fiscal year," added Peckham.
SALES
Sales for the first quarter were $34.4 million, a decrease of 1.5%
compared to $34.9 million in sales for last year's first quarter. On a
sequential basis, total sales decreased 9.5%, compared to $38.0
million in sales for the quarter ended June 30, 2005.
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SALES BY SEGMENT
----------------
(dollars in millions)
---------------------
Sept. 30, % of Sept. 30, % of June 30, % of
Three months ended: 2005 total 2004 total 2005 total
------------------- --------- ------ --------- ------ -------- -------
Americas Group $22.2 65% $23.4 67% $23.1 61%
Europe Group 12.2 35% 11.5 33% 14.9 39%
---------------- ---------------- ----------------
Total $34.4 100% $34.9 100% $38.0 100%
================ ================ ================
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By segment, sales for the first quarter by the Americas Group were
$22.2 million, a decrease of 5.2%, and sales by the Europe Group were
$12.2 million, an increase of 6.2%, both compared to the first quarter
of the previous fiscal year. On a sequential basis, sales by the
Americas Group decreased 3.7% and sales by the Europe Group decreased
18.5%, both compared to the quarter ended June 30, 2005. In both
periods, changes in currency exchange rates had minimal impact on
sales.
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SALES BY END MARKET
-------------------
(dollars in millions)
---------------------
Sept. 30, % of Sept. 30, % of June 30, % of
Three months ended: 2005 total 2004 total 2005 total
------------------- --------- ------ --------- ------ -------- -------
Government $14.7 43% $15.3 44% $16.4 43%
Communications 10.7 31% 9.4 27% 11.8 31%
Commercial 9.0 26% 10.2 29% 9.8 26%
---------------- ---------------- ----------------
Total $34.4 100% $34.9 100% $38.0 100%
================ ================ ================
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By end market, for the quarter ended September 30, 2005, sales to
government customers were $14.7 million, a decrease of 4.0%, sales to
communications customers were $10.7 million, an increase of 14.7%, and
sales to commercial customers were $9.0 million, a decrease of 12.5%,
all compared to the first quarter of the prior fiscal year. On a
sequential basis, sales to government customers decreased 10.3%, sales
to communications customers decreased 9.4%, and sales to commercial
customers decreased 8.4%, all compared to the quarter ended June 30,
2005.
For the quarter ended September 30, 2005, as a percentage of total
sales, sales to one communications customer, Ericsson, represented 17%
and sales to one commercial customer, Applied Materials, represented
7%. No other customer represented more than 5% of sales.
NET INCOME/(LOSS)
For the quarter ended September 30, 2005, SBS incurred a loss of
($430,000), compared to a profit of $1.2 million for the same period
of the prior fiscal year. Net (loss) per common share - assuming
dilution, for the quarter ended September 30, 2005, was ($0.03),
compared to $0.08 reported for the first quarter of the prior fiscal
year. The loss incurred for the quarter was primarily the result of
lower than anticipated sales due to a combination of supplier problems
and customer delays affecting shipments for the quarter.
GROSS PROFIT
Gross profit for the quarter as a percentage of sales was 41.9%,
compared to 44.4% for the first quarter of the prior fiscal year, and
44.2% for the preceding quarter. Compared to the quarter ended
September 30, 2004 and the preceding quarter, an increased proportion
of sales of lower margin products and competitive pricing lowered
gross profit as a percentage of sales. Consistent with SBS' Form 10-K
for the year ended June 30, 2005, SBS has included the amortization of
intangible assets associated with completed technology and license
agreements as a separate component of cost of sales.
BACKLOG
Company backlog as of September 30, 2005 was approximately $50.2
million, compared to $46.9 million at the end of the first quarter of
the prior fiscal year, and $44.4 million at the end of the preceding
quarter. Bookings for the quarter were $40.1 million, resulting in a
book-to-bill ratio of 1.17 to 1.
CASH
The cash balance at September 30, 2005 was $55.9 million compared
to $55.2 million at the end of the prior fiscal year, and SBS remains
debt free.
DESIGN WINS
During the quarter ended September 30, 2005, SBS achieved eleven
design wins. In the government and commercial markets, each reported
design win represents an initial purchase order of a minimum of
$100,000 and is forecasted to produce a minimum of $500,000 in annual
sales when in production.
Recognizing the different characteristics of the communications
market, beginning this quarter SBS has lowered the minimum purchase
order value for design wins in the communications market to $10,000,
although the $500,000 minimum anticipated production rate remains
unchanged. Based on quoting activity for design win opportunities, SBS
believes that the production potential is large but initial orders are
in low-value prototype quantities. The new threshold is more
representative of customers' future order patterns in the
communications market.
By market, seven design wins were for the government market, two
were for the commercial market, and two were for the communications
market.
All seven government wins were for systems. They are an F-16 fire
control computer, vehicle management computers for the new Fire Scout
Unmanned Aerial Vehicle, a flight computer for a new Unmanned Aerial
Vehicle, a mission computer for an upgrade to the E2C Airborne Early
Warning and Control (AWAC) military aircraft, a cockpit display
upgrade for the B-52 Bomber, the control computer for the
Expeditionary Fighting Vehicle (EFV), and a system for a NASA
application. These are representative of the types of funded
high-value programs that combine a wide variety of SBS' products into
sophisticated systems.
In the commercial market, one of the design wins was to provide a
single board computer and input/output (I/O) card used to provide
video surveillance for public transportation facilities such as subway
and train stations. The second commercial design win was an I/O card
for an in-flight entertainment system for commercial aircraft.
In-flight entertainment is a growing market as commercial airlines
compete for passengers. SBS' commercial market focus is on projects
such as these that offer high volume potential and can utilize the
broad SBS product line.
In the communications market one design win was with a
telecommunications equipment manufacturer for a T1/E1 I/O card in a
communications controller for small and medium sized businesses
providing voice (VOIP)/data/fax capability. The second design win was
with Ericsson for a single board computer for a multi-source access
node program.
NEW PRODUCTS
During the quarter, SBS released four new products: two were 3U
CompactPCI(R) single board computers, one was a PCI Mezzanine Card
(PMC) Intel(R)-based single board computer, and one was a high
performance graphics PMC card.
The single board computers were developed to support market demand
for more performance in both Intel and PowerPC(R) architectures.
Customers are continuing to develop applications that require more
performance in smaller form factors. An example is the CV1 PowerPC 3U
CompactPCI card, which is being used in multiple military programs to
upgrade flight computers.
The graphics board is used primarily in military applications,
such as in the cockpit display upgrade for the B-52 previously
discussed.
BUSINESS OUTLOOK
The following statements are based on current expectations and
speak only as of the date of this release, October 18, 2005. These
statements are forward-looking, and actual results may differ
materially.
"In the communications market, we are continuing to see strong
interest and increased proposal activity for our new family of
AdvancedMC(TM) products," said Peckham. "In addition, we have placed
product for evaluation and test with telecommunications equipment
manufacturers' research and development labs. We believe the market
opportunities are progressing as planned, with the remainder of fiscal
year 2006 targeted to capture new design wins and low rate initial
production, with significant production to follow in fiscal year 2007.
"I was particularly pleased with the results of our business
development activities in the government market. This quarter, we had
seven excellent design wins and strong bookings for follow on
production for several preexisting design wins. Increased production
orders in the government market are one of the key indicators for our
anticipated second half growth.
"In the commercial market, we are continuing to pursue
opportunities for semiconductor manufacturing equipment, image
processing, and medical electronics applications. These are segments
of the market that require high performance solutions which are a good
fit for our product portfolio.
"As discussed in previous press releases, based on our forecasts,
we expect that a significant amount of our revenue growth for fiscal
year 2006 will occur in the second half of the fiscal year. This is
due to two primary factors. First, we expect revenues from AdvancedMC
products to begin to ramp up during the later part of the year.
Second, based on customers' forecasts, orders for military systems
will increase as we progress through the fiscal year.
"Based on our backlog and our customers' forecasts, we expect
sales for the second quarter of fiscal year 2006 ending December 31,
2005 to be between $37 million and $39 million. This forecast reflects
a government customer push-out of approximately $4 million due to
technical issues not involving our product. This order, originally
scheduled to ship in the second quarter, is now scheduled to ship in
the second half of our fiscal year. For the fiscal year ending June
30, 2006, we continue to expect sales to be between $165 million and
$175 million," said Peckham.
CONFERENCE CALL INFORMATION
SBS will host a conference call to discuss further the results of
the quarter at 4:45 p.m. Eastern Time, Tuesday, October 18, 2005. To
access the call, dial toll-free (800) 988-9518, or international dial
+1(610) 794-9308. The passcode for the conference call is "SBS." The
call will also be webcast live, and later archived for a limited time
in the Investor Relations section of the SBS web site at
http://www.sbs.com. An audio replay of the call may be accessed
approximately one hour following the conclusion of the call by dialing
(800) 841-6832 or international (203) 369-3832. There is no passcode
for the audio replay. The replay will be available through October 29,
2005.
ABOUT SBS TECHNOLOGIES
SBS Technologies, Inc., (Nasdaq: SBSE) founded in 1986, designs
and builds a wide range of standard and customized embedded computer
products. Our products include processor boards, input/output modules,
networking devices, and complete computer systems. Our products are
used in many industries, including telecommunications, medical
electronics, industrial automation and defense. Headquartered in
Albuquerque, New Mexico, SBS maintains eight primary operating
locations, has regional sales offices throughout the United States and
has international sales and support offices in six countries. More
information on SBS is available at www.sbs.com.
This release contains forward-looking statements regarding future
events and the future financial performance of SBS, including future
sales, earnings, shipment delays by customers, market conditions,
customer demand, and bookings, and the continued development of SBS'
competitive position, that are subject to a number of risks and other
factors which could cause the actual results to differ materially from
those projected or implied in the forward-looking statements. Among
these factors are: timing of receipt of government production orders;
continued health of SBS' end markets, including the semiconductor
manufacturing equipment market and the telecommunications market;
sales to Ericsson to continue during fiscal year 2006 at approximately
the same dollar sales level as during fiscal year 2005; the rate of
adoption of the new AdvancedTCA standard in the telecommunications
market; business and economic conditions generally affecting SBS'
customers and their end customers, including but not limited to the
changes in size and program priorities of military procurement
budgets; a high degree of uncertainty and rapid change in the markets
addressed by SBS' products that could reduce sales or render certain
SBS products obsolete; customer demand for and acceptance of SBS'
products which may affect both sales and margins; SBS' ability to
design, test and introduce new products on a timely basis; and the
other risk factors listed from time to time in SBS' Securities and
Exchange Commission reports, including those listed under "Risk
Factors" in SBS' Annual Report on Form 10-K for the year ended June
30, 2005 filed with the SEC.
Brand or product names are registered trademarks or trademarks of
their respective holders.
Tables to Follow
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SBS Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
Thousands (except per share amounts)
(Unaudited)
Three months ended
September 30,
--------------------
2005 2004
----------- --------
Sales $ 34,361 34,884
Cost of sales:
Cost of products sold 19,716 19,040
Amortization of intangible assets 259 367
----------- -------
Total cost of sales 19,975 19,407
----------- -------
Gross profit 14,386 15,477
Selling, general and administrative
expense 8,661 8,023
Research and development expense 6,693 5,505
Amortization of intangible assets 78 71
----------- -------
Operating income (loss) (1,046) 1,878
----------- -------
Interest and other income, net 396 141
Foreign exchange losses (12) (102)
----------- -------
384 39
----------- -------
Income (loss) before income taxes (662) 1,917
Income tax expense (benefit) (232) 671
----------- -------
Net income (loss) $ (430) 1,246
=========== =======
Earnings per share data:
Net income (loss) per share $ (0.03) 0.08
=========== =======
Net income (loss) per share -
assuming dilution $ (0.03) 0.08
=========== =======
Weighted average shares used in net
income (loss) per share computations 15,646 15,504
=========== =======
Weighted average shares used in net
income (loss) per share - assuming
dilution computations 15,646 15,664
=========== =======
SBS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
Thousands (except share amounts)
(Unaudited)
September 30, June 30,
2005 2005
-------------- --------
Assets
------
Current assets:
Cash and cash equivalents $ 55,868 55,195
Receivables, net 27,358 27,535
Inventories 22,377 21,815
Deferred income taxes 1,355 1,361
Prepaid expenses 1,557 1,676
Other current assets 972 718
-------------- --------
Total current assets 109,487 108,300
-------------- --------
Property and equipment, net 7,418 7,635
Goodwill 17,134 16,995
Intangible assets, net 2,840 3,108
Deferred income taxes 15,429 15,529
Other assets 941 891
-------------- --------
Total assets 153,249 152,458
============== ========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 5,490 4,509
Accrued representative commissions 716 819
Income taxes payable 2,166 3,051
Accrued compensation 5,093 4,851
Accrued severance and consolidation costs 304 424
Other current liabilities 3,464 2,785
-------------- --------
Total current liabilities 17,233 16,439
Other long-term liabilities 190 132
-------------- --------
Total liabilities 17,423 16,571
-------------- --------
Stockholders' equity:
Common stock, no par value; 200,000,000
shares authorized; 15,646,255 issued
and outstanding at September 30, 2005,
15,645,929 issued and outstanding at
June 30, 2005 98,941 98,369
Unearned compensation (525) (84)
Accumulated other comprehensive income 2,252 2,014
Retained earnings 35,158 35,588
-------------- --------
Total stockholders' equity 135,826 135,887
-------------- --------
Total liabilities and stockholders'
equity $ 153,249 152,458
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