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 second quarter of fiscal year 2006 ended December
31, 2005. Highlights for the quarter include:
-- Sales were $37.3 million.
-- Bookings were $42.0 million, net bookings were $37.3 million,
due to cancellation of a $4.7 million order received in fiscal
year 2005.
-- Book-to-bill ratio based on new business was 1.13 to 1.
-- Net income was $1.1 million.
-- EPS was $0.07.
-- Gross profit as a percentage of sales was 43.5%.
-- Backlog at the end of the quarter was $49.9 million, net of
the $4.7 million order cancellation, compared with $50.4
million at the end of the prior quarter.
-- Cash at the end of the quarter was $53.2 million compared to
$55.9 million at the end of the prior quarter.
-- Fifteen design wins were reported.
"SBS' growth expectations are enhanced by four important events:
strong design wins with twenty-six design wins for the first half of
fiscal year 2006 compared to fifteen for the first half of the
previous fiscal year, four consecutive quarters of increasing
bookings, capturing SBS' first AdvancedMC(TM) based design win, and a
company backlog increase of 12% since June 2005," said Clarence
Peckham, CEO of SBS Technologies. "During the first six months of
fiscal year 2006, we have implemented cost control initiatives, which
we began to see the effects of in the December quarter. We will
control our costs while continuing to implement our long term
strategy," added Peckham.
SALES
Sales for the second quarter were $37.3 million, a decrease of
11.7% compared to $42.2 million in sales for last year's second
quarter. On a sequential basis, total sales increased 9.2%, compared
to $34.1 million in sales for the quarter ended September 30, 2005.
Sales for the six months ended December 31, 2005 were $71.4 million, a
decrease of 7.4% for the same period of the prior fiscal year.
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SALES BY SEGMENT
(dollars in millions)
---------------------
Dec. 31, % of Dec. 31, % of Sept. 30, % of
Three months ended: 2005 total 2004 total 2005 total
------------------- -------- ------ -------- ------- --------- ------
Americas Group $21.3 57% $27.0 64% $21.9 64%
Europe Group 16.0 43% 15.2 36% 12.2 36%
--------------- ---------------- ----------------
Total $37.3 100% $42.2 100% $34.1 100%
=============== ================ ================
Dec. 31, % of Dec. 31, % of
Six months ended: 2005 total 2004 total
----------------- -------- ------ -------- -------
Americas Group $43.2 61% $50.4 65%
Europe Group 28.2 39% 26.7 35%
--------------- ----------------
Total $71.4 100% $77.1 100%
=============== ================
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By segment, sales for the second quarter by the Americas Group
were $21.3 million, a decrease of 21.4%, and sales by the Europe Group
were $16.0 million, an increase of 5.4%, net of a 9.6% decline in
currency exchange rates, both compared to the second quarter of the
previous fiscal year. On a sequential basis, sales by the Americas
Group decreased 3.2% and sales by the Europe Group increased 31.7%,
net of a 3.7% decline in currency exchange rates, both compared to the
quarter ended September 30, 2005. Sales for the six months ended
December 31, 2005 by the Americas Group were $43.2 million, a 14.3%
decrease and sales by the Europe Group were $28.2 million, an increase
of 5.8%, net of a 5.4% decline in currency exchange rates, both
compared to the six-month period ended December 31, 2004.
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SALES BY END MARKET
(dollars in millions)
---------------------
Dec. 31, % of Dec. 31, % of Sept. 30, % of
Three months ended: 2005 total 2004 total 2005 total
------------------- -------- ------- -------- ------ --------- ------
Government $19.4 52% $18.8 45% $14.4 42%
Communications 10.0 27% 11.4 27% 10.7 31%
Commercial 7.9 21% 12.0 28% 9.0 27%
---------------- --------------- ----------------
Total $37.3 100% $42.2 100% $34.1 100%
================ =============== ================
Dec. 31, % of Dec. 31, % of
Six months ended: 2005 total 2004 total
----------------- -------- ------- -------- ------
Government $33.9 47% $34.1 44%
Communications 20.7 29% 20.8 27%
Commercial 16.8 24% 22.2 29%
-------- ------- -------- ------
Total $71.4 100% $77.1 100%
======== ======= ======== ======
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By end market, for the quarter ended December 31, 2005, sales to
government customers were $19.4 million, an increase of 3.2%, sales to
communications customers were $10.0 million, a decrease of 12.8%, and
sales to commercial customers were $7.9 million, a decrease of 34.1%,
all compared to the second quarter of the prior fiscal year. On a
sequential basis, sales to government customers increased 34.1%, sales
to communications customers decreased 6.9%, and sales to commercial
customers decreased 11.7%, all compared to the quarter ended September
30, 2005. For the six months ended December 31, 2005, sales to
government customers were $33.9 million, a decrease of 1%, sales to
communications customers were $20.7 million, a decrease of 0.5%, and
sales to commercial customers were $16.8, a decrease of 24.2%, all
compared to the same period of the prior fiscal year.
For the quarter ended December 31, 2005, as a percentage of total
sales, sales to one communications customer, Ericsson, represented 16%
of sales, and no other customer represented more than 5% of sales.
NET INCOME
Net income for the quarter ended December 31, 2005 was $1.1
million, compared to $2.2 million for the same period of the prior
fiscal year. For the six months ended December 31, 2005, net income
was $524,000 compared to $3.4 million for the six months ended
December 31, 2004. Net income per common share - assuming dilution,
for the quarter ended December 31, 2005, was $0.07, compared to $0.14
reported for the second quarter of the prior fiscal year. Net income
per common share - assuming dilution, for the six months ended
December 31, 2005 was $0.03, compared to $0.22 for the same period of
the prior fiscal year.
GROSS PROFIT
Gross profit for the quarter as a percentage of sales was 43.5%,
compared to 44.4% for the second quarter of the prior fiscal year, and
41.6% for the preceding quarter. Compared to the preceding quarter, an
increased proportion of higher margin government sales favorably
impacted 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 December 31, 2005 was approximately $49.9
million, net of cancellation of a $4.7 million order received in
fiscal year 2005, compared to $45.9 million at the end of the second
quarter of the prior fiscal year, and $50.4 million at the end of the
preceding quarter. The order cancellation was due to the recent
decision by a government customer to change the project requirements,
and was not caused by a funding issue or dissatisfaction with SBS.
Bookings were $42.0 million, and net bookings were $37.3 million due
to the order cancellation. The book-to-bill ratio based on new
business was 1.13 to 1.
CASH
The cash balance at December 31, 2005 was $53.2 million compared
to $55.9 million at the end of the prior quarter, and SBS remains debt
free.
DESIGN WINS
During the quarter ended December 31, 2005, SBS achieved fifteen
design wins, bringing the total to twenty-six for the first six months
of this fiscal year. This compares to sixteen design wins achieved for
the first six months of the prior fiscal year. For the quarter ended
December 31, 2005, by market, there were eleven government, three
communications and one commercial design wins.
In the government and commercial markets, each reported design win
represents an initial purchase order of a minimum of $100,000, and in
the communications market the minimum purchase order value is $10,000.
All design wins are forecasted to produce a minimum of $500,000 in
annual sales when in production.
In the government market, all eleven of the design wins were
systems for upgrades of existing platforms or for new unmanned aerial
vehicle (UAV) programs.
The three communications design wins were board products for a
traffic management system, a telecom switch application and a WiMAX
application. The WiMAX application is the first design win for the new
AdvancedMC(TM) product line.
The new commercial design win was a single board computer used in
a system to inspect bottles during manufacturing.
NEW PRODUCTS
During the quarter ended December 31, 2005, SBS released a new
product line, the Rugged Operational Computer (ROC), which is a new
direction for SBS' military computer product portfolio. It is the
first commercially available small form factor military computer on
the market. The ROC is ideal for small platforms, such as unmanned
vehicles or other applications, where minimizing space and weight is
critical but a fully ruggedized conduction cooled system is required.
BUSINESS OUTLOOK
The following statements are based on current expectations and
speak only as of the date of this release, January 17, 2006. These
statements are forward-looking, and actual results may differ
materially.
"We are pleased with the order activity we saw in the first half
of the year, reinforcing our confidence in the growth we anticipate in
the second half of the fiscal year. Our confidence is based on strong
backlog, increases in government orders, excellent sales growth from
our European markets, and, in the commercial market, recent
strengthening of orders from semiconductor manufacturing equipment
customers. Additionally, we are encouraged by the amount of activity
in the marketplace for our AdvancedMC products, which will generate
increased sales in the second half of the fiscal year.
"Based on our backlog and our customers' forecasts, we expect
sales for the third quarter of fiscal year 2006 ending March 31, 2006
to be between $40 million and $44 million. For the fiscal year ending
June 30, 2006, we are reducing our guidance by $5 million due to the
recent order cancellation and now expect sales to be between $160
million and $170 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, January 17, 2006. 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
(866) 454-2124 or international (203) 369-1243. There is no passcode
for the audio replay. The replay will be available through January 31,
2006.
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.
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SBS Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
Thousands (except per share amounts)
(Unaudited)
----------------------------------------------------------------------
Three months ended Six months ended
December 31, December 31,
------------------- ------------------
2005 2004 2005 2004
--------- -------- -------- --------
Sales $ 37,284 42,246 71,422 77,130
Cost of sales:
Cost of products sold 20,788 23,039 40,448 42,079
Amortization of
intangible assets 260 450 519 817
--------- -------- -------- --------
Total cost of sales 21,048 23,489 40,967 42,896
--------- -------- -------- --------
Gross profit 16,236 18,757 30,455 34,234
Selling, general and
administrative expense 8,413 9,121 17,075 17,145
Research and development
expense 6,530 6,102 13,222 11,608
Amortization of intangible
assets 80 79 159 148
--------- -------- -------- --------
Operating income
(loss) 1,213 3,455 (1) 5,333
--------- -------- -------- --------
Interest and other income,
net 410 204 806 345
Foreign exchange gains
(losses) 13 (342) 1 (444)
--------- -------- -------- --------
423 (138) 807 (99)
--------- -------- -------- --------
Income before income taxes 1,636 3,317 806 5,234
Income tax expense 572 1,161 282 1,832
--------- -------- -------- --------
Net income $ 1,064 2,156 524 3,402
========= ======== ======== ========
Earnings per share data:
Net income per share $ 0.07 0.14 0.03 0.22
========= ======== ======== ========
Net income per share -
assuming dilution $ 0.07 0.14 0.03 0.22
========= ======== ======== ========
Weighted average shares used
in net income per share
computations 15,654 15,527 15,650 15,516
========= ======== ======== ========
Weighted average shares used
in net income per share -
assuming dilution
computations 15,715 15,763 15,702 15,714
========= ======== ======== ========
SBS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
Thousands (except share amounts)
(Unaudited)
----------------------------------------------------------------------
December 31, June 30,
2005 2005
------------ --------
Assets
------
Current assets:
Cash and cash equivalents $ 53,180 55,195
Receivables, net 28,658 27,535
Inventories 22,752 21,815
Deferred income taxes 1,356 1,361
Prepaid expenses 1,050 1,676
Other current assets 999 718
------------ --------
Total current assets 107,995 108,300
------------ --------
Property and equipment, net 7,026 7,635
Goodwill 16,932 16,995
Intangible assets, net 2,506 3,108
Deferred income taxes 15,325 15,529
Other assets 917 891
------------ --------
Total assets 150,701 152,458
============ ========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 4,667 4,509
Accrued representative commissions 688 819
Income taxes payable 2,095 3,051
Accrued compensation 3,666 4,851
Accrued severance and consolidation costs 183 424
Other current liabilities 2,977 2,785
------------ --------
Total current liabilities 14,276 16,439
Other long-term liabilities 198 132
------------ --------
Total liabilities 14,474 16,571
------------ --------
Stockholders' equity:
Common stock, no par value; 200,000,000
shares authorized;
15,663,665 issued and outstanding at
December 31, 2005,
15,645,929 issued and outstanding at
June 30, 2005 99,314 98,369
Unearned compensation (693) (84)
Accumulated other comprehensive income 1,494 2,014
Retained earnings 36,112 35,588
------------ --------
Total stockholders' equity 136,227 135,887
------------ --------
Total liabilities and stockholders'
equity $ 150,701 152,458
============ ========
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