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. -0- *T 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% ================ ================ ================ *T 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. -0- *T 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% ================
================ ================ *T 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 -0- *T 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
============== ======== *T
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