UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| [ X ]
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 2002 | |
| [ ]
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number 1-10981
SBS TECHNOLOGIES, INC.
| New Mexico (State or other jurisdiction of incorporation or organization) |
85-0359415 (IRS Employer Identification Number) |
2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
(505) 875-0600
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
YES [ X ] NO [ ]
As of February 4, 2003, the Registrant had 14,602,308 shares of its common stock outstanding.
SBS Technologies, Inc. and Subsidiaries
Form 10-Q for the Quarter Ended December 31, 2002
Table of Contents
| Page | |||||||||
| PART I | — FINANCIAL INFORMATION |
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Item 1 — |
Unaudited Condensed Financial Statements | ||||||||
| Consolidated Balance Sheets as of December 31, 2002 and June 30, 2002 | 2 | ||||||||
| Consolidated Statements of Operations, Six and Three Months Ended December 31, 2002 and 2001 | 3 | ||||||||
| Consolidated Statement of Changes in Stockholders’ Equity, Six Months Ended December 31, 2002 | 4 | ||||||||
| Consolidated Statements of Cash Flows, Six Months Ended December 31, 2002 and 2001 | 5 | ||||||||
| Notes to Unaudited Condensed Consolidated Financial Statements as of December 31, 2002 | 6 | ||||||||
Item 2 — |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | |||||||
Item 3 — |
Quantitative and Qualitative Disclosures about Market Risk | 26 | |||||||
Item 4 — |
Controls and Procedures | 26 | |||||||
| PART II | — OTHER INFORMATION |
||||||||
Item 1 — |
Legal Proceedings | 27 | |||||||
Item 4 — |
Submission of Matters to a Vote of Security Holders | 27 | |||||||
Item 6 — |
Exhibits and Reports on Form 8-K | 28 | |||||||
SIGNATURES |
29 | ||||||||
CERTIFICATIONS |
30 | ||||||||
EXHIBIT INDEX |
32 | ||||||||
SBS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
Thousands (except share amounts)
(Unaudited)
| December 31, | June 30, | |||||||||||
| 2002 | 2002 | |||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 25,155 | 24,811 | |||||||||
Receivables, net |
24,171 | 22,619 | ||||||||||
Inventories |
19,256 | 18,428 | ||||||||||
Deferred income taxes |
6,930 | 9,446 | ||||||||||
Income tax receivable |
7,296 | 4,584 | ||||||||||
Prepaid expenses |
1,986 | 1,226 | ||||||||||
Other current assets |
133 | 165 | ||||||||||
Total current assets |
84,927 | 81,279 | ||||||||||
Property and equipment, net |
10,197 | 11,507 | ||||||||||
Goodwill, net |
21,075 | 20,468 | ||||||||||
Intangible assets, net |
5,447 | 6,284 | ||||||||||
Deferred income taxes |
5,391 | 5,703 | ||||||||||
Other assets |
389 | 407 | ||||||||||
Total assets |
$ | 127,426 | 125,648 | |||||||||
Liabilities and Stockholders’ Equity |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 4,097 | 4,361 | |||||||||
Accrued representative commissions |
969 | 518 | ||||||||||
Accrued compensation |
3,646 | 4,170 | ||||||||||
Other current liabilities |
3,263 | 2,926 | ||||||||||
Total current liabilities |
11,975 | 11,975 | ||||||||||
Long-term liabilities: |
||||||||||||
Other liabilities |
19 | 27 | ||||||||||
Total liabilities |
11,994 | 12,002 | ||||||||||
Stockholders’ equity: |
||||||||||||
Common stock, no par value; 200,000,000 shares authorized, 14,602,308
issued and outstanding at December 31, 2002,
14,628,709 issued and outstanding at June 30, 2002 |
86,329 | 86,338 | ||||||||||
Unearned compensation |
(81 | ) | — | |||||||||
Accumulated other comprehensive loss |
(1,920 | ) | (3,113 | ) | ||||||||
Retained earnings |
31,104 | 30,421 | ||||||||||
Total stockholders’ equity |
115,432 | 113,646 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 127,426 | 125,648 | |||||||||
See accompanying notes to condensed consolidated financial statements
Page 2
SBS Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
Thousands (except per share amounts)
(Unaudited)
| Six Months Ended December 31 | Three Months Ended December 31 | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
Sales |
$ | 57,093 | 60,781 | 29,260 | 28,982 | ||||||||||||
Cost of sales |
28,534 | 43,575 | 14,155 | 27,697 | |||||||||||||
Gross profit |
28,559 | 17,206 | 15,105 | 1,285 | |||||||||||||
Selling, general and administrative expense |
16,766 | 18,684 | 8,532 | 9,769 | |||||||||||||
Research and development expense |
9,421 | 8,776 | 4,735 | 4,502 | |||||||||||||
Severance and other exit costs |
598 | 322 | 234 | 137 | |||||||||||||
Impairment of intangible assets |
— | 2,682 | — | 2,682 | |||||||||||||
Amortization of intangible assets |
1,036 | 3,853 | 452 | 1,925 | |||||||||||||
Operating income (loss) |
738 | (17,111 | ) | 1,152 | (17,730 | ) | |||||||||||
Interest and other income (expense), net |
225 | 277 | 100 | (159 | ) | ||||||||||||
Foreign exchange gains (losses) |
(27 | ) | 25 | (5 | ) | (24 | ) | ||||||||||
| 198 | 302 | 95 | (183 | ) | |||||||||||||
Income (loss) before income taxes |
936 | (16,809 | ) | 1,247 | (17,913 | ) | |||||||||||
Income tax expense (benefit) |
253 | (6,072 | ) | 381 | (6,528 | ) | |||||||||||
Net income (loss) |
$ | 683 | (10,737 | ) | 866 | (11,385 | ) | ||||||||||
Net income (loss) per common share |
$ | 0.05 | (0.74 | ) | 0.06 | (0.78 | ) | ||||||||||
Net income (loss) per common share -
assuming dilution |
$ | 0.05 | (0.74 | ) | 0.06 | (0.78 | ) | ||||||||||
See accompanying notes to condensed consolidated financial statements
Page 3
SBS Technologies, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Equity
Thousands (except share amounts)
(Unaudited)
| Common | Accumulated | Total | |||||||||||||||||||||||
| stock | Unearned | other | stock- | ||||||||||||||||||||||
| Compen- | comprehensive | Retained | holders' | ||||||||||||||||||||||
| Shares | Amount | sation | loss | earnings | equity | ||||||||||||||||||||
Balance
at June 30, 2002 |
14,628,709 | $ | 86,338 | — | (3,113 | ) | 30,421 | 113,646 | |||||||||||||||||
Exercise of stock options |
5,560 | 13 | — | — | — | 13 | |||||||||||||||||||
Restricted stock awards issued |
14,039 | 299 | (97 | ) | — | — | 202 | ||||||||||||||||||
to directors |
|||||||||||||||||||||||||
Stock-based compensation |
— | — | 16 | — | — | 16 | |||||||||||||||||||
Stock repurchased and retired |
(46,000 | ) | (321 | ) | — | — | — | (321 | ) | ||||||||||||||||
Net income |
— | — | — | — | 683 | 683 | |||||||||||||||||||
Other comprehensive income: |
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Foreign currency translation
adjustments |
— | — | — | 1,193 | — | 1,193 | |||||||||||||||||||
Balance
at December 31, 2002 |
14,602,308 | $ | 86,329 | (81 | ) | (1,920 | ) | 31,104 | 115,432 | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements
Page 4
SBS Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Thousands
(Unaudited)
| Six months ended | ||||||||||||
| December 31, | ||||||||||||
| 2002 | 2001 | |||||||||||
Cash flows from operating activities: |
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Net income (loss) |
$ | 683 | (10,737 | ) | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
||||||||||||
Depreciation |
1,996 | 1,776 | ||||||||||
Amortization of intangible assets |
1,036 | 3,853 | ||||||||||
Impairment of intangible assets |
— | 2,682 | ||||||||||
Bad debt expense |
268 | 297 | ||||||||||
Deferred income taxes |
2,861 | (6,562 | ) | |||||||||
Income tax benefit of stock options exercised |
— | 83 | ||||||||||
Loss on disposition of assets |
5 | 7 | ||||||||||
Foreign exchange (gains) losses |
27 | (25 | ) | |||||||||
Stock-based compensation |
16 | 56 | ||||||||||
Stock issued to directors under restricted stock awards |
202 | — | ||||||||||
Changes in assets and liabilities: |
||||||||||||
Receivables |
(1,557 | ) | 7,330 | |||||||||
Inventories |
(616 | ) | 18,057 | |||||||||
Income tax receivable |
(2,750 | ) | 2,260 | |||||||||
Prepaids and other assets |
(700 | ) | 1,188 | |||||||||
Accounts payable |
(282 | ) | (420 | ) | ||||||||
Accrued representative commissions |
442 | (239 | ) | |||||||||
Accrued compensation |
(554 | ) | (440 | ) | ||||||||
Other current liabilities |
253 | 1,200 | ||||||||||
Net cash provided by operating activities |
1,330 | 20,366 | ||||||||||
Cash flows from investing activities: |
||||||||||||
Acquisition of property and equipment |
(666 | ) | (2,231 | ) | ||||||||
Purchase of license agreement |
(200 | ) | — | |||||||||
Net cash used by investing activities |
(866 | ) | (2,231 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||
Payments on notes payable |
— | (2,500 | ) | |||||||||
Repurchase and retirement of common stock |
(321 | ) | (488 | ) | ||||||||
Proceeds from exercise of stock options and warrants |
13 | 828 | ||||||||||
Net cash used by financing activities |
(308 | ) | (2,160 | ) | ||||||||
Effect of exchange rate changes on cash |
188 | 36 | ||||||||||
Net change in cash and cash equivalents |
344 | 16,011 | ||||||||||
Cash and cash equivalents at beginning of period |
24,811 | 9,734 | ||||||||||
Cash and cash equivalents at end of period |
$ | 25,155 | 25,745 | |||||||||
Supplemental disclosure of cash flow information: |
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Interest paid |
$ | 12 | 15 | |||||||||
Income taxes paid (received) |
$ | 252 | (1,868 | ) | ||||||||
See accompanying notes to condensed consolidated financial statements
Page 5
SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Unaudited
December 31, 2002
| 1) | Summary of Significant Accounting Policies |
| The accounting policies as set forth in SBS Technologies, Inc.’s (“SBS”) Annual Report on Form 10-K for the year ended June 30, 2002 have been adhered to in preparing the accompanying interim condensed consolidated financial statements except as amended for the following discussion on accounting for goodwill. These statements are unaudited but include all adjustments, consisting of normal recurring adjustments that SBS considers necessary for a fair presentation of the financial position, results of operations, and cash flows for such interim periods. Results for such interim periods are not necessarily indicative of results for a full year. | |||
| The Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142) on July 1, 2002. SFAS 142 eliminates the amortization of goodwill and other intangible assets that have indefinite useful lives. Amortization will continue to be recorded for intangible assets with definite useful lives. SFAS 142 also requires at least an annual impairment review of goodwill and other intangible assets. Any asset deemed to be impaired is to be written down to its fair value. SBS completed step 1 of the required transitional goodwill impairment analysis in accordance with SFAS 142 prior to December 31, 2002 and an indicator of potential impairment was determined for certain reporting units in both the Commercial and Government Group and the Communications and Enterprise Group. SBS is in the process of completing step 2 of the required analysis to determine the amount, if any, of transitional impairment to be recorded prior to June 30, 2003. | |||
| 2) | Receivables, net | ||
| Receivables, net consist of the following: |
| December 31, | June 30, | |||||||
| Thousands | 2002 | 2002 | ||||||
Accounts receivable |
25,377 | 23,992 | ||||||
Less allowance for doubtful accounts |
(1,206 | ) | (1,373 | ) | ||||