SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ------- Exchange Act of 1934 for the quarterly period ended MARCH 31, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
- ------- Exchange Act of 1934
COMMISSION FILE NUMBER 1-10981
SBS TECHNOLOGIES, INC.
Formerly, SBS Engineering, Inc.
New Mexico 85-0359415
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
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 and (2) has been subject to such filing requirements for
at least the past 90 days.
YES X NO
----- ------
As of March 31, 1996, the Registrant had 3,062,773 shares of its common stock
outstanding.
<PAGE>
SBS TECHNOLOGIES, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Condensed Financial Statements
Consolidated Balance Sheets at March 31, 1996
and June 30, 1995
Consolidated Statements of Operations, Nine and Three Months
Ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows, Nine Months
Ended March 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
as of March 31, 1996
Item 2 - Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
SIGNATURES
EXHIBIT INDEX
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Assets March 31, 1996 June 30, 1995
-------- -------------- -------------
<S> <C> <C>
Current assets:
Cash $ 156,102 883,804
Accounts receivable 4,486,338 3,269,091
Contract receivables (note 2) 938,999 3,882,472
Inventories (note 3) 4,983,703 3,903,957
Deferred income tax 360,000 360,000
Other current assets 424,045 614,732
-------------- -------------
Total current assets 11,349,187 12,914,056
-------------- -------------
Property and equipment, at cost 2,178,430 1,728,764
Less accumulated depreciation 960,545 784,673
-------------- -------------
Net property and equipment 1,217,885 944,091
-------------- -------------
Intangible assets, net 5,642,150 6,076,894
Other assets 35,110 49,881
-------------- -------------
Total assets $ 18,244,332 19,984,922
============== =============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 1,722,219 1,751,392
Notes payable to bank 2,387,537 2,959,920
Accounts payable and accrued expenses 1,493,231 2,204,265
Accrued salaries 1,000,699 594,518
Accrued compensated absences 314,091 282,072
Accrued software license fees - 313,000
Income taxes 239,892 350,913
Other current liabilities 376,322 353,877
Reserve for discontinued operations - 784,068
-------------- -------------
Total current liabilities 7,533,991 9,594,025
Long-term debt, excluding current installments 2,418,341 5,341,649
-------------- -------------
Total liabilities 9,952,332 14,935,674
-------------- -------------
Stockholders' equity:
Common stock, no par value; 30,000,000
shares authorized, 3,062,773 issued and
outstanding at March 31, 1996;
2,893,654 issued and outstanding
at June 30, 1995 4,152,933 3,375,021
Common stock warrants 75,000 75,000
Retained earnings 4,064,067 1,599,227
-------------- -------------
Total stockholders' equity 8,292,000 5,049,248
-------------- -------------
Total liabilities and
stockholders' equity $ 18,244,332 19,984,922
============== =============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended March 31 Three Months Ended March 31
-------------------------------- ---------------------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales $ 22,913,386 11,319,926 7,895,826 3,249,826
Cost of sales 11,801,933 5,158,036 4,026,690 1,752,009
------------ ------------ ------------ ------------
Gross profit 11,111,453 6,161,890 3,869,136 1,497,817
Selling, general and administrative expense 5,654,049 2,845,157 1,920,724 890,266
Amortization of intangible assets 669,149 300,840 222,305 100,280
------------ ------------ ------------ ------------
Operating income from continuing
operations 4,788,255 3,015,893 1,726,107 507,271
------------ ------------ ------------ ------------
Interest income 1,772 1,582 396 470
Interest expense (681,187) (24,585) (200,264) (13,006)
------------ ------------ ------------ -----------
(679,415) (23,003) (199,868) (12,536)
------------ ------------ ------------ -----------
Income from continuing operations before
income taxes 4,108,840 2,992,890 1,526,239 494,735
Income taxes 1,644,000 1,268,000 560,000 212,000
------------ ----------- ----------- -----------
Income from continuing operations 2,464,840 1,724,890 966,239 282,735
------------ ----------- ----------- -----------
Discontinued operations (net of tax) - (2,919,849) - (2,075,374)
------------ ----------- ----------- -----------
Net income (loss) $ 2,464,840 (1,194,959) 966,239 (1,792,639)
============ =========== =========== ===========
Income (loss) per common and
common equivalent share:
Continuing operations $ 0.70 0.59 0.26 0.10
Discontinued operations - (1.00) - (0.71)
------ ------ ------ ------
Net income (loss) per common and
common equivalent share $ 0.70 (0.41) 0.26 (0.61)
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended March 31
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 24,639,612 18,788,830
Cash paid to suppliers and employees (19,466,188) (17,705,902)
Interest paid (689,632) (245,850)
Income taxes paid (1,755,021) (700,000)
Interest received 1,772 1,582
------------ ------------
Net cash provided by operating activities 2,730,543 138,660
------------ ------------
Cash flow from investing activities:
Acquisition of property and equipment (538,734) (532,841)
Business acquisition (note 5) (172,559) -
------------ ------------
Net cash used by investing activities (711,293) (532,841)
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of stock options 777,912 18,020
Proceeds from notes payable to bank 3,995,000 5,090,515
Payments on notes payable to bank (4,567,383) (4,440,515)
Payments on liability to stockholder (75,000) (91,667)
Payments on long-term borrowings (2,877,481) (35,187)
------------ ------------
Net cash provided (used) by
financing activities (2,746,952) 541,666
------------ ------------
Net increase (decrease) in cash (727,702) 146,985
Cash at beginning of period 883,804 83,326
------------ ------------
Cash at end of period $ 156,102 230,311
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Nine Months Ended March 31
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income (loss) $ 2,464,840 (1,194,959)
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 203,094 186,307
Amortization of intangible assets 669,149 513,054
Losses on discontinued operations - 2,250,000
Changes in assets and liabilities:
Accounts receivable (1,217,247) (349,851)
Contract receivables 2,943,473 1,003,348
Inventories (1,079,746) (965,320)
Other assets 205,458 (149,352)
Accounts payable (711,034) 430,303
Accrued salaries 406,181 (266,410)
Accrued compensated absences 32,019 (53,852)
Accrued software license fees (313,000) 15,000
Income tax liability (111,021) (1,381,908)
Other liabilities (761,623) 102,300
------------ ------------
Net adjustments 265,703 1,333,619
------------ ------------
Net cash provided by operating activities $ 2,730,543 138,660
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SBS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1) The accounting policies as set forth in SBS Technologies, Inc.'s Annual
Report on Form 10-K dated September 27, 1995 have been adhered to in
preparing the accompanying interim consolidated financial statements.
These statements are unaudited but include all adjustments, consisting of
normal recurring adjustments, that the Company considers necessary for a
fair presentation of the results for such interim period. Results for an
interim period are not necessarily indicative of results for a full year.
2) Contract receivables consisted of the following:
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
-------------- -------------
<S> <C> <C>
Amount billed $ 581,102 $ 2,216,673
Recoverable costs and accrued profit on
progress completed - not billed 357,897 1,665,799
-------------- -------------
$ 938,999 $ 3,882,472
============== =============
</TABLE>
Recoverable costs and accrued profit not billed are comprised principally
of amounts of sales recognized on contracts for which billings had not been
presented to the contract owners because the amounts were not billable at
the balance sheet date, because contract specified milestones had not yet
been reached or because progress billings are restricted by the contract to
a percentage of costs incurred.
3) Inventories relate primarily to circuit board manufacturing and consisted
of the following:
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
-------------- -------------
<S> <C> <C>
Raw materials $ 2,088,204 $ 1,724,307
Work in process 1,615,963 757,682
Finished goods 1,279,536 1,421,968
-------------- -------------
$ 4,983,703 $ 3,903,957
============== =============
</TABLE>
4) On April 28, 1995, the Company acquired GreenSpring Computers, Inc.
(GreenSpring), a corporation based in California, for $7,325,000.
GreenSpring is engaged in the design, development, marketing and
manufacturing of industrial circuit boards and computers. The acquisition
was accounted for using the purchase method of accounting, and goodwill is
being amortized over 10 years.
Had the acquisition taken place on July 1, 1994, sales for the nine and
three month periods ended March 31, 1995, would have been approximately
$17,648,000 and $6,002,000, respectively, and net income and net income per
common and common equivalent share for the same periods would have been
approximately $(526,000) and $(1,382,000) and $(.18) and $(.47),
respectively.
5) On January 10, 1996, the Company's wholly owned subsidiary GreenSpring
Computers, Inc. completed an asset purchase of the IndustryPack -Registered
Trademark- compatible product line from Wavetron Microsystems, Inc. The
purchase price, including capitalizable expenses, was $236,626. In
conjunction with the acquisition, goodwill of $172,559 was recorded and is
being amortized over five years. The reported net income and net income
per common and common equivalent shares for the reported periods would not
have been materially different from that reported had the acquisition taken
place at the beginning of the respective fiscal year.
<PAGE>
SBS TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ----------------------
Sales from continuing operations of SBS Technologies, Inc. (the Company) for the
nine month period ended March 31, 1996 increased $11,593,460 or 102.4% to
$22,913,386 compared with the equivalent period of the prior year. Sales for
the three month period ended March 31, 1996 increased $4,646,000 or 143.0% to
$7,895,826 compared to the equivalent period of the prior year. The increase
for the nine and three month periods was primarily attributable to the
additional sales contributed by GreenSpring Computers, Inc. (GreenSpring) which
was acquired in April 1995 plus additional sales contributed by the GreenSpring
acquisition of the IndustryPack -Registered Trademark- compatible product line
from Wavetron Microsystems, Inc. in January 1996, as well as increases in market
share from the Company's avionics, telemetry and other high-end computer system
and subsystem products. On April 26, 1995, the Company sold its flight and
radar simulation business to Camber Corporation. This business is being
reported as discontinued operations. During the nine and three month periods
ended March 31, 1996, prices for the Company's products remained firm due to
continued strong customer satisfaction with the value of the Company's products
and aftermarket support. Operating income from continuing operations for the
nine month period ended March 31, 1996 increased $1,772,362 or 58.8% to
$4,788,255 compared to the equivalent period of the prior year. Operating
income from continuing operations for the three month period ended March 31,
1996 increased $1,218,836 or 240.3% to $1,726,107 compared to the equivalent
period of the prior year. Net income from continuing and discontinued
operations for the nine month period ended March 31, 1996 increased $3,659,799
or 306.3% to $2,464,840 compared to a loss of ($1,194,959) for the equivalent
period of the prior year. Net income from continuing and discontinued
operations for the three month period ended March 31, 1996 increased $2,758,878
or 153.9% to $966,239 compared to a loss of ($1,792,639) for the equivalent
period of the prior year. The increase in net income for the nine and three
month periods is a result of the additional net income being contributed by
GreenSpring and the IndustryPack -Registered Trademark- compatible product line,
increases in net income from the Company's avionics, telemetry and other high-
end computer systems and subsystems, as well as the effect of exiting the flight
and radar simulation business in April 1995. During the three month period
ended March 31, 1995, the company recorded a charge against earnings of
$2,250,000 to exit the flight and radar simulation business. In addition, net
income for the nine and three month periods ended March 31, 1996 includes the
favorable effect of a reduction to the company's estimated effective tax rate
due to finalizing tax planning strategies. Net income per common and common
equivalent share from continuing and discontinued operations for the nine month
period ended March 31, 1996 increased $1.11 per share or 270.7% to $.70 per
share from a loss of ($0.41) and for the three month period ended March 31, 1996
increased $.87 or 142.6% to $.26 per share from a loss of ($0.61). Income per
common and common equivalent share from continuing operations for the nine month
period ended March 31, 1996 increased $.11 or 18.6% to $.70 per share and for
the three month period ended March 31, 1996 increased $.16 or 160.0% to $.26 per
share compared to the equivalent periods of the prior year. Net income per
common and common equivalent share for the nine and three month period ended
March 31, 1996 was calculated using the 20% modified treasury stock method.
Cost of sales for the nine and three month periods ended March 31, 1996
increased $6,643,897 or 128.8% to $11,801,933 and $2,274,681 or 129.8% to
$4,026,690, respectively, compared to the equivalent period of the prior year.
This is a result of the increase in sales due to the acquisition of GreenSpring
and the IndustryPack -Registered Trademark- compatible product line and
increases from the Company's avionics, telemetry and other products. Gross
profit for the nine and three month periods ended March 31, 1996 increased
$4,949,563 or 80.3% to $11,111,453 and $2,371,319 or 158.3% to $3,869,136,
respectively, compared to the equivalent periods of the prior year. Gross
profit as a percentage of total sales for the nine month period ended March 31,
1996 declined 5.9% compared to the equivalent period of the prior year. This
decrease was primarily a result of consolidating GreenSpring income which
traditionally realizes a lower gross profit margin than the Company's avionics,
telemetry and other high-end computer system and subsystem products. Gross
profit as a percentage of total sales for the three month period ended March 31,
1996 increased 2.9% compared to the equivalent period of the prior year. This
margin increase is a result of consistent favorable pricing and reductions in
material and direct overhead costs. Selling, general and administration expense
for the nine and three month periods ended March 31, 1996 increased $2,808,892
or 98.7% to $5,654,049 and $1,030,458 or 115.7% to $1,920,724, respectively,
compared to the equivalent periods of the prior year. These increases are due
to the addition of GreenSpring as well as additions made to the Company's
marketing and administrative areas, structuring the Company for continued
growth. Amortization of intangible assets for the nine and three month periods
ended March 31, 1996 increased $368,309 or 122.4% to $669,149 and $122,025 or
121.7% to $222,305, respectively, compared to the equivalent periods of the
prior year. This increase was a result of goodwill amortization associated with
the acquisition of GreenSpring and the acquisition of the IndustryPack -
Registered Trademark- compatible product line from Wavetron Microsystems, Inc.
Interest expense for the nine month period ended March 31, 1996 increased
$656,602 to $681,187 from $24,585 for the equivalent period of the prior year
and increased for the three month period ended March 31, 1996 $187,258 to
$200,264 from $13,006 for the equivalent period of the prior year. This increase
in interest expense is a result of the debt incurred to acquire GreenSpring and
the financing of increased working capital due to the higher level of business
activity.
On January 10, 1996, the Company's wholly owned subsidiary GreenSpring
Computers, Inc. completed an asset purchase of the IndustryPack -Registered
Trademark- compatible product line from Wavetron Microsystems, Inc. The
purchase price, including capitalizable expenses, was $236,626. In conjunction
with the acquisition, goodwill of $172,559 was recorded and is being amortized
over five years. The reported net income for the reported periods would not
have been materially different from that reported had the acquisition taken
place at the beginning of the respective fiscal year.
On April 28, 1995, the Company acquired GreenSpring Computers, Inc. a
corporation based in California, for $7,325,000. GreenSpring is engaged in the
design, development, marketing and manufacturing of computer input/output
products for the commercial/industrial market. The acquisition was accounted
for using the purchase method of accounting, and goodwill is being amortized
over ten years. Had the acquisition taken place on July 1, 1994, sales for the
nine and three month periods ended March 31, 1995 would have been approximately
$17,648,000 and $6,002,000, respectively, and net income and net income per
common and common equivalent share for the nine month period ended March 31,
1995 would have been approximately ($526,000) and ($.18), respectively, and for
the three month period ended March 31, 1995, would have been approximately
($1,382,000) and ($.47), respectively.
On April 26, 1995 the Company sold its flight and radar simulation business for
$400,300 to Camber Corporation. The disposition of the flight and radar
simulation business has been accounted for as a discontinued operation and prior
years consolidated statements of operations have been restated accordingly.
Sales from discontinued operations for the nine and three month periods ended
March 31, 1995, were approximately $6,815,000 and $1,825,000, respectively.
Liquidity and Capital Resources
- --------------------------------
Cash totaled $156,102 at March 31, 1996, a decrease of $727,702 from June 30,
1995, representing normal fluctuations in cash flow. Net cash provided by
operating activities for the nine month period ended March 31, 1996 was
$2,730,543, primarily due to the collection of contract receivables of
$2,943,473, the majority of which are from the Company's discontinued flight and
radar simulation business and were retained by the Company when it exited this
business in April 1995. Increases in sales volume and demand for semiconductor
parts during the nine month period ended March 31, 1996 have caused the Company
to increase accounts receivable and inventory over this period. In addition
liabilities increased in line with the current level of business activity. Net
cash used by investing activities for the nine month period ended March 31, 1996
of $711,293 was primarily for the purchase of software and equipment totaling
$538,734 and $172,599 for the purchase of the IndustryPack -Registered Trademark
- -compatible product line from Wavetron Microsystems, Inc. The Company utilized
$2,746,952 primarily to pay down short and long term bank debt. In April 1995,
the Company entered into a bank financing agreement for a $7,000,000 term loan
with an interest rate at prime plus 1.5% due in monthly installments of $116,667
plus interest and a $4,000,000 line of credit, which matured on April 26, 1996,
with an interest rate at prime plus 1.0%, interest payable monthly. The bank's
prime lending rate at March 31, 1996 was 8.25%. On April 26, 1996, after the
close of the quarter covered by this report, the financing agreement was amended
to provide the Company with a $6,750,000 term loan and a $2,500,000 revolving
line of credit which Management believes is sufficient. The term loan is a
three year note with a five year amortization maturing on October 30, 1999 and
refinanced a majority the Company's outstanding debt. The revolving line of
credit matures on October 30, 1997. The interest rate of the term loan is prime
plus .25% or LIBOR plus 2.50% in 30, 60, or 90 day options. The interest rate
of the revolving line of credit is prime or LIBOR plus 2.25% in 30, 60, or 90
day options. The amended financing agreement provides for a security interest by
the bank in the Company's receivables, inventories and equipment and imposes
certain performance ratios on the Company. These ratios include a current
maturities ratio which requires that the Company's net earnings plus
depreciation and amortization expense for the preceding four quarters from time
of measurement compared to the Company's current portion of its long term debt
will not be less than a ratio of 2.00 to 1.00, a senior funded debt to EBITDA
ratio which requires that the Company's total debt evidenced by promissory
notes, loan agreements, bonds or similar instruments, but excluding subordinated
debt, will not be greater than a ratio of 1.50 to 1.00 when compared to the
Company's profit before tax plus interest, depreciation, and amortization
expense for the preceding four quarters from time of measurement, and a fixed
charge coverage ratio requiring that the Company's income before tax plus
interest expense plus operating lease expense for the preceding four quarters
from the time of measurement will not be less than a ratio of 2.00 to 1.00 when
compared to the Company's interest expense plus operating lease expense for the
same preceding four quarters. The Company is prohibited from disposing of or
acquiring certain assets and businesses without the consent of the lender. At
March 31, 1996 the Company was in compliance with all covenants of the existing
financing agreement and the amended financing agreement.
The outstanding balance at March 31, 1996 was $2,980,021 on the term loan and
$2,387,537 on the line of credit. In addition to the bank financing agreement,
the Company had additional long term borrowings at March 31, 1996 of $1,160,539,
consisting of interest bearing and non-interest bearing notes. The amended
financing agreement refinanced $1,000,000 of this debt. As of March 31, 1996,
the Company was in compliance with the terms of these notes. Management
believes that its financial resources, including its internally generated funds
and available bank borrowings, will be sufficient to finance the Company's
current operations for the next twelve months.
<PAGE>
PART II - OTHER INFORMATION
-----------------------------
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults by the Company upon its Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (exhibit reference numbers refer to Item 601 of
Regulation S-K)
10.v 1996 Employee Stock Purchase Plan, adopted January 21,
1996 subject to shareholder approval.
11. Statement re computation of per-share income
27. Financial data schedule
(b) Reports on Form 8-K.
The Company filed a Form 8-K on January 30, 1996 reporting an
asset purchase of the IndustryPack -Registered Trademark-
compatible product line of Wavetron Microsystems, Inc., Redwood
City, California.
The Company filed a Form 8-KA2 on February 26, 1996 which
included revised pro-forma financial statements for the
acquisition of GreenSpring Computers, Inc.
SIGNATURES
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SBS TECHNOLOGIES, INC.
Date: May 10, 1996 /s Christopher J. Amenson
President
Date: May 10, 1996 /s James E. Dixon, Jr.
Chief Financial Officer
<PAGE>
SBS TECHNOLOGIES, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Method of Filing
- -------------- ----------------------------- -----------------------
<S> <C> <C>
03.i(1) Articles of Incorporation,
as amended. - -
03.ii(1) Bylaws, as amended. - -
10. 1996 Employee Stock Purchase Plan,
adopted January 21, 1996, subject
to shareholder approval Filed herewith electronically
11. Statement Re Computation of
Per-Share Income Filed herewith electronically
27. Financial Data Schedules Filed herewith electronically
</TABLE>
(1) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended December 31, 1995.
THIS PLAN HAS NOT BEEN APPROVED BY SHAREHOLDERS. THAT APPROVAL IS REQUIRED.
THE PLAN IS ALSO SUBJECT TO MODIFICATIONS AND CHANGES MADE BY THE BOARD OF
DIRECTORS IN ITS DISCRETION.
SBS TECHNOLOGIES, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
300,000 SHARES
I. PURPOSE
--------
The purpose of the 1996 Employee Stock Purchase Plan ("Plan") of SBS
Technologies, Inc. ("SBS") and its subsidiaries (together, with SBS, the
"Company") is to attract, compensate and retain well-qualified employees by
providing to them an equity interest in the Company's success.
II. PLAN SHARES
------------
SBS may issue and sell not more than 300,000 shares ("Plan Shares") of its
no par value common stock ("Common Stock") pursuant to the Plan. The Plan
Shares include authorized but unissued shares of Common Stock and shares of
Common Stock that have been subject to unexercised options under the Plan,
whether those options have terminated or expired by their terms, by
cancellation, or otherwise. The number of Plan Shares will be adjusted if the
number of outstanding shares of Common Stock of SBS is increased or reduced by
split-up, reclassification, stock dividend and the like.
III. ADMINISTRATION
---------------
The Plan shall be administered by a committee ("Committee") of the Board of
Directors of SBS consisting of two or more directors who are "disinterested
persons" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 ("Exchange Act") or such other persons as may be permitted by that Rule, as
amended or superseded from time to time. The Committee shall have the power and
authority necessary or appropriate to carry out the provisions of the Plan,
including the interpretation and construction of the Plan and the option grants
made under the Plan, the adoption, amendment or rescission of such rules and
regulations as the Committee deems advisable, the amendment with respect to the
terms of future option grants under the Plan, the termination of further option
grants under the Plan, and to make all other determinations the Committee deems
necessary or advisable in administering the Plan. The determinations of the
Committee on these matters shall be conclusive and binding upon all persons in
interest.
<PAGE>
IV. ELIGIBILITY
------------
Options under the Plan may be granted only to Eligible Employees. Eligible
Employees are full-time employees of the Company but shall not include an
employee: (i) who, if an option is granted to the employee under the Plan, will
immediately after the option is granted own or be entitled to purchase under
such an option 5% or more of the total combined voting power or value of all
classes of stock of the Company, within the meaning of Section 423(b)(3) of the
Internal Revenue Code of 1986, as amended ("Code"), (ii) who, of an option is
granted, would have rights to purchase shares under all employee stock purchase
plans offered by the Company accruing at a rate exceeding $25,000 of the fair
market value of the Common Stock (determined at the time the option is granted)
for each calendar year in which the option is outstanding at any time, (iii)
whose customary employment is 20 hours or less per week, (iv) whose customary
employment is for not more than 5 months in any fiscal year, (v) who is a
highly compensated employee within the meaning of Code Section 414(g) as amended
or superseded from time to time and an executive officer of the Company subject
to Section 16 of the Securities Exchange Act, or (vi) who has been employed by
the Company less than two years.
V. OPTION GRANTS
--------------
Until such time as the Committee may in its sole discretion amend the terms
of the option grants or terminate further option grants under the Plan, all
eligible employees of the Company shall, on the twenty-first day of January,
1996, 1997 and 1998 ("Date of Grant"), be granted an option to purchase Plan
Shares on the following terms and conditions:
A. OPTION TERM.
-------------
The term of each option will be from the Date of Grant until 1700
hours, mountain time, on the date which is twenty-seven months from the Date of
Grant, when the option will expire ("Date of Expiration").
B. OPTION PRICE.
--------------
The purchase price per Plan Share ("Option Price") will be the fair
market value on the Date of Grant ("Date of Grant Price"). Fair market value
means (a) the closing price of the Common Stock on the NASDAQ National Market
System or, if the Common Stock is admitted to trading on an exchange, on that
exchange, or (b) if no such closing price is available, the value as determined
in good faith by the Board of Directors of SBS.
C. NUMBER OF OPTION SHARES.
-------------------------
The number of Plan Shares subject to each option shall, within the
limitations of eligibility, be the whole number equal to (i) up to 10% of each
eligible employee's annual base compensation (without regard to benefits,
bonuses or the like), the percentage to be determined by the Committee, divided
by (ii) the Date of Grant Price.
D. EXERCISE.
----------
Each option may be exercised in whole or in part beginning eighteen
months from the Date of Grant, when the option will vest, until the Date of
Expiration by payment to the Company by cashier's check or money order of the
full amount of the exercise price of the Plan Shares being purchased.
<PAGE>
E. DELIVERY OF SHARES.
--------------------
A stock certificate representing the Plan Shares purchased pursuant to
an exercised option, or if the Company has uncertificated shares, a written
notice complying with the New Mexico Business Corporation Act, will be delivered
by the Company to the purchaser as promptly as practicable after exercise of the
option.
F. TERMINATION OF EMPLOYMENT.
---------------------------
If an employee's employment with the Company is terminated for cause,
any option held by the employee, whether or not vested, will immediately
terminate. For purposes of this Plan, cause is defined to mean if the employee
refuses, upon the Company's request, or, fails, to render services competently
and in good faith to the Company's benefit while employed by the Company, or if
the employee violates any provision or restriction or fails to perform any
obligation contained in any employment agreement with the Company, or in any
Company policy or Company employment manual or practice, or unless otherwise
provided by Company policy or Company employment manual, (a) is reasonably
believed by Company (i) to have failed to comply with any employment or
nondiscrimination or similar law, regulation or policy, (ii) to abuse, as
determined by the Company, alcohol or to use drugs, (other than as prescribed by
employee's physician), or (b) refuses to submit to testing for alcohol or drugs,
or (c) is reasonably believed by Company to have committed or is charged with
any felony or a misdemeanor (except minor traffic violations and similar
offenses). If an employee is terminated for any reason other than for cause,
the employee's option will be exercisable in accordance with the terms of the
Plan, except that the option must be exercised within three months of the
employee's termination of employment and will expire at the end of that three-
month period to the extent not previously exercised.
VI. RIGHTS AS SHAREHOLDER
----------------------
Until an option granted under the Plan has been exercised and the Plan
Shares acquired pursuant to that exercise have been issued (or a written notice
for uncertificated Plan Shares has been sent), the employee holding the option
will have no rights as a shareholder with respect to the Plan Shares subject to
the option.
VII. PLAN NOT TO AFFECT EMPLOYMENT
------------------------------
Nothing in this Plan or options issued under it confers upon any employee
the right to continue in the employ of the Company.
VIII. NONTRANSFERABILITY OF THE OPTION
---------------------------------
No option granted under the Plan may be transferred or assigned otherwise
than by will or the laws of descent and distribution, nor may any option be
exercised by anyone other than the optionee during the optionee's lifetime.
<PAGE>
IX. SEVERABILITY
-------------
If any part of this Plan is determined to be invalid or void in any
respect, that determination will not affect, impair, invalidate or nullify the
remaining provisions of this Plan, which will continue in full force and effect.
X. COMPLIANCE WITH SECURITIES LAWS
--------------------------------
If the Plan Shares have not been registered under the Securities Act of
1933 and any applicable state securities laws, the Company's obligation to issue
Plan Shares pursuant to the exercise of an option shall be conditioned upon
receipt of a representation letter in form satisfactory to the Company which
includes, among other things, a representation that the employee is acquiring
the Plan Shares for the employee's own account and not with a view to the
distribution; the certificate representing those Plan Shares will bear a legend
in a form deemed necessary or advisable by the SBS's legal counsel. In no event
shall the Company be obligated to issue any Plan Shares pursuant to the exercise
of an option if, in the opinion of SBS' legal counsel, that issuance would
result in a violation of any federal or state securities laws.
XI. EFFECTIVENESS AND SHAREHOLDER APPROVAL
---------------------------------------
The Plan is effective on January 21, 1996, subject to approval of the
shareholders of SBS. If approval by SBS shareholders is not obtained within
twelve months from the Plan's effective date, the Plan and any options issued
under it will be deemed void ab initio.
XII. STOCK ADJUSTMENTS
------------------
A. STOCK DIVIDENDS, SPLITS AND THE LIKE.
--------------------------------------
In the event of a stock dividend, stock split, recapitalization,
merger in which SBS is the surviving corporation or other capital adjustment
affecting the outstanding shares of Common Stock, an appropriate adjustment will
be made, as determined by the SBS Board of Directors, to the number of Plan
Shares and the exercise price per Plan Share with respect to any option granted
under the Plan.
B. LIQUIDATION AND REORGANIZATION.
--------------------------------
If SBS is liquidated or is a party to a reorganization, consolidation
or merger in which SBS is not the surviving corporation, any option granted
under the Plan will vest.
XIII. AMENDMENT AND TERMINATION
--------------------------
The Committee or the SBS Board of Directors may at any time alter, amend,
or suspend or terminate the Plan in whole or in part in any respect except that
upon termination of the Plan for reasons other than its failure to qualify as an
employee stock purchase plan under Section 423 of the Code, vested options may
still be exercised in accordance with their terms and, as to them, the Plan will
be considered to be in effect and not terminated until exercise or expiration of
the vested options. If the Plan is terminated because it fails to comply with
Section 423 of the Code, the Plan and all options issued under it, whether or
not vested, will terminate.
<PAGE>
XIV. APPLICABLE LAW
---------------
This Plan will be construed in accordance with the laws of the State of New
Mexico, to the extent not pre-empted by applicable Federal law.
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF PER-SHARE INCOME
TREASURY STOCK METHOD
AS MODIFIED FOR 20% TEST
<TABLE>
<CAPTION>
Period ended March 31, 1996
---------------------------
Nine Months Three Months
---------------------------
<S> <C> <C>
Proceeds upon exercise of options
and warrants outstanding
(1,262,806 shares at a weighted average
exercise price of $4.894) $ 6,180,173 6,180,173
============ ============
Weighted average number of shares outstanding 2,987,398 3,046,044
Issued shares - exercise of options and warrants 1,262,806 1,262,806
Shares assumed to be repurchased with proceeds from
exercise subject to 20% of average shares
outstanding maximum (597,480) (609,209)
------------ ------------
Total common and common equivalent shares 3,652,724 3,699,641
============ ===========
Net income for the year $ 2,464,840 966,239
Add: After-tax reduction in interest expense
from the assumed repayment of debt 80,942(1) 15,578(2)
------------ -----------
Adjusted net income $ 2,545,782 981,817
============ ===========
Total common and common equivalent shares 3,652,724 3,699,641
============ ===========
Income per common and common equivalent shares $ 0.70 0.26
============ ===========
Income adjustment:
Proceeds upon exercise $ 3,180,173 6,180,173
Price of shares assumed repurchased:
Number of shares 597,480 609,209
Average market value based on average
monthly market close information as
published by NASDAQ 7.835 8.724
------------ -----------
4,681,253 5,314,738
------------ -----------
Repayment of debt 1,498,920 865,435
Interest Rate (estimated average interest rate
on debt for year) 12% 12%
After tax effect (1 - 40%) 60% 60%
Portion of year 75% 25%
------------ -----------
$ 80,942(1) 15,578(2)
============ ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND IN
THE COMPANY'S 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 156102
<SECURITIES> 0
<RECEIVABLES> 5425337
<ALLOWANCES> 0
<INVENTORY> 4983703
<CURRENT-ASSETS> 11349187
<PP&E> 2178430
<DEPRECIATION> 960545
<TOTAL-ASSETS> 18244332
<CURRENT-LIABILITIES> 7533991
<BONDS> 0
0
0
<COMMON> 4152933
<OTHER-SE> 4139067
<TOTAL-LIABILITY-AND-EQUITY> 18244332
<SALES> 22913386
<TOTAL-REVENUES> 22913386
<CGS> 11801933
<TOTAL-COSTS> 18125131
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 681187
<INCOME-PRETAX> 4108840
<INCOME-TAX> 1644000
<INCOME-CONTINUING> 2464840
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2464840
<EPS-PRIMARY> .70
<EPS-DILUTED> 0
</TABLE>
