<PAGE>
UNITED STATES
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 September 30, 2000
|_| 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 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
the past 90 days.
YES |X| NO |_|
As of November 1, 2000, the Registrant had 13,787,055 shares of its common
stock outstanding.
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
September 30, 2000 June 30, 2000
------------------ -------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,176,618 3,595,078
Receivables, net (note 2) 33,763,734 29,164,257
Inventories (note 3) 40,304,663 30,492,779
Deferred income taxes 5,845,053 5,185,853
Income tax receivable 724,831 1,022,215
Prepaid expenses 659,927 856,399
Other current assets 341,774 431,776
------------- -----------
Total current assets 87,816,600 70,748,357
------------- -----------
Property and equipment, net 7,476,535 7,320,222
Intangible assets, net 51,930,001 54,961,154
Other assets 124,304 130,524
------------- -----------
Total assets $ 147,347,440 133,160,257
============= ===========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 20,000,000 20,000,000
Accounts payable 10,233,021 5,556,479
Accrued representative commissions 584,677 652,397
Accrued salaries 2,139,939 3,171,690
Accrued compensated absences 1,193,465 1,229,307
Other current liabilities 3,306,449 2,603,812
------------- -----------
Total current liabilities 37,457,551 33,213,685
------------- -----------
Deferred income taxes 577,089 932,809
------------- -----------
Total liabilities 38,034,640 34,146,494
------------- -----------
Stockholders' equity:
Common stock, no par value; 200,000,000 shares authorized,
13,719,176 issued and outstanding at September 30, 2000,
13,302,144 issued and outstanding at June 30, 2000 72,801,583 65,384,516
Accumulated other comprehensive loss (5,410,682) (3,967,584)
Retained earnings 41,921,899 37,596,831
------------- -----------
Total stockholders' equity 109,312,800 99,013,763
------------- -----------
Total liabilities and stockholders' equity $ 147,347,440 133,160,257
============= ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 2
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
================================================================================
Three Months Ended September 30
-------------------------------
2000 1999
------------ ---------
Sales $ 43,678,535 28,023,122
Cost of sales 22,234,212 12,452,627
------------ ---------
Gross Profit 21,444,323 15,570,495
Selling, general and administrative expense 7,933,716 5,911,315
Research and development expense 4,963,582 3,668,244
Amortization of intangible assets 1,973,529 1,113,026
------------ ---------
Operating income 6,573,496 4,877,910
------------ ---------
Interest income (expense), net (353,109) 86,862
Foreign exchange gains (losses) (82,024) 12,140
------------ ---------
(435,133) 99,002
------------ ---------
Income before income taxes 6,138,363 4,976,912
Income taxes 1,813,295 1,843,020
------------ ---------
Net income $ 4,325,068 3,133,892
============ ==========
Net income per common share $ 0.32 0.27
============ ==========
Net income per common share -
assuming dilution $ 0.29 0.25
============ ==========
See accompanying notes to condensed consolidated financial statements
Page 3
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Common Accumulated Total
stock Other stock-
-------------------------- Retained Comprehensive holders'
Shares Amount earnings Loss equity
------------ --------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 2000 13,302,144 $65,384,516 $37,596,831 $(3,967,584) $ 99,013,763
Exercise of stock options 417,032 4,717,733 -- -- 4,717,733
Stock-based compensation -- 7,031 -- -- 7,031
Income tax benefit from stock
options exercised -- 2,692,303 -- -- 2,692,303
Net income -- -- 4,325,068 -- 4,325,068
Other comprehensive income:
Foreign currency translation adjustment -- -- -- (1,443,098) (1,443,098)
---------- ----------- ----------- ----------- -------------
Balance at September 30, 2000 13,719,176 $72,801,583 $41,921,899 $(5,410,682) $ 109,312,800
========== =========== =========== =========== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 4
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
================================================================================
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,325,068 3,133,892
------------ ---------
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation 554,393 457,472
Amortization of intangible assets 1,973,529 1,113,026
Bad debt expense 330,827 (8,827)
Deferred income taxes (1,083,616) (102,655)
Income tax benefit of stock options exercised 2,692,303 20,276
Loss on disposition of assets 9,429 --
Foreign exchange losses (gains) 82,024 (12,140)
Stock-based compensation 7,031 7,031
Changes in assets and liabilities:
Receivables (5,264,248) (782,099)
Inventories (10,068,875) (1,450,426)
Prepaids and other assets 286,937 (51,009)
Accounts payable 4,630,724 435,531
Accrued representative commissions (67,720) 3,217
Accrued salaries (997,184) (871,370)
Accrued compensated absences (23,594) (81,396)
Income taxes 360,780 1,377,047
Other current liabilities 907,223 168,528
------------ ---------
Net adjustments (5,670,037) 222,206
------------ ---------
Net cash (used) provided by operating activities (1,344,969) 3,356,098
------------ ---------
Cash flows from investing activities:
Acquisition of property and equipment (786,130) (430,043)
------------ ---------
Net cash used in investing activities (786,130) (430,043)
------------ ---------
</TABLE>
(Continued)
Page 5
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
================================================================================
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from financing activities:
Payments on notes payable to related parties -- (538,938)
Payments on notes payable to bank -- (3,900,000)
Proceeds from exercise of stock options 4,717,733 239,062
----------- ---------
Net cash provided (used) by financing activities 4,717,733 (4,199,876)
----------- ---------
Effect of exchange rate changes on cash (5,094) 13,187
----------- ---------
Net increase (decrease) in cash and cash equivalents 2,581,540 (1,260,634)
Cash and cash equivalents at beginning of period 3,595,078 3,500,556
----------- ---------
Cash and cash equivalents at end of period $ 6,176,618 2,239,922
=========== =========
Supplemental disclosure of cash flow information:
Interest paid $ 694,696 51,194
Income taxes (received) paid (166,726) 449,670
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 6
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 2000
(Unaudited)
================================================================================
1) Summary of Significant Accounting Policies
The accounting policies as set forth in SBS Technologies, Inc.'s ("SBS")
Annual Report on Form 10-K dated September 22, 2000 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 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.
Effective July 1, 2000, SBS adopted Statement of Financial Accounting
Standard ("SFAS") 133, "Accounting for Derivative Instruments and Certain
Hedging Activities", as amended by SFAS 138. SFAS 133, as amended,
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. SBS did not have any outstanding
derivatives at September 30, 2000 or July 1, 2000, and as such,
adoption of SFAS 133 had no impact on SBS' financial position or
results of operations for the period ended September 30, 2000.
On August 18, 2000, SBS declared a two-for-one stock split for
stockholders of record on September 5, 2000, distributed on September 20,
2000. All references to net income per common share, net income per common
share - assuming dilution, common stock, and stockholders' equity have
been restated as if the stock split occurred as of the earliest period
presented.
2) Receivables, net
Receivables, net consist of the following:
September 30, 2000 June 30, 2000
------------------ -------------
Accounts receivable $ 34,820,797 29,993,290
Less: allowance for doubtful accounts (1,057,063) (829,033)
------------ ----------
$ 33,763,734 29,164,257
============ ==========
3) Inventories
Inventories consist of the following:
September 30, 2000 June 30, 2000
Raw materials $19,589,636 15,010,729
Work in process 14,544,716 8,902,019
Finished goods 4,814,652 5,379,699
Inventory consigned to others 1,355,659 1,200,332
----------- ----------
$40,304,663 30,492,779
=========== ==========
4) Earnings Per Share
Net income per common share is based on weighted average shares
outstanding. Net income per common share - assuming dilution includes the
dilutive effects of potential common shares outstanding during the period.
A reconciliation of the numerator and denominator of the per share and per
share - assuming dilution calculation follows:
Page 7
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 2000 (Continued)
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Three Months Ended September 30
-----------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income Per Common Share
Net Income $4,325,068 13,404,794 $0.32 $3,133,892 11,679,802 $0.27
===== =====
Effect of Dilutive Securities
Dilutive options and warrants -- 1,388,034 -- 929,290
---------- ---------- ---------- ----------
Net Income Per Common Share
- assuming dilution
Net Income $4,325,068 14,792,828 $0.29 $3,133,892 12,609,092 $0.25
===== =====
</TABLE>
For the three months ended September 30, 2000 and 1999, options to
purchase 34,784 and 1,642,196 shares of common stock, respectively, were
outstanding but were not included in the computation of net income per
common share - assuming dilution because the options' exercise price was
greater than the average market price of the common shares.
5) Comprehensive Income
Comprehensive income for the three months ended September 30, 2000 and
1999, was $2.9 million and $3.2 million, respectively. The difference
between comprehensive income and net income was related to foreign
currency translation adjustments.
6) Segment Financial Data
SBS operates internationally through three operating segments: the
Communications Group, the Computer Group, and the Aerospace Group. These
segments are based on the markets that are served and the products that
are provided to those markets, and have managers who report directly to
the chief operating decision-maker. Reportable segments for the fiscal
2000 period have been reclassified to conform to the segment structure
reported at the end of fiscal 2000.
Page 8
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 2000 (Continued)
(Unaudited)
================================================================================
SBS measures its segments' results of operations based on income before
income taxes and before allocation of corporate overhead expenses,
substantially all amortization of goodwill and intangibles, corporate
interest income and expense, and acquired in-process research and
development charges associated with purchase business combinations. The
accounting policies used to measure segment results of operations are the
same as those referred to in Note 1.
================================================================================
<TABLE>
<CAPTION>
Corporate
Communications Computer Aerospace and un-
Group Group Group allocated (1) Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended September 30
Gross Sales 2000 $ 22,458,410 15,925,762 6,104,330 -- 44,488,502
Intersegment sales (417,912) (392,055) -- -- (809,967)
------------ ---------- ---------- ---------- -----------
Sales to external customers 22,040,498 15,533,707 6,104,330 -- 43,678,535
Gross Sales 1999 6,392,797 13,568,555 8,245,021 -- 28,206,373
Intersegment sales (58,836) (12,961) (111,454) -- (183,251)
------------ ---------- ---------- ---------- -----------
Sales to external customers 6,333,961 13,555,594 8,133,567 -- 28,023,122
Segment profit (Income
before income taxes) 2000 5,456,158 3,426,880 1,320,380 (4,065,055) 6,138,363
1999 1,214,405 2,826,443 2,803,081 (1,867,017) 4,976,912
September 30
Total assets 2000 43,032,356 29,525,069 9,754,466 65,035,549 147,347,440
1999 12,533,386 22,743,836 11,328,103 45,530,149 92,135,474
-------------------------------------------------------------------------------------
</TABLE>
(1) The corporate and unallocated column includes amounts for corporate items.
With regard to results of operations, corporate and unallocated includes
corporate overhead, substantially all interest expense, interest income,
and amortization expense associated with goodwill and intangibles not
considered in assessing segment profit. Corporate assets primarily include
cash and cash equivalents, deferred and current income tax assets and
intangible assets.
Page 9
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
September 30, 2000
================================================================================
The following discussion and analysis should be read in conjunction with the
Company's Financial Statements and Notes thereto. Information discussed herein,
other than statements of historical fact, that addresses future financial
performance, activities, events or developments that SBS or management intends,
expects, projects, believes or anticipates will or may occur in the future are
forward-looking statements. These statements are based upon certain assumptions
and assessments made by management of SBS in light of its experience and its
perception of historical trends, current conditions, expected future
developments and other factors it believes to be appropriate. The
forward-looking statements included in this Form 10-Q are also subject to a
number of risks and uncertainties, including but not limited to economic,
competitive, supply and demand, governmental and technological factors affecting
SBS' operations, markets, products, services, prices, and other risk factors
listed in the Company's Form 10-K for the year ended June 30, 2000. These
forward-looking statements are not guarantees of future performance and actual
results, developments and business decisions may differ from those expressed or
implied by these forward-looking statements.
Results of Operations
Three Months Ended September 30, 2000 Compared To Three Months Ended September
30, 1999
Sales. For the three-month period ended September 30, 2000, sales increased
55.9%, or $15.7 million, from $28.0 million for the three-month period ended
September 30, 1999, to $43.7 million. Of this 55.9% increase, sales contributed
by the acquisition of SDL on April 12, 2000 comprised 26.4%, and 29.5% was
attributable to SBS' other product lines. Unit shipments increased within the
Computer Group segment, primarily due to an increase in sales of the Group's
computer connectivity and expansion unit products and general purpose I/O
products. Unit shipments of the Computer Group's German-produced computer
processor products increased, but sales were negatively impacted by changes in
exchange rates, as the U.S. dollar strengthened against the Deutsche mark. Unit
shipments increased among all product lines within the Communications Group.
Unit shipments declined within the Aerospace Group primarily due to declines in
the commercial satellite and military markets and decline in major new aircraft
development programs.
Gross Profit. For the three-month period ended September 30, 2000, gross profit
increased 37.7%, or $5.8 million from $15.6 million for the three-month period
ended September 30, 1999, to $21.4 million. Of this 37.7% increase, gross profit
contributed by the acquisition of SDL on April 12, 2000 comprised 23.5%, and
14.2% was attributable to SBS' other product lines. As expected, for the
three-month period ended September 30, 2000, gross profit as a percentage of
sales decreased to 49.1% from 55.6% for the three-month period ended September
30, 1999, primarily due to the significant sales mix change that has been
occurring, as SBS continues to transition to higher volume, lower margin OEM
production orders, and becomes less dependent on its high-margin legacy
products. Gross margins as a percentage of sales are expected to continue to
decrease slightly, as SBS' lower margin production and systems business
continues to be a larger portion of total sales mix.
Selling, General and Administrative Expense. For the three-month period ended
September 30, 2000, selling, general and administrative (SG&A) expense increased
34.2%, or $2.0 million, from $5.9 million for the three-month period ended
September 30, 1999, to $7.9 million. Of this 34.2% increase, 9.2% was due to the
acquisition of SDL on April 12, 2000, and 25.0% was primarily due to an increase
in costs commensurate with the growth of the Communications Group, partially
offset by a reduction of costs within the Aerospace Group. For the three-month
period ended September 30, 2000, SG&A expense as a percentage of sales decreased
to 18.2% from 21.1% in the three-month period ended September 30, 1999, as the
increase in sales volume more than offset the increase in expense.
Research and Development Expense. For the three-month period ended September 30,
2000, research and development (R&D) expense increased 35.3%, or $1.3 million,
from $3.7 million for the three-month period ended September 30, 1999, to $5.0
million. Of this 35.3% increase, 26.1% was due to the acquisition of SDL on
April 12, 2000, and 9.2% was primarily due to increased investment in product
development within the Communications Group, commensurate with the growth of the
segment, partially offset by a reduction in costs within the Aerospace Group.
For the three-month period ended September 30, 2000, R&D expense as a percentage
of sales decreased to 11.4% from 13.1% in the three-month period ended September
30, 1999, as the increase in sales volume more than offset the increase in
expense.
Amortization of Intangible Assets. For the three-month period ended September
30, 2000, amortization of intangible assets increased 77.3%, or $861,000, from
$1.1 million for the three-month period ended September 30, 1999, to $2.0
million. This increase was the result of the amortization of intangibles and
goodwill associated with the acquisition of SDL on April 12, 2000 and
amortization of SBS' license agreement for fibre channel technology purchased in
the fourth quarter of fiscal 2000.
Page 10
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
September 30, 2000
(Continued)
================================================================================
Interest Income, Net of Interest Expense. For the three-month period ended
September 30, 2000, interest income, net of interest expense decreased $440,000,
from $87,000 for the three-month period ended September 30, 1999, to $(353,000).
This decrease was primarily due to interest expense associated with the $20.0
million of borrowings used to fund the acquisition of SDL on April 12, 2000.
Foreign Exchange Gains (Losses). For the three-month period ended September 30,
2000, the $82,000 foreign exchange loss was primarily attributable to the change
in exchange rates relating to interest payable on debt from SBS' foreign
subsidiary, partially offset by a foreign exchange gain attributable to the
change in exchange rates relating to payments by SBS' U.S. subsidiaries to an
SBS foreign subsidiary for commissions accrued at June 30, 2000.
Income Taxes. For the three-month periods ended September 30, 2000 and 1999,
income taxes represented effective income tax rates of 29.5% and 37.0%,
respectively. The decrease in the effective income tax rate was primarily due to
a favorable ruling by the German tax authorities allowing for the deduction of
goodwill amortization for trade tax purposes. This ruling was applied
retroactively to January 1, 1999. This retroactive adjustment resulted in an
approximate 6.5% decrease in the effective rate for the period ended September
30, 2000. Management expects the effective rate for the remaining three quarters
in fiscal 2001 to be approximately 36.0%. Actual results may vary.
Earnings Per Share. For the three-month period ended September 30, 2000, net
income per common share was $0.32 compared to $0.29 for the three-month period
ended September 30, 1999. For the three-month period ended September 30, 2000,
net income per common share-assuming dilution was $0.29 compared to $0.25 for
the three-month period ended September 30, 1999. For the three-month period
ended September 30, 2000, net income per common share and net income per common
share-assuming dilution include the positive effect of $0.03 and $0.02,
respectively, for the retroactive adjustment to German income taxes (see "Income
Taxes" above).
Review of Business Segments
SBS is managed and operates through three operating segments: the Communications
Group, the Computer Group and the Aerospace Group. Reportable segments for the
fiscal 2000 period have been reclassified to conform to the segment structure
reported at the end of fiscal 2000.
The following is a discussion of sales to external customers and segment profit
for each reportable segment. SBS does not allocate to these segments costs
associated with its corporate headquarters, substantially all of the
amortization expense associated with acquisitions, substantially all interest
income earned on cash balances, interest expense associated with SBS borrowing
facilities and acquired in-process research and development charges. This
measure of segment profit described above is referred to in this review as
"Segment Profit."
Communications Group
For the three-month period ended September 30, 2000, Communications Group sales
to external customers increased 248.0%, or $15.7 million, from $6.3 million for
the three-month period ended September 30, 1999 to $22.0 million. Of this 248.0%
increase, sales contributed from the acquisition of SDL on April 12, 2000
accounted for 117.0% of the increase. The balance of the increase was primarily
attributable to a 196.2% increase in sales of the Group's PowerPC based
processor products, resulting from growth in sales to wireless internet access,
high speed router, and optical switch business customers.
For the three-month period ended September 30, 2000, Communications Group
segment profit increased 349.3%, or $4.3 million, from $1.2 million for the
three-month period ended September 30, 1999, to $5.5 million. This increase was
primarily due to earnings contributed by the acquisition of SDL on April 12,
2000 and an increase in sales among the Group's other product lines, partially
offset by an increase in SG&A and R&D expenses commensurate with the growth of
the segment. Segment profit as a percentage of sales increased from 19.2% for
the three-month period ended September 30, 1999 to 24.8% for the same period in
2000, as the increase in sales volume more than offset the increase in expenses.
This increase was partially offset by a decrease in gross margins on the Group's
higher volume OEM production orders.
Page 11
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
September 30, 2000
(Continued)
================================================================================
Computer Group
For the three-month period ended September 30, 2000, Computer Group sales to
external customers increased 14.6%, or $1.9 from $13.6 million for the
three-month period ended September 30, 1999 to $15.5 million. Sales of the
Group's general purpose I/O products and computer connectivity and expansion
unit products increased 34.4% and 15.3%, respectively, primarily the result of
an increase in sales to semiconductor equipment manufacturers, and an increase
in sales to the entertainment production equipment and defense industries. Unit
shipments of the Group's German-produced computer processor products increased
compared to the three-month period ended September 30, 1999, but sales were
negatively impacted by changes in exchange rates by approximately $500,000, as
the U.S. dollar strengthened against the Deutsche mark.
For the three-month period ended September 30, 2000, Computer Group segment
profit increased 21.2%, or $600,000, from $2.8 million for the three-month
period ended September 30, 1999 to $3.4 million. This increase was primarily due
to the net margin contribution from the increase in sales of the Group's general
purpose I/O products and computer connectivity and expansion unit products.
Segment profit as a percentage of sales increased from 20.9% for the three-month
period ended September 30, 1999 to 22.1% for the same period in 2000, as SG&A
and R&D expenses remained consistent with the three-month period ended September
30, 1999. This increase was partially offset by a shift in sales mix to lower
margin products.
Aerospace Group
For the three-month period ended September 30, 2000, Aerospace Group sales to
external customers decreased 25.0%, or $2.0 million, from $8.1 million for the
three-month period ended September 30, 1999 to $6.1 million. This decrease was
primarily the result of the continued declines in the commercial satellite and
military markets served by the Group, and in major new aircraft development
programs. Management does not expect growth in Aerospace Group sales to external
customers in fiscal 2001 as compared to fiscal 2000.
For the three-month period ended September 30, 2000, Aerospace Group segment
profit decreased 52.9%, or $1.5 million, from $2.8 million for the three-month
period ended September 30, 1999 to $1.3 million. This decrease was primarily due
to lower sales of the Group's telemetry and avionics interface product lines and
a shift in sales mix to lower margin products, partially offset by reductions in
R&D and SG&A expense. For the same reasons, segment profit as a percentage of
sales decreased from 34.5% for the three-month period ended September 30, 1999
to 21.6% for the same period in 2000.
Liquidity and Capital Resources
The Company uses a combination of the sale of equity securities, internally
generated funds and bank borrowings to finance its acquisitions, working capital
requirements, capital expenditures and operations.
Cash totaled $6.2 million at September 30, 2000, an increase of $2.6 million
from June 30, 2000. This increase was the result of $4.7 million from the
exercise of stock options, partially offset by $1.3 million of cash used by
operating activities and $0.8 million of expenditures for capital equipment. The
Company's growth during the three-month period ended September 30, 2000 caused
the Company to increase accounts receivable and inventory. Liabilities were in
line with the current level of business. The exercise of stock options reduced
the Company's tax liability.
SBS has experienced and expects to continue to experience component part
shortages. In order to help prevent shortages of critical components, SBS has
begun to build inventory of these components. To date, the shortages have had
minimal impact on results of operations. However, the impact of these shortages
on future periods cannot be predicted with certainty.
As of September 30, 2000, borrowings drawn on SBS' $30.0 million Credit
Agreement ("Agreement") with Bank of America, N.A. totaled $20.0 million and SBS
was in compliance with all of the covenants of the Agreement. The Agreement
expires on March 31, 2001. Management believes that its financial resources,
including its internally generated funds and debt capacity, will be sufficient
to finance SBS' current operations and capital expenditures, excluding
acquisitions, for the next twelve months. At September 30, 2000, there were no
material outstanding commitments for capital expenditures.
Page 12
<PAGE>
SBS Technologies, Inc. and Subsidiaries
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
September 30, 2000
(Continued)
================================================================================
For the three-month period ended September 30, 2000, there was no significant
impact from inflation.
Euro Conversion
On January 1, 1999 eleven of the fifteen member countries of the European
Union adopted the euro as their common legal currency and established fixed
conversion rates between their existing sovereign currencies and the euro.
The legacy currencies of the participating European Union members will remain
legal tender in the participating countries for the transition period from
January 1, 1999 to January 1, 2002. Beginning January 1, 2002, the
participating countries will issue new euro-denominated bills and coins for
use in cash transactions. Legacy currencies will no longer be legal tender
for any transactions beginning July 1, 2002, making conversion to the euro
complete. SBS is assessing its need to adapt information technology and other
systems to accommodate euro-denominated transactions, any potential impact on
terms and enforceability of legacy denominated contracts, and potential tax
consequences of currency conversion. This assessment is being conducted to
determine whether the euro conversion will have a material adverse effect on
SBS' financial position, results of operations, or liquidity.
New Accounting Standards
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." This
bulletin summarizes certain of the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. In June
2000, the Securities and Exchange Commission issued SAB No. 101B that delayed
the implementation date of SAB No. 101 until the fourth fiscal quarter of fiscal
years beginning after December 15, 1999, although early adoption is allowed. SBS
does not expect the adoption of the provisions of this bulletin to have a
material effect on its financial position or results of operations.
Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in the information on this risk that was
provided in the Company's Form 10-K for the year ended June 30, 2000.
Business Outlook
Consistent with SBS' press release dated October 17, 2000, management expects
sales to increase approximately five percent sequentially for each remaining
quarter of fiscal 2001, resulting in total sales for fiscal 2001 of
approximately $185.0 million to $190.0 million. Management expects second
quarter net income per common share - assuming dilution to be between $0.28 and
$0.31 and net income per common share - assuming dilution for fiscal 2001 to be
between $1.25 and $1.30. Actual results may vary.
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<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)
03.i (1) Restated Articles of Incorporation
03.ii (1) Restated and Amended Bylaws
04.c (1) Form of certificate evidencing Common Stock
27. Financial Data Schedule
(b) Reports on Form 8-K - None
(1) See Exhibit Index
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<PAGE>
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: November 13, 2000 /s/ Christopher J. Amenson
Chairman of the Board,
Chief Executive Officer
and President
Date: November 13, 2000 /s/ James E. Dixon, Jr.
Vice President,
Finance and Administration;
Chief Financial Officer and
Treasurer
Page 15
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Method of Filing
-------------- ------------------------------------------- -----------------------------
<S> <C> <C>
03.i Restated Articles of Incorporation Filed herewith electronically
03.ii Restated and Amended Bylaws Filed herewith electronically
04.c Form of certificate evidencing Common Stock Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically
</TABLE>
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