DANVERS, Mass.--(BUSINESS WIRE)--Oct. 25, 2001--Signal Technology Corporation (Nasdaq: STCO), a leading provider of electronics and power management products for wireless communications in the commercial, defense and space markets, today reported its financial results for the third quarter and nine months ended September 30, 2001.
Net sales for the third quarter were $20.5 million, compared with $27.2 million in the third quarter of 2000. Signal reported a net loss of $16.1 million for the third quarter of 2001, or $1.61 per diluted share, compared with net income of $555,000, or $0.06 per diluted share, for the same period last year. The net loss includes previously announced charges. The first is an inventory charge of $0.54 per share after tax. The amount of this charge has been increased from the estimate provided by the Company on October 16th, based on disclosure to Signal yesterday by a major customer (Spike Broadband Systems) indicating a softening in their markets and related financial difficulties. The second charge is a reserve against net deferred tax assets, and amounts to $0.83 per share.
For the nine months ended September 30, 2001, Signal reported net sales of $65.5 million, versus $70.5 million for the comparable period a year ago. Net loss for the first nine months of 2001 was $16.8 million, or $1.68 per diluted share, compared to net income of $1.5 million, or $0.16 per diluted share, reported for the first nine months of 2000.
Comments on Third-quarter Results:
"Our commercial wireless business continued to suffer from the ongoing global retrenchment in broadband investment during the third quarter," said Chairman and Chief Executive Officer George Lombard. "The slowdown in spending on wireless telecom infrastructure is emerging as a worldwide lag in previously planned deployments, and is especially pronounced within the competitive local exchange carrier (CLEC) industry. This continues to affect our sales in the cellular/PCS infrastructure market, where deployments by telecom carriers in Europe and CLECs in the U.S. were key growth drivers for Signal in 2000. Yesterday, Spike Broadband Systems, a major Signal customer in the fixed wireless access market, informed us that their near-term projections have been dramatically reduced. As a result of these circumstances, we have taken a charge for certain inventories and for product that was shipped, but not paid for. In addition, we have reduced personnel as well as discretionary spending for broadband wireless."
"On the positive side, our RFIC (radio frequency integrated circuit) module initiative with Northrop Grumman and Vitesse Semiconductor is moving ahead and is on track. We recently augmented Signal's internal design capabilities through an agreement with RF Integration Inc., a leading fabless chipset manufacturer, and we expect sampling of our first HBTs (heterojunction bipolar transistors) in the first quarter of 2002.
Third-Quarter Defense Business Highlights:
-- Signal's defense business improved its gross margins to 35.5 percent. This improvement was in line with the Company's expectations, reflecting several recent defense product design orders, which advanced to production.
-- Signal received a follow-on production contract, valued in excess of $800,000, for its state-of-the-art logamplifier product from a major U.S. defense contractor. Production is scheduled to continue through 2002. Signal's logamplifiers are critical parts of the Identification Friend or Foe radar systems at the heart of the electronic warfare and radar countermeasures capabilities on board both the U.S. Navy's F/A-18 E/F Super Hornet fighter aircraft and the U.S. Air Force's F-16 Falcon fighter aircraft.
-- The Company received follow-on production contracts for a total of five 4Kw transmitter systems from multiple customers developing unmanned aerial vehicle (UAV) platforms for defense intelligence, and expects to receive follow-on production quantity orders from multiple users in 2002. Signal's 4Kw transmitter system is an integral part of the synthetic aperture radar that gathers intelligence imagery on the U.S. Air Force Global Hawk and other UAVs. The increased operational interest in UAVs for intelligence gathering is expected to generate greater demand for Signal's state-of-the-art transmitter products. The Company expects that its soon-to-be-released 5Kw transmitter will open the door to additional opportunities in this market sector.
Third-Quarter Commercial Wireless Business Highlights:
-- Signal announced a strategic initiative to translate its expertise in the design and manufacture of RF and microwave modules for defense and broadband wireless applications into advanced semiconductor modules for next-generation mobile phones and wireless appliances. The strategic initiative centers on technology and manufacturing agreements with Northrop Grumman Corporation (NYSE: NOC) and Vitesse Semiconductor Corporation (Nasdaq: VTSS), and consists of two efforts.
The first is centered on a 10-year license to use Northrop Grumman's HBT and pseudomorphic high electron mobility transistor (PHEMT) semiconductor technologies to produce advanced monolithic microwave integrated circuits (MMICs) and RFICs for the mobile communications market. Northrop Grumman has also agreed to supply devices to Signal for up to 10 years to support Signal's growing line of wireless broadband products. In return for the technology license and supply agreements, Northrop Grumman will receive approximately one million shares of Signal common stock over time, based on the achievement of certain milestones.
The second effort is based on an exclusive relationship with Vitesse Semiconductor that will provide Signal with a high-volume supply of wafers containing custom RFICs and MMICs. The agreement includes the transfer of Northrop Grumman's GaAs technologies to Vitesse's world-renowned 6" GaAs wafer fab line and the production of Signal's MMIC designs for a period of 10 years. Vitesse received warrants for 500,000 shares of Signal common stock.
Business Outlook
"Looking to the fourth quarter of 2001, we anticipate an increase in bookings and sales and strong gross margins in our defense business, while the outlook for the commercial wireless business is guarded," Lombard said. "We expect several large defense orders that are currently pending to be booked in the fourth quarter. This defense activity is related to the emphasis on electronic systems and major platform upgrades that we see emerging as a mid- to long-term trend in U.S. defense spending. It does not reflect any assumptions about defense procurement policy changes associated with the post-September 11th geopolitical environment."
Lombard said, "Given this outlook, we expect our business to generate revenues of between $26 million and $28 million in the fourth quarter, bringing the full-year 2001 total to between $91 million and $93 million. Of this, our commercial wireless business represents approximately $2 million in revenues during the fourth quarter, for a 2001 total of approximately $12 million. We anticipate that the fourth-quarter loss per share will range from $0.18 to $0.20."
"Despite the pervasive problems in the commercial wireless business, we believe that Signal's strengths in broadband radio technology position us to be a major participant when these markets resume their long-term growth," Lombard continued. "Since early 2000, our R&D plan has been aggressively but selectively focused on opportunities in the wireless markets, and it remains so. In addition, our technology transfer initiative with Northrop Grumman and Vitesse Semiconductor provides entry into the potentially lucrative wireless handset space at what we believe is a cost advantage over our competitors. We fully expect the global migration to wireless technology to begin accelerating again, and that Signal will benefit when it does." |
