Signal Technology Reports Better-Than-Expected Second Quarter Results; Again Raises 2002 Financial Guidance
BUSINESS WIRE - July 25, 2002 07:06
DANVERS, Mass., Jul 25, 2002 (BUSINESS WIRE) -- Company's Defense Electronics Sales and Bookings Continue to Grow; Improved Gross Margins and Lower Operating Costs Reduce Loss for Quarter
Signal Technology Corporation (Nasdaq: STCO), a leading provider of electronics and power management products for wireless communications in the defense, space and commercial markets, today reported its financial results for the second quarter ended June 30, 2002.
Net sales were $21.5 million, compared with $22.2 million in the second quarter of 2001. The Company's net loss was $1.5 million, or $0.14 per share, for the second quarter of 2002. This compares with a net loss of $846,000, or $0.08 per share, for the same period last year.
For the first six months of 2002, Signal Technology reported net sales of $41.4 million, compared with $45.0 million for the first six months of 2001. A 60% reduction in commercial wireless sales was only partially offset by a $2.0 million increase in defense sales during the period. Net loss for the first six months of 2002 was $2.5 million, or $0.24 per share, compared with a loss of $676,000, or $0.07 per share, for the first six months of 2001.
Signal Technology's financial guidance for the second quarter of 2002 was net sales of $20 million to $23 million and a loss of $0.17 to $0.20 per share.
Comments on the Second Quarter
"Signal Technology's bottom line benefited from improving gross margins in our defense business and the tight rein we maintained on operating costs across the board," said Chairman and Chief Executive Officer George Lombard. "This helped offset the impact of a substantial increase in R&D investment compared with the prior year. Total net sales increased more than 7% from the first quarter, due to an 8% increase in defense sales. The Company was cash flow positive in the second quarter, and we are substantially ahead of our 2002 plan with regard to cash as we begin the second half of the year."
"Most important, we closed the second quarter with strong defense bookings and backlog, in terms of both volume and quality," Lombard said. "In addition to posting the best defense bookings number in more than four years, virtually all of our defense contract awards were associated with the U.S. military's newest generation of transformational aircraft, missile, radar and electronic warfare platforms. These contracts present Signal Technology with excellent follow-on potential. Further, during the second quarter we received our first award for development of Homeland Security technologies."
"Signal Technology's bookings performance demonstrates the success of our long-term strategy for evolving and growing the Company's defense business through R&D investment," Lombard continued. "Four years ago, more than 66% of Signal Technology's defense sales were related to older, legacy platforms. We expect this figure to decline to approximately 26% for the year 2002, reflecting a continuing shift toward new products in our bookings mix. The high quality of our defense backlog positions the Company for accelerating sales growth as the nation's newest defense platforms move from development to full rate production."
"In our commercial wireless business, we continued to advance in our initiative to develop semiconductor RF module solutions for wireless phones and PDAs," Lombard said. "Customers have begun sampling our first-generation products, and we are on track toward commencing volume production in 2003. We are also nearing the sampling stage with a highly sophisticated power amplifier module, and anticipate reporting our first design wins for this product during the fourth quarter of 2002."
"In the cellular infrastructure business, it was a disappointing quarter," Lombard said. "With wireless service providers continuing to postpone capital investments, sales of our switched power combiners were sharply lower, as were orders for our millimeter wave transceivers for 2.5G point-to-point digital radio applications. Looking toward an eventual rebound in this market, however, we posted a major technology advance during the second quarter as we shipped the first of our very high-capacity, 155 megabit-per-second, complete outdoor units for digital radio applications. Produced at Signal Technology's offshore manufacturing operation, this new product incorporates state-of-the-art technology for transmitting data between wireless base stations or from nodes in a metropolitan area network to central switching points."
Major Second-quarter Defense Bookings -- Signal Technology was selected by Northrop Grumman Systems Corporation as the sole-source supplier of the next generation of Band 4 and 5 transmitters for the AN/ALQ-131 aircraft electronic countermeasures system. Although the first production release is valued at more than $9 million, the Company's second-quarter bookings reflect, conservatively, only the development phase of the contract, valued at approximately $800,000. Follow-on production is valued at $80 million to $120 million over the next 10 years. -- A major U.S. defense prime contractor awarded the Company multiple contracts for microwave components and subsystems designed for the MK45 Target Detection Device as part of the Standard Missile Block III Program. Deliveries are expected to extend into 2004, and the contract is valued at more than $5 million. Signal Technology anticipates that follow-on contracts, with a potential value of more than $5 million, will continue through 2010. -- Signal Technology received an initial production order from BAE SYSTEMS plc for multi-output, low-voltage power supplies for next generation electronic countermeasures and avionics on board the U.S. Navy's F/A-18 E/F aircraft and other military airborne and shipboard platforms. This initial production order is part of a multi-year agreement with BAE SYSTEMS valued at $2.8 million. -- The Company was awarded multiple contracts for microwave oscillators designed for a classified subsystem within the Standard Missile Block III Program. The awards, from a major U.S. defense prime contractor, are valued at $2.4 million, and Signal Technology estimates follow-on potential of more than $3.0 million. -- Signal Technology was selected by Smiths Aerospace to develop a state-of-the-art low-voltage power supply for defense aircraft platforms. The award is valued at $1 million, and there is significant follow-on potential. -- The Company received a follow-on contract valued at $500,000 for microwave oscillators designed for the phased array radar deployed as part of the Aegis Combat System on the U.S. Navy's DDG-51 Class destroyers. The Company estimates that future follow-on production contracts could exceed $5 million. -- The Company received two contract awards for the production of highly sophisticated electronics designed for the federal government's emerging Homeland Security initiative. Signal Technology's UHF/VHF and video antenna switch matrix products were selected to provide highly sophisticated switching capabilities for deployment in electronic information gathering. The two contracts are valued at a total of $500,000, and the Company believes the orders have significant follow-on potential. Business Outlook
"Signal Technology's expertise in electronic power management, transmitters and microwave technologies positions us to capitalize on the U.S. Defense Department's increasing focus on electronic warfare and intelligence systems, precision guided munitions and missile defense, as well as emerging homeland security initiatives," Lombard said. "As we increase our participation in these newest platforms, the quality of our defense bookings has never been better. In addition, we closed the second quarter with defense bidding and quoting activity at its best level in recent memory, suggesting continued growth in our defense business in 2003 and beyond. In commercial wireless, while telecom industry capital spending remains weak, our mobile appliance semiconductor initiative is on schedule, and we expect it to begin generating revenues in 2003."
Financial Guidance
Based on current market conditions, Signal Technology is providing the following financial guidance:
Third-quarter 2002 guidance: -- Total revenues of approximately $23 million to $25 million. -- Net loss per share of approximately $0.09 to $0.12. Signal is raising its earnings guidance for full-year 2002: -- Total revenues remain at approximately $92 million to $94 million. -- Net loss per share of approximately $0.34 to $0.38.
The above guidance does not reflect any potential impairment charge related to the accounting change for goodwill in accordance with Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets."
Conference Call Webcast
Signal Technology will conduct its quarterly financial results conference call at 11:00 a.m. (ET), this morning, July 25, 2002. The call will be broadcast live over the Internet. To listen to the call, visit the Company's Web site (www.sigtech.com), and click on the "Corporate Information" link at least 15 minutes prior to the Web cast. The call will be available in replay format at this site for one week |
