Better than expected
Signal Tech Puts 4Q Net 31% Below
Year-Ago On Sales Decline
By WILLIAM M. BULKELEY
Dow Jones Newswires
DANVERS, Mass. -- Signal Technology Corp. (STZ) expects to report
income for the fourth quarter fell 31% on a 3.7% sales decline, Chairman and
Chief Executive George Lombard said.
Lombard, who joined Signal last year, said that despite the declines, the
Sunnyvale, Calif., company has cleared up a raft of hidden problems, slashed
borrowings and put itself in position to start showing improvements following
a tumultuous year.
"The status of the turnaround is we've made some very important changes" in
management and operations, Lombard told Dow Jones. "Now we have to
execute."
Lombard said Signal expects to report fourth-quarter net income fell to
$371,000, or 5 cents a share, from $534,000, or 7 cents a share, in the
year-ago fourth quarter. Sales fell to $23.4 million from $24.3 million a year
ago.
All last year's results have been restated to reflect inventory writedowns and
reevaluations of contract-completion schedules that caused some $10.2
million in writedowns attributed to 1997 and the first half of 1998.
Lombard, a defense industry veteran, joined Signal in June and discovered
that many of its contracts were behind schedule and over budget, but the
company hadn't recognized that in its accounting. The company postponed
reporting quarterly results, while it reaudited operations. That caused the
American Stock Exchange to halt trading for three months. He said that
despite the restatement, the year-ago actual results "were probably worse"
than they appear.
For the full year, Signal expects to report a net loss of $7.5 million, or 97
cents a share, including a pre-tax writedown of $8.5 million. The year before,
Signal had a restated net loss of $657,000, or 9 cents a share, including $1.7
million in one-time charges. Sales fell 9.9% to $92.1 million from $102.2
million in 1997.
The company is expected to report results Tuesday.
Signal generally works as a defense subcontractor, making parts such as
power supplies and amplifiers for defense and space communications
systems.
Lombard said "we're focusing on improving our performance with core
customers," after a year of angering them due to late deliveries. Now, he says,
"the customers are giving us follow-on orders." He said when he arrived at
Signal, the company had an $8 million backlog of orders that hadn't been
delivered on time. Now that is down to $3 million and he said that by June, it
will be reduced to zero.
In another sign of improved health, Chief Financial Officer Robert Nelsen said
the company has reduced its short-term draw from its bank line to $1 million
from $7.2 million last June. In addition, he said Signal now has $600,000 in
cash.
This was done mostly by slashing inventories 44% to $11.4 million by
writedowns of obsolete inventory. In addition, Signal ended a practice of
ordering all parts as soon as a contract started rather than waiting until the
parts were needed.
Lombard said Signal's growth strategy involves both acquisitions and
expanding sales of current technology. He said the company's acquisition
plans are hampered by its currently low stock price, however. The stock
closed at 4 1/2 Thursday.
To develop new products, Lombard said Signal will fund almost $2 million in
research and development this year, in addition to R&D funded under its
contracts. Last year, Signal had slashed its R&D budget 65% to $274,000
from $777,000. |
