Embedded systems drive
Artesyn to profit
Artesyn Technologies has reported financial results for the first quarter ending on 31st March 2006
Sales reported for the first quarter of 2006 were $114.2 million compared with $102.5 million for the same quarter last year. Net income and earnings per share for the first quarter of 2006 were $4.8 million and $0.11 per share, respectively, compared with net income of $1.9 million and earnings per share of $0.05 for the first quarter of 2005.
The results for the quarter reflect strong performance of the embedded systems segment, somewhat offset by the operating losses incurred by the power conversion segment.
Included in net income for the first quarter of 2006 is approximately $1.3 million of restructuring expenses, related to the closure of the company's manufacturing facility in Hungary in December 2005, and $2.6 million of merger-related expenses.
Additionally, the company recorded a tax benefit during the quarter of $3.6 million, resulting from the resolution of an IRS examination of previous tax years.
The impact of these items, net of tax, where applicable, attributed $0.02 to earnings per share.
Total orders received during the first quarter of 2006 were $138.2 million, yielding a book-to-bill ratio of 1.21.
Backlog at the end of the quarter was $104.0 million with approximately 93% shippable during the second quarter.
There were 22 major design wins during the first quarter, which Artesyn estimates will realise approximately $238 million in revenues over the next two to four years.
The company adopted Statement of Financial Accounting Standards (SFAS) 123R: 'Share-based payments', in the first quarter of 2006 and recorded compensation expense related to stock options, net of tax, of approximately $0.01 per share.
Prior to adopting SFAS 123R, the company had not recognised compensation expense related to stock options.
At the end of the quarter, cash and short-term investments increased to $118.5 million.
The company's net debt position also improved to $57.0 million, as bondholders converted $28.5 million of convertible subordinated notes into approximately 3.5 million shares of common stock during the first quarter.
First quarter sales reported for the power conversion segment were $79.9 million, representing a decline of $1.4 million from the first quarter in 2005.
While rectifier sales continue to be incremental for the power conversion segment, older server programs going end of life in late 2005 offset this growth.
Also contributing to lower than expected revenues during the quarter were delays in manufacturing RoHS compliant standard products for the distribution channel and delays in shipments by the company's European outsourcing partner on production transferred from the company's Hungary factory.
Operating performance in the power conversion segment was adversely impacted by lower revenue, including the loss of higher margin revenue through the distribution channel due to the delays in manufacturing of RoHS compliant standard products, restructuring expenses related to the closure of the Hungary facility and a $0.6 million charge to dispose of nonrepairable inventory returned by a customer.
As a result, the power conversion segment had a quarterly operating loss of $5.0 million compared with an operating loss of $1.2 million for the same period last year.
First quarter sales reported for the embedded systems segment were $34.2 million, an increase of $13.0 million from the first quarter of 2005.
The improvement in revenue was due to increased demand from customers supplying 3G deployments and carrier upgrades in North America during the quarter.
As a result of higher sales, operating income for the quarter was $13.2 million compared with operating income of $7.0 million for the same period last year.
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