FREMONT, Calif., May 16 /PRNewswire-FirstCall/ -- SCM Microsystems,
Inc. (Nasdaq: SCMM; Prime Standard: SMY), a leading provider of
solutions that open the Digital World, today announced results for
the first quarter ended March 31, 2006. SCM's reported financial
results for the first quarter of 2006 and the first quarter of 2005
reflect continuing operations of the Company's PC Security and
Flash Media Interface businesses only, as the Company announced on
April 6, 2006 that it had entered into an agreement to sell its
Digital TV Solutions business. Financial results for the Digital TV
Solutions business are being accounted for as discontinued
operations. First Quarter Results Revenues from continuing
operations in the first quarter of 2006 were $7.4 million, up 10%
from revenues of $6.7 million in the first quarter of 2005. By
product segment, first quarter 2006 revenues included $4.5 million
from sales of smart card readers and other products for secure
network and physical access, and $2.9 million from sales of OEM
digital media reader technology. Gross margin in the first quarter
of 2006 was 36% and included $0.1 million of costs related to the
closure of the company's Singapore manufacturing facility.
Operating expenses in the first quarter of 2006, as reported in
accordance with GAAP, were $5.5 million, including amortization of
intangibles of $0.2 million and restructuring and other charges of
$0.4 million. This compares with operating expenses of $5.4 million
in the first quarter of 2005, which included amortization of
intangibles of $0.2 million and restructuring and other charges of
$0.2 million. Operating loss for the first quarter of 2006, as
reported in accordance with GAAP, was $(2.8) million, compared with
operating loss of $(2.4) million in the year ago quarter. Loss from
continuing operations for the first quarter of 2006, as reported in
accordance with GAAP, was $(2.7) million, or $(0.17) per share,
compared with net loss of $(1.3) million, or $(0.08) per share, in
the first quarter of 2005. Following the sale of its Digital TV
solutions business, SCM's business strategy will include the
following components: -- a restructuring program aimed at reaching
profitability, which the Company expects will result in further
operating losses over the near-term due to one-time effects/charges
of the restructuring; -- a focused approach in the smart card
reader market to extend market share and grow revenues in smart
card-based security programs such as ePassport, eID and eHealth and
enterprise security initiatives; -- continued investment in
critical technology development to enhance SCM's leadership
position in the smart card reader and digital media reader markets;
and -- proactively seeking complementary strategic opportunities to
augment SCM's technology and market reach. Robert Schneider, chief
executive officer of SCM Microsystems, commented, "We believe that
SCM is well positioned to address emerging opportunities in the
e-health, citizen ID, physical access, electronic payment and
digital photo access markets. During the first quarter of 2006, we
began the process of consolidating our global operations into one
headquarters and operational center in Germany, one development
facility in India and sales offices in the U.S. and Japan. We hired
a new chief financial officer in Germany, Stephan Rohaly, who will
drive the transition of our corporate headquarters functions from
the U.S. to Germany. We also agreed to sell our Digital TV
solutions business to Kudelski S.A. We expect to complete our
consolidation and restructuring activities by the end of the fourth
quarter of 2006. Following this, we believe that we will be able to
take advantage of market opportunities more efficiently and reduce
operating expenses to position the Company for profitability." For
the second quarter of 2006, management currently estimates that
revenues from continuing operations will be in the range of $7
million to $8 million and gross margin will be between 35% and 39%.
Excluding amortization and one-time charges, operating expenses are
expected to remain at the same level as the first quarter of 2006
while the Company continues the consolidation and restructuring of
its global operations. Within this range of revenue, gross margin
and operating expense, SCM expects to record an operating loss in
the second quarter of 2006. SCM does not plan to hold a conference
call or webcast to discuss the results of its 2006 first quarter.
For more information on SCM's first quarter results, please see the
Company's Quarterly Report on Form 10-Q for quarter ended March 31,
2006, filed with the U.S. Securities and Exchange Commission. About
SCM Microsystems SCM Microsystems is a leading supplier of
solutions that open the Digital World by enabling people to
conveniently access digital content and services. The company
develops, markets and sells the industry's broadest range of smart
card reader technology for secure PC, network and physical access
and digital media readers for transfer of digital content to OEM
customers in the government, financial, enterprise, consumer
electronics and photographic equipment markets worldwide. Global
headquarters are in Fremont, California, with European headquarters
in Ismaning, Germany. For additional information, visit the SCM
Microsystems web site at http://www.scmmicro.com/. NOTE: This press
release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These
include, without limitation, our statements regarding our
expectations for revenues, gross margin, operating expenses and
operating performance in the second quarter of 2006, our
expectations that the consolidation and restructuring of our
business operations will be completed by the end of the year and
will enable us to leverage market opportunities more efficiently,
to reduce operating expenses and to position the Company for
profitability, and our ability to identify and complete strategic
market opportunities. These statements are subject to risks and
uncertainties which may cause actual results to differ materially
from those contemplated herein. Our financial results may not meet
expectations. Some of the risks and uncertainties that could cause
our actual business and operating results to differ include, but
are not limited to, our ability to grow market share and revenues
based on a strategy of participating in specific early stage
markets; our ability to successfully develop and introduce new
products that satisfy the evolving and increasingly complex
requirements of customers; our ability to identify and complete
strategic market opportunities; the markets in which we participate
or target may not grow, converge or standardize at anticipated
rates or at all; we may not successfully compete in the markets in
which we participate or target; competitors could take market share
or create pricing pressure; and we may not be able to improve our
operational performance or enhance our strategic position through
the consolidation of our corporate headquarters into one location.
For a discussion of further risks and uncertainties related to our
business, please refer to our public company reports, including our
Annual Report on Form 10-K and Form 10-K/A for the year ended
December 31, 2005 filed with the U.S. Securities and Exchange
Commission. NOTE: All trade names are trademarks or registered
trademarks of their respective holders. NOTE: The unaudited
financial results contained within this release for the first
quarter ended March 31, 2006 reflect continuing operations only, as
SCM sold its retail Dazzle(TM)-branded digital media and video
business in July of 2003 and agreed in April 2006 to sell its
Digital TV solutions business. SCM's continuing business is focused
on providing solutions for the smart card reader and digital flash
media reader markets. Financial results for the retail digital
media and video business and the Digital TV solutions business are
being accounted for as discontinued operations. SCM MICROSYSTEMS,
INC. Condensed Consolidated Statements of Operations (in thousands,
except per share data) (unaudited) Three months ended March 31,
2006 2005 Net revenue $7,427 $6,744 Cost of revenue 4,777 3,701
Gross margin 2,650 3,043 Operating expenses: Research and
development 969 974 Sales and marketing 1,839 1,799 General and
administrative 2,084 2,295 Amortization of intangible assets 160
176 Restructuring and other charges 422 193 Total operating
expenses 5,474 5,437 Loss from operations (2,824) (2,394) Interest
and other, net 134 1,124 Loss from continuing operations before
income taxes (2,690) (1,270) Provision for income taxes (11) --
Loss from continuing operations (2,701) (1,270) Loss from
discontinued operations, net of income taxes (942) (1,706) Gain on
sale of discontinued operations, net of income taxes 21 55 Net loss
$(3,622) $(2,921) Loss per share from continuing operations: Basic
and diluted $(0.17) $(0.08) Loss per share from discontinued
operations: Basic and diluted $(0.06) $(0.11) Net loss per share:
Basic and diluted $(0.23) $(0.19) Shares used in computing loss per
share: Basic and diluted 15,593 15,485 SCM MICROSYSTEMS, INC.
Condensed Consolidated Balance Sheets (in thousands) (unaudited)
March 31, December 31, ASSETS 2006 2005 Current assets: Cash, cash
equivalents and short-term investments $27,727 $32,440 Restricted
short-term investments 2,000 -- Accounts receivable, net 6,345
6,904 Inventories 5,041 6,005 Other current assets 2,839 2,038
Assets held for sale 3,407 -- Total current assets 47,359 47,387
Property, equipment and other assets, net 3,224 4,468 Intangibles,
net 738 879 Total assets $51,321 $52,734 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $6,766
$5,700 Accrued expenses and other current liabilities 14,065 14,316
Liabilities held for sale 943 -- Deferred tax liability 103 101
Total liabilities 21,877 20,117 Stockholders' equity 29,444 32,617
Total liabilities and stockholders' equity $51,321 $52,734
DATASOURCE: SCM Microsystems, Inc. CONTACT: Stephan Rohaly, Chief
Financial Officer, +49 89 95 95 5101, or , or Darby Dye, Investor
Relations-US, +1-510-360-2302, or , or Manfred Mueller, Investor
Relations-Europe, +49 89 9595 5140, or , all of SCM Microsystems,
Inc. Web site: http://www.scmmicro.com/
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