SCM Microsystems Reports Fourth Quarter and Fiscal 2003 Results
Divested Dazzle Retail Business and Refocused Company Around
Security in 2003; Increased Cash to $55 Million FREMONT, Calif.,
Feb. 19 /PRNewswire-FirstCall/ -- SCM Microsystems, Inc. (Nasdaq:
SCMM; Prime Standard: SMY), a leading provider of solutions that
open the Digital World, today announced results for its fiscal
fourth quarter and year ended December 31, 2003. SCM's reported
financial performance for the 2003 fourth quarter andfiscal year
reflect continuing operations for the Company's Security business
only, as SCM sold its retail digital media and video business in
July of 2003. SCM's continuing Security business is focused on
enabling secure access to digital content and services through the
digital television and PC platforms. Financial results for the
digital media and video business are being treated as discontinued
operations. Fourth Quarter Results Revenues from continuing
operations in the fourth quarter of 2003were $12.6 million, as
communicated by SCM in a preliminary press release on February 3,
2004. This compares with revenues of $23.8 million in the fourth
quarter of 2002. By product segment, fourth quarter 2003 revenues
included $5.4 million from sales of Digital TV security modules,
$4.2 million from sales of smart card readers and other products
for PC and network security, and $3.0 million from sales of flash
media reader technology. Gross margin from continuing operations in
the fourth quarter of 2003 was 42%, at the high end of management's
previously communicated guidance of 39% to 42%. Operating expenses
for continuing operations for SCM's Security business in the fourth
quarter of 2003, as reported in accordance with GAAP, were $11.3
million. This figure includes amortization of intangibles of $0.3
million and restructuring and infrequent charges of $2.9 million.
Operating loss for the quarter was $(6.0) million. This compares
with operating loss of $(13.8) million in the year ago quarter,
which included amortization of intangibles of $0.3 million,
impairment of goodwill of $6.6 million and restructuring and
infrequent charges of $5.1 million. Net loss from continuing
operations for SCM's Security business for the fourth quarter
of2003, as reported in accordance with GAAP, was $(5.0) million, or
$(0.33) per share, compared with net loss of $(15.1) million, or
$(0.97) per share, in the fourth quarter of 2002. Loss from
discontinued operations for SCM's retail digital media and video
business was $(4.3) million in the fourth quarter of 2003, and
included $(3.3) million of loss on sale of discontinued operations
and $(1.0) million of operational loss for the business in the
fourth quarter. Balance Sheet SCM ended the fourth quarter with
cash, cash equivalents and short-term investments of $55.0 million,
a 40% increase over the $39.4 million held at the end of the
previous quarter. As anticipated, the company received
approximately $25 million in cash during the fourth quarter related
to the sale of its retail digital media and video business, which
was partially offset by expenses related to the disposition. Fiscal
2003 Results For the year ended December 31, 2003, revenues from
continuing operations for the Company's Security business were
$66.5 million, compared with revenues of $90.1 million for the year
ended December 31, 2002. Net loss from continuing operations for
fiscal 2003, as reported in accordance with GAAP, was $(8.8)
million, or $(0.57) per share, compared with net loss of $(18.7)
million, or $(1.20) per share for fiscal 2002. Commented Robert
Schneider, chief executive officer of SCM Microsystems, "The
economic environment remained challenging in 2003. Even so, we
accomplished major objectives to strengthen our strategic position.
We successfully disposed of our low margin, retail digital media
and video division and refocused the Company around our core
Security business. Through this transaction, we significantly
increased our cash reserves, while carefully managing transaction
related costs. We restructured our organization to better align
resources around market opportunities in the security space. We are
optimistic that these efforts will begin to yield results beginning
in mid-2004, as digital TV projects in Korea and smart card
projects in the U.S. and Europe start to gain momentum." Guidance
For the first quarter of 2004, management estimates that revenues
from its continuing Security business will be in the range of $12
million to $15 million, reflecting continued economic pressure in
Europe and the U.S. and a lack of visibility into the timing of
known digital security projects in the U.S. and Europe. Gross
margin is expected to be between 40% and 42%. Within this range of
revenue and gross margin, SCM expects to record an operating loss
for its continuing Security business in the first quarter.
Conference Call SCM will hold a conference call and webcast on
February 19, 2004 at 8:30 AM Eastern Time to discuss the results
ofits fiscal 2003 fourth quarter and year. The webcast can be
accessed through the Company's investor relations site at
http://www.scmmicro.com/ir_en/index.html. 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 markets and sells its smart card
reader technology for network and physical access and conditional
access modules for secure digital TV decryption to OEM customers in
the government, financial, enterprise and broadcasting 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. These statements are subject to
risks and uncertainties which may cause actual results to differ
materially from those contemplated herein. These include, without
limitation, our statements regarding (i) our expectations for
revenue, gross margin and operating loss for the first quarter;
(ii) our expectations that projects planned by our digital TV and
PC security customers will go forward in 2004 as anticipated; and
(iii) our expectations that we will realize benefits from these
projects beginning in the middle of 2004 or ever. Actual results
could differ materially. Our financial results may not meet
expectations. Our customers may not go forward with planned
projects that we believe would create demand for our products, and
these projects, even if carried out, may not create demand for our
products or result in the realization of any benefit to us. We may
not successfully execute against our market opportunities or the
identified markets and market opportunities may grow or develop
differently than anticipated or not at all. Other risks and
uncertainties that could cause SCM's actual business and operating
results to differ include, but are not limited to our ability to
manage our business given the greater volatility in sales and net
margins we experience as an OEM Security company; our ability to
grow based on a strategy of participating in multiple early stage
markets; our ability to successfully develop and introduce new
products that satisfy the evolving and increasingly complex
requirements of customers; 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; and competitors could take market share
or create pricing pressure. For a discussion of further risks and
uncertainties related to SCM's business, please refer to SCM's
public company reports, including the Report on Form 10-Q for the
quarter ended September 30, 2003, filed with the U.S. Securities
and Exchange Commission. NOTE: All trade names are trademarks or
registered trademarks of their respective holders. NOTE: The
Condensed Consolidated Statements of Operations in this press
release include pro forma operating results that are not in
accordance with GAAP. A reconciliation of the presentation of pro
forma results to GAAP is also provided in this release. As
described in the tables, pro forma net earnings exclude charges
related to the amortization of intangible assets, impairment of
goodwill and restructuring, and infrequent charges. We believe pro
forma results allow for SCM and our investors to better evaluate
comparable operating results. Further, our pro forma results are a
primary indicator our management uses to plan and forecast for
futureperiods. These pro forma results are not intended as a
substitute for information presented in accordance with GAAP.
Furthermore, our pro forma information may not be comparable to pro
forma information that other companies provide. SCM MICROSYSTEMS,
INC. Condensed Consolidated Statements of Operations (in thousands,
except per share data) (unaudited) Three months ended Year ended
December 31, December 31, 2003 2002 2003 2002 Revenues $12,575
$23,793 $66,488 $90,075 Cost of revenues 7,297 17,175 39,661 56,501
Gross margin 5,278 6,618 26,827 33,574 Operating expenses: Research
and development 2,657 2,157 9,535 8,567 Sales and marketing 2,897
2,994 11,469 10,466 General and administrative 2,527 3,265 11,502
11,270 Amortization of intangible assets 288 312 1,129 819
Impairment of goodwill and intangibles -- 6,578 -- 6,578
Restructuring and infrequent charges 2,949 5,099 4,728 8,500 Total
operating expenses 11,318 20,405 38,363 46,200 Loss from operations
(6,040) (13,787) (11,536) (12,626) Loss from investments -- -- (95)
(1,242) Interest and other, net 851 (1,015) 1,371 (1,679) Loss from
continuing operations before income taxes (5,189) (14,802) (10,260)
(15,547) Benefit (provision) for income taxes 206 (314) 1,442
(3,200) Net loss from continuing operations (4,983) (15,116)
(8,818) (18,747) Loss from discontinued operations (1,042) (14,606)
(14,256) (30,327) Loss on sale of discontinued operations (3,302)
-- (15,102) -- Net loss $(9,327) $(29,722) $(38,176) $(49,074) Loss
per share from continuing operations: Basic and diluted $(0.33)
$(0.97) $(0.57) $(1.20) Loss per share from discontinued
operations: Basic and diluted (0.28) (0.93) (1.92) (1.95) Net loss
per share: Basic and diluted $(0.61) $(1.90) $(2.49) $(3.15) Shares
used in computing loss per share: Basic and diluted 15,260 15,627
15,317 15,597 Pro forma results: Pro forma continuing operating
income (loss) $(2,803) $(1,798) $(5,679) $3,271 Pro forma net loss
$(1,746) $(3,127) $(5,911) $(1,608) Diluted shares used in pro
forma net loss per share 15,260 15,627 15,31715,597 Pro forma net
loss per share $(0.11) $(0.20) $(0.39) $(0.10) See attached tables
for reconciliation of pro forma to GAAP results. Reconciliation of
Pro Forma Results (in thousands, except per share data) Three
months ended Year ended December 31, December 31, 2003 2002 2003
2002 Reconciliation of pro forma income (loss) from continuing
operations Loss from continuing operations $(6,040) $(13,787)
$(11,536) $(12,626) Add back: Amortization of intangible assets 288
312 1,129 819 Impairment of goodwill -- 6,578 -- 6,578
Restructuring and infrequent charges 2,949 5,099 4,728 8,500 Pro
forma income (loss) from continuing operations $(2,803) $(1,798)
$(5,679) $3,271 Reconciliation of pro forma net loss Net loss
$(9,327) $(29,722) $(38,176) $(49,074) Add back: Amortization of
intangibles 288 312 1,129819 Impairment of goodwill -- 6,578 --
6,578 Restructuring and infrequent charges 2,949 5,099 4,728 8,500
Loss from investments -- -- 95 1,242 Reimbursement of investment --
-- (558) -- Income tax refund and interest -- -- (2,487) --
Discontinued operations 4,344 14,606 29,358 30,327 Pro forma net
loss $(1,746) $(3,127) $(5,911) $(1,608) Diluted shares used in pro
forma net loss per share 15,260 15,627 15,317 15,597 Pro forma net
loss per share $(0.11) $(0.20) $(0.39) $(0.10) SCM MICROSYSTEMS,
INC. Condensed Consolidated Balance Sheets (in thousands)
(unaudited) December 31, December 31, ASSETS 2003 2002 Current
assets: Cash, cash equivalents and short-term investments $55,038
$55,517 Accounts receivable, net 10,378 31,254 Inventories 9,108
39,114 Other current assets 8,909 6,629 Total current assets 83,433
132,514 Property, equipment and other assets, net 9,933 11,786
Intangibles, net 3,076 4,317 Total assets $96,442 $148,617
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable $7,571 $21,470 Accrued expenses and other current
liabilities 25,447 27,047 Totalcurrent liabilities 33,018 48,517
Stockholders' equity 63,424 100,100 Total liabilities and
stockholders' equity $96,442 $148,617 DATASOURCE: SCM Microsystems,
Inc. CONTACT: Manfred Mueller, Investor Relations-Europe, +49 89
9595 5140, or , Darby Dye, Investor Relations-US, +1-510-360-2302,
or , or Steve Moore, Chief Financial Officer, +1-510-360-2300, or ,
all of SCM Microsystems, Inc. Web site: http://www.scmmicro.com/
Copyright