PHOENIX, Nov. 15, 2006 (PRIMEZONE) -- Suntron Corporation (Nasdaq:SUNN), a leading provider of integrated electronics manufacturing solutions, today reported net sales of $70.6 million and an operating loss of $2.6 million for the third quarter of 2006. These results include $1.2 million of professional fees related to outstanding litigation and $1.1 million of restructuring charges related to severance, retention and lease exit costs primarily associated with the Company's previously announced decisions to close two U.S. manufacturing operations and to transfer their business to other Suntron sites.
Gross profit for the third quarter of 2006 was $4.0 million (5.7% of net sales), a decrease of $1.5 million as compared to $5.5 million in the third quarter of 2005 (6.9% of net sales). The gross profit results in the third quarter of 2005 and 2006 include $0.3 million and $1.0 million of restructuring charges, respectively, related to severance, retention and lease exit costs. Sequentially, third quarter gross profit decreased $2.2 million from the $6.2 million reported in the second quarter of 2006. The decrease in gross profit was driven primarily by a reduction in net sales from $80.4 million in the third quarter of 2005 and from $85.1 million in the second quarter of 2006. This decrease was partially offset by the cost savings achieved by the Company's 2005 and 2006 restructuring activities.
Operating loss for the third quarter of 2006 was $2.6 million, an increase of $2.2 million as compared to an operating loss of $0.4 million for both the third quarter of 2005 and the second quarter of 2006. Operating results were also impacted by reduced sales levels and increased litigation costs, offset by cost savings generated by our restructuring activities.
Net loss for the third quarter of 2006 was $3.7 million, an increase of $2.2 million as compared to a net loss of $1.5 million in the third quarter of 2005. Consequently, loss per share for the third quarter of 2006 was $0.13 per share, as compared to a loss of $0.06 per share for the third quarter of 2005. For the second quarter of 2006, net loss was $1.3 million and loss per share was $0.05 per share.
As announced last week, the Company has reached a confidential settlement agreement with Applied Materials, Inc. that terminates litigation previously disclosed by the Company.
"Though our primary focus for 2006 has been on the right-sizing of our U.S. manufacturing footprint, our sales efforts during the third quarter resulted in three new customer wins," stated Paul Singh, Suntron's president and chief executive officer. "The nature of our low volume/high mix model requires a longer ramp-up of production and therefore, any significant sales from these and other new customers added in 2006 should be realized in 2007. As we move forward with our business plan for 2007, our focus will be on profitably growing and managing growth while maintaining high standards of service to our customers," concluded Mr. Singh.
About Suntron Corporation
Suntron delivers complete manufacturing services and solutions to support the entire life cycle of complex products in the aerospace and defense, industrial, semiconductor capital equipment, networking and telecommunications, and medical markets. Headquartered in Phoenix, Arizona, Suntron operates six full-service manufacturing facilities and two quick-turn manufacturing facilities in North America. Suntron is involved in product design, engineering services, cable and harness production, printed circuit card assembly, box build, large scale and complex system integration and test.
The Suntron Corporation logo is available at http://www.primezone.com/newsroom/prs/?pkgid=2268
Non-GAAP Information
In addition to disclosing results determined in accordance with generally accepted accounting principles (GAAP), Suntron also discloses certain non-GAAP results of operations that exclude certain items. These non-GAAP financial data are provided to facilitate meaningful period-to-period comparisons of underlying operational performance by eliminating infrequent or unusual charges. The primary measure of our operating performance is net income (loss). However, the Company's lenders, internal management and many investment analysts believe that other measures provide additional information to further analyze the company's financial performance. Additionally, in evaluating alternative measures of operating performance, it is important to understand that there are no standards for these calculations. Accordingly, the lack of standards can result in subjective determinations by management about which items may be excluded from the calculations, as well as the potential for inconsistencies between different companies that have similarly titled alternative measures. See the tables to this press release for a reconciliation of GAAP amounts to non-GAAP amounts.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This release contains forward-looking statements that relate to future events or performance. These statements reflect Suntron's current expectations, and Suntron does not undertake to update or revise these forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied in this or other company statements will not be realized. Furthermore, readers are cautioned that these statements involve risks and uncertainties, many of which are beyond Suntron's control, which could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include, but are not limited to, general economic conditions and specific conditions in the electronics industry, including the aerospace and semiconductor capital equipment market segments of the electronics industry; Suntron's dependence upon a small number of customers; the Company's ability to attract new customers and retain existing customers; cash availability/liquidity; changes or cancellations in customer orders; the risks inherent with predicting cash flows, revenue and earnings outcomes as well as other factors identified as "Risk Factors" or otherwise described in Suntron's filings with the Securities and Exchange Commission from time to time.
Visit www.suntroncorp.com or call 888-520-3382 for more information.
SUNTRON CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Quarter Ended
-------------
October 2, July 2, October 1,
2005 2006 2006
---- ---- ----
Net Sales $80,383 $85,101 $70,604
Cost of Goods Sold 74,868 78,895 66,577
------- ------- -------
Gross profit 5,515 6,206 4,027
Operating Expenses:
Selling, general and
administrative expenses 5,652 6,198 6,363
Severance, retention, and lease
exit costs 44 222 123
Related party management and
consulting fees 188 187 188
------- ------- -------
Total operating expenses 5,884 6,607 6,674
------- ------- -------
Operating loss (369) (401) (2,647)
Other Income (Expense):
Interest expense (1,199) (938) (1,075)
Gain on sale of assets 17 26 (6)
Interest and other income (expense) 17 (3) 25
------- ------- -------
Total other income (expense) (1,165) (915) (1,056)
------- ------- -------
Net loss $(1,534) $(1,316) $(3,703)
======= ======= =======
Loss Per Share (Basic and Diluted) $ (0.06) $ (0.05) $ (0.13)
======= ======= =======
Weighted Average Shares Outstanding
(Basic and diluted) 27,415 27,526 27,551
======= ======= =======
SUNTRON CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
December 31, July 2, October 1,
2005 2006 2006
---- ---- ----
ASSETS
------
Current Assets:
Cash and equivalents $ 59 $ 109 $ 45
Trade receivables 51,377 49,224 48,705
Inventories 61,985 61,120 60,801
Land, building and improvements
held for sale, net 18,772 -- --
Prepaid expenses and other 1,430 1,341 1,180
-------- -------- --------
Total Current Assets 133,623 111,794 110,731
Net property and equipment 8,367 6,483 6,893
Goodwill 10,918 10,918 10,918
Debt issuance costs, net 1,586 791 701
Identifiable intangible assets 675 575 525
Deposits and other 180 1,764 1,737
-------- -------- --------
Total Assets $155,349 $132,325 $131,505
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 38,605 $ 32,345 $ 30,337
Outstanding checks in excess of
cash balances 1,039 4,143 3,510
Borrowings under revolving
credit agreement 47,000 21,312 24,038
Accrued compensation and benefits 6,181 6,250 7,478
Current portion of accrued exit
costs related to facility
closures 494 540 435
Payable to affiliates 501 410 493
Other accrued liabilities 5,934 2,760 3,475
-------- -------- --------
Total Current Liabilities 99,754 67,760 69,766
Long-term Liabilities:
Subordinated debt payable to
affiliate -- 10,421 10,858
Accrued exit costs related to
facility closures 122 -- --
Other 905 1,642 1,791
-------- -------- --------
Total Liabilities 100,781 79,823 82,415
-------- -------- --------
Stockholders' Equity:
Preferred stock, $.01 par value
Authorized 10,000 shares,
none issued -- -- --
Common stock, $.01 par value
Authorized 50,000 shares; issued
and outstanding 27,415, 27,548 and
27,563 shares, respectively 274 275 275
Additional paid-in capital 380,744 380,854 381,145
Deferred stock compensation (276) -- --
Accumulated deficit (326,174) (328,627) (332,330)
-------- -------- --------
Total Stockholders' Equity 54,568 52,502 49,090
-------- -------- --------
Total Liabilities and
Stockholders' Equity $155,349 $132,325 $131,505
======== ======== ========
RECONCILIATION OF GAAP FINANCIAL RESULTS TO
NON-GAAP MEASURES
(In Thousands, Except Per Share Data)
Q3 Q2 Q3
2005 2006 2006
---- ---- ----
Net Loss (GAAP) $(1,534) $(1,316) $(3,703)
Restructuring expenses 340 467 1,129
Professional fees related
to litigation 388 643 1,211
Stock compensation expense 88 179 291
------- ------- -------
Net Income (Loss) (Non-GAAP) $ (718) $ (27) $(1,072)
======= ======= =======
Loss Per Share (GAAP) $ (0.06) $ (0.05) $ (0.13)
======= ======= =======
Loss Per Share (Non-GAAP) $ (0.03) $ (0.00) $ (0.04)
======= ======= =======
OTHER SELECTED FINANCIAL DATA
(In Thousands)
Q3 Q2 Q3
2005 2006 2006
---- ---- ----
EBITDA $ 1,616 $ 749 $(1,654)
Cash Flow Provided (Used) by
Operating Activities 1,295 (2,049) (1,273)
Restructuring Charges:
Included in Cost of Goods Sold 296 245 1,006
Other 44 222 123
Borrowing Availability
(End of Period) 14,915 21,681 20,861
Working Capital (End of Period) 12,829 44,034 40,965
CALCULATION OF EBITDA
(In Thousands)
Q3 Q2 Q3
2005 2006 2006
---- ---- ----
Net Loss $(1,534) $(1,316) $(3,703)
Interest Expense 1,199 938 1,075
Income Tax Expense -- -- --
Depreciation and Amortization 1,951 1,127 974
------- ------- -------
EBITDA $ 1,616 $ 749 $(1,654)
======= ======= =======