Cherokee International Corporation (NASDAQ: CHRK), a leading
designer and manufacturer of power supplies, today announced its
financial results for the first quarter ended March 30, 2008. Net
sales for the first quarter of 2008 were $34.7 million, up over 16%
compared to $30.0 million for the first quarter of 2007. Net sales
increases quarter over quarter were across all market sectors, led
by a significant increase in our telecom market. The company�s
backlog at March 30, 2008 was $55.1 million compared with $45.0
million at April 1 2007. The book to bill for the first quarter of
2008 was 1.25 to 1.00 compared to 1.00 to 1.00 for the first
quarter of 2007. Net income for the first quarter of 2008 was $12
thousand, or $0.00 per diluted share, compared to a net loss of
$2.0 million, or $0.10 per diluted share, for the first quarter a
year ago. Gross profit for the first quarter was $8.6 million, up
51% compared to $5.7 million for the same period in 2007. Gross
margin of 25% for the first quarter of 2008 was up from the 19%
realized in the first quarter of 2007. Improvements in gross profit
and gross margin stemmed principally from lower material costs in
North America and Asia due to our activity in China and to a lesser
extent from higher net sales in Europe. �Last year we stated that
we expected significantly improved gross margins as a result of
several initiatives. Two of those initiatives included migrating
production from Mexico to China, and sourcing a larger percentage
of raw materials from Asian vendors. Execution of this dual
strategy has successfully resulted in a 51% improvement in gross
profit and the highest percentage of overall gross margin for
Cherokee in three years,� said Jeffrey M. Frank, Cherokee�s
President and Chief Executive Officer. �We are confident that we
will sustain momentum throughout 2008 from the high energy
efficient programs introduced in the second half of 2007, a 50%
production increase at our wholly owned subsidiary in China, and a
laser focus on improving operating metrics. We remain committed to
providing our customers with the best products and services, while
we continue to reduce costs and improve performance.� Operating
expenses were $8.1 million for the first quarter of 2008 compared
to $7.8 million for the first quarter of 2007. General and
administrative costs for audit, legal and professional expenses
were higher because of the engagement of investment bankers and the
compression of year-end audit fees into the first quarter of 2008,
whereas they were incurred over the first half of 2007 a year ago.
There was no repeat of the restructuring costs from our Mexico exit
in the first quarter of last year. �The Company ended the first
quarter with $12.0 million in cash, up $3.5 million from year-end.
We generated $4.8 million in cash from operations during the first
quarter of 2008. Strong collections from fourth quarter business
and greater profitability in the first quarter both contributed to
this improvement,� said Linster W. Fox, Cherokee�s EVP, CFO and
Secretary. �This is the highest quarterly production of cash from
operations in the last twelve quarters.� Conference Call
Information The senior management of Cherokee will hold a
conference call on Monday, May 12, 2008 at 5:00 p.m. Eastern (2:00
p.m. Pacific) to discuss the quarter in more detail. This
conference call will be webcast live and can be accessed from
Cherokee�s website at www.cherokeepwr.com. A replay of the webcast
will be available on Cherokee�s website shortly after the call.
Investors who prefer to dial into the conference may call
877-419-6590 (or 719-325-4893 for International callers). The
conference ID is 1486469. Please call in 10 minutes before the
start of the call. A telephone replay will be available shortly
after the live call. The telephone replay number in the U.S. is
888-203-1112 (or 719-457-0820 for International callers). Passcode
for the telephone replay is 1486469. The telephone replay will be
available through 11:59 p.m. Eastern, Wednesday, May 14, 2008.
About Cherokee International Cherokee International designs,
manufactures and markets high-reliability custom and standard
switch-mode power supplies for datacom, telecom, medical and
process-control applications. With advanced manufacturing
facilities and engineering expertise located worldwide, Cherokee
applies a customer-focused approach to provide high-reliability
power products to manufacturers, reducing time to market. As the
leading provider of custom-designed power sources, Cherokee also
delivers a complete range of standard and modified-standard AC/DC
power supplies, AC/DC rectifiers and power shelves, and DC/DC
converters. Cherokee International headquarters are at 2841 Dow
Ave, Tustin, California 92780 and can be reached at 714 544 6665.
European operations are at Boulevard de l�Europe 131, 1301 Wavre,
Belgium and can be reached at +32 10 438 510. Cherokee
International (China) Power Supply Ltd. is located at 1353 Chenqiao
Road, Shanghai Fengpu Industrial Park Shanghai, 201401 China and
can be reached at 021 6710 8910. Additional information about the
Company and its products is available at
http://www.cherokeepwr.com. Safe Harbor Statement Certain
statements contained in this press release are forward-looking
statements. These forward-looking statements are based upon our
current expectations about future events. When used in this press
release, the words �believe,� �anticipate,� �intend,� �estimate,�
�expect� and similar expressions, or the negative of such words and
expressions, are intended to identify forward-looking statements,
although not all forward-looking statements contain such words or
expressions. These forward-looking statements generally relate to
our plans, objectives and expectations for future operations and
include our statements in this press release that: we will sustain
momentum throughout 2008 from the high energy efficient programs
introduced in the second half of 2007, a 50% production increase at
our wholly owned subsidiary in China and a laser focus on improving
operating metrics; and we continue to reduce costs and improve
performance. However, these statements are subject to a number of
risks and uncertainties affecting our business. You should read
this press release completely and with the understanding that
actual future results may be materially different from what we
expect as a result of these risks and uncertainties and other
factors, which include, but are not limited to: (1) changes in
general economic and business conditions, domestically and
internationally, (2) reductions in sales to, or the loss of, any of
the Company�s significant customers or in customer capacity
generally, (3) changes in the Company�s sales mix to lower margin
products, (4) increased competition in the Company�s industry, (5)
disruptions of the Company�s established supply channels, (6) the
Company�s level of debt and restrictions imposed by its debt
agreements and the Company�s ability to repay this debt, and (7)
the additional risk factors identified in the Company�s filings
with the Securities and Exchange Commission, including its annual
report on Form 10-K. Except as required by law, the Company
undertakes no obligation to update any forward-looking statements,
even though the Company�s situation may change in the future.
CHEROKEE INTERNATIONAL CORPORATION Condensed Consolidated
Statements of Operations (In Thousands, Except Per Share Amounts)
(Unaudited) � � � Three Months Ended Mar 30, � Apr 1, 2008 2007 �
Net sales $ 34,738 $ 30,020 Cost of sales � 26,097 � � 24,303 �
Gross profit � 8,641 � � 5,717 � Operating Expenses: Engineering
and development 2,781 2,642 Selling and marketing 1,735 1,864
General and administrative 3,593 3,137 Restructuring costs � - � �
193 � Total operating expenses � 8,109 � � 7,836 � Operating income
(loss) 532 (2,119 ) � Interest expense (742 ) (685 ) Other income,
net � 213 � � 162 � Income (loss) before income taxes 3 (2,642 )
Provision (benefit) for income taxes � (9 ) � (620 ) Net income
(loss) $ 12 � $ (2,022 ) � Net income (loss) per share: Basic $ - $
(0.10 ) Diluted $ - $ (0.10 ) � Weighted average shares
outstanding: Basic 19,454 19,341 Diluted 19,462 19,341 CHEROKEE
INTERNATIONAL CORPORATION Condensed Consolidated Balance Sheets (In
Thousands) (Unaudited) � � March 30, December 30, 2008 Unaudited
2007 Audited ASSETS � Current Assets: Cash and cash equivalents $
12,014 $ 8,484 Accounts receivable, net 27,467 31,237 Inventories,
net 30,005 28,021 Prepaid expenses and other current assets 2,042
1,583 Deferred Income taxes � 363 � � 363 � Total current assets
71,891 69,688 � Property and equipment, net 19,044 19,194 Deposits
and other assets 1,088 1,515 Deferred financing costs, net 383 86
Deferred income taxes-long term portion 1,345 1,257 Goodwill �
1,120 � � 1,120 � Total Assets $ 94,871 � $ 92,860 � � LIABILITIES
AND STOCKHOLDERS� EQUITY � Current Liabilities: Accounts payable $
15,691 $ 15,140 Accrued liabilities 4,630 4,667 Accrued
compensation and benefits 7,848 6,876 Accrued restructuring costs
503 431 Other short-term borrowings 475 0 Borrowings under
revolving line of credit 2,206 3,395 Current debt 24,485 24,485
Current debt payable to affiliates � 22,145 � � 22,145 � Total
current liabilities 77,983 77,139 � Other long-term obligations $
4,659 $ 4,534 � Common stock $ 19 $ 19 Paid-in capital 186,296
186,035 Accumulated deficit (178,311 ) (178,323 ) Accumulated other
comprehensive income � 4,225 � � 3,456 � Total stockholders' equity
� 12,229 � � 11,187 � Total Liabilities and Stockholders' Equity $
94,871 � $ 92,860 � CHEROKEE INTERNATIONAL CORPORATION Condensed
Consolidated Statements of Cash Flows (In Thousands) (Unaudited) �
� Three Months Ended March 30, 2008 � April 1, 2007 � CASH FLOWS
FROM OPERATING ACTIVITIES: Net income (loss) $ 12 ($2,022 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization $ 697 $ 852
Amortization of deferred financing costs $ 32 $ 32 Stock-based
compensation $ 261 $ 212 Net change in operating assets and
liabilities: Accounts receivable, net $ 4,589 $ 4,685 Inventories,
net ($1,286 ) ($2,342 ) Prepaid expenses and other current assets
($394 ) $ 77 Deposits and other assets $ 427 ($34 ) Accounts
payable $ 105 ($1,046 ) Accrued liabilities and restructuring costs
($754 ) ($1,066 ) Accrued compensation and benefits $ 728 $ 1,068
Accrued interest payable $ 596 $ 622 Other long-term obligations �
($179 ) � $ 261 � Net cash provided by operating activities $ 4,834
$ 1,299 � CASH FLOWS FROM INVESTING ACTIVITIES: Additions to
property and equipment � ($47 ) � � ($723 ) Net cash used in
investing activities ($47 ) ($723 ) � CASH FLOWS FROM FINANCING
ACTIVITIES: Other short-term borrowings $ 475 - Borrowings
(repayments) on revolving lines of credit, net ($1,335 ) $ 1,297
Deferred financing costs ($329 ) - Net proceeds from exercises of
stock options � - � � $ 29 � Net cash (used in) provided by
financing activities ($1,189 ) $ 1,326 � Effect of exchange rate
changes on cash � ($68 ) � $ 53 � � Net increase in cash and cash
equivalents $ 3,530 $ 1,955 Cash and cash equivalents, beginning of
period $ 8,484 � � $ 8,881 � Cash and cash equivalents, end of
period $ 12,014 � � $ 10,836 �
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