SUNN Suntron Corp (MM)

Suntron Corp. Reports Fourth Quarter and Fiscal 2003 Year End Results PHOENIX, March 30 /PRNewswire-FirstCall/ -- Suntron Corporation , a leading provider of integrated electronics manufacturing solutions, today reported revenue and operating results for the fourth quarter and year ended December 31, 2003. The Company reported net sales of $78.6 million and a net loss of $6.1 million ($0.22 per share) in the fourth quarter and net sales of $313.2 million and a net loss of $34.3 million ($1.25 pershare) for the full year. Net sales for the fourth quarter of 2003 were $78.6 million, an increase of $0.3 million from the $78.3 million reported in the fourth quarter of 2002. Net sales for fiscal year 2003 were $313.2 million, a decrease of 16% from $370.8 million reported for fiscal 2002. Despite continued softness in the aerospace industry, net sales increased in the fourth quarter of 2003 due to increased demand in semiconductor capital equipment, increased net sales from new customer wins and the acquisition of Trilogic Systems. The decline in net sales for fiscal year 2003 compared with the prior year was primarily attributable to decreases in net sales from the Company's two largest customers, Honeywell and Applied Materials. The Company believes the decline in net sales with these customers was due to continued softness in the aerospace and semiconductor capital equipment industries in 2003. Gross profit (loss) for the fourth quarter of 2003 was $1.1 million, an improvement of $9.2million as compared to a loss of $8.1 million in the fourth quarter of 2002. Gross profit (loss) for fiscal year 2003 was a loss of $8.4 million compared to a loss of $28.0 million for fiscal year 2002. The gross profit results in the fourth quarter of 2003 includes a credit from the reversal of an accrual from the termination of an operating lease of $4.7 million, while the negative gross profit reported in the fourth quarter of 2002 includes $0.3 million of restructuring charges related to facility closures and severance costs. The gross profit (loss) results for fiscal years 2003 and 2002 include a credit of $2.0 million and a loss of $13.6 million, respectively, associated with restructuring activities related to facility closures and severance costs. The improvement in gross profit (loss) was positively impacted by the reduction in restructuring charges, improved capacity utilization and a reduction in manufacturing overhead. Selling, general and administrative expense (SG&A) for the fourth quarter of 2003 was $6.4 million as compared to $6.0 million in the fourth quarter of 2002. SG&A expense for fiscal year 2003 was $22.6 million as compared to $27.2 million for fiscal year 2002. Operating loss for the fourth quarter of 2003 was $5.5 million, an improvement of $8.8 million as compared to an operating loss of $14.3 million recognized in the fourth quarter last year. Operating loss for fiscal year 2003 was $31.9 million as compared to $56.5 million for fiscal year 2002. In addition to the factors positively impacting gross margins, the reduction in selling, general and administrative (SG&A) expenses contributed favorably to year over year results. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter of 2003 was negative $0.1 million, an improvement of $8.7 million as compared to EBITDA of negative $8.8 million recognized in the fourth quarter last year. EBITDA for fiscal year 2003 was negative $9.5 million, an improvement of $24.4 million as compared to EBITDA of negative $33.9 million in fiscal 2002. The factors positively impacting operating loss were also primarily responsible for the improvement in EBITDA. Net loss for the fourth quarter of 2003 was $6.1 million, an improvement of $8.5 million as compared to a net loss of $14.7 million recognized in the fourth quarter last year. Net loss for fiscal year 2003 was $34.3 million as compared to a net loss of $126.2 million for fiscal year 2002 (including a $69.0 million non-cash goodwill impairment charge recorded as a cumulative effect of change in accounting principle, which resulted from implementing a new accounting standard in the first quarter of 2002). The factors positively impacting operating loss and the elimination of the cumulative effect from the change in accounting principle were primarily responsible for the improvement in net loss in 2003. Basic and diluted loss per share (EPS) for the fourth quarter of 2003 was $0.22 per share, an improvement of $0.31per share from the loss of $0.53 per share recognized in the fourth quarter last year. Basic and diluted loss per share (EPS) for fiscal year 2003 was $1.25 per share, an improvement of $3.35 from the loss of $4.60 per share recognized in fiscal year 2002. Cash flow from operating activities for the fourth quarter was negative $0.8 million, an improvement of $0.2 million as compared to $1.0 million of negative operating cash flow recognized in the fourth quarter last year. Cash flow from operatingactivities for fiscal year 2003 was negative $19.8 million as compared with positive $22.8 million for fiscal year 2002. The primary reason for the negative cash flow in the fourth quarter of 2003 and fiscal year 2003 were the operating losses of the business and an increase in accounts receivable as compared with the prior periods. At year-end, the Company had debt outstanding of $34.0 million as compared to $10.9 million at December 31, 2002. "In 2003, Suntron made significant strides to improveour business by reducing costs, maintaining strong asset management disciplines, and investing selectively for growth opportunities," said James Bass, Suntron president and chief executive officer. "Our strategic emphasis on providing complete product life cycle solutions to customers in our target markets of semiconductor capital equipment, aerospace and defense, medical and industrial is having an impact, as evidenced by 39 new customer wins in 2003 and increased order strength from selected existing customers. After more than two years of declining demand, we are beginning to see growth from certain of our customers end markets, specifically semiconductor capital equipment and industrial applications," said Mr. Bass. "During 2003, we also completed a number of significant corporate actions to improve the Company's competitive position and long-term outlook. In June, we completed the acquisition of certain assets from Trilogic Systems which has enhanced our front-end design capabilities. Second, we expanded the Company's capabilities in Mexico to include automated surface mount technology production in order to provide lower cost alternatives for our customers. Third, we completed the consolidation of our Moses Lake facility into our Newberg operations, thereby reducing our fixed costs. Finally, we were able to terminate certain obligations related to a long-term lease in Fremont, CA that resulted in the reversal of a $4.7 million lease termination accrual," said Mr. Bass. "During the fourth quarter, we saw increased order strength from certain customers and increased demand from our new customers. As a result, revenues in the quarter grew more quickly than expected and will continue to increase in the first quarter. As we look ahead to the first quarter, we expect net sales will be $10-15 million higher than the net sales of $78 million reported in the fourth quarter of 2003 due primarily to increased demand in the semiconductor capital equipment market," said Mr. Bass. "We expect to be EBITDA positive in the first quarter as the increased revenue allows us to capitalize on the operating leverage of Suntron's business model," concluded Mr. Bass. About Suntron Corporation Suntron delivers complete manufacturing services and solutions to support the entire life cycle of complex products in the semiconductor capital equipment, aerospace and defense, medical and industrial markets. Headquartered in Phoenix, Arizona, Suntron operates seven full-service, assembly facilities and two quick-turn assembly facilities in North America. Suntron is involved in printed circuit card assembly, cable and harness production, plastic injection molding, sheet metal, product design, engineering services, and full systems integration and test. The Company has approximately 2,650 employees and contract workers. Income Statement Summary (Amounts in Thousands, Except Per Share Amounts) Q4 Q3 Q4 Fiscal YearEnded 2002 2003 2003 12/31/02 12/31/03 Net Sales $78,267 $79,638 $78,584 $370,797 $313,231 Gross Profit (Loss) (8,124) (1,142) 1,056 (27,970) (8,368) SG&A Expense 6,036 5,039 6,391 27,234 22,648 Operating Loss (14,348) (6,369) (5,522) (56,541) (31,890) Loss before cumulative effect of change in accounting principle (14,650) (7,120) (6,111)(57,135) (34,288) Net Loss (14,650) (7,120) (6,111) (126,150) (34,288) Net Loss Per Common Share (0.53) (0.26) (0.22) (4.60) (1.25) Selected Financial Data(Dollars in Thousands) EBITDA $(8,775) $(486) $(65) $(33,885) $(9,459) Cash Flow from Operating Activities (983) (6,200) (838) 22,779 ($19,768) Working Capital (End of Period) 50,372 54,207 49,378 50,372 49,378 The primary measure of our operating performance is net income (loss). However, the Company's lenders and many investment analysts believe that other measures of operating performance are relevant. One of these alternative measuresis Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"). Management emphasizes that EBITDA is a non-GAAP measurement that excludes many significant items that are also important to understanding and assessing Suntron'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. In order to illustrate our EBITDA calculations, we have provided the details below of the calculation as follows: Calculation of EBITDA (Dollars in Thousands) Q4 Q3 Q4 Fiscal Year Ended 2002 2003 2003 12/31/02 12/31/03 Loss before cumulative effect of change in accounting principle $(14,650) $(7,120) $(6,111) $(57,135) $(34,288) Interest expense 446 -- 755 2,568 2,696 Reduction in interest under settlement -- -- -- (1,029) -- Income tax expense (benefit) -- 761 -- (276) -- Depreciation and amortization 5,429 5,873 5,291 21,987 22,133 EBITDA $(8,775) $(486) $(65) $(33,885) $(9,459) Balance Sheet Summary - At End of Year (Dollars in Thousands) 2001 2002 2003 Cash and Equivalents $14,172 $1,621 $26 Trade Receivables, Net 31,029 29,161 34,390 Inventories, Net 106,768 67,381 61,391 Other Current Assets 2,037 1,860 3,366 Property, Plant & Equipment, Net 81,424 61,906 43,494 Goodwill 82,604 6,964 9,627 Other Assets 4,605 3,323 2,352 Total Assets $322,639 $172,216 $154,646 Accounts Payable $28,391 $32,550 $32,858 Accrued Liabilities 19,185 17,101 16,896 Outstanding checks in excess of cash 900 -- 41 Bank Debt 31,628 10,856 34,011 Subordinated Debt 12,202 -- -- Other Long-term Liabilities 201 7,698 891 Stockholders' Equity 230,132 104,011 69,949 Total Liabilities and Stockholders' Equity $322,639 $172,216 $154,646 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 reflectSuntron'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 segments of the electronics industry; Suntron's dependence upon a smallnumber of customers; the Company's ability to attract new customers and maintain existing customers; the results of the Company's restructuring and cost reduction efforts; changes or cancellations in customer orders; the risks inherent with predicting revenue and earnings outcomes as well as other factors identified as "Factors That May Affect Future Results" or otherwise described in Suntron's filings with the Securities and Exchange Commission from time to time. DATASOURCE: Suntron Corporation CONTACT: Jim Bass, President and CEO, or Peter Harper, Chief Financial Officer, both of Suntron Corporation; or Chris Hendriksen or Jennifer Walaitis, +1-888-520-3382, , both for Suntron Corporation

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