SUNN Suntron Corp (MM)

PHOENIX, Aug. 17 /PRNewswire-FirstCall/ -- Suntron Corporation (NASDAQ:SUNN), a leading provider of integrated electronics manufacturing solutions, today reported revenue and operating results for the second quarter of 2005. Consistent with earlier guidance, net sales for the second quarter of 2005 were $81.8 million, a decrease of $0.9 million, from the $82.7 million reported for the first quarter of 2005. Net sales for the second quarter of 2005 declined from $130.4 million reported for the second quarter of 2004, primarily due to the loss of Applied Materials as a customer. Gross profit for the second quarter of 2005 improved to $3.9 million compared to $0.5 million reported for the first quarter of 2005. These gross profit results include restructuring charges of $0.4 million for the first quarter of 2005 and $0.5 million for the second quarter of 2005. The improvement in gross profit for the second quarter of 2005 compared with the first quarter of 2005 was positively impacted by favorable product mix, and restructuring activities that lowered manufacturing overhead. Gross profit for the second quarter of 2005 decreased by $4.8 million as compared to $8.7 million for the second quarter of 2004. Selling, general and administrative expense (SG&A) increased to $6.1 million for the second quarter of 2005 compared to $5.6 million for the first quarter of 2005, primarily due to an increase in bad debt expense. SG&A decreased by $0.3 million in the second quarter of 2005 compared to SG&A of $6.4 million for the second quarter of 2004. Severance, retention and lease exit costs related to administrative activities amounted to $0.6 million for the second quarter of 2005, as compared to $0.0 million for the first quarter of 2005 and $0.1 million for the second quarter of 2004. The increase in severance, retention and lease exit costs for the second quarter of 2005 was primarily due to severance costs. Operating loss for the second quarter of 2005 improved by $2.3 million to $3.1 million, compared to an operating loss of $5.4 million for the first quarter of 2005. For the second quarter of 2004, operating income was positive $2.1 million. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter of 2005 improved by $2.5 million to negative $0.5 million, as compared to EBITDA of negative $3.0 million reported for the first quarter of 2005. EBITDA for the second quarter of 2004 was positive $4.8 million. Despite lower net sales in the second quarter of 2005, net loss improved by $2.5 million from the negative $6.2 million reported for the first quarter of 2005. For the second quarter of 2004, net income was $1.0 million. Basic and diluted loss per share (EPS) for the second quarter of 2005 was a loss of $0.14 per share, an improvement of $0.09 per share from the $0.23 loss per share reported for the first quarter of 2005. For the second quarter of 2004, earnings per share was $0.04. Cash flow from operating activities for the second quarter of 2005 was positive $4.2 million compared to positive operating cash flow of $5.4 million in the first quarter of 2005. Operating cash flow for the second quarter of 2004 was negative $12.1 million. The primary reason for the improvement in operating cash flow in 2005 was a decrease in working capital requirements associated with lower net sales. At July 3, 2005, the Company had debt outstanding of $53.5 million as compared to $54.9 million at April 3, 2005. "As our results indicate, we are starting to see the benefit of our cost cutting actions and our asset utilization improvements," stated Paul Singh, Suntron's president and chief executive officer. "We are continuing to focus on operational execution, controlling costs, asset management, improving customer satisfaction, and the addition of new customers in our targeted market sectors," said Mr. Singh. "As we look ahead to the third quarter, we expect net sales will be up to 5% higher sequentially. We remain committed to our low-volume, high-mix manufacturing model and believe Suntron is uniquely positioned to service our customers," said Mr. Singh. 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, 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, and large scale and complex system integration and test. The Company has approximately 1,760 employees and contract workers. Income Statement Summary (In Thousands, Except Per Share Amounts) Q2 Q1 Q2 2004 2005 2005 Net Sales $130,381 $82,736 $81,758 Gross Profit 8,746 472 3,874 SG&A Expense 6,394 5,618 6,136 Operating Income (Loss) 2,098 (5,360) (3,060) Net Income (Loss) 1,011 (6,189) (3,745) Earnings (Loss) Per Common Share 0.04 (0.23) (0.14) Selected Financial Data (In Thousands) Q2 Q1 Q2 2004 2005 2005 EBITDA $4,812 $(2,983) $(538) Cash Flow Provided (Used) by Operating Activities (12,118) 5,419 4,234 Restructuring Charges: Included in Cost of Goods Sold (32) (381) (475) Other (67) (26) (611) Working Capital (End of Period) 80,692 14,198 12,341 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 measures is 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 of the calculation as follows: Calculation of EBITDA (In Thousands) Q2 Q1 Q2 2004 2005 2005 Net Income (Loss) $1,011 $(6,189) $(3,745) Interest Expense 1,097 1,090 1,187 Income Tax Expense -- -- -- Depreciation and Amortization 2,704 2,116 2,020 EBITDA $4,812 $(2,983) $(538) Balance Sheet Summary (In Thousands) June 27, April 3, July 3, 2004 2005 2005 Cash and Equivalents $12 $23 $23 Trade Receivables, Net 64,914 46,929 46,061 Inventories, Net 92,922 69,082 65,316 Other Current Assets 1,689 2,445 1,191 Property, Plant & Equipment, Net 38,244 32,181 30,399 Goodwill 9,982 10,918 10,918 Other Assets 2,209 2,941 2,735 Total Assets $209,972 $164,519 $156,643 Accounts Payable $63,902 $30,179 $33,677 Accrued Liabilities 14,815 15,541 12,260 Outstanding Checks in Excess of Cash 128 3,700 853 Bank Debt 63,338 54,861 53,460 Other Long-term Liabilities 922 551 411 Stockholders' Equity 66,867 59,687 55,982 Total Liabilities and Stockholders' Equity $209,972 $164,519 $156,643 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 semiconductor and aerospace segments of the electronics industry; Suntron's dependence upon a small number of customers; the Company's ability to attract new customers and maintain 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 "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: Paul Singh, President and CEO, or Peter Harper, Chief Financial Officer, , both of Suntron Corporation, +1-602-789-6600 Web site: http://www.suntroncorp.com/

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