PEMSTAR Reports Fiscal 2006 First Quarter Results ROCHESTER, Minn.,
July 27 /PRNewswire-FirstCall/ -- PEMSTAR Inc. (NASDAQ:PMTR), a
leading provider of global engineering, product design,
manufacturing and fulfillment services to technology, industrial
and medical companies, today announced financial results for its
fiscal 2006 first quarter ended June 30, 2005. Revenue from
continuing operations for the three months ended June 30, 2005
increased to $209.8 million, compared to $185.3 million in the same
quarter a year ago. The increase included $49.4 million of
additional revenue resulting from the shift to a full turnkey
operation with a wireless handset customer that was not in our
guidance going into the quarter, which was partially offset by a
$24.9 million decrease in revenue, largely due to the planned
transition out of certain consumer business and softer
semi-conductor capital equipment orders. Net loss from continuing
operations for the fiscal 2006 first quarter ended June 30, 2005
was $(9.9) million or $(0.22) per share, compared to net income
from continuing operations of $3.0 million or $0.07 per share in
the same quarter a year ago. Results from continuing operations for
the first quarter include adjustments for certain Americas
locations of $(4.3) million or $(0.10) per share, comprised of
restructuring charges of $(2.3) million, $(1.3) million of accounts
receivable and inventory reserves primarily related to restructured
sites and $(0.7) million due to other items. The net loss from
continuing operations without these adjustments resulted primarily
from reduced gross margins related to volume reduction and product
mix changes in the semiconductor capital equipment and wireless
hand set production combined with the low capacity utilization
being addressed by the restructuring efforts. Revenues from
discontinued operations in our Guadalajara facility for the fiscal
first quarter were $5.1 and $11.4 million for fiscal 2006 and 2005,
respectively. Loss from discontinued operations for the fiscal
first quarter totaled $(7.7) million or $(0.17) per share. Expenses
contributing to the fiscal 2006 loss included $(6.6) million or
$(0.14) per share of adjustments comprised of the following:
restructuring charges of $(4.4) million, $(1.9) million of accounts
receivable and inventory reserves primarily related to restructured
sites and $(0.3) million of other items. Excluding the
above-mentioned adjustments of $(4.3) million for continuing
operations and $(6.6) million for discontinued operations totaling
$(0.24) per share, the adjusted net loss for the fiscal first
quarter of 2006, was $(6.7) million or $(0.15) per share, which is
in-line with prior guidance. Roy Bauer, PEMSTAR's President and COO
stated, "As we previously announced, we undertook several
initiatives over the last year to optimize our cost structure,
capacity and engineering organization in the Americas. This process
is progressing in line with our guidance from the prior quarter and
we feel that the majority of these actions will be completed over
the next three months. During the quarter we closed down our Mexico
operations. Our San Jose facility will be right sized leaving only
our engineering development operation and support for prototype
production during our fiscal second quarter. We believe that these
steps to further reduce excess capacity will improve PEMSTAR's
financial performance going forward. To improve capacity
utilization, new manufacturing opportunities, requiring lower cost
structures, are being shifted to our other low cost facilities
around the world. We are now in a better position to expand our
sales initiatives in the Product Design, Automation, and Test
engineering, which is a more profitable and growing part of our
business." Greg Lea, PEMSTAR's Executive Vice President and CFO
commented, "Our results in the first quarter include the effects of
actions we continue to take in our business restructuring. These
restructuring actions position PEMSTAR to capitalize on our core
capabilities and better align our cost structure with expected
customer demands. As stated in the prior quarter, we expect these
cost-containment efforts in improved capacity utilization and
infrastructure reductions will result in a savings to our operating
expenses by approximately $4 million to $5 million per quarter. As
a result of our planned restructuring activities, we took a charge
of $(6.7) million in this first fiscal quarter and we anticipate
taking the remainder of the previously announced total charges of
$14 million to $18 million over the next quarter. Based on 2005
actions and expected 2006 remaining reductions, we expect to remove
approximately 425,000 square feet of manufacturing capacity from
our global operations, leaving us with 1,151,000 square feet
worldwide. By the end of the second quarter of fiscal 2006 we will
have reduced our workforce in the Americas by 20 percent over that
eighteen month period." Business Update During the first quarter of
fiscal 2006, sales, excluding incremental turn key revenue, from
continuing operations to the industrial sector accounted for 40.6%
of net sales; computing and data storage was 28.1% of net sales;
communications was 29.9% of net sales; and medical was 1.4% of net
sales. The turnkey transaction change in our Tianjin facility
materially affected the following statistical points given the
increases in sales, accounts receivable and accounts payable.
Accounts receivable at June 30, 2005 was $150.9 million with days
sales outstanding (DSO) of 65 compared with $98.8 million in
accounts receivable with DSO of 61 at March 31, 2005. Net
inventories of $63.8 million as of June 30, 2005 with a turn rate
of 12.8 times, compared with $68.3 million at March 31, 2005 and a
turn rate of 8.1 times. PEMSTAR's cash cycle of 37 days was lower
than the March quarter's level of 52 days. The cash and restricted
cash balance at June 30, 2005, was $33.6 million, compared to $25.9
million at March 31, 2005. Liquidity, defined as worldwide cash and
restricted cash plus available domestic borrowing, stood at $50.7
million, as of June 30, 2005. Debt as of June 30, 2005, was $122.0
million, compared to $98.1 million in the quarter ended March 31,
2005. The June 30, 2005 balance includes $21.0 million, which
together with restricted cash of $22.8 million are related to
financing transactions to stabilize costs of the China turnkey
transactions. The remaining increase was due to increased
borrowings under PEMSTAR's Asia credit facilities net of reduced
domestic borrowings. Debt is calculated as debt plus capital
leases, including current maturities in both cases. Al Berning,
Chairman and CEO of PEMSTAR stated, "We remain focused on improving
our margin and mix, concentrating on profitable customer accounts
and improving our utilization. We continue to make significant
progress on all these fronts and we believe that this will be
reflected in our bottom-line performance later this year. We are
also pleased to be working on projects with new customers this
quarter as well as servicing the needs of our existing customers."
Fiscal 2006 Second-Quarter Outlook The following forward-looking
statements are based on current expectations, and today's economic
uncertainties make it difficult to project results going forward.
PEMSTAR currently expects net sales in the fiscal 2006 second
quarter ending September 30, 2005, of $215 million to $230 million,
including planned turnkey revenue in China, and a net loss of
$(0.07) to $(0.12) per share, as the company's restructuring
improvements are not fully implemented until the second quarter. As
is the company's practice, this guidance excludes reserves to
adjust capacity to market conditions and customer demands, along
with further restructuring charges referred to above. Use of
Non-GAAP Measures From time to time management uses financial
measures which do not reflect "generally accepted accounting
principles" (GAAP) in analyzing PEMSTAR's operating performance,
and believes that these non-GAAP measures may assist investors in
analyzing the underlying trends in PEMSTAR's business over time.
Investors should consider these non-GAAP measures in addition to,
not as a substitute for or as superior to, financial reporting
measures prepared in accordance with GAAP. In this press release,
PEMSTAR has reported a non-GAAP measure called "adjusted net
income" for the fiscal quarter ended June 30, 2005, which excludes
certain restructuring charges, adjustments made to create accounts
receivable and inventory reserves and first quarter adjustments to
estimated unbilled services. Management uses the adjusted net
income measures in its internal analysis and review of operational
performance, and for providing guidance to investors. Management
believes that this adjusted net income measure provides investors
with useful information in comparing PEMSTAR's performance over
different periods, particularly when comparing this period to
periods in which PEMSTAR did not incur some or all of the charges
and adjustments described above. By using this non-GAAP measure
management believes that investors get a better picture of the
performance of PEMSTAR's underlying business. Management encourages
investors to review PEMSTAR's net income prepared in accordance
with GAAP to understand its performance taking into account all
relevant factors, including those that may only occur from time to
time but have a material impact on PEMSTAR's financial results.
Investor Conference Call / Webcast Details PEMSTAR will host a live
Webcast to review fiscal 2006 first-quarter results today,
Wednesday, July 27, at 4:00 p.m. CT (5:00 p.m. ET). To access the
Webcast, go to the investor relations portion of PEMSTAR's Web
site, http://www.pemstar.com/, and click on the Webcast icon. A
replay of the Webcast will be available on PEMSTAR's Web site for
one month. If you do not have access to the Internet and want to
listen to an audio replay of the first quarter conference call,
phone 800-633-8284 (domestic), or 402-977-9140 (international),
access number 21252566. The telephone replay will be available
beginning at 6:00 p.m. CT (7:00 p.m. ET) on Wednesday, July 27,
through 6:00 p.m. CT (7:00 p.m. ET) on Friday, July 29. About
PEMSTAR PEMSTAR Inc. (http://www.pemstar.com/) provides a
comprehensive range of engineering, product design, manufacturing
and fulfillment services to customers on a global basis through
facilities strategically located in the Americas, Asia and Europe.
The company's service offerings support customers' needs from
product development and design, through manufacturing to worldwide
distribution and aftermarket support. PEMSTAR has over one million
square feet in 12 locations worldwide. This press release may
contain "forward-looking" statements. These forward-looking
statements, including statements made by Mr. Berning, Mr. Bauer and
Mr. Lea, may contain statements of intent, belief or current
expectations of PEMSTAR Inc. and its management. Such
forward-looking statements are not guarantees of future results and
involve risks and uncertainties that may cause actual results to
differ materially from the potential results discussed in the
forward-looking statements. In addition to factors discussed above,
risks and uncertainties that may cause such differences for PEMSTAR
include but are not limited to: recession or decline in economic
conditions; rumors or threats of war; actual conflicts or trade
disruptions; trade disruptions resulting from world health alerts
or actual disease outbreaks; changes in demand for electronics
manufacturing services; changes in demand by major customers due to
cancellations, reductions or delays of orders; shortages or price
fluctuations in component parts; difficulties managing expansion
and integration of acquired or restructured businesses; increased
competition; and other risk factors listed from time to time in
PEMSTAR's Securities and Exchange Commission filings, including but
not limited to risks as included in PEMSTAR's Annual Report on Form
10-K for the fiscal year ended March 31, 2005. Contacts: Greg S.
Lea PEMSTAR Inc. Executive Vice President & Chief Financial
Officer Phone: 507-292-6941 Email: David Pasquale The Ruth Group
Executive Vice President Phone: 646-536-7006 Email: Pemstar Inc.
Consolidated Balance Sheets (In thousands, except per share data)
June 30, March 31, 2005 2005 Assets (Note A) Current assets: Cash
and equivalents $10,744 $25,883 Restricted cash 22,835 -- Accounts
receivable, net 150,868 98,759 Recoverable income taxes 973 971
Inventories 63,812 68,345 Unbilled services 8,024 8,173 Deferred
income taxes 973 953 Prepaid expenses and other 11,661 10,413
Assets related to discontinued operations 2,101 9,395 Total current
assets 271,991 222,892 Property, plant and equipment, net 70,824
76,169 Goodwill, net 33,878 33,878 Deferred income taxes 2,747
2,733 Other assets 4,030 4,210 Non-current assets related to
discontinued operations 448 4,112 Total assets $383,918 $343,994
Liabilities and shareholders' equity Current liabilities: Cash
overdraft $2,921 $ 312 Revolving credit facilities and current
maturities of long-term debt 103,189 79,068 Current maturities of
capital lease obligations 626 453 Accounts payable 123,322 84,375
Income taxes payable 807 1,491 Accrued expenses and other 21,850
26,001 Liabilities related to discontinued operations 4,162 5,695
Total current liabilities 256,877 197,395 Long-term debt, less
current maturities 6,179 6,560 Capital lease obligations, less
current maturities 11,959 11,973 Other liabilities and deferred
credits 2,840 2,895 Shareholders' equity: Common stock, par value
$0.01 per share-authorized 150,000 shares, issued and outstanding
45,198 shares at June 30, 2005 and 45,178 shares at March 31, 2005
452 452 Additional paid-in capital 255,060 255,067 Accumulated
other comprehensive income 2,120 3,601 Accumulated deficit
(151,569) (133,949) 106,063 125,171 Total liabilities and
shareholders' equity $383,918 $343,994 Note A -- Amounts have been
reclassified to conform to discontinued operations presentation.
Pemstar Inc. Consolidated Statements of Operations (In thousands,
except per share data) Three Months Ended June 30, 2005 2004 (Note
A) Net sales $209,843 $185,320 Cost of goods sold 204,354 167,781
Gross profit 5,489 17,539 Selling, general and administrative
expenses 12,136 13,886 Restructuring and impairment charges 2,346
-- Operating loss (8,993) 3,653 Other (income) expense -net (64)
(1,406) Interest expense 1,677 2,013 (Loss) income before income
taxes (10,606) 3,046 Income tax (benefit) expense (692) 78 (Loss)
income from continuing operations (9,914) 2,968 Loss from
discontinued operations (7,706) (2,443) Net (loss) income $(17,620)
$525 Basic (loss) income per common share: (Loss) income from
continuing operations $(0.22) $0.07 Loss from discontinued
operations (0.17) (0.06) Net (loss) income $(0.39) $0.01 Diluted
(loss) income per common share: (Loss) income from continuing
operations $(0.22) $0.07 Loss from discontinued operations (0.17)
(0.06) Net (loss) income $(0.39) $0.01 Shares used in computing net
(loss) income per common share: Basic 45,195 45,142 Diluted 45,195
48,662 Note A -- Amounts have been reclassified to conform to
discontinued operations presentation. DATASOURCE: PEMSTAR Inc.
CONTACT: Greg S. Lea, Executive Vice President & Chief
Financial Officer of PEMSTAR Inc., +1-507-292-6941, ; or David
Pasquale, Executive Vice President of The Ruth Group for PEMSTAR
Inc., +1-646-536-7006, Web site: http://www.pemstar.com/
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