Pemstar (NASDAQ:PMTR)
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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/