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PEMSTAR Reports Fiscal Fourth Quarter And Full Year 2005 Results
Announces Initiatives to Improve Future Operations and Financial Performance
ROCHESTER, Minn., May 24 /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 2005 fourth quarter and full year
ended March 31, 2 005.
Revenue for the three months ended March 31, 2005 decreased to $150.4 million,
compared to $186.1 million in the same quarter a year ago. This was due to the
planned transition out of certain consumer business and weaker semi-conductor
capital equipment orders. The year ago period also includes revenues from
manufacturing sites that have since been closed. Revenue for the fiscal year
ended March 31, 2005 increased to $689.9 million, as compared with $669.4
million for the fiscal year ended March 31, 2004. The revenue growth was led by
growth in semi-conductor capital equipment business.
Net loss for the fiscal fourth quarter ended March 31, 2005 was $(12.3) million
or $(0.27) per share, compared to net loss of $(3.3) million or $(0.07) per
share in the same quarter a year ago. The increased net loss resulted from a
$9.8 million decrease in gross profit compared to the prior year period due to
decreased sales resulting in lower capacity utilization. Results for the fourth
quarter also include one time adjustments for certain Americas locations and to
engineering operations of $4.3 million or $(0.09) per share, including
adjustments to estimated unbilled services of $(0.06) and accounts receivable
and inventory reserves of $(0.03). Net loss for the full year ended March 31,
2005 was $(33.7) million or $(0.75) per share, compared to net loss of $(25.3)
million or $(0.60) per share for the full year ended March 31, 2004. Results
for the full year 2005 include one-time restructuring charges totaling $5.2
million or $(0.11) per share. The prior year net loss, as restated, included
restructuring charges of $8.0 million or $(0.19) per share. There was a $16.2
million decline in second half gross profit performance due to lower sales
resulting in lower capacity utilization in fiscal 2005 versus fiscal 2004,
which the company is addressing as noted below.
Excluding the above-mentioned one time adjustments totaling $(0.09) per share,
the adjusted net loss for the fiscal fourth quarter of 2005, was $(8.0) million
or $(0.18) per share, which is in-line with prior guidance. The adjusted net
loss for the fiscal year ended March 31, 2005, excluding charges for
restructuring of $5.2 million, accounts receivable and inventory reserves of
$7.5 million, was $(25.1) million or $(0.56) per share.
Al Berning, Chairman and CEO of PEMSTAR stated, "Fiscal year 2005 has been a
transition year for PEMSTAR. Our focus, while taking restructuring actions
over the past 12 months, has been on maintaining our ability to support and
service our customers globally by strengthening the performance of our core
operations."
Roy Bauer, PEMSTAR's President and COO added, "We are taking actions over the
next 6 months to optimize our cost structure, capacity and engineering
organization in the Americas. This will result in the reduction of 100,000
square feet from our San Jose facility and one consolidated Americas
engineering team. PEMSTAR's San Jose operation will now be a center for new
customer product introductions and prototype builds. We are also reviewing
options for our Mexico operation, which would likely include a sale or
downsizing, thereby eliminating additional excess capacity. New manufacturing
opportunities, requiring lower cost structures, will be shifted to our other
low cost facilities around the world. Finally, we are further reducing our
SG&A costs with a planned 6% reduction of our domestic workforce. Taken
together, our planned actions position PEMSTAR to better capitalize on our core
capabilities geared towards engineering services and high complexity
manufacturing, while making us stronger and better able to service our key
customers."
Greg Lea, PEMSTAR's Executive Vice President and CFO commented, "The planned
restructuring actions we are currently taking are expected to significantly
improve our competitive position and financial model. Once completed, we
expect that these actions, along with our other cost containment initiatives
currently being implemented, will reduce our operating expense structure by
approximately $4 to $5 million per quarter giving PEMSTAR increased operating
leverage and putting us on track to achieve profitability. As a result of our
planned restructuring activities, we expect to take a charge of approximately
$14 to $18 million over the next two quarters. Based on 2005 actions and
expected 2006 reductions, we estimate removing 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 fourth quarter of fiscal 2005, sales to the industrial sector
accounted for 41.5% of net sales; computing and data storage was 28.9 % of net
sales; communications was 26.0% of net sales; and medical was 3.6% of net
sales.
Accounts receivable at March 31, 2005 was $102.5 million with days sales
outstanding (DSO) of 61, compared with $124.9 million in accounts receivable
with DSO of 64 at December 31, 2004. Net inventories of $73.4 million as of
March 31, 2005 with a turn rate of 8.0 times, compared with $84.0 million at
December 31, 2004 and a turn rate of 8.2 times. PEMSTAR's cash cycle remained
at the December quarter's level of 52 days. Cash generated from operations was
$23.0 million in the fourth quarter and $25.3 million for fiscal 2005 primarily
due to improved working capital management. The cash balance at March 31,
2005, was $26.0 million, compared to $18.4 million at December 31, 2004.
Liquidity, defined as worldwide cash plus available domestic borrowing, stood
at $48.9 million.
Debt as of March 31, 2005, was $98.1 million, compared to $104.2 million in the
quarter ended December 31, 2004. This decrease was due to reduced borrowings
under PEMSTAR's domestic and Asia credit facilities. Debt is calculated as
debt plus capital leases, including current maturities in both cases.
Al Berning further commented, "Despite a challenging business environment we
remain optimistic about our prospects in 2006 and we expect to derive the
incremental benefits from our restructuring actions starting in the fiscal
second quarter. By eliminating the less strategic, underperforming parts of
our business, PEMSTAR will now be a leaner, more efficient company with
improved capacity utilization levels and the ability to achieve improved
financial performance. In addition, we continue to win important new programs
from both new and existing customers like the Airbus A380 project and the
General Dynamics' Land Warrior program funded by the U.S. Army this past
February. PEMSTAR plays an important role in these programs. Customers
continue to value our focus on product development, test, automation services
and high complexity manufacturing, which differentiates us."
Fiscal 2006 First-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 first quarter
ending June 30, 2005, of $160 million to $170 million, and a net loss of
$(0.10) to $(0.15) 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 year and quarter ended
March 31, 2005, which excludes certain restructuring charges, adjustments made
to create accounts receivable and inventory reserves and fourth 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 2005 fourth-quarter results
today, Tuesday, May 24, 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 conference call, phone 800-633-8284 (domestic), or 402-977-9140
(international), access number 21247992. The telephone replay will be available
beginning at 6:00 p.m. CT on Tuesday, May 24, through 6:00 p.m. CT on Thursday,
May 26.
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 14 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 integrating acquired
businesses; increased competition; the courts' failure to approve the class
action and derivative settlements 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 Exhibit 13.1 of PEMSTAR's Annual Report on Form
10-K for the fiscal year ended March 31, 2004, as amended, and in PEMSTAR's
Quarterly Reports on Form 10-Q filed since March 31, 2004.
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 Statements of Operations
(In thousands, except per share data)
Three Months Ended Year Ended
March 31, March 31,
2005 2004 2005 2004
Net sales $ 150,446 $ 186,050 $ 689,916 $ 669,446
Cost of goods sold 145,905 171,693 652,018 626,832
Gross profit 4,541 14,357 37,898 42,614
Selling, general and
administrative
expenses 15,876 15,155 60,593 52,413
Restructuring costs 38 295 5,205 7,961
Operating loss (11,373) (1,093) (27,900) (17,760)
Other expense
(income)-net (73) 91 (928) (794)
Interest expense 2,166 1,893 8,162 7,815
Loss before
income taxes (13,466) (3,077) (35,134) (24,781)
Income tax (benefit)
expense (1,153) 203 (1,397) 503
Net loss $(12,313) $(3,280) $(33,737) $(25,284)
Basic and diluted
loss per common
share: $(0.27) $(0.07) $(0.75) $(0.60)
Shares used in
computing net loss
per common share: 45,173 45,119 45,154 42,002
PEMSTAR Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
March 31, March 31,
2005 2004
Assets
Current assets:
Cash and equivalents $26,038 $9,832
Accounts receivable, net 102,516 127,823
Recoverable income taxes 1,248 870
Inventories 73,402 93,661
Unbilled services 8,078 11,547
Deferred income taxes 953 63
Prepaid expenses and other 10,657 14,810
Total current assets 222,892 258,606
Property, plant and equipment 173,266 167,325
Less accumulated depreciation (93,169) (74,204)
80,097 93,121
Goodwill 33,878 33,878
Deferred income taxes 2,733 2,177
Other assets 4,394 6,351
Total assets $343,994 $394,133
Liabilities and shareholders' equity
Current liabilities:
Cash overdraft $ 375 $7,130
Revolving credit facilities and current
maturities of long-term debt 79,068 68,618
Current maturities of capital lease obligations 453 1,769
Accounts payable 88,543 106,644
Income taxes payable 1,556 631
Accrued expenses and other 27,400 22,925
Total current liabilities 197,395 207,717
Long-term debt, less current maturities 6,560 8,856
Capital lease obligations, less
current maturities 11,973 11,867
Other liabilities and deferred credits 2,895 7,384
Shareholders' equity
Common stock, par value $0.01 per share-authorized
150,000 shares, issued and outstanding 45,178
shares at March 31, 2005 and 45,136 shares
at March 31, 2004 452 451
Additional paid-in capital 255,067 255,153
Accumulated other comprehensive income 3,601 3,081
Accumulated deficit (133,949) (100,212)
Loans to shareholders - (164)
Total shareholders' equity 125,171 158,309
Total liabilities and shareholders' equity $343,994 $394,133
DATASOURCE: PEMSTAR Inc.
CONTACT: Greg S. Lea, Executive Vice President & Chief Financial Officer
of PEMSTAR Inc., +1-507-292-6941, or ; or David Pasquale,
Executive Vice President of The Ruth Group, +1-646-536-7006, or
, for PEMSTAR Inc.
Web site: http://www.pemstar.com/