PEMSTAR reports Q2 results
Nov 02, 2006
PEMSTAR Inc. (NASDAQ:PMTR) announced financial results for its fiscal 2007 second quarter ended September 30, 2006.
Revenue for the three months ended September 30, 2006 increased to $212.3 million, compared to $211.1 million in the same quarter a year ago. Sales from the September 30, 2006 quarter included approximately $52.5 million of additional revenue resulting from the full turnkey operation with a wireless handset customer, which was in the Company's prior guidance.
Net income for the fiscal 2007 second quarter ended September 30, 2006 was $3.2 million or $ 0.07 per diluted share, compared to a net loss of $(13.5) million or $(0.30) per share in the same quarter a year ago. The prior year loss from continuing operations includes restructuring and impairment charges totaling $7.9 million or $(0.17) per share.
Al Berning, Chairman and CEO of PEMSTAR, stated, "Our results reflect the continued execution on our business strategy. We remain focused on our more profitable markets of medical, industrial, instrumentation, military/aerospace and process equipment, which has resulted in strong positive adjusted EBITDA in the four quarters ended September 30, 2006. PEMSTAR continues to differentiate itself and add value to its customers through engineering excellence, and by leveraging the strength of our operations in key strategic locations worldwide."
During the second quarter of fiscal 2007, sales to the industrial sector accounted for 40.4% of net sales; computing and data storage was 23.5% of net sales; communications was 34.1% of net sales; and medical was 2.0% of net sales. Excluding incremental turnkey revenue, the adjusted percentages are 53.6%, 31.2%, 12.5% and 2.7%, respectively.
Accounts receivable at September 30, 2006 was $138.8 million with days sales outstanding (DSO) of 59 compared with $125.5 million in accounts receivable with DSO of 53 at June 30, 2006. Net inventories of $76.4 million as of September 30, 2006 with a turn rate of 10.2 times, compared with $64.2 million at June 30, 2006 and a turn rate of 12.4 times. PEMSTAR's cash cycle was 37 days compared to the June quarter's level of 31 days. The unrestricted cash balance at September 30, 2006, was $21.2 million, compared to $24.6 million at June 30, 2006. Liquidity, defined as worldwide unrestricted cash plus available domestic borrowing, was $38.4 million, as of September 30, 2006, compared to $40.7 million at June 30, 2006. Please note that the full turnkey transaction change in PEMSTAR's Tianjin facility materially affected these statistical points given the increases in sales, accounts receivable and accounts payable. For example, without the turnkey impact, PEMSTAR's cash cycle for the September quarter would have been 50 days.
Debt as of September 30, 2006, was $106.0 million, compared to $99.7 million as of June 30, 2006. Debt is calculated as debt plus capital leases, including current maturities in both cases.
Fiscal 2007 Third-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 2007 third quarter ending December 31, 2006 will be in the range of $200 million to $220 million, including planned turnkey revenue in China, which is expected to decline sequentially, with net income of $0.06 to $0.10 per diluted share. As is the company's practice, this guidance excludes reserves to adjust capacity to market conditions and customer demands, along with further restructuring or unusual charges.
PEMSTAR is in its final stages of completing an analysis of strategic alternatives for its Tianjin, China operations and expects conclusion in the next 30 days.