Suntron Corp. Reports First Quarter 2004 Results
May 12, 2004
Suntron Corporation (Nasdaq: SUNN), a provider of integrated electronics manufacturing solutions, reported revenue and operating results for the first quarter of 2004. The Company reported net sales of $100.7 million and a net loss of $4.3 million ($0.16 per share). These results include $0.7 million of restructuring charges related to severance, facility closure and relocation costs.
Net sales for the first quarter of 2004 were $100.7 million, an increase of $20.5 million from the $80.2 million reported in the first quarter of 2003. Sequentially, first quarter net sales increased $22.1 million, or 28%, from $78.6 million reported in the fourth quarter of 2003. Net sales increased in the first quarter of 2004 due to increased demand in semiconductor capital equipment and increased net sales from new customer wins.
Gross profit for the first quarter of 2004 was $3.0 million, an improvement of $7.3 million as compared to a loss of $4.3 million in the first quarter of 2003. The gross profit results in the first quarter of 2004 include restructuring costs of $0.1 million, while the negative gross profit reported in the first quarter of 2003 includes $0.3 million of restructuring charges. The improvement in gross profit was positively impacted by a $1.4 million reduction in depreciation expense, net sales growth and improved capacity utilization.
Selling, general and administrative expense (SG&A) for the first quarter of 2004 was unchanged at $5.6 million compared to the first quarter of 2003. Sequentially, SG&A decreased by $0.8 million compared to the fourth quarter of 2003, primarily due to a reduction in bad debt expense.
Operating loss for the first quarter of 2004 was $3.5 million, an improvement of $6.6 million as compared to an operating loss of $10.1 million recognized in the first quarter last year. The improvement in operating loss was primarily due to the factors positively impacting gross margins, partially offset by an increase in restructuring costs in the first quarter of 2004 of $0.6 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter of 2004 was $0.4 million, an improvement of $5.2 million as compared to EBITDA of negative $4.8 million recognized in the first quarter last year. The factors positively impacting operating loss were also primarily responsible for the improvement in EBITDA.
Net loss for the first quarter of 2004 was $4.3 million, an improvement of $6.2 million as compared to a net loss of $10.5 million recognized in the first quarter last year. The factors positively impacting operating loss were primarily responsible for the improvement in net loss.
Basic and diluted loss per share (EPS) for the first quarter of 2004 was $0.16 per share, an improvement of $0.22 per share from the loss of $0.38 per share recognized in the first quarter last year.
Cash flow from operating activities for the first quarter was negative $13.3 million, a decrease of $4.3 million as compared to $9.0 million of negative operating cash flow recognized in the first quarter last year. The primary reason for the negative operating cash flow in the first quarter of 2004 was an increase in working capital associated with the significant increase in net sales. At quarter-end, the Company had debt outstanding of $46.7 million as compared to $34.0 million at December 31, 2003.
"During the first quarter, Suntron experienced substantial sales growth. The growth was mainly driven by increased demand from customers in the semiconductor capital equipment industry, the acquisition of Trilogic and from increased revenues attributable to new customer wins. With higher net sales, we were able to improve margins due to an improvement in capacity utilization and by leveraging the Company's corporate infrastructure," said James Bass, Suntron president and chief executive officer. "In addition, we continued to win new business with 9 new high-quality customers in our targeted markets during the first quarter. We believe these customer wins are an indication of the value Suntron provides to its customers and a reflection of our reputation as the leader in manufacturing solutions for complex products in our targeted market segments," said Mr. Bass.
"While we are excited with the Company's rapid sales growth, we continue to focus on controlling costs, improving efficiency and increasing margins. In order to support the growth of our customers in the first quarter, Suntron hired nearly 500 employees and invested in additional working capital. As a result, we were not able to realize all the efficiencies associated with a larger sales base and expect to see efficiency improvements throughout 2004," said Mr. Bass.
"We continue to see increased order strength from certain customers and increased demand from our new customers. As we look ahead to the second quarter, we expect net sales will be approximately 45-60% higher than the second quarter of 2003, or approximately 10-20% higher sequentially," said Mr. Bass. "We expect to realize benefits from increased efficiency and higher capacity utilization and anticipate improvement in gross profit, operating income and EBITDA margins. Based on our current estimates, we expect EBITDA margins of 2-4% in the second quarter. We also expect positive net income and earnings per share of $0.01 to $0.04. We expect to have slightly negative cash flow from operations in the second quarter as we continue to support the growth of our customers by investing in additional working capital," said Mr. Bass.
"We remain committed to our high-mix manufacturing model and believe Suntron is uniquely positioned to service customers that require complex manufacturing solutions in the aerospace & defense, semiconductor capital equipment, industrial and medical markets," concluded Mr. Bass.