Suntron reports Q1 - sales down

Suntron Corporation (Nasdaq: SUNN) reported revenue and operating results for the first quarter of 2005. The Company reported net sales of $82.7 million and a net loss of $6.2 million (a loss of $0.23 per share). These results include $0.4 million of restructuring charges related to severance, retention and lease exit costs.
 
Net sales for the first quarter of 2005 were $82.7 million, an 18% decrease from the $100.7 million reported in the first quarter of 2004. Sequentially, first quarter net sales decreased $33.1 million, or 29%, from $115.8 million reported in the fourth quarter of 2004. The decline in net sales for the first quarter of 2005 compared with the first quarter of 2004 was primarily due to the loss of Applied Materials as a customer, partially offset by an increase in demand from other customers in the semiconductor capital equipment sector.

Gross profit for the first quarter of 2005 was $0.5 million (0.6% of net sales), a decrease of $2.5 million as compared to $3.0 million for the first quarter of 2004 (3.0% of net sales). The gross profit results in the first quarter of 2004 and 2005 include $0.1 million and $0.4 million of restructuring charges, respectively, related to severance, retention, and lease exit costs. Sequentially, first quarter of 2005 gross profit decreased $6.0 million from the $6.5 million reported in the fourth quarter of 2004. The gross profit in the fourth quarter of 2004 included $0.1 million of restructuring charges. The decrease in gross profit in the first quarter of 2005 is primarily attributable to the inability to reduce fixed costs in proportion to the decline in net sales.

Selling, general and administrative expense (SG&A) was $5.6 million in both the first quarter of 2004 and the first quarter of 2005. However, SG&A increased as a percentage of net sales from approximately 5.6% in both the first and fourth quarters of 2004 to 6.8% in the first quarter of 2005. While SG&A declined by $1.0 million compared to the fourth quarter of 2004, administrative overhead did not decline in proportion to the decrease in net sales in the first quarter of 2005.

Operating loss for the first quarter of 2005 was $5.4 million, an increase of $1.9 million as compared to an operating loss of $3.5 million for the first quarter of 2004. Sequentially, the operating loss for the first quarter of 2005 increased by $5.0 million from the $0.4 million loss reported in the fourth quarter of 2004. The increase in operating loss was primarily due to the same factors that negatively impacted gross profit.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter of 2005 was negative $3.0 million, as compared to EBITDA of positive $0.4 million for the first quarter of 2004. Sequentially, first quarter of 2005 EBITDA decreased by $5.0 million from the positive $2.0 million reported in the fourth quarter of 2004. The factors negatively impacting gross profit were also primarily responsible for the reduction of EBITDA compared to the prior year.

Net loss for the first quarter of 2005 was $6.2 million, an increase of $1.9 million as compared to a net loss of $4.3 million for the first quarter of 2004. The increase in net loss was primarily attributable to the lower gross profit discussed previously.

Basic and diluted loss per share (EPS) for the first quarter of 2005 was a loss of $0.23 per share, as compared to a loss of $0.16 per share for the first quarter of 2004. Sequentially, first quarter of 2005 EPS decreased by $0.18 per share from the $0.05 loss per share reported in the fourth quarter of 2004.

Cash flow from operating activities for the first quarter of 2005 was positive $5.4 million, an improvement of $18.7 million as compared to $13.3 million of negative operating cash flow recognized in the first quarter last year. Sequentially, cash flow from operating activities improved $0.3 million as compared to the fourth quarter of 2004. The primary reason for the improvement in operating cash flow in the first quarter of 2005 was a decrease in working capital requirements associated with lower net sales. At April 3, 2005, the Company had debt outstanding of $54.9 million as compared to $59.1 million at December 31, 2004.

Looking forward to the second quarter, the Company stated that preliminary sales forecasts indicate that net sales for the second quarter of 2005 will not exceed net sales for the first quarter of 2005. The Company also stated that it expects to have positive cash flow from operations in the second quarter.