Suntron Corporation Reports Third Quarter 2006 Results


PHOENIX, Nov. 15, 2006 (PRIMEZONE) -- Suntron Corporation (Nasdaq:SUNN), a leading provider of integrated electronics manufacturing solutions, today reported net sales of $70.6 million and an operating loss of $2.6 million for the third quarter of 2006. These results include $1.2 million of professional fees related to outstanding litigation and $1.1 million of restructuring charges related to severance, retention and lease exit costs primarily associated with the Company's previously announced decisions to close two U.S. manufacturing operations and to transfer their business to other Suntron sites.

Gross profit for the third quarter of 2006 was $4.0 million (5.7% of net sales), a decrease of $1.5 million as compared to $5.5 million in the third quarter of 2005 (6.9% of net sales). The gross profit results in the third quarter of 2005 and 2006 include $0.3 million and $1.0 million of restructuring charges, respectively, related to severance, retention and lease exit costs. Sequentially, third quarter gross profit decreased $2.2 million from the $6.2 million reported in the second quarter of 2006. The decrease in gross profit was driven primarily by a reduction in net sales from $80.4 million in the third quarter of 2005 and from $85.1 million in the second quarter of 2006. This decrease was partially offset by the cost savings achieved by the Company's 2005 and 2006 restructuring activities.

Operating loss for the third quarter of 2006 was $2.6 million, an increase of $2.2 million as compared to an operating loss of $0.4 million for both the third quarter of 2005 and the second quarter of 2006. Operating results were also impacted by reduced sales levels and increased litigation costs, offset by cost savings generated by our restructuring activities.

Net loss for the third quarter of 2006 was $3.7 million, an increase of $2.2 million as compared to a net loss of $1.5 million in the third quarter of 2005. Consequently, loss per share for the third quarter of 2006 was $0.13 per share, as compared to a loss of $0.06 per share for the third quarter of 2005. For the second quarter of 2006, net loss was $1.3 million and loss per share was $0.05 per share.

As announced last week, the Company has reached a confidential settlement agreement with Applied Materials, Inc. that terminates litigation previously disclosed by the Company.

"Though our primary focus for 2006 has been on the right-sizing of our U.S. manufacturing footprint, our sales efforts during the third quarter resulted in three new customer wins," stated Paul Singh, Suntron's president and chief executive officer. "The nature of our low volume/high mix model requires a longer ramp-up of production and therefore, any significant sales from these and other new customers added in 2006 should be realized in 2007. As we move forward with our business plan for 2007, our focus will be on profitably growing and managing growth while maintaining high standards of service to our customers," concluded Mr. Singh.

About Suntron Corporation

Suntron delivers complete manufacturing services and solutions to support the entire life cycle of complex products in the aerospace and defense, industrial, semiconductor capital equipment, networking and telecommunications, and medical markets. Headquartered in Phoenix, Arizona, Suntron operates six full-service manufacturing facilities and two quick-turn manufacturing facilities in North America. Suntron is involved in product design, engineering services, cable and harness production, printed circuit card assembly, box build, large scale and complex system integration and test.

The Suntron Corporation logo is available at http://www.primezone.com/newsroom/prs/?pkgid=2268

Non-GAAP Information

In addition to disclosing results determined in accordance with generally accepted accounting principles (GAAP), Suntron also discloses certain non-GAAP results of operations that exclude certain items. These non-GAAP financial data are provided to facilitate meaningful period-to-period comparisons of underlying operational performance by eliminating infrequent or unusual charges. The primary measure of our operating performance is net income (loss). However, the Company's lenders, internal management and many investment analysts believe that other measures provide additional information to further analyze the company's financial performance. Additionally, in evaluating alternative measures of operating performance, it is important to understand that there are no standards for these calculations. Accordingly, the lack of standards can result in subjective determinations by management about which items may be excluded from the calculations, as well as the potential for inconsistencies between different companies that have similarly titled alternative measures. See the tables to this press release for a reconciliation of GAAP amounts to non-GAAP amounts.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This release contains forward-looking statements that relate to future events or performance. These statements reflect Suntron's current expectations, and Suntron does not undertake to update or revise these forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied in this or other company statements will not be realized. Furthermore, readers are cautioned that these statements involve risks and uncertainties, many of which are beyond Suntron's control, which could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include, but are not limited to, general economic conditions and specific conditions in the electronics industry, including the aerospace and semiconductor capital equipment market segments of the electronics industry; Suntron's dependence upon a small number of customers; the Company's ability to attract new customers and retain existing customers; cash availability/liquidity; changes or cancellations in customer orders; the risks inherent with predicting cash flows, revenue and earnings outcomes as well as other factors identified as "Risk Factors" or otherwise described in Suntron's filings with the Securities and Exchange Commission from time to time.

Visit www.suntroncorp.com or call 888-520-3382 for more information.


                 SUNTRON CORPORATION AND SUBSIDIARIES
            UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
               (In Thousands, Except Per Share Amounts)

                                             Quarter Ended
                                             -------------
                                    October 2,   July 2,   October 1,
                                      2005        2006       2006
                                      ----        ----       ----
 Net Sales                           $80,383    $85,101     $70,604
 Cost of Goods Sold                   74,868     78,895      66,577
                                     -------    -------     -------
    Gross profit                       5,515      6,206       4,027

 Operating Expenses:
   Selling, general and
    administrative expenses            5,652      6,198       6,363
   Severance, retention, and lease
    exit costs                            44        222         123
   Related party management and
    consulting fees                      188        187         188
                                     -------    -------     -------
    Total operating expenses           5,884      6,607       6,674
                                     -------    -------     -------
    Operating loss                      (369)      (401)     (2,647)

 Other Income (Expense):
   Interest expense                   (1,199)      (938)     (1,075)
   Gain on sale of assets                 17         26          (6)
   Interest and other income (expense)    17         (3)         25
                                     -------    -------     -------
    Total other income (expense)      (1,165)      (915)     (1,056)
                                     -------    -------     -------
    Net loss                         $(1,534)   $(1,316)    $(3,703)
                                     =======    =======     =======
 
 Loss Per Share (Basic and Diluted)  $ (0.06)   $ (0.05)    $ (0.13)
                                     =======    =======     =======
 Weighted Average Shares Outstanding
  (Basic and diluted)                 27,415     27,526      27,551
                                     =======    =======     =======



                 SUNTRON CORPORATION AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED BALANCE SHEETS
               (In Thousands, Except Per Share Amounts)

                                  December 31,  July 2,    October 1,
                                     2005        2006        2006
                                     ----        ----        ----
 ASSETS
 ------
 Current Assets:
   Cash and equivalents             $    59    $    109    $     45
   Trade receivables                  51,377     49,224      48,705
   Inventories                        61,985     61,120      60,801
   Land, building and improvements
    held for sale, net                18,772         --          --
   Prepaid expenses and other          1,430      1,341       1,180
                                    --------   --------    --------
     Total Current Assets            133,623    111,794     110,731
 Net property and equipment            8,367      6,483       6,893
 Goodwill                             10,918     10,918      10,918
 Debt issuance costs, net              1,586        791         701
 Identifiable intangible assets          675        575         525
 Deposits and other                      180      1,764       1,737
                                    --------   --------    --------
     Total Assets                   $155,349   $132,325    $131,505
                                    ========   ========    ========

 LIABILITIES AND STOCKHOLDERS' EQUITY
 ------------------------------------
 Current Liabilities:
   Accounts payable                 $ 38,605   $ 32,345    $ 30,337
   Outstanding checks in excess of
    cash balances                      1,039      4,143       3,510
   Borrowings under revolving
    credit agreement                  47,000     21,312      24,038
   Accrued compensation and benefits   6,181      6,250       7,478
   Current portion of accrued exit
    costs related to facility
    closures                             494        540         435
   Payable to affiliates                 501        410         493
   Other accrued liabilities           5,934      2,760       3,475
                                    --------   --------    --------
     Total Current Liabilities        99,754     67,760      69,766

 Long-term Liabilities:
   Subordinated debt payable to
    affiliate                             --     10,421      10,858
   Accrued exit costs related to
    facility closures                    122         --          --
   Other                                 905      1,642       1,791
                                    --------   --------    --------
     Total Liabilities               100,781     79,823      82,415
                                    --------   --------    --------
 Stockholders' Equity:
   Preferred stock, $.01 par value
    Authorized 10,000 shares,
    none issued                           --         --          --
   Common stock, $.01 par value
    Authorized 50,000 shares; issued
    and outstanding 27,415, 27,548 and
    27,563 shares, respectively          274        275         275
   Additional paid-in capital        380,744    380,854     381,145
   Deferred stock compensation          (276)        --          --
   Accumulated deficit              (326,174)  (328,627)   (332,330)
                                    --------   --------    --------
     Total Stockholders' Equity       54,568     52,502      49,090
                                    --------   --------    --------
     Total Liabilities and
      Stockholders' Equity          $155,349   $132,325    $131,505
                                    ========   ========    ========



              RECONCILIATION OF GAAP FINANCIAL RESULTS TO
                           NON-GAAP MEASURES
                 (In Thousands, Except Per Share Data)

                                        Q3         Q2         Q3
                                       2005       2006       2006
                                       ----       ----       ----
 Net Loss  (GAAP)                    $(1,534)   $(1,316)   $(3,703)
 Restructuring expenses                  340        467      1,129
 Professional fees related
  to litigation                          388        643      1,211
 Stock compensation expense               88        179        291
                                     -------    -------    -------
 Net Income (Loss)  (Non-GAAP)       $  (718)   $   (27)   $(1,072)
                                     =======    =======    =======
 Loss Per Share  (GAAP)              $ (0.06)   $ (0.05)   $ (0.13)
                                     =======    =======    =======
 Loss Per Share  (Non-GAAP)          $ (0.03)   $ (0.00)   $ (0.04)
                                     =======    =======    =======


                     OTHER SELECTED FINANCIAL DATA
                            (In Thousands)

                                        Q3         Q2         Q3
                                       2005       2006       2006
                                       ----       ----       ----
 EBITDA                              $ 1,616    $   749    $(1,654)
 Cash Flow Provided (Used) by
  Operating Activities                 1,295     (2,049)    (1,273)
 Restructuring Charges:
     Included in Cost of Goods Sold      296        245      1,006
     Other                                44        222        123
 Borrowing Availability
  (End of Period)                     14,915     21,681     20,861
 Working Capital (End of Period)      12,829     44,034     40,965

                            CALCULATION OF EBITDA
                               (In Thousands)

                                        Q3         Q2         Q3
                                       2005       2006       2006
                                       ----       ----       ----
 Net Loss                            $(1,534)   $(1,316)   $(3,703)
 Interest Expense                      1,199        938      1,075
 Income Tax Expense                       --         --         --
 Depreciation and Amortization         1,951      1,127        974
                                     -------    -------    -------
        EBITDA                       $ 1,616    $   749    $(1,654)
                                     =======    =======    =======


            

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