MSL Reports First Quarter 2002 Earnings; Exceeds Consensus Cash EPS; Announces Fifteen New Program Wins
CONCORD, Mass.--April 30, 2002-- MSL , a full-service global electronics manufacturing services and supply chain (EMS) company, today released its results for the first quarter of fiscal 2002.Revenues for the quarter were $215 million, a sequential decrease of 21% compared to the fourth quarter of 2001, as a result of normal seasonality and the generally soft demand environment, and a decrease of 59% from the period a year ago, reflecting a strategic shift in the Company's customer base and overall slowdown in technology spending. Cash EPS, which excludes non-recurring charges and amortization of goodwill and other intangibles, was $0.11 per share which exceeded the consensus estimate as reported by Thomson Financial/First Call, compared to $0.15 in the fourth quarter of 2001 and $0.16 in the period a year ago. Net income before non-recurring charges, consisting of restructuring charges, asset write-downs and losses from a site closure in the previous quarter, was $1.7 million in the first quarter of 2002, compared with $2.6 million in the fourth quarter of 2001 and $3.9 million in the first quarter of 2001.
Earnings before interest, taxes, depreciation and amortization, as adjusted (EBITDA), was $12.1 million for the first quarter of 2002 or 5.6% of sales, compared to $13.7 million, 5.1% of sales, in the fourth quarter of 2001 and $19.7 million, 3.7% of sales, in the first quarter of 2001.
For the first quarter, MSL incurred a net loss under U.S. Generally Accepted Accounting Principles (GAAP) of $7.2 million, or a loss of $.23 per diluted share, an improvement from the net loss of $24.1 million in the fourth quarter of 2001, or a loss of $0.74 per diluted share, and compared to net income of $1.1 million, or $0.03 per diluted share, in the first quarter of the prior year. In the quarter ended March 31, 2002, the Company recorded $5.5 million in restructuring charges and asset write-downs, consistent with its prior indications, and $3.5 million in losses representing the final costs associated with the closure of a high cost manufacturing site in the fourth quarter of 2001.
At March 31, 2002, debt, net of cash, was $21.5 million, substantially reduced from $89.7 million at December 31, 2001 and $178.4 million at the end of the first quarter of 2001. Cash generated from operations during the quarter was approximately $29 million.
The Company also reported it won 15 new programs during the quarter, seven of which were for volume production or after market services and eight of which were for design and new product introduction services. Nine of the programs were wins with new customers and six were with existing customers, across several target end markets. The design and new product introduction wins include customers in the medical, industrial and security markets, and the volume production wins were for communications, peripherals and industrial products.
"During the first quarter, we successfully established our new executive management team, sharpened our focus and accelerated the addition of new programs and customers to MSL," stated Bob Bradshaw, MSL's CEO and President. "I am pleased that we are off to a fast start at this exciting time in MSL's growth and believe our successes this quarter validate MSL's ability to play a lead role as the EMS industry rebounds."
"We added strength to our balance sheet again this quarter through improved working capital management and the completion of a $41.5 million convertible preferred and warrant offering," stated Bert Notini, MSL's CFO. "These actions further enable us to grow with our current customers, attract new customers and leverage our global capabilities."
The Company also reported that it currently expects revenues for the second quarter to increase sequentially and be in the range of $220 million to $250 million. After including the impact of its recent preferred share and warrant offering, the Company estimates that cash EPS for the second quarter will be in the range of $0.08 to $0.11 per share.
Non GAAP measurements, including cash net income, cash EPS and EBITDA, are presented as additional measures of operating performance and are not a substitute for earnings per share under generally accepted accounting principles. The non GAAP measurements in this press release are reconciled to the Company's GAAP financial statements on the following pages.
About MSL:
MSL is a leading global provider of full service electronics manufacturing and supply chain services to original equipment manufacturers (OEMs). The company has established a global network of manufacturing facilities in the world's major electronics markets - North America, Europe and Asia. MSL has developed relationships with leading OEMs in a diverse set of industries such as wired and wireless communications, networking and storage equipment, computer systems and peripherals, consumer electronics, industrial equipment and commercial avionics. MSL provides integrated supply chain solutions that address all stages of the product life cycle, including engineering and design, new product introduction, materials procurement and management, testing, printed circuit board assembly, product assembly and systems integration and assembly, order fulfillment, distribution and after-market support.
MSL differentiates itself by providing exceptional customer service, by broadly and deeply integrating our services into our OEM customer's operations, and by leveraging information technology to connect a global network of supply, purchasing and fulfillment sites. MSL is headquartered in Concord, Mass. For more information, please visit the company's Web site at www.msl.com.
Any statements in this press release about future expectations, plans and prospects for the Company, including statements containing the words "believes," "anticipates," "plans," "expects," "will," and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: our dependence upon a relatively small number of customers; risks associated with our acquisitions of other companies or businesses; the incurrence of indebtedness and associated interest expense to fund our business strategy; the availability of critical components, particularly those from sole-source suppliers; the impact of competition within our industry; cancellations of or delays in customer orders; general economic conditions within our industry; the impact of foreign currency fluctuations and other factors specifically affecting our international operations. In addition, the forward-looking statements included in this press release represent the Company's estimates as of April 30, 2002. The Company anticipates that subsequent events and developments will cause the Company's estimates to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so.
MANUFACTURERS' SERVICES, LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three Months Ended
March 31, 2002 April 1, 2001
Net sales $ 215,366 $ 528,708
Cost of goods sold 197,086 494,572
Gross profit 18,280 34,136
Operating expenses:
Selling, general and administrative 22,669 26,535
Stock-based compensation 213 185
Other operating (income) expense (800) -
Income (loss) from operations (3,802) 7,416
Interest expense, net (2,994) (5,724)
Foreign exchange gain (loss) 17 (37)
Income (loss) before provision for
income taxes (6,779) 1,655
Provision for income taxes 407 573
Net income (loss) $ (7,186) $ 1,082
Net income (loss) applicable to
common stock $ (7,329) $ 1,082
Basic income (loss) per share
Net income (loss) applicable to
common stock $ (0.23) $ 0.03
Weighted average shares
outstanding 32,379,089 33,442,036
Diluted income (loss) per share
Net income (loss) applicable to
common stock $ (0.23) $ 0.03
Weighted average shares
outstanding 32,379,089 33,673,887
MANUFACTURERS' SERVICES, LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS -
Excluding Non-recurring Items
(In thousands, except per share data)
(unaudited)
Three Months Ended
March 31, 2002 April 1, 2001
Net sales $ 215,366 $ 528,708
Cost of goods sold 195,029 494,572
Gross profit before non-recurring
items 20,337 34,136
Operating expenses:
Selling, general and
administrative (1) 15,795 23,744
Stock-based compensation 213 185
Other operating (income)
expense (2) (800) -
Income from operations before
non-recurring items (1) 5,129 10,207
Interest expense, net (2,994) (5,724)
Foreign exchange gain (loss) 17 (37)
Income before provision for income taxes
and non-recurring items 2,152 4,446
Provision for income taxes 407 573
Net income before non-recurring items $ 1,745 $ 3,873
Diluted EPS - Net income (loss) before
non-recurring items (1) (5) $ 0.05 $ 0.12
Diluted Cash EPS (3)(5) $ 0.11 $ 0.16
Weighted average shares
outstanding - diluted 32,379,089 33,673,887
Adjusted EBITDA (4)(5) $ 12,097 $ 19,724
(1) Non-recurring items include charges related to restructuring,
asset writedowns and operating losses associated with the
Company's Salt Lake Facility . Charges related to restructuring
and asset writedowns were $5,457 and $2,791 in the first quarter
of 2002 and 2001, respectively. Losses associated with the
Company's Salt Lake City facility incurred in the first quarter
of 2002, subsequent to the Company's decision to close the site
in the fourth quarter of 2001, were $3,474.
(2) Represents the net reimbursement received in first quarter of
2002 for costs incurred in pursuing an acquisition opportunity
from a prior quarter.
(3) Diluted Cash EPS is defined as net income (loss) applicable to
common stock before non-recurring items and amortization of
goodwill and other intangibles net of tax, divided by diluted
weighted average shares outstanding.
(4) Adjusted EBITDA is defined as earnings before net interest
expense, income taxes, depreciation and amortization,
restructuring and other asset write-downs, stock-based
compensation and other non-recurring items as well as
non-operating expenses
including foreign exchange gain (loss).
(5) Diluted Cash EPS, Diluted EPS - Income before provision for
income tax and non-recurring items and Adjusted EBITDA are
presented as additional measures of operating performance and
are not a substitute for earnings per share under generally
accepted accounting principles.
MANUFACTURERS' SERVICES, LTD.
SUPPLEMENTAL DATA
(In thousands, except per share data)
(unaudited)
Three Months Ended
March 31, 2002 April 1, 2001
Net Income (loss) applicable
to common stock $ (7,329) $ 1,082
Amortization of goodwill and
intangibles, net of tax 1,853 1,613
Restructuring and asset writedowns,
net of tax 5,457 2,791
Losses associated with Salt Lake
City facility 3,474 -
Cash earnings $ 3,455 $ 5,486
Diluted Cash EPS $ 0.11 $ 0.16
Weighted average shares
outstanding - diluted 32,379,089 33,673,887
MANUFACTURERS' SERVICES, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2002 2001
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 66,362 $ 30,906
Accounts receivable, net $ 117,682 172,822
Inventories $ 105,297 126,328
Prepaid expenses and other current
assets $ 26,711 27,860
Total current assets 316,052 357,916
Property and equipment, net 44,953 52,681
Goodwill and other intangibles 10,069 11,947
Other assets 12,944 14,276
Total assets $ 384,018 $ 436,820
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt
and capital lease obligations $ 3,542 $ 6,477
Accounts payable $ 111,144 150,216
Accrued expenses and other current
liabilities $ 37,938 49,224
Total current liablities 152,624 205,917
Long-term debt and capital lease
obligations 84,356 114,083
Other liabilities 6,132 3,114
Total liabilities 243,112 323,114
Redeemable preferred stock 34,786 -
Stockholders' equity 106,120 113,706
Total liabilities, redeemable
preferred stock and
stockholders' equity $ 384,018 $ 436,820