SIMC Simclar Inc (CE)

HIALEAH, Fla., Nov. 17 /PRNewswire-FirstCall/ -- Simclar, Inc. (NASDAQ:SIMC), a multi-plant electronics contract manufacturer, reported its results for the three months ended June 30, 2008 and the three months ended September 30, 2008. Revenue for the three months ended June 30, 2008 and the three months ended September 30, 2008 was $27 million and $20 million respectively, compared to $37 million and $33 million in the same periods in 2007. The decrease, while disappointing, was mainly due to the worsening global economic environment which has particularly impacted the telecommunications infrastructure sector which accounts for some 60% of the company's business. In addition, the previously reported production problems in our Mexican facility, discussed below, had an adverse impact on shipments in each of the two quarters. The company has previously reported its strategic plan to close its North Carolina facility and transfer the sheet metal fabrication business to its Simclar de Mexico facility, which was largely completed by the end of the first quarter of the current year. Problems subsequently came to light late in the second quarter which highlighted significant issues arising as a result of the transfer, along with significant deficiencies within the Mexican facility's recently implemented ERP system, and, as a result, management concluded that the company's filing of its Form 10-Q for the second quarter of 2008 should be delayed until completion of an internal review. The review identified that the low-margined business transferred from North Carolina was ill-suited to the Mexican facility and management therefore decided to exit from this business, along with loss-making plastic injection molding business, with the resultant asset write-offs totaling $2.8 million in the second quarter. The extent of the necessary reorganization and corrective actions and the consequent disruption had an adverse impact on the operations of the Mexican production facility, resulting in sales below breakeven level, thereby generating operating losses in both the three months to June 30, 2008 and the three months to September 30, 2008. Pre-tax losses for the three months ended June 30, 2008 and the three months ended September 30, 2008 were $4.1 million and $1.1 million respectively, compared to pre-tax income of $2.1 million and $0.6 million for the same periods in 2007. While the significant decline in earnings was in part as a result of the reduced level of sales in both quarters, the second quarter loss was also due to the exceptional and non-recurring charges of $2.8 million relating in the main, to asset write-offs. Net losses for the three months ended June 30, 2008 and the three months ended September 30, 2008 were $2.7 million and $0.7 million respectively, or a loss of $0.41 per share and a loss of $0.11 per share, compared to net income of $1.4 million and $0.4 million respectively, or a profit of $0.21 per share and a profit of $0.06 per share in the same periods in 2007. However, exclusion of the non-recurring exceptional charges of $2.8 million would give an adjusted net loss for the second quarter of 2008 of $0.8 million or $0.13 per share. This adjusted net loss, giving effect to the exclusion of non-recurring exceptional charges, is a non-GAAP financial measure that management believes may be helpful to investors in comparing the second quarter results to those of prior and subsequent periods. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Chairman Sam Russell commented, "The company has suffered during the second and third quarters due to significant problems encountered with the transfer of the North Carolina business to our Mexico facility. Having identified the problems, the company has been aggressive in implementing corrective actions and has undertaken a fundamental reorganization of the Mexican business and the management team. Despite the company's other locations remaining profitable, such was the seriousness of the problems in our Mexico facility that it drove the company into significant losses in each of the two quarters. We are, however, confident, that we have now made substantive improvements in the management and operations of our Mexican facility and are developing plans to significantly grow the business in this strengthened facility. Although it is evident that the economic slowdown has severely affected some of our key customers, our order backlog at the end of the third quarter remained steady at $28 million, and, with the successful implementation of cost reduction projects and improvement plans, we would anticipate the company returning to profitability during the fourth quarter." Simclar, Inc., with four North American manufacturing locations, and numerous regional sales locations, has been engaged in contract manufacturing of electronic and electro-mechanical products for OEMs for 32 years. Statements in this news release, which relate to other than strictly historical facts, such as statements about the Company's plans and strategies, expectations for future financial performance, and markets for the Company's products and services are forward-looking statements. The words "believe," "expect," "anticipate," "estimate," "project," and similar expressions identify forward-looking statements that speak only as of the date hereof. Investors are cautioned that such statements involve risks and uncertainties that could cause actual results to differ materially from historical or anticipated results due to many factors including, but not limited to, the Company's customer concentration, debt covenants, competition, the effectiveness of our internal controls, and other risks detailed in the Company's most recent Annual Report on Form 10-K and other Securities and Exchange Commission filings. The Company undertakes no obligation to publicly update or revise any forward-looking statements. Visit Simclar, Inc at its website, http://www.simclar.com/ for more information about the Company. DATASOURCE: Simclar, Inc. CONTACT: Steph Donnelly, CFO, of Simclar, Inc., +1-937-220-9777 Web site: http://www.simclar.com/

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