Pemstar loss could hit $20 million
Customer's bankruptcy a big factor
CLARIFICATION RAN THURSDAY (7/4/02)
Co-founder Robert R. Murphy retired from the board of directors of Pemstar Inc. at the end of March when his most recent term of office expired. His planned departure opened a vacant seat, which was one of two filled this week by outside directors. The board changes were reported in an article on Page 5C Tuesday.
---------------------------------------------------------- By Bob Freund
Pemstar Inc.'s finances won't get any better in its upcoming first-quarter report, due partially to the bankruptcy of a Top 20 customer.
Chief financial officer Bill Kullback also has left the Rochester-based electronics manufacturer, the company said this morning. Director Greg Lea, a former executive with Josten's and IBM Corp., was elected interim chief financial officer.
Kullback resigned "to pursue other opportunities," the company said in a statement.
The contract manufacturer said its loss for the quarter ending June 30 likely will grow to between $18 million and $20 million, well above the prior guidance issued by the company.
Revenue should be about $145 million, close to the earlier forecast, the company said.
A contributing factor was the Chapter 11 bankruptcy of customer Diva Systems Corp. Pemstar also is taking additional reserves for other misvalued inventories and for uncollected bills, which were a big part of the $47 million loss in the March 30 quarter.
President Al Berning said the company has dug deeper into restructuring by cutting 350 workers worldwide, which is more than previously announced, and by consolidating manufacturing operations at work sites in San Jose, Calif., Boston and Thailand.
Pemstar also has revised its board structure to give outside directors the majority of seats. To do that, one founder, Robert Murphy, and one executive, Hargopal Singh, have stepped down from the board voluntarily.
A Lehman Brothers executive, Michael Odrich, has returned to the board table, and Kenneth Hendrickson, former chairman of Ancor Communications, has joined for the first time, Pemstar announced.
Berning said this morning Kullback was not asked to leave. "We owe Bill Kullback our thanks for his years of service and leadership during and after our IPO (initial public offering) and wish him well in his new endeavors," Berning said.
Pemstar said it is selling excess inventory of components to specific customers and establishing more credit, likely to yield more than $20 million in improved liquidity in the current quarter.
With those actions, Pemstar should have sufficient cash and other liquidity to operate until June 30, 2003, without issuing any more convertible debt, the company said in a statement.
The price of Pemstar shares was down 11 cents, to $1.24 at 9:40 a.m. today, after plunging as low as 98 cents shortly after the market's opening.