Three-Five Systems Acquires Malaysian EMS Company
Monday April 28, 9:01 am ET
Increases Revenue Forecast; Expands Asian EMS Capabilities
TEMPE, Ariz., April 28 /PRNewswire-FirstCall/ -- Three-Five Systems, Inc. (NYSE: TFS - News), a leading provider of electronic manufacturing services and display products, announced today that it acquired the business and certain assets of Unico Technology Bhd., a privately held Malaysian company located in Penang. Unico is an electronic manufacturer for OEM customers in the computer, server, and communications industries. The Unico business was acquired by TFS Electronic Manufacturing Services Sdn. Bhd. (referred to in this release as "TFS-Malaysia"), a joint venture established by Three-Five Systems, Inc., and the former parent company of Unico Technology to facilitate the acquisition.
"This acquisition provides us with expanded EMS capabilities and is in line with our growth strategy," said Jack Saltich, President and CEO of TFS. "Many of our existing customers utilized Unico for their low-cost Asian manufacturing, and those customers have told us that Unico was second to none in many of its capabilities, including IT infrastructure, supply chain management, and factory floor processes. Acquiring this tremendous set of skills will allow us to accelerate the upgrade of our manufacturing plants in Redmond, Manila, and Beijing. With its advanced manufacturing technology, TFS-Malaysia will bolster our Asian EMS capabilities and serve as a platform for the migration of best practices into our other facilities."
As a result of this transaction, TFS-Malaysia has the manufacturing capabilities of six surface mount manufacturing lines with full box-build capability, including lines dedicated to new product introduction and prototyping activity. TFS-Malaysia also offers engineering support, including RF design, automated printed circuit board assembly, in-circuit and functional testing, systems integration and box-build, supply chain management, and turnkey packaging and fulfillment services. Existing key customers include Avocent, a leading producer of keyboard, video, mouse (KVM) switches; WatchGuard Technologies, a developer of authentication and data encryption software and firewall hardware for virtual private networks; and Teledex, a developer of communications equipment.
Commenting on the acquisition, Gene Mulligan, Avocent's Vice President of West Coast Operations, said, "The acquisition of Unico by TFS unifies two of our strategic suppliers and allows for not only leveraged synergy in the supply chain but also integration of best practices, both of which will ultimately provide greater value to Avocent as well TFS's other customers."
"Our new Penang facility is scaled to support TFS-Malaysia's expected 2003 volume of business," said Saltich. "Our Manila facility is expected to be at an optimal 65 to 70 percent of capacity for the remainder of 2003, partially as a result of the selection of that facility to provide complete manufacturing services for Microtune, a leading provider of RF tuners. By applying the Penang facility's best known practices to our operations in Beijing, we expect to more rapidly have that facility qualified by the numerous existing and potential customers that are interested in manufacturing in China. In the next year, we believe that having a facility located in Beijing will allow us to achieve significant organic growth in our EMS business."
TFS-Malaysia is owned 60% by an overseas TFS subsidiary and 40% by Unico Holdings Bhd., the former parent of Unico. Unico Holdings is the investment arm of the Chinese Chamber of Commerce of Malaysia. The financial statements of TFS-Malaysia will be fully consolidated with those of TFS. TFS expects that this acquisition will be accretive, cash flow positive and contribute $15 million to $20 million of additional revenue to TFS for the remainder of 2003. TFS's share of the initial cost of capitalizing TFS-Malaysia was under $5 million, most of which will be used for working capital. No advance payment was required for the acquisition of the property, plant and equipment of Unico, all of which will be leased from the seller.
About TFS:
TFS is a recognized leader in providing end-to-end engineering, electronic manufacturing, and display solutions to original equipment manufacturers (OEMs). TFS has a global footprint, with operations in the United States, Europe and in several locations in Asia offering engineering and electronic manufacturing services (EMS), with a special emphasis and expertise in display subsystems. TFS also has a separate Microdisplay division, which is being spun off into a newly created publicly traded company in mid-2003. The Microdisplay division offers discrete microdisplay devices through completely integrated microdisplay engine solutions based on its liquid crystal on silicon (LCoS®) microdisplays. The company's Web site is located at www.threefive.com .
Three-Five Systems, Inc., the Three-Five Systems' logo, LCoS, and Brillian, are trademarks or registered trademarks of Three-Five Systems, Inc. All other trademarks are the property of their respective owners.
Certain statements contained in this document may be deemed to be forward- looking statements under federal securities laws, and TFS intends that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements include, but are not limited to expectations regarding (i) factory utilization, including the expectations of usage of our Penang facility and our Manila facility; (ii) revenue for TFS-Malaysia for the remainder of 2003; (iii) accretion to earnings, positive cash flow and revenue growth resulting from the acquisition; (iv) the upgrading of our EMS capabilities at our Manila and Beijing facilities; (v) organic growth as a result of having our Beijing facility; (vi) customer usage of the services of TFS-Malaysia; (vii) the cost of capitalizing TFS-Malaysia; and (viii) the spin-off of our Microdisplay division in mid-2003. TFS cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained herein. Such factors include, but are not limited to (a) changes in markets or demand for TFS-Malaysia's products, (b) changes in markets or demand for TFS's EMS business, (c) changes in TFS's ability to adequately service its existing or new customers, (d) failure to achieve synergies and efficiencies expected by the combination of TFS and TFS-Malaysia, and (e) other risks as identified from time to time in TFS's SEC reports, including Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and Annual Report on Form 10-K.
--------------------------------------------------------------------------------
Source: Three-Five Systems, Inc. |
